How Not to Overreact:Prop 65 updates andother chemical regulations

Lauren Michals & Alison TorbittGeneral Credit

Wednesday, January 17, 2018 | 11:10 AM

• Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety Code Sec. 25249.5 et seq.)

• A “right to know” statute“No person in course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving a clear and reasonable warning …”

• 900+ chemicals listed (https://oehha.ca.gov/proposition-65)

• Affects almost any company whose product ends up in California

California Proposition 65

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Common Warnings

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• All consumer products, including:• Food, packaging, lumber, clothing• Retail sales, internet sales, catalog sales• Restaurants

• Discharge into water

• Occupational exposures• Environmental

• Buildings• Emissions

What Does Proposition 65 Cover?

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Enforcement• California Attorney General

• Any private person “in the public interest” – ”bounty hunters”

• Must send “60-Day Notice” of alleged violation and intent to bring suit• As long as public prosecutors do not bring claim

Remedies• Penalties up to $2,500/day/violation

• 25% to plaintiff as bounty (plus costs and legal fees)/75 % to state• Injunctive relief: warning or reformulation or cease sales

2017: 678 settlements, almost $20 million paid for enforcer’s legal fees

Key Provisions

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Revised Warning Regulations (27 Cal. Code Regs. § 25600 et seq.):• Changes existing “safe harbor” warning language

• Requires identification of at least one specific chemical for each harm

• Requires yellow triangle symbol

• Requires direction to state information site

• Requires (in some cases, duplicate) website and catalog warnings

• Provides more guidance on size/placement

• Warning must be visible before sale, not exposure, for some sales

• Foreign language required if also on the label

• Ban on text that could dilute warning

• Effective date of August 30, 2018

What’s New in 2018?

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New Warnings Required by August 31, 2018

Current Safe Harbor Warnings

WARNING: This product contains a chemical known to the State of California to cause cancer.

WARNING: This product contains a chemical known to the State of California to cause birth defects or other reproductive harm.

New Safe Harbor Warning (for products manufactured after August 30, 2018):

WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause cancer [and birth defects or other reproductive harm]. For more information go to www.P65Warnings.ca.gov.

(Warnings in prior court approved consent judgments remain valid.)

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• Tailored safe harbor warning language for specific categories: foods, furniture, diesel engines, dental care, alcoholic beverages, restaurants, foods, amusement parks, parking lots, designated smoking areas and more.

• Specific warning text for specific types of products or exposures:

• Foods/Dietary Supplements: Enclosed in a box WARNING: Consuming this product can expose you to chemicals including lead, which are known to the State to cause cancer and birth defects or other reproductive harm. For more information go to www.P65Warnings.ca.gov/food.

• Truncated Warnings, only for use on-product or its immediate packaging, not for food, does not require the identification of a chemical:

WARNING: Cancer and Reproductive Harm: www.P65Warnings.ca.govWARNING: Cancer: www.P65Warnings.ca.govWARNING: Reproductive Harm: www.P65Warnings.ca.gov

New Safe Harbor Warnings

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Premises/Environmental warnings:• WARNING: Entering this area can expose you to chemicals

known to the State of California to cause cancer and birth defects or other reproductive harm. Including [name of chemical], from [source of exposure]. For more information go to …”– Must be posted at each entrance

• Section 25605(a) was revised for readability and clarity. An example of the text of a compliant waring is as follows:– WARNING: Entering this area can expose you to chemicals

known to the State of California to cause cancer, including asbestos, from construction debris. For more information got to www.P65Warnings.ca.gov.

New Warnings Required by August 31, 2018

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• May need to re-visit out-of-court settlements• Non-California internet sellers must warn California customers

• On product display page: either entire warning or hyperlink using the word “WARNING”; or

• Before purchase is completed by California purchaser (e.g., pop-up)• Wording can match warning on product

• Warnings must be provided in catalogs • Wording can match warning on product• Must be clearly associated with product

• Not clear whether internet sites, like eBay, that are not directly selling the product have warning obligations

New Obligations

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• Manufacturers can pass on obligation to warn to retailers (27 Cal. Code Regs. § 25600.2) • Must provide warning and other material to retailer and obtain

confirmation• Vendor agreements could override

• Retailers will have new short window to cure any warning defect after receiving a Notice of Violation

• Retailer must not have had prior knowledge of need to warn• Retailer may avoid liability by ceasing sales or provide warning within

five (5) business days of receiving Notice• Must provide information on manufacturer/supplier, if requested

New Obligations after August 30, 2018

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AB 1583, took effect January 1, 2018: “requires the Attorney General's Office to send a letter to the noticing party and alleged violator if, after reviewing the factual information attached to the Attorney General's copy of a certificate of merit and meeting and conferring with the noticing party, the Attorney General believes there is no merit to the action. (Health & Saf. Code, § 25249.7, subd. (e)(1)(A).”

• Letters will be posted at https://oag.ca.gov/prop65/ag-letters

• No comment by AG is not an endorsement of the claim

• AG objection is not necessarily binding on parties

Heightened AG Review of Notices?

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• Foods• Acrylamide (snack foods, chips, bread, cookies, nuts, prune juice)• Cadmium (chocolate-based products)• Lead

• Consumer Products• Phthalates (DEHP, DINP) in any plastic product• Lead• BPA (blanket safe harbor warning has expired)

• Dietary Supplements (lead, cadmium)• New Listed Chemicals: furfuryl alcohol

Prop. 65 Enforcement Trends

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• Coffee: Center for Education and Research on Toxins (CERT) v. Starbucks

• Acrylamide in coffee: created by roasting bean• Is “created by cooking” enough to avoid a warning?• Must an alternate safe harbor level be established?• Must companies reduce acrylamide levels if possible

• Snack Foods: Center for Environmental Health (CEH) v. Save Mart• Acrylamide in snack foods: created by cooking

• Is this enough to avoid a warning?• Must an alternate safe harbor level be established?• Should the prior proposed safe harbor level be used?

• Wine: Charles v. Sutter Home

• Is the alcohol beverage safe harbor warning sufficient for all chemical exposures?

Litigation to Watch

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• Sign up for OEHHA updates and notices:• http://www.oehha.ca.gov/prop65.html

• Check Attorney General website for Notices: • https://oag.ca.gov/prop65

• Test for commonly expected chemicals• Test within and across lots• Do not rely upon overseas suppliers’ assurances• Contractual terms (indemnification, warranties)• Consider a Safe Use Determination – before a Notice• Risk assessment

What to Do?

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Cal Haz Waste Control Law & Fed’s RCRA

If your business generates waste – you need to know! Includes consumer returnsCAL HWCL: HSC §7 25100 et seq. predates RCRA; operates “in lieu” of RCRA w/ EPA authorizationAllows for enforcement by:US EPA

California EPA and

Third Parties

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Definitions

Waste any solid, liquid, semisolid or contained gaseous discarded material that is not excluded by this Chapter or regulations

Hazardous ignitable, corrosive, reactive, toxic, listed or poses substantial present or potential hazard to human health or environment when improperly managed

Recyclable capable of being used, reused or reclaimed

Universal Waste

generally household hazardous waste (light bulbs, batteries, thermostats, pesticides, cellphones, etc.)

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Large Quantity Generator

>1,000 kg/month or >1 kg of acutely hazardous, 90 day accumulation time limit

Small Quantity Generator

>100 kg/month, 180/270 day accumulation time limit

Conditionally Exempt Small Quantity Generator

<100 kg/month, no accumulation time limit

All must identify haz waste, manage and store properly, recordkeeping and manifest, train, prevent and respond to releases …

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E-WASTE RECYCLING— CalRecycle, DTSC and Cal Board

of Equalization

— Obligations for manufacturers, retailers and recyclers

— Covered Electronic Device (CED) —$6-10 recycling fee collected at point of sale

— Others: universal waste

Enforcement

US EPA Region 9; DTSC; CUPAsAuthority to inspect facility, conduct sampling, stop and inspect equipment or vehicle, inspect and copy any record, take photos

Information requests, administrative subpoenas, environmental audits, pre-investigations, investigations, routine and non-routine inspections

Enforcement via informal (oral warnings, letters, Notice to Comply) and formal (civil or criminal complaints, administrative)

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Hazardous Waste Enforcement – E-WASTE

2015: Comcast Corp. agreed to pay the state of California $25.95 million to resolve allegations that the company unlawfully disposed of electronics, including remote controls, modems, splitters and routers• Ten years of sending e-waste to local landfills• “Careless and unlawful”• Four years of investigation

2014: AT&T agreed to pay the state of California $23.8 million over similar hazardous waste disposal violations• DTSC goes Dumpster Diving

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Who big box retailers to pharmacies to groceries to electronic and telecommunication retailers

What hazardous and universal wastes

When routine and non-routine inspections

Where roll-off bins and yard bins

Why 2010–2014: 10 cases alone = $140 million in fines

How “pre-investigation” power under Cal. Health & Safety Code Section 25180(a)(1) and 25182

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All significant spills, releases, or threatened releases of hazardous materials must be immediately reported.Release = Any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment, unless permitted or authorized by a regulatory agency (CERCLA § 101(22) & Cal. H&S Code § 25501(q)) or

A threatened release = a condition creating a substantial probability of harm that requiresimmediate action to prevent, reduce, or mitigate damages to persons, property or the environment (Cal. H&S Code § 25501(u)) of aHazardous material = Any material that, because of its quantity, concentration, or physical or chemical characteristics, poses a significant present or threatened hazard to human health and safety or to the environment, if released into the workplace or the environment …” (Cal. H&S Code §25501 (m))

Chemical Release Notifications

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• Owners

• Operators

• Licensees

• Persons in Charge

• Employers

Who and What

• Handlers, any employees, authorized representatives, agent or designees of handlers shall, upon discovery, immediately report any release or threatened release of hazardous materials (Health and Safety Code §25510)

• Facilities

• Vehicles

• Vessels

• Pipelines

• Railroads

Requirements for immediate notification from:

Notification is required regarding significant releases from:

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Immediate Notification (generally defined as within 15 minutes of discovery)

Written Follow-Up 304 Reporting (7 days later) or Non-Emergency Written report (30 days later)

What:• Identity of caller

• Exact location, date and time of spill, release or threatened release

• Location of threatened or involved waterway or storm drains

• Substance, quantity involved and isotope if necessary

• Chemical name (if known, it should be reported if the chemical is extremely hazardous)

• Description of what happened

When and What to Report

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911 or Fire Department

Certified Unified Program Agency

California Governor’s Office of Emergency Services (CalEMA): 800-852-7550

California Highway Patrol if on highway

RWQCB if into state waters

Potentially more!

Whom to Call

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Enforcement Tools• Notice of Violations• Summary of Violations• Notice to Comply• Notice of Significant Violations UST• Office Meeting • Permit Revocation• Facility Closure• Business License Revocation

Administrative Enforcement Orders• Quarantine Hazardous Waste

Generators/Tiered Permitting Facilities

• Referral to Another State Agency• Referral to Federal• Civil Case• Criminal Case

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Enforcement Goals

Return violators to compliance in a timely manner.

Penalize violators.

Deprive violators of any significant economic benefit gained from violations.

Treat similar facility owners and operators equally and consistently with regard to the same types of violations.

Initiate and conclude enforcement activities in a timely manner.

Promote compliance with statutes and regulations.

Prevent any businesses from having an unfair business advantage through noncompliance.

Deter violators of hazardous material/waste rules and regulations. 28

Types of Enforcement Results

Settlements are generally agreed-upon resolutions to an enforcement case.

• Consent agreements/final orders (CA/FOs) • Administrative orders on consent (AOCs)• Consent decrees signed by all parties to the action and filed in the

appropriate court• Informal Expedited settlement agreements (ESAs)Civil Penalties

Injunctive Relief

Supplemental Environmental Projects (SEPs)

Criminal Penalties

Incarceration

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Penalties – eeek!

• CAA § 113(b): up to $37,500 per day for each violation

• CERCLA § 109(c): up to $107,500 per day for each violation

• EPCRA § 325(b)(3): up to $107,500 per day for each violation

• Cal. Health & Safety Code § 25189.2 (HazSub): up to $70,000 per day for each violation

• Cal. Health & Safety Code § 25299 (USTs): up to $5,000 per day for each violation

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A Few Examples of Escalating Penalties

VIOLATION MAXIMUM CRIMINAL PENALTY (MISDEMEANORS) MAXIMUM CIVIL PENALTY

“Knowing” violations $10,000 or 6 months in jail or both; H&S § 42400.3.5(a): Any person who knowingly violates any rule, regulation, permit, order, fee requirement, or filing requirement

$40,000H&S § 42402.2(a): Any person who emits an air contaminant in violation of any order, rule, regulation, or permit and who knew of the emission and failed to take corrective action within a reasonable period of time under the circumstances*

“Knowing” false material statement or falsification of required document

$35,000 or 9 months in jail or both; H&S § 42400.3.5(b): Any person who knowingly makes any false material statement, representation, or certification in any form, notice, or report required by a rule or regulation or permit or who knowingly renders inaccurate any monitoring device required by a rule, regulation, or permit or with intent to deceive, falsifies any required document pursuant to any provision, rule, regulation, permit, notice to comply or order

$35,000H&S § 42402.4: Any person who knowingly and with intent to deceive, falsifies any document required to be kept pursuant to any rule, regulation, permit, or order

“Willful and Intentional” emission of an air contaminant

$75,000 or 1 year in jail or both; H&S § 42400.3(a): Any person who willfully and intentionally emits an air contaminant in violation of a rule, regulation, or permit*

$75,000H&S § 42402.3(a): Any person who willfully and intentionally emits an air contaminant in violation of any order, rule, regulation, or permit*

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A Few Examples of Escalating Penalties (cont’d)

VIOLATION MAXIMUM CRIMINAL PENALTY (MISDEMEANORS) MAXIMUM CIVIL PENALTY

“Willful and Intentional” emission of an air contaminant with reckless disregard of great bodily injury or death and results in an “unreasonable risk” of great bodily injury or death of any person

$125,000-$500,000 or 1 year in jail or both; H&S §42400.3(b): Any person who willfully and intentionally emits with reckless disregard of great bodily injury or death and results in an “unreasonable risk” of great bodily injury or death of any person. (If a corporation is the “person,” the fine may increase to a maximum of $500,000)*

$125,000 - $500,000 H&S § 42402.3(b): Any person who willfully and intentionally emits with reckless disregard of great bodily injury or death and results in an “unreasonable risk” of great bodily injury or death of any person. (If a corporation is the “person,” the fine may increase to a maximum of $500,000)*

Failure to take corrective action after known emission violation

$40,000 or 1 year in jail or both; H&S § 42400.2(a): Any person who fails to take corrective action (defined as termination of the emission violation or grant of a variance) after a known emission which violates a rule, regulation, or permit within a reasonable period of time*

$40,000 H&S § 42402.2(a): Any person who emits an air contaminant in violation of any order, rule, regulation, or permit and who knows of the emission and fails to take corrective action (defined as termination of the emission violation or grant of a variance)*

Negligent emission violation

$25,000 or 9 months in jail or both; H&S § 42400.1(a): Any person who negligently emits an air contaminant in violation of a rule, regulation, permit, or order*

$25,000 H&S § 42402.1(a): Any person who negligently emits an air contaminant in violation of a rule, regulation, permit, or order *

Strict liability violation $1,000 or 6 months in jail or both; H&S § 42400(a): strictly liable for any violation of any law, rule, regulation, permit, or order*

$1-10,000H&S § 42402: strictly liable for any violation of any law, rule, regulation, permit, or order* 32

Penalty Considerations

Health & Safety Code Section 42403(b): shall take into consideration all relevant circumstances, including but not limited to:

The extent of harm caused by the violation

The nature and persistence of the violation

The length of time over which the violation occurs

The frequency of past violations

The record of maintenance

The unproven or innovative nature of the control equipment

Any action taken by the defendant, including the nature, extent and time of response of the cleanup and construction undertaken to mitigate the violation

The financial burden to the defendant

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Miscellaneous Considerations

Conspiracy: two or more persons agree to commit “any crime” and then at least one person must act in furtherance of the planned crime. Cal. Penal Code section 182

California Business & Professions Code Section 17200: Unfair Competition Law prohibits unfair commercial business advantage gained by violations of law

Equitable Remedies: temporary or permanent injunction tailored to prevent the violations from re-occurring in the future

Individual Accountability for Corporate Wrongdoing: Sept. 2015 US DOJ Memo made priority and gave steps for how to …

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Self-Reporting

Federal and state laws prohibit concealing emissions + USEPA’s Audit Policy’s conditions for mitigation: 1. Systematic discovery of the violation through an environmental audit or the implementation of a compliance management

system

2. Voluntary discovery of the violation was not detected as a result of a legally required monitoring, sampling or auditing procedure

3. Prompt disclosure in writing to US EPA within 21 days of discovery

4. Independent discovery and disclosure

5. Correction and remediation within 60 calendar days from the date of discovery

6. Prevent recurrence of the violation

7. Repeat violations are not eligible if they occur at the same facility within the past three years or have occurred as part ofa pattern within the past five years

8. Violations are not eligible if they result in serious actual harm, present an imminent and substantial endangerment, or violate the specific terms of an administrative or judicial order or consent agreement

9. Cooperation by the disclosing entity is required

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Some More Examples

USEPA and Whole Foods

CARB/California Attorney General and Walmart Stores, Inc.

SWRCB & Morning Star Packing Company

Sacramento AQMD & Contractor & Asbestos: a settlement story …

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Lauren MichalsCounsel, Nixon Peabody LLP415-984-8261lmichals@nixonpeabody.com

Alison TorbittAssociate, Nixon Peabody LLP415-984-5008atorbitt@nixonpeabody.com