California Environmental Law Enforcement Update

O’Melveny is pleased to present this brief update on two important areas of California environmental law enforcement: Proposition 65 (Prop 65) and improper disposal of hazard waste. If you conduct activities in the State of California, these enforcement efforts may very well affect your operations, but they can also apply to operations outside the State if you merely manufacture or distribute products that find their way to California consumers.

Prop 65 requires that warnings be provided to California consumers prior to exposing them to certain levels of any of the nearly 1,000 toxicants that cause cancer or reproductive harm. Recent regulatory changes now clarify that the law also applies to online sales, where warnings must be provided on the product description page or within one mouse click of that description. The warnings themselves have also changed. Generally, there are two types of codified warnings: long-form (in which at least one toxicant must be named) and short-form (which only lists the type of harm, e.g., “cancer” or “reproductive harm”). If you have not updated your product warnings, occupational warnings (for workplace exposures), or environmental warnings (for exposures in areas such as parking garages) since the new regulations went into effect in August 2018, now is the time to conduct a compliance audit.

Prop 65, passed by a voter initiative in 1986, is enforced almost entirely by plaintiff’s attorneys acting in the public interest. Penalties (up to $2,500 a day) and attorneys’ fees are typically sought, with total settlements averaging $15 million annually over the past few years. Few cases go to trial, but settlement, even for products with limited manufacture and/or distribution, can easily reach $50,000 to $100,000.

Nearly 1,000 notices of violation (NOV) have been filed with the Attorney General’s office since the start of 2020. For restaurants and food manufacturers and distributors, acrylamide (from baked, fried, or roasted foods) and lead (because it is found nearly everywhere) are significant contaminants, though many others form the basis of NOVs. Manufacturers and distributors of products containing brass continue to receive NOVs for lead. Products containing pliable plastics often contain phthalates, several types of which are listed as Prop 65 toxicants. Absent evidence that exposures to the toxicants are below established “safe harbor” levels, a warning must be provided.

Although the warning requirements of Prop 65 receive most attention, the safe drinking water branch of the law is sometimes utilized by plaintiffs to address contamination to sources of drinking water. This may involve actions against oil and gas production operations for either injections of listed chemicals into groundwater or releases of chemicals into surface waters.

O’Melveny has substantial counseling and litigation experience with Prop 65 compliance matters and enforcement actions brought by the California Attorney General and third parties under Prop 65. Our team has provided Prop 65 representation in many dozens of high-profile proceedings, including matters for American Airlines, Inc., Bausch & Lomb, Quiksilver, Inc., Lennar Homes of California, Inc., KIK Custom Products Inc., Rexnord Corporation, Korg (USA), Hampton Products International Corporation, and a retail grocer. Our team has a proven record of success in handling Prop 65 proceedings, with deep familiarity with the principle litigants and Agency guidance and practice.

In recent years, California state, county, and city prosecutors have launched civil investigations against California retailers and service providers alleged to have improperly discarded regulated waste in their municipal trash, including hazardous waste, medical waste, and personal health or identifying information. While some materials, such as pesticides, lithium batteries, and infectious material, are understood to be regulated, some of the waste in question is often thought to be benign by defendants. This seemingly benign waste includes items such as spent light bulbs, alkaline batteries, aerosol cans with sunscreen or air freshener, expired over-the-counter drugs, payment receipts, electronic toys and office equipment, hand sanitizers, and even body lotion and baby shampoo. All such products may, in fact, be classified as “hazardous waste” under federal or state law, requiring segregation and special disposal.

The California Attorney General’s Office and local district attorneys have joined forces to investigate the subject disposal practices with targets including home improvement stores, pharmacies, supermarkets, cable providers, telecom companies, warehouses and other “big box stores,” and service providers. These investigations often begin with surreptitious “dumpster dives” where local district attorneys intercept several landfill-bound trash containers from a targeted business and empty their contents onto the ground at the transfer station, sorting through the trash and inventorying all the regulated items. The resulting statewide investigations seek millions of dollars in civil penalties, with one of the largest recent cases resulting in a $28 million penalty against a single defendant in 2018. Virtually all of these investigations lead to consent judgments with mandatory five-year injunctions requiring compliance with waste laws and, often, major investments in compliance programs. The costs of compliance programs imposed by injunction often exceed the penalties. Companies that resist settlement are subjected to onerous investigatory subpoenas and grand jury-like examinations of store managers, key health and safety officers, and other executives.

It is important to remember that California hazardous waste laws are more stringent than federal laws and those enacted by most states. Companies establishing national practices for handling, storage, treatment, and disposal of hazardous wastes generally will need to roll out more stringent programs for their California operations. While it is difficult, if not impossible, to keep all regulated waste out of dumpsters and compactors headed to municipal landfills, companies that put in place rigorous waste compliance programs before they are investigated fare much better in any investigation and settlement.

Our team has extensive experience in defending these investigations and negotiating settlements with state prosecutors. We can advise on an appropriate compliance program and arrange for the performance of waste audits designed to mitigate the impact of any investigation. We have also defended companies responding to investigatory subpoenas and obtained the first litigated termination of a waste injunction under the terms of an existing consent judgment.

Representative high-profile representations include those for FedEx Ground and Walmart. We represent other companies with significant statewide and national operations subject to ongoing waste investigations; these representations are currently confidential.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Bob Nicksin, an O’Melveny counsel licensed to practice law in California, Michael D. Hamilton, an O’Melveny partner licensed to practice law in California, Kelly McTigue, an O’Melveny partner licensed to practice law in California, Eric Rothenberg, an O’Melveny partner licensed to practice law in Missouri and New York, Dawn Sestito, an O’Melveny partner licensed to practice law in California, and Geoff Yost, an O’Melveny partner licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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