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In the last few days of December, Kamran Ghalchi sent more than 3,000 California businesses an unwelcome holiday greeting — legal notices claiming they were in violation of Proposition 65, a one-of-a-kind California law requiring warnings on products that contain potentially dangerous chemicals. Defense lawyers and California’s attorney general are concerned that the huge volume of notices, along with 1,300 more filed by other lawyers in December, may be more about lining lawyers’ pockets than improving California’s environment. “I think that there’s an odor of extortion around many of these notices that concerns me,” says California Attorney General Bill Lockyer. “I hope that firms won’t pay ransom to make these issues go away.” According to Ghalchi, he and the other lawyers are being demonized to advance the political ends of businesses that have no love for Prop 65. “It’s not about money,” says Ghalchi, a solo practitioner in Encino, Calif. “We’re trying to do something good and at the same time recover our costs.” The flood of filings, timed to beat a new law that would have made suing more difficult, has unified industry groups that complain that many of the notices are just plain wrong. At the same time, it worries supporters of Prop 65, who fear the excesses of a few plaintiffs’ lawyers may lead to calls to kill or cripple the law. On Feb. 15, representatives of a loose coalition of defense lawyers and dozens of business groups met with Lockyer to discuss the December notices. His office has requested additional information from plaintiffs and has asked Ghalchi to delay pursuing suits against the 3,000 businesses while Edward G. Weil, deputy attorney general in charge of Prop 65 enforcement, processes the flood of information. Businesses and consumers outside California have as much at stake in this fight as those in the state, which is home to more than one in 10 Americans. “Everybody sells in California,” says Thomas Donegan, counsel to the Cosmetic, Toiletry and Fragrance Association, a trade group that supports federal legislation to limit Prop 65. “Anything California does is important.” PROP 65 California’s Safe Drinking Water and Toxic Enforcement Act of 1986 — more commonly known as Proposition 65 — got its start as a ballot initiative passed by nearly two-thirds of the state’s voters in 1986. It prohibits businesses with 10 or more employees from releasing identified carcinogens and reproductive toxins into drinking water. (More than 700 chemicals listed in state regulations are subject to Prop 65.) More controversially, it prohibits businesses from intentionally exposing anyone to a listed chemical without first providing a warning. The 60-day notices, like those filed by Ghalchi and others, are filed with the attorney general and served on businesses, putting them on notice that they may be violating the statute. The state is permitted to take over the case, which it does in a small number of instances. Most often, though, citizens or groups file the suits, which can result in fines of $2,500 per day. Prop 65 was intended to give businesses the burden of showing that their use of chemicals is safe, says David Roe, an environmental lawyer who was the primary drafter of Prop 65. “The idea was putting some of the tricky science back on the defendants’ shoulders, says Roe. “You have a legal obligation unless you can prove your way out of it, but only for chemicals that are known to cause cancer and birth defects.” Lawyers have filed more than 19,000 Prop 65 notices with companies doing business in California since 1988, most of them in the past few years. “The number of 34-cent stamps is not a good measure of the number of situations addressed,” says Roe, referring to the number of notices. “Almost all of the action is below the surface. It’s companies taking preventative action in advance. Prop 65 has worked extremely well.” Out of all the notices sent to California businesses, Roe and others say, there have been just three trials. The rest ended in dismissals, settlements and other out-of-court resolutions. BENEFITS Spurred by the law, manufacturers of faucets, china and drinking glasses have removed lead from their products. Many companies have reformulated products rather than risk the stigma of a cancer or birth defect warning. Other products that have no economical alternative now include warnings, allowing consumers to avoid them if they wish. While many defense lawyers acknowledge some of the law’s positive effects, there are criticisms. “Prop 65 takes all carcinogens and reproductive toxins and treats them all the same,” says Jeffrey B. Margulies of Parker, Milliken, Clark, O’Hara & Samuelian in Los Angeles, who maintains www.calprop65.com. “A tub of benzene, which is a known human carcinogen, and a microgram of Sweet ‘N Low got the same warning,” he says. (Saccharine was removed from the Prop 65 list only last year.) And claims that don’t settle immediately can cost tens of thousands to defend, lawyers say. As a result, many settle and move on, even if there is little merit to some of the claims, lawyers say. The 3,000 notices filed by Ghalchi in December is about twice as many as the total filed by all lawyers in every other year the law has been in effect, except 1999. (A flood of notices targeting second-hand tobacco smoke raised that year’s total to 6,000, the AG’s office says.) More than half of Ghalchi’s December notices were filed against car dealers and other automotive businesses throughout the state. Warnings at gas stations are a familiar sight to Californians, but car dealers do not warn customers that buying a car could expose them to oil, gasoline and car exhaust. In a letter offering to settle with one dealer, Ghalchi demands $7,500 to settle right away: $750 of it in fines to the attorney general, the rest split evenly between Ghalchi and Citizens for Responsible Business, a new Prop 65 enforcement group that is the plaintiff in all of Ghalchi’s December filings. He also demands that the dealer post warnings for employees and customers. Ghalchi says that he offers to settle many cases, without a fee, if the defendants find a way to eliminate chemicals: “If there are errors, if mistakes do happen, we take corrective action.” He says he is dropping as many as 1,000 cases in response to claims that the data supporting many claims are inaccurate. Despite industry complaints about Prop 65 suits, which lawyers say can be difficult and expensive to defend, they know it’s not going to go away soon. Because it became law as an initiative, the state Legislature can amend it only by a two-thirds vote. And it can only amend the statute to further its purpose, not to weaken it. “As a practical matter, if either the environmental leaders or business people are opposed, you can’t get two-thirds,” says Lockyer. It is perhaps no surprise, then, that Prop 65 has been amended just twice. In 1999, the Legislature passed a provision requiring that plaintiffs report details of their Prop 65 settlements to the attorney general’s office, setting the stage for reforms down the road. After collecting data on 239 settlements in 2000 and part of 2001, the attorney general’s office produced a summary. The settlements cost defendants $13.7 million, two-thirds of which went to fees and costs for plaintiffs’ attorneys. Less than eight percent was recovered as “civil penalties” and forwarded to the state. Much of the remaining money went to the plaintiffs, often earmarked for future Prop 65 enforcement. Besides the payments, the settlements typically required defendants to take some kind of action — provide a warning, reformulate a product or eliminate smoking areas in places accessible to the public, for instance. “A few law firms were bringing lawsuits about nonmeritorious or frivolous cases, forcing small settlements from small businesses and putting warnings on things that didn’t require warnings,” says Weil, the deputy AG who oversees Prop 65 enforcement for California. The data helped build support for substantive reforms to Prop 65. A second amendment, which took effect on New Year’s Day, requires plaintiffs to file certificates of merit. It also requires court approval of settlements and gives the state a role in the process. FEDS TO THE RESCUE? While changes passed by state legislators have been modest, industry groups, particularly those in the food, drug and cosmetics industries, have lobbied for federal laws to pre-empt Prop 65. “If you can have, say, California making environmental determinations and two or three other states making slightly different determinations, you really create a chaotic situation and confuse consumers,” says Donegan, lawyer for the cosmetics trade group. Environmental lawyers, along with Lockyer, worry that the controversy stirred up by the December notices will lead to renewed pleas for Washington to make Prop 65 a dead letter. Bills threatening to pre-empt Prop 65 have dogged it from its birth. And Congress held hearings on abuses by Prop 65 plaintiffs’ lawyers in 1999. “The current argument of choice is that it’s being abused — it puts too big a gun in the hands of abusers,” says Roe, the Prop 65 author. “But it’s the citizen suit potential that has made it so powerful on the ground.”

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