BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 227
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          Date of Hearing:  April 30, 2013

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                Bob Wieckowski, Chair
                      AB 227 (Gatto) - As Amended: April 9, 2013
                                           
                               As Proposed to be Amended
                                           
          SUBJECT  :  PROPOSITION 65: ENFORCEMENT

           KEY ISSUE  :  SHOULD CERTAIN VIOLATIONS OF PROPOSITION 65 BE  
          SUBJECT TO AN ALTERNATIVE ENFORCEMENT MECHANISM TO AVOID  
          UNNECESSARY LITIGATION?

           FISCAL EFFECT  :  As currently in print this bill is keyed fiscal.

                                      SYNOPSIS
          
          This measure is motivated by the author's laudable goal to  
          prevent unnecessary litigation regarding alleged violations of  
          the Safe Drinking Water and Toxic Enforcement Act (Prop. 65)  
          where there is documented evidence of abusive claims while  
          preserving the vital public protection goals and rights of the  
          act.  In consultation with stakeholders and experts, the bill as  
          proposed to be amended precludes litigation as well as the  
          payment of money in settlement for specified alleged violations  
          relating to exposure to alcohol and food-related chemicals,  
          tobacco smoke, and vehicle exhaust if the alleged violator has  
          taken appropriate remedial measures and has not committed other  
          prior offenses.  The measure further provides that prescribed  
          notices must advise the alleged violators of the law in a clear  
          and reasonable fashion, and sets forth a mechanism for  
          resolution of disputes regarding the application of these  
          provisions and potential sanctions against the plaintiff.   
          Supporters argue that the bill addresses the alleged problem in  
          a manner that is reasonable and workable and consistent with the  
          purposes and design of Prop. 65.  While there are some  
          outstanding technical concerns that the author will continue to  
          discuss with stakeholders, apart from those issues there is no  
          known opposition to the bill as proposed to be amended. 

           SUMMARY  :  Revises the Safe Drinking Water and Toxic Enforcement  
          Act.  Specifically,  this bill  :  

          1)Prohibits any person who serves a notice of alleged violation  








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            as specified from filing an action for exposure against the  
            alleged violator, or recovering from the alleged violator in a  
            settlement any payment in lieu of penalties or any  
            reimbursement for costs and attorney's fees, under the  
            following conditions:

              (1)   The notice was served on or after the effective date  
                of this statute and alleges that the alleged violator  
                failed to provide clear and reasonable warning as required  
                under Health and Safety Code section 25249.6 regarding:

                  (A)       an exposure to alcoholic beverages, or to a  
                    chemical known to cause cancer or reproductive  
                    toxicity to the extent the chemical is formed on the  
                    alleged violator's premises by necessary preparation  
                    of food or beverages which are sold on the alleged  
                    violator's premises for immediate consumption;
                  (B)       an exposure to environmental tobacco smoke  
                    caused by entry of persons (other than employees) on  
                    premises owned or operated by the alleged violator  
                    where smoking is permitted at any location on the  
                    premises; or 
                  (C)       an exposure to chemicals known to cause cancer  
                    or reproductive toxicity in engine exhaust, to the  
                    extent the exposure occurs inside a facility owned or  
                    operated by the alleged violator and primarily  
                    intended for parking noncommercial vehicles.

              (2)   Within 14 days after service of the notice, the  
                alleged violator has:

                  (A)       corrected the alleged violation;
                  (B)       paid a civil penalty for the alleged violation  
                    of section 25496.6 in the amount of $500, to be  
                    adjusted annually to reflect any increases in the cost  
                    of living in California, as indicated by the annual  
                    average of the California Consumer Price Index, per  
                    facility or premises where the alleged violation  
                    occurred, of which seventy-five percent shall be  
                    deposited in the Safe Drinking Water and Toxic  
                    Enforcement Fund, and twenty-five percent shall be  
                    paid to the person that served the notice as provided  
                    in section 25249.12; and
                  (C)       served on the person that served the notice a  
                    written statement, signed under penalty of perjury,  








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                    that fully describes the actions taken to correct the  
                    alleged violation and attaches a true and correct copy  
                    of any warning provided as part of such actions.

              (3)   The alleged violator has not been served with a notice  
                under paragraph (1) of subdivision (d) for an exposure  
                identified in paragraph (1)(A),(B), or (C) of this  
                subdivision within the previous five years for failure to  
                provide clear and reasonable warning about the same  
                exposure in the same facility or on the same premises.

          2)Further provides that any notice subject to the subdivision  
            above shall prominently include a clear and reasonable  
            description of the terms of the subdivision, and provides that  
            the lead agency may prescribe specific language for inclusion  
            in the notice that meets this requirement.

          3)Specifies that in the event of a dispute over whether an  
            action is barred by this statute the alleged violator shall  
            bear the burden of proving the applicability of subdivision  
            (k) and its compliance with all requirements of paragraph (2)  
            of subdivision (k). Upon the conclusion of an action brought  
            pursuant to subdivision (d), if the trial court determines  
            that the alleged violator has prevailed on the affirmative  
            defense under subdivision (k), the court may, upon motion of  
            that alleged violator or upon the court's own motion, review  
            the basis for the belief of the plaintiff that the action was  
            not precluded by subdivision (k). If the court finds that  
            there was no credible factual basis for the plaintiff's belief  
            that the action was not precluded by subdivision (k), then the  
            action shall be deemed a violation of Section 128.7(b)  of the  
            Code of Civil Procedure. The court shall not find a factual  
            basis credible if it is based on a legal theory of liability  
            that is frivolous within the meaning of Section 128.5 of the  
            Code of Civil Procedure.

          4)Provides that nothing in subdivision (k) shall prevent the  
            Attorney General, a district attorney, a city attorney, or a  
            prosecutor in whose jurisdiction the violation is alleged to  
            have occurred from filing an action pursuant to subdivision  
            (c) against an alleged violator.  In any such action, the  
            amount of any civil penalty for a violation shall be reduced  
            to reflect any payment made by the alleged violator for the  
            same alleged violation pursuant to paragraph (2)(B) of  
            subdivision (k).








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          5)Finds and declares that subsection 25249.7 (k) is necessary to  
            further the purposes of Section 25249.6, in terms of speed of  
            compliance and reasonableness as contemplated by the Section. 

          6)Finds and declares that subsection (k)(2) shall be independent  
            and severable from the rest of this enactment.

          7)Further finds and declares that  subsections (k)-(m) are  
            necessary to further the purposes of the intent of fairness  
            contemplated by the Safe Drinking Water and Toxic Enforcement  
            Act of 1986 as evinced by the fairness factors outlined in  
            Section 25249.10.

          8)Specifies that this act is an urgency statute necessary for  
            the immediate preservation of the public peace, health, or  
            safety within the meaning of Article IV of the Constitution  
            and shall go into immediate effect. The facts constituting the  
            necessity are: In order to avoid unnecessary litigation and to  
            facilitate compliance with the Safe Drinking Water and Toxic  
            Enforcement Act of 1986.

           EXISTING LAW  :  

          1)Under the Safe Drinking Water and Toxic Enforcement Act of  
            1986 (Proposition 65) prohibits any person, in the course of  
            doing business, from knowingly and intentionally exposing any  
            individual to a chemical known to the state to cause cancer or  
            reproductive toxicity without giving a specified warning, or  
            from knowingly discharging or releasing such a chemical into  
            water or any source of drinking water, except as specified.   
            (Health and Safety Code section 25249.5 et seq.)

          2)The act imposes civil penalties upon persons who violate those  
            prohibitions, and provides for the enforcement of those  
            prohibitions by the Attorney General, a district attorney, or  
            specified city attorneys or prosecutors, and by any person in  
            the public interest. The act requires any person bringing an  
            action in the public interest, or any private person filing an  
            action in which a violation of the act is alleged, to notify  
            the Attorney General, the district attorney, city attorney, or  
            prosecutor in whose jurisdiction the violation is alleged to  
            have occurred, and the alleged violator that such an action  
            has been filed.  (Health and Safety Code section 25249.5 et  
            seq.)








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           COMMENTS  :  The author explains the reason for the bill as  
          follows:

               Prop. 65, the Safe Drinking Water and Toxic Enforcement  
               Act, was enacted by ballot initiative in 1986.  It was  
               intended to protect Californians and their drinking water  
               from chemicals known to cause cancer, birth defects or  
               other reproductive harm, and to inform citizens about  
               exposure to such chemicals.

               Since its enactment, Prop. 65 has been an effective tool to  
               keep toxic chemicals out of the state's water supplies and  
               has raised awareness about possible exposure to  
               carcinogens.

               Unfortunately, there have been some who have taken  
               advantage of provisions in the proposition to ensnare  
               businesses in lawsuits, with the hope of obtaining  
               settlement payments that were never contemplated by the  
               voters when they passed Prop. 65.

               These lawsuits are instigated by parties who target  
               businesses that, for various reasons, have neglected to  
               display the proper Prop. 65 warning sign.  Prop. 65 was  
               motivated by voters' laudable wish to inform and protect  
               Californians from the potential exposure to dangerous  
               chemicals, not as a money-making venture.  Businesses such  
               as restaurants or coffee shops or bars - places that must  
               provide Prop. 65 warnings for serving baked goods, beer,  
               wine, or coffee, because these everyday things happen to  
               contain substances deemed to pose some health risks -  
               should be helped to comply with the intent of the law.

               Many of these lawsuits never get to a courtroom.  They are  
               settled out of court, sometimes for tens of thousands of  
               dollars, because business owners do not have the means to  
               hire attorneys, and fear becoming entangled in protracted  
               legal proceedings that could result in significant damages  
               and attorney's fees.

               AB 227 intends to reduce or eliminate frivolous legal  
               actions brought under Prop. 65 where plaintiffs are seeking  
               damages for alleged violations that involve a retail  
               business either neglecting to have a sign posted, or  








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               posting in a manner that isn't visible enough to the  
               public.  There has been a recent wave of violation notices  
               sent to businesses like bars, restaurants and coffee shops,  
               (places that must post signs because of alcohol or  
               byproducts of coffee roasting) because of improperly posted  
               signs or signs that were not up due to an honest oversight.  
                These are cases where the business owners are not exposing  
               customers to unknown, dangerous chemicals.  Rather, they  
               are serving things like the aforementioned coffee or  
               alcohol and are more than happy to post the proper signage.

               Unfortunately, under the current regime, the cost to put up  
               a sign can be in the thousands or tens of thousands of  
               dollars due to the cost of settling these suits brought by  
               private attorneys.  The punishment appears to be  
               disproportionate to the business' oversight.  This measure  
               seeks to bring the severity of the punishment more in line  
               with the severity, or lack thereof, of the violation.

               AB 227 will return Prop. 65 to what the voters intended it  
               do: punish violators who pollute our state's waterways or  
               expose workers to dangerous carcinogens and to inform  
               consumers of the risks in products they may purchase.

           This Bill Would Establish Important New Limits On the Right To  
          Sue Or To Collect Money In Settlement For Specified Alleged  
          Violations of Prop. 65 That Have Been The Subject Of Alleged  
          Abuses.   As proposed to be amended, the bill precludes  
          litigation as well as the payment of money in settlement for  
          specified alleged violations relating to exposure to alcohol and  
          food-related chemicals, tobacco smoke, and vehicle exhaust if  
          the alleged violator has taken appropriate remedial measures and  
          has not committed other prior offenses.  The measure further  
          provides that prescribed notices must advise the alleged  
          violators of the law in a clear and reasonable fashion, and sets  
          forth a mechanism for resolution of disputes regarding the  
          application of these provisions and potential sanctions against  
          the plaintiff.

          More specifically, the bill prohibits any person who serves a  
          notice of alleged violation as specified from filing an action  
          for exposure against the alleged violator, or recovering from  
          the alleged violator in a settlement any payment in lieu of  
          penalties or any reimbursement for costs and attorney's fees,  
          under the conditions set forth above.








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          The bill further provides that any notice subject to the  
          subdivision above shall prominently include a clear and  
          reasonable description of the terms of the subdivision, and  
          provides that the lead agency may prescribe specific language  
          for inclusion in the notice that meets this requirement.

          In addition the bill specifies that in the event of a dispute  
          over whether an action is barred by this statute the alleged  
          violator shall bear the burden of proving the applicability of  
          subdivision (k) and its compliance with all requirements of  
          paragraph (2) of subdivision (k).  Upon the conclusion of an  
          action brought pursuant to subdivision (d), if the trial court  
          determines that the alleged violator has prevailed on the  
          affirmative defense under subdivision (k), the court may, upon  
          motion of that alleged violator or upon the court's own motion,  
          review the basis for the belief of the plaintiff that the action  
          was not precluded by subdivision (k).  If the court finds that  
          there was no credible factual basis for the plaintiff's belief  
          that the action was not precluded by subdivision (k), then the  
          action shall be deemed a violation of Section 128.7(b) of the  
          Code of Civil Procedure.  The court shall not find a factual  
          basis credible if it is based on a legal theory of liability  
          that is frivolous within the meaning of Section 128.5 of the  
          Code of Civil Procedure.

          The bill also provides that nothing in subdivision (k) shall  
          prevent the Attorney General, a district attorney, a city  
          attorney, or a prosecutor in whose jurisdiction the violation is  
          alleged to have occurred from filing an action pursuant to  
          subdivision (c) against an alleged violator.  In any such  
          action, the amount of any civil penalty for a violation shall be  
          reduced to reflect any payment made by the alleged violator for  
          the same alleged violation pursuant to paragraph (2)(B) of  
          subdivision (k).

           Lingering Concerns Regarding Intent Language.  While the  
          substantive provisions of the bill appear to have been resolved  
          with the proposed amendments, there are less critical but still  
          outstanding anxieties among some groups regarding the proposed  
          findings and declarations the author would add to the bill  
          regarding its relationship to the purposes of Prop. 65.   
          Specifically, the bill would find and declare:

          1)That subsection 25249.7 (k) is necessary to further the  








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            purposes of Section 25249.6, in terms of speed of compliance  
            and reasonableness as contemplated by the Section. 

          2)That subsection (k)(2) shall be independent and severable from  
            the rest of this enactment; and 

          3)That subsections (k)-(m) are necessary to further the purposes  
            of the intent of fairness contemplated by the Safe Drinking  
            Water and Toxic Enforcement Act of 1986 as evinced by the  
            fairness factors outlined in Section 25249.10.

          The outstanding concerns are to the effect that these proposed  
          findings are inoperative, unneeded, overbroad and potentially  
          confusing.  The Committee is advised that the author and  
          stakeholders remain optimistic and committed to resolving these  
          remaining concerns.

           ARGUMENTS IN SUPPORT  :  In support of the bill, the Consumer  
          Attorneys of California state:

               By narrowly focusing on the issue at hand, the bill, as  
               proposed to be amended, avoids unintended consequences on  
               other Proposition 65 enforcement actions that are serving  
               the important goals of the ballot initiative.  This will  
               also maximize the chances that the bill satisfies  
               Proposition 65's requirement that any amendments must  
               "further its purposes."  Proposition 65, Section 1  
               (reproduced at Health & Safety Code  25249.5, Historical  
               and Statutory Notes).

               There is a workable solution to the problem presented.

               The proposed amendments narrowly focus on the types of  
               pre-suit notices that have raised concerns: (1) pre-suit  
               notices sent to restaurants, cafes and other small  
               businesses for failing to post warnings about the health  
               hazards of consuming alcohol; (2) pre-suit notices sent to  
               apartment buildings and other establishments where smoking  
               is allowed for failing to post warnings about the health  
               hazards of secondhand smoke; and (3) pre-suit notices sent  
               to parking facilities for failing to post warnings about  
               the health hazards of gasoline engine exhaust.  

               By narrowly focusing on the issue at hand, the bill avoids  
               any unintended consequences on other Proposition 65  








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               enforcement actions that are serving the important goals of  
               the ballot initiative.  This will also maximize the chances  
               that the bill satisfies Proposition 65's requirement that  
               any amendments must "further its purposes."  Proposition  
               65, Section 1 (reproduced at Health & Safety Code   
               25249.5, Historical and Statutory Notes).

               The bill tracks existing law by providing an opportunity  
               for an alleged violator to recovery monetary sanctions if  
               the court determines that there was no credible factual  
               basis for the plaintiff's belief that the violation had not  
               been cured.  This is the same mechanism that currently  
               exists in Proposition 65 when a court determines that there  
               was no credible factual basis for the plaintiff's  
               allegation that there was an exposure to a listed chemical.  
                See Health & Safety Code  25249.7(h)(2).
           
          Author's Proposed Refining and Narrowing Amendments.   In  
          consultation with interested stakeholders including the Attorney  
          General's office, the author proposes the helpful amendments set  
          forth in the summary above to more precisely focus on the  
          concerns that motivate the legislation, revising proposed  
          subdivision (k), adding three additional subdivisions, two new  
          findings sections, and an urgency clause.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Air Conditioning Trade Association
          American Coatings Association
          Apartment Association, California Southern Cities
          BIOCOM
          California Apartment Association
          California Assisted Living Association
          California Association of Health Facilities
          California Automotive Business Coalition
          California Bus Association
          California Business Properties Association
          California Chamber of Commerce
          California Citizens Against Lawsuit Abuse
          California Construction & Industrial Materials Association
          California Craft Brewers Association
          California Dental Association
          California Framing Contractors Association








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          California Grocers Association
          California Hotel and Lodging Association
          California Independent Grocers Association
          California Independent Oil Marketers Association
          California Independent Petroleum Association
          California Metals Coalition
          California Restaurant Association
          California Retailers Association
          California Service Station & Auto Repair Association
          Civil Justice Association of California
          Clovis Chamber of Commerce
          Consumer Specialty Products Association
          Culver City Chamber of Commerce
          Duarte Chamber of Commerce
          East Bay Rental Housing Association
          National Association of Theatre Owners of CA/NV
          National Federation of Independent Business
          NOR CAL Rental Property Association
          Palm Desert Chamber of Commerce
          Plumbing-Heating-Cooling Contractors Association of California
          Rancho Cordova Chamber of Commerce
          San Fernando Valley Chamber of Commerce
                                                                    Simi Valley Chamber of Commerce
          United Chambers of San Fernando Valley
          Valley Industry & Commerce Association
          Visalia Chamber of Commerce
          Western Electrical Contractors Association
           
          Opposition (as proposed to be amended)

           None on file
           
          Analysis Prepared by  :  Kevin G. Baker / JUD. / (916) 319-2334