Prop 65

California Court Does Not Side With Coffee

Prop 65, Uncategorized, ,

** Starbucks and other Coffee Makers Lose Latest Phase of Prop 65 Acrylamide Warning Case **                                                                                                                                                                                                                                                                                          

By: Brent E. Johnson                                                                                                                                                                                                                        

Background: Acrylamide is a chemical compound first isolated in laboratories in the 1950’s.  Since its discovery, it has been used in many industrial applications, such as in the manufacture of polymers, in papermaking, ore processing, oil recovery, and in the manufacture of permanent press fabrics.

Acrylamide was listed by OEHHA as a chemical known to the State of California to cause cancer in 1990 based on studies that showed it produced cancer in laboratory rats and mice.  In 2011, it was added to the reproductive and developmental harm list following studies of laboratory animals that showed effects on the growth of offspring exposed in utero as well as genetic damage.

Apart from its industrial uses, in 2002 acrylamide was discovered in foods – in particular starchy, carbohydrate rich plant based foods.  The chemical appears to be created when these foods are roasted or fried at temperatures higher than 248 °F – but not in food that had been boiled or steamed.  Further, acrylamide levels seem to rise as food is heated for longer periods of time, although researchers are still unsure of the precise mechanisms by which acrylamide is formed.  It has been detected irrespective of whether the food is cooked at home, by a restaurant or by commercial food processors and manufacturers.  All the good stuff is implicated – french fries, potato chips, other fried and baked snack foods, coffee, roasted nuts, breakfast cereals, crackers, cookies and breads.  At present the Prop 65 No Significant Risk Level (NSRL)  for acrylamide is 0.2 µg/day.  Cal. Code Regs. tit. 27, § 25705 (c)(2).

In 2005, California attorney general Bill Lockyer filed a Prop 65 lawsuit against four makers of French fries and potato chips – H.J. Heinz Co., Frito-Lay, Kettle Foods Inc., and Lance Inc..  People of the State of California v. Frito-Lay, Inc. et al., Case No. BC338956 (Cal. Super. Ct. 2005).  The lawsuit was settled in 2008, with the food producers agreeing to reformulate, cutting acrylamide levels to 275 parts per billion (thereby avoiding a Prop 65 warning label).  The companies also agreed to pay a combined $3 million in civil penalties.

It was not until 2010 that a private attorney general filed a Prop 65 complaint against the major coffee sellers in California.  A number of similar cases were filed and ultimately consolidated in Los Angeles County Superior Court – Council for Education and Research on Toxics v. Starbucks Corp. et al., No. BC435759, and Council for Education and Research on Toxics v. Brad Barry Co. Ltd. et al., No. BC461182.  In all, the consolidated litigation involves more than 70 companies including grocery stores, coffee companies, food manufacturers and big-box retailers, such as Whole Foods Market, Trader Joe’s Co., Peet’s Coffee & Tea Inc., Nestle USA Inc., Costco Wholesale Inc. and Wal-Mart Stores.

The first phase of the trial took place in 2014, with a bench trial on several affirmative defenses, including whether acrylamide posed “no significant risk.” Judge Berle ruled in favor of Plaintiff at this phase, rejecting Defendants’ arguments that the level of acrylamide in their coffee products posed no significant risk because a multitude of studies show that coffee consumption does not increase the risk of cancer.  The court ruled that the studies assessed the effects of coffee generally, as opposed to the presence of acrylamide in the coffee and were therefore not persuasive.  Defendants’ argument that requiring them to post a Prop 65 warning amounted to unconstitutional forced speech was also rejected.

The second phase of the bench trial was held in September of 2017.  Several of the defendants settled on the eve of trial, among them were BP, which operates gas stations and convenience stores ($675,000 + warning label); Yum Yum Donuts Inc. ($250,000+ warning label) and 7-Eleven stores ($900,000 + warning label).  Starbucks did not settle, although it did begin posting Prop 65 notices in its stores, presumably to limit civil penalties were it unsuccessful at trial.

At the September 2017 trial, Defendants focused their trial strategy on:

  • Code Regs. tit. 27, § 25703 (b)(1), which exempts from the normal risk level circumstance where the “chemicals in food are produced by cooking necessary to render the food palatable or to avoid microbiological contamination.” At trial, experts for the defendants testified that there is no commercially viable way to reduce acrylamide in coffee by some other cooking method.
  • If § 25703 (b)(1) applies, the statute allows for a higher “alternative risk level” (i.e. not the NSRL of 0.2 µg/day) to apply to chemicals produced in the process of cooking foods if “sound considerations of public health” justify it. As to the appropriate risk level posed by drinking coffee, Defendants’ experts pegged it at up to 19 µg/day of acrylamide in coffee over a lifetime, and otherwise testified that the average person’s exposure to acrylamide in coffee is ten times less.  Defendants’ experts also testified that studies found no increased risk of cancer for coffee drinkers, and to the contrary, evidence suggested that moderate coffee consumption is associated with a reduced risk of certain chronic diseases, including certain cancers.

On March 28, 2018, Judge Berle issued a statement of decision under Rule 632 (akin to a preliminary ruling) rejecting the coffee makers’ arguments.  Council for Education and Research on Toxics v. Starbucks Corp. et al., No. BC435759 (Cal. Super. Ct. L.A. County March 28, 2018).  Judge Berle noted that Prop 65 contemplated an alternative risk level if “public health” justified it.  Id. ¶¶ at 75 – 81.  But he found that the expert evidence did not persuade him that drinking coffee was strictly speaking a “public health” concern, i.e. that coffee confers a particular benefit to human health.  On that basis, the alternative significant risk level defense failed as a threshold matter.  Under California procedure, the Defendants can object to these preliminary findings, but it is uncommon for a statement of decision to not ultimately be entered as the judgment.  The judge can now set another phase of trial to consider potential civil penalties – up to $2,500 per person exposed each day.  In the abstract, that could calculate out to be an astronomical sum, although this preliminary decision may push the parties to the settlement table.  We will see who the next target is – acrylamide is after all not just in coffee – but in many cooked and processed foods.

Round Up – Round One

FDA, Food, , ,

** Monsanto Gets its First Victory in the Battle over Herbicide Prop 65 Listing **                                                                                                                                                                                                                                                                                                   

By: Brent E. Johnson

Background: Glyphosate is a molecule that inhibits a biological process only found in plants (not humans and animals).  The compound was discovered by a Monsanto chemist in 1970, then patented and brought to market in 1974 as “Round Up.”  Initially, the product was only used on a small scale, because, while it is toxic to most weeds, it also kills most crops.  However, when Monsanto developed and began introducing genetically modified crops engineered to be resistant to the herbicide (“Roundup Ready” crops), the chemical was able to be used on a broad scale.  As a result, the chemical’s use skyrocketed — at the same time that overall herbicide use dropped.  In 1987, only 11 million pounds of Round Up were used on U.S. farms – now nearly 300 million pounds are applied each year.  A study published in 2015 in the journal Environmental Sciences Europe found that Americans have applied 1.8 million tons of glyphosate since its introduction in 1974.  Worldwide, the number is 9.4 million tons.  That is  enough to spray nearly half a pound of Roundup on every cultivated acre of land in the world.  Round Up and Round Up Ready products are worth many billions of dollars.

California’s Office of Environment Health Hazard Assessment (OEHHA) announced a proposed listing of glyphosate as a Prop 65 chemical on September 4, 2015.  The effect of glyphosate’s listing under Prop 65, cannot be underestimated as there are detectable levels of glyphosate in virtually every part of the food chain.  Monsanto is famously vigilant in protecting its rights – for example in protecting its crop patents.  So when OEHHA proposed the listing, it was inevitable that litigation would follow.

On January 21, 2016, Monsanto struck.  It filed a petition in Superior Court in Fresno County seeking injunctive and declaratory relief to enjoin OEHHA from listing glyphosate as a Prop 65 chemical.  It did so on the basis of its allegation that the listing mechanism violated the California and United States Constitutions.  See Monsanto Co. v. Office of Environmental Health Hazard Assessment, No. 16-CE CG 00183, (Sup. Cal.)  That is, primarily, Monsanto complained about how its product came to be added to the list.

Under Cal. Health & Safety Code § 25249.8 (b), which cites to Cal. Lab. Code § 6382 (b)(1), “at a minimum” the Prop 65 list must include those “[s]ubstances listed as human or animal carcinogens by the International Agency for Research on Cancer (IARC).”  IARC, based in Lyon, France, is an intergovernmental agency, part of the World Health Organization.  In March 2015, IARC issued a report labeling the weed killer glyphosate as a “probable carcinogen.”  Glyphosate Monograph, Vol. 112, IARC Monographs Series (IARC, 2015b).  That report is not without controversy — for example, the EPA has more recently issued its draft human health risk assessment which concludes that glyphosate is not likely to be carcinogenic to humans.  Nevertheless, OEHHA has interpreted § 25249.8 (b) to provide that once IARC lists a chemical, it is mandatory for them to do so also.  OEHHA duly noticed its intent to list, prompting the lawsuit.

Monsanto raised four arguments, all ultimately rejected by the trial court.

  • First, Monsanto argued that OEHHA unconstitutionally delegated its authority to the IRAC by relying on its assessment that glyphosate is a probable human carcinogen. The doctrine of nondelegation is the rather esoteric theory that one branch of government must not authorize another entity to exercise the power or function that it is constitutionally authorized to exercise, itself.  Under California law, this doctrine is not offended if the legislature determines the overarching legislative policy and leaves to others the role of filling in the details.  Monsanto Co. v. Office of Environmental Health Hazard Assessment, 2017 WL 3784247 (Cal.Super.) citing Kugler v. Yocum, 69 Cal.2d 371, 375-376 (Cal. 1968).  On that point, the court stated that the Prop 65 listing mechanism does not constitute an unconstitutional delegation of authority to an outside agency, since the voters and the Legislature have established the basic legislative scheme and policy and it was permitted to leave the “highly-technical, fact-finding” to the IARC (and other authoritative bodies referred to in the Act).
  • Second, the court rejected Monsanto’s due process claims. It held that due processrights are only triggered by judicial or adjudicatory actions.  California Gillnetters Assn. v. Department of Fish & Game, 39 Cal.App.4th 1145, 1160 (Cal. 1995).  The court stated the Prop 65 listing was not adjudicative, but a “quasi-legislative act.”
  • Third, the court rejected Monsanto’s arguments that the listing process violated California’s Article II, Section 12, which prohibits private corporations from holding office or performing legislative functions. It found that there are no facts that would tend to indicate that the IARC is a “private corporation,” or that IARC has an pecuniary interest in being given the power to name certain chemicals on its list of possible carcinogens.
  • Fourth, the court gave short shrift to Monsanto’s claim that listing glyphosate would violate its right to free speech under the California and Federal constitutions, in particular the inherent protections for commercial speech from unwarranted governmental regulation. The court held that the First Amendment claim was not ripe for adjudication because the mere listing of glyphosate does not in and of itself require Monsanto to provide a warning and it may never be required to give a warning.

Monsanto appealed this ruling.  It also sought a stay of the trial court’s decision pending its appeal,  The appellate court and the California Supreme Court rejected these requests for a stay in June 2017.  OEHHA wasted no time after the Supreme Court’s decision adding glyphosate to the list on July 7, 2017.  After this ruling, subject to the substantive appeal of the trial court decision, July 7, 2018 was to be the date by which companies must comply with the Prop 65 requirements for glyphosate.

Not content to wait idly by, Monsanto moved the battle to Federal Court,  On November 15, 2017, it filed a complaint for declaratory and injunctive relief in the Eastern District of California (No. 2:17-cv-02401-WBS-EFB) together with the National Association of Wheat Growers, National Corn Growers Association, United States Durum Growers Association, Western Plant Health Association, Missouri Farm Bureau, Iowa Soybean Association, South Dakota Agri-Business Association, North Dakota Grain Growers Association, Missouri Chamber of Commerce and Industry, Associated Industries of Missouri and the Agribusiness Association of Iowa.  So far, the following have also signed on as amicus – the State of Wisconsin, South Dakota, North Dakota, Oklahoma, Michigan, Kansas, Louisiana, Iowa, Indiana, Idaho and Missouri.

The complaint starts by attacking the IARC listing, noting that a dozen other global regulatory and scientific agencies have found no link between glyphosate and cancer.  The allegedly “false” warning under Prop 65, plaintiffs argue, compels speech violating Plaintiff’s First Amendment rights.  Plaintiffs also argue that the listing and warning requirement conflict with, and are preempted by Federal legislation,notably the United States Food, Drug, and Cosmetic Act (FDCA) and Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).  The complaint also raises the issue rejected by the state court that the listing process violates the Due Process Clause of the Fourteenth Amendment.  Plaintiffs filed a Motion for Preliminary Injunction on December 6, 2017, which was heard on February 20, 2018.  On February 26, 2018, U.S. District Court Judge William B. Shubb ruled in favor of Monsanto and the other named plaintiffs.  No. CV 2:17-2401 WBS EFB, 2018 WL 1071168, at *1 (E.D. Cal. Feb. 26, 2018).  The order declined to go so far as to remove glyphosate from the Proposition 65 list, but at least for now, bars the State of California from imposing the corresponding warning requirement while the case challenging its listing proceeds on the merits.

The court primarily relied on Monsanto’s First Amendment argument in issuing the injunction.  Judge Shubb concluded that, to the extent Prop 65 necessitates warnings for glyphosate, California is in essence compelling commercial speech.  The court held that the government may only require commercial speakers to disclose “purely factual and uncontroversial information” about commercial products or services, as long as the “disclosure requirements are reasonably related” to a substantial government interest and are neither “unjustified [n]or unduly burdensome.”  Id. at * 5 citing Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio, 471 U.S. 626, 651 (1985); CTIA-The Wireless Ass’n v. City of Berkeley, 854 F.3d 1105, 1118 (9th Cir. 2017).

In this case, the court held that the link between cancer and glyphosate was not uncontroverted – particularly where “only one health organization had found that the substance in question causes cancer and virtually all other government agencies and health organizations that have reviewed studies on the chemical had found there was no evidence that it caused cancer.”  Id. at *6.  The court went further stating, “[u]nder these facts, the message that glyphosate is known to cause cancer is misleading at best.”  Id.  Accordingly, it was determined that the balancing of interests involved weighed in favor of restraining the enforcement of the warning requirement for glyphosate while the remainder of the case was decided.

The court enjoined “defendants” (i.e. OEHHA and the California Attorney General) and “their agents and employees, all persons or entities in privity with them, and anyone acting in concert with them.” Id. at *8.  We will see if private Prop 65 bounty hunters consider themselves bound by this injunction.

One area the dispute will also move to is the No Significant Risk Levels (NSRLs) for glyphosate.  If the NSRL is set at a particularly high level (perhaps based on the factual controversies referred to above), then the issue over listing may be mooted.  Again, however, a sky high NSRL still may not dissuade Prop 65 bounty hunters.

Updating Proposition 65 Warnings for the Online Era

Prop 65, ,

** California Law Makers Turn Their Attention to the Prop 65 Implications of Online Retailing **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

By: Brent E. Johnson                                                                                                                                                                                                                                                                                                             

California’s Proposition 65, requires any person who exposes a consumer to a listed chemical deemed to be either a carcinogen or a reproductive toxicant “in the course of doing business” to first provide a warning about that exposure (California Health & Saf. Code § 25249.5 et seq.).  As many of our readers are no doubt aware, particularly those who represent clients in California, Proposition 65 has generated a substantial amount of litigation since its enactment, largely due to “public interest” standing creating a private right of action to “any person” (§ 25249.7(d)).

California’s Office of Environmental Health Hazard Assessment (OEHHA) is tasked with updating the list of offending chemicals – there are almost a thousand currently on the list – and once a consumer product is shown to contain one of the listed chemicals a defendant has a heavy burden to show that the amount of exposure is within a safe harbor level or that the product is manufactured in such a way which precludes exposure.  The usual practice for consumer companies has been to rely on the warning provision – foreclosing on Prop. 65 litigation.  That said, the warning, in order to properly immunize the consumer company has to be “clear and reasonable” (§ 25249.11(f)).

What does this mean for manufacturers and retailers that deal with consumers online?  Bear in mind that the initial passage of Proposition 65 was in 1985 and unfortunately the implementing rules had not kept pace with changing trends in online retailing (not having been updated since 2008).  So internet sellers have been left somewhat to wonder.  OEHHA has released new regulations to take effect August 30, 2018, and for the first time they provide added specificity for internet sellers, and demonstrate when and how a Prop 65 warning should be provided.

New Reg. § 25600.1 provides a definition of “Retail seller” which means “a person or business that sells or otherwise provides consumer products directly to consumers by any means, including via the internet” (emphasis added).  The new rules do not upend the presumption that “[t]o the extent practicable, warning materials such as signs, notices, menu stickers, or labels shall be provided by the manufacturer, producer, or packager of the consumer product, rather than by the retail seller” (old § 25603) – they recognize that the new implementing rules are intended to minimize the burden on retail sellers of consumer products (see § 25249.11(f) of the Act).  As such it is primarily the burden of the “manufacturer, producer, packager, importer, supplier, or distributor” to provide the written notice of exposure to the retailer seller (Reg. § 25600.2 (b), (c)).

However, a retailer sellers is responsible for providing a Prop 65 warning in the following instances (§ 25600.2(e)):

  • The retail seller is selling the product under a brand or trademark that is owned or licensed by the retail seller or an affiliated entity;
  • The retail seller has knowingly introduced a listed chemical into the product, or knowingly caused a listed chemical to be created in the product;
  • The retail seller has covered, obscured or altered a warning label that has been affixed to the product by a manufacturer; or
  • Where the seller has “actual knowledge” from a “reliable source” of the potential of consumer product exposure to a listed chemical AND where the manufacturer, producer, packager, importer, supplier, or distributor of the product is: EITHER not “doing business” (because for example, they have less than 10 employees ” ( 25249.11(b))) OR has no registered agent or place of business in California. See Reg. § 25600.2 (e)(5).  In essence this broadens the reach of Prop 65 to retailers as a proxy for manufacturers who were not otherwise caught by Prop 65, either because they were too small or not connected to California.  “Actual knowledge” means specific knowledge of the consumer product exposure received by the retail seller from any reliable source.”  If the source of this knowledge is a notice served pursuant to Section 25249.7 (d)(1) of the Act (i.e. the 60 day notice required under Prop 65 before litigation can commence), the retail seller shall not be deemed to have actual knowledge of any consumer product exposure that is alleged in the notice until five business days after the notice.  This 5 day rule provides an important safe harbor for retailers – and begs the question as to whether there is any incentive for retailers to investigate products – or just wait until notice is provided. The fact that the provision also only applies to retailers when they are dealing with small (or out of state companies) also begs the question whether they’ll be a perhaps unintended consequence – retailers refusing to deal with these small businesses out of fear of the pass-along risk.

A retail seller can also be liable to provide Prop 65 warning where the manufacturer , importer, etc. provides notice and materials for the retailer to affix them, to shelves, products, or the text to provide on internet listings.  (Reg. § 25600.2 (b), (c)). The retailer’s correlative obligation is the “placement and maintenance of warning materials, including warnings for products sold over the Internet, that the retail seller receives” from the manufacture, producer etc.  (Reg. § 25600.2 (d)).  However, a retailer who agrees in writing with the manufacturer, importer, etc., that allocates legal responsibility to the latter will be binding and effective against Prop 65 liability (provided the consumer receives the relevant warning) (Reg. § 25600.2 (d)).  This provision provides another important safe harbor for retailers.  It will be interesting to see in which retail-manufacturer relationships the retailer has the bargaining power to demand this agreement.

The new regulations also provide guidance on how a Prop 65 warning should be given (Reg. § 25602 (b)): “For internet purchases, a . . .  must be provided by including either the warning or a clearly marked hyperlink using the word “WARNING” on the product display page, or by otherwise prominently displaying the warning to the purchaser prior to completing the purchase.  If an on-product warning is provided pursuant to Section 25602(a)(4), the warning provided on the website may use the same content as the on-product warning. For purposes of this subarticle, a warning is not prominently displayed if the purchaser must search for it in the general content of the website.”  As many of you are aware, the new 2018 Regulations also provide new warning requirements, including a symbol, hyperlink and warning language more specific to the carcinogen, reproductive toxicant, etc. (Reg. § 25603).  There are also slightly different rules for specific products such as Food (Reg. § 25607.2), Raw Wood Products (Reg. § 25607.10), Furniture (Reg. § 25607.12), Products With Diesel Engines (Reg. § 25607.14), etc.

These new rules provide clarity . . . but also raise new questions.  For example, is an online platform which is merely connecting the ultimate seller and buyer, such as eBay (and to some extent Amazon) the actual “retail seller” or is the vendor who uses the site the “retail seller.”  See Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 96–97 (2d Cir.2010) (eBay does not “does not itself sell the items listed for sale on the site nor does it ever take physical possession of them.”); Butler v. eBay, Inc., No. 5:06–cv–02704–JW (N.D.Cal. 12, 2006) (“[T]he seller is in control of the sale, not eBay…. Thus, the sale transaction is between the seller and the bidder.”); see also Cal. Att’y Gen. Op. No. 02–111 (2003) (“We have little doubt that eBay does not sell or offer to sell or buy or offer to buy, on behalf of another or others, any of the items.”). Should retailers, as discussed above, be required to be affirmative or have constructive knowledge of Prop 65 chemicals?  And if online retailers, as a practical matter, have to make the warning nationwide – does this trigger dormant commerce clause challenges?  These developments and more to follow as the rules begin implementation next year.