What now? California finalizes Prop 65 exemption for coffee

On June 3, 2019, the California Office of Administrative Law approved a regulation adopted by the California Environmental Office of Health Hazard Assessment (OEHHA) exempting chemicals in coffee from Prop 65’s warning requirement. The regulation, which has an effective date of October 1, 2019, provides:

Exposures to chemicals in coffee, listed on or before March 15, 2019 as known to the state to cause cancer, that are created by and inherent in the processes of roasting coffee beans or brewing coffee do not pose a significant risk of cancer.

While the adoption of the regulation would seem to end the ongoing controversy about whether Prop 65 warnings are required for acrylamide in coffee, and to be very good news for those who make and sell coffee, much dust remains to settle.

Background and current status of Prop 65 coffee litigation

This regulation follows an industry-wide litigation brought by the Council for Education and Research on Toxics (CERT) in which Los Angeles Superior Court Judge Elihu Berle found that coffee roasters and retailers failed to demonstrate that the levels of acrylamide – a chemical formed when coffee beans are roasted – did not pose a significant risk of cancer.

In September 2018, Judge Berle rejected the coffee companies’ request to stay the litigation during the rulemaking (as well as their first amendment argument that compelling a warning that coffee caused cancer was controversial and factually inaccurate in light of the overwhelming evidence in the June 2018 monograph published by the International Agency for Research on Cancer (IARC) on which OEHHA relied for its regulation), and set an October 15, 2018 trial date for the CERT’s request for civil penalties and an injunction. The Friday before trial was to start, October 12, 2018, the California Court of Appeal granted the companies’ request for a stay, which has been in effect since that date.

Meanwhile, on September 7, 2018, CERT filed a separate action against OEHHA, seeking to have the proposed regulation deemed invalid, for a variety of reasons. The case was originally assigned to Judge Berle, but OEHHA requested reassignment to another judge due to the fact that his original decision was based on much of the same evidence as OEHHA’s regulation, but would be determined under a different standard. The new judge, Carolyn Kuhl, stayed the litigation until the regulation was finalized, and then decided to stay the action entirely to let Judge Berle determine the validity of the regulation in the enforcement case. On June 5, 2019, OEHHA filed a writ petition in the Court of Appeal, seeking to have Judge Kuhl ordered to lift the stay and determine the validity of the regulation. CERT has yet to file a response to the writ petition.

On May 31, CERT asked the Court of Appeal to allow Judge Berle to resume handling the case so that the parties can litigate whether the regulation applies to it, and if so whether the regulation is valid. The defendants have asked the appellate court to maintain the stay so that the validity of the regulation can be decided in the case in which OEHHA is a party – the case currently stayed by Judge Kuhl. As of June 10, the Court of Appeal has yet to take any action on either request.

What’s Next?

There are a number of issues that remain unresolved, and it is quite likely that these issues will take quite some time to resolve, with appellate proceedings expected.

Procedurally, the following issues need to be sorted out:

  • Which Superior Court judge–Berle or Kuhl–will decide whether the regulation is valid?

In its writ petition, OEHHA contends that it is not a party to CERT’s enforcement litigation, and it will not be bound by any decision Judge Berle makes. OEHHA contends that it should not be required to litigate the validity of the regulation before a judge it has challenged, who has already made decisions on some of the same evidence, with a different legal standard (the proof necessary for a “no significant risk” defense to a Prop 65 enforcement action vs. the proof necessary to show that a regulation is invalid because it is “arbitrary and capricious”).

  • Will the Court of Appeal rule on the first amendment defense?

The defendants’ writ petition sought to have Judge Berle’s ruling on the first amendment defense reversed by the Court of Appeal. To this point, the court has simply stayed the case pending the OEHHA rulemaking. The defendants have reiterated their position that the court can and should rule on this defense.

Substantively, the following issues remain to be decided:

  • Is the regulation valid?

CERT has raised a kitchen-sink’s worth of challenges to the regulation. The most sensational claim is that former Governor Jerry Brown put out a “kill order” on Judge Berle’s ruling at the coffee companies’ request, directing OEHHA to adopt a regulation to reverse the ruling. OEHHA’s position is that its regulation is eminently justified by the science, as it told the Court of Appeal in its writ petition:

As the Administrative Record supporting OEHHA’s Regulation will show, although coffee contains chemicals that have been identified as carcinogens in some contexts, there is overwhelming scientific evidence that consumption of coffee poses no increased risk of cancer; to the contrary, consumption of coffee may lower the risk of several types of cancer. (Emphasis added.)

  • Does the regulation apply to the existing litigation?

Everyone recognizes that, if the regulation applies to the litigation, the case must be dismissed. Not surprisingly, CERT takes the position that because the regulation was not adopted until after the court found liability, it cannot be retroactively applied. CERT also argues that the defendants did not include the regulation in their affirmative defenses, so they cannot rely on it.

The defense has argued that because Proposition 65 is a statutory remedy, and because OEHHA is authorized to develop regulations to implement Prop 65 (including how the no significant risk defense is established), any changes that are adopted before final judgment are applicable to pending litigation under the “statutory repeal” rule. The defendants also note that their answers all raised the no significant risk defense, and that this new regulation is simply a specific implementation of that defense, such that no amendment of their answers is necessary.

  • The first amendment defense.

Judge Berle rejected the defense’s attempt to renew their first amendment defense following a 2018 opinion from the US Supreme Court and a US District Court order enjoining the state from requiring Prop 65 warnings for glyphosate. The defendants asserted that any Prop 65 warning about acrylamide in coffee would not be “purely factual and uncontroversial,” given statements by IARC, OEHHA, and the US FDA that coffee does not cause cancer. As noted above, the Court of Appeal has yet to address this issue; if it does not take the issue up now, undoubtedly it will be asked to take the issue up at some time in the future.

  • Has conflict preemption arisen?

FDA supported the proposed regulation. In a statement, FDA Commission Scott Gottlieb, M.D., stated:

We’ve taken this position because we too have carefully reviewed the most current research on coffee and cancer and it does not support a cancer warning for coffee. In fact, as our letter to California states, such a warning could mislead consumers to believe that drinking coffee could be dangerous to their health when it actually could provide health benefits. Misleading labeling on food violates the Federal Food, Drug, and Cosmetic Act. No state law can require food to bear a warning that violates federal law.

While Prop 65 has avoided many preemption challenges, it has been successfully challenged where its warnings are at odds with federal agencies’ positions on product labeling, most famously when the California Supreme Court upheld a finding that Prop 65 warnings for nicotine replacement therapy products was preempted by FDA’s rejection of the Prop 65 warning language in Dowhal v. Smithkline Beecham Consumer Healthcare, 32 Cal. 4th 910 (2004).

If the regulation and first amendment do not dispose of the litigation, it is likely that the defense will assert that imposing a Proposition 65 warning for coffee will irreconcilably conflict with federal law, given FDA’s  position that such a warning could mislead consumers.

Conclusion

Unfortunately, this long saga does not seem to be heading to a conclusion anytime soon. We do expect that the procedural issues will be resolved in the next 60-90 days, but likely the briefing and decision on the substantive issues will take several months longer. And, it takes no crystal ball to predict years of appellate proceedings initiated by whichever party or parties are unhappy with how the litigation plays out.

Webinar: What do you mean I’m shipping hazmat?

I’m delighted to announce that Norton Rose Fulbright will be hosting a webinar on May 30 at noon CDT with an absolute HazMat pro, Jim Shimko of Labelmaster.

Each day, U.S. businesses transport over one million HazMat shipments, and every one of them is subject to federal standards. Chances are, your company is shipping HazMat whether you know it or not. And while your logistics and operations personnel may be well-versed in the requirements, HazMat is heavily enforced, and in-house counsel should know the basics in case a problem arises. HazMat regulations establish standards for HazMat identification, training, labeling, use of proper containers, recordkeeping, reporting, placarding, and vehicle safety. The transport of such goods is governed by a complex network of national and international regulations, programs that have extremely broad applicability across many industries.

During the webinar, we will cover the following topics:

  • What is HazMat?
  • How are these rules applied?
  • How do you structure a management program to control the risks?
  • Who can help?

You can register for the webinar here.

Beyond cosmetics: ARB enforcement of California’s Consumer Products regulation

We’ve previously published analyses on the California Air Resource Board’s (ARB) case settlements related to cosmetic products, but there are a whole host of other consumer products also subject to ARB enforcement. We thought it would be helpful to provide some insight into these as well. Continue reading

Six months: how the new Proposition 65 regulations have impacted retailer enforcement

It’s been about six months since the new Proposition 65 regulations allocated the primary responsibility for providing warnings to suppliers, manufacturers, distributors, and importers, while limiting retailers’ responsibility to limited, specified circumstances. Many wondered what impact these new regulations would have on the enforcement of Proposition 65 against retailers. Six months in, the answer still isn’t clear. Continue reading

CPSC targets furniture tip over hazard with substantial product hazard designation

At last week’s ICPHSO Annual Meeting, the U.S. Consumer Product Safety Commission’s Acting Chairman Ann Marie Buerkle broke news to attendees, announcing that CPSC would deem “clothing storage units” that do not meet ASTM F2057-17 as posing a “substantial product hazard.” In concert with Buerkle’s announcement, CPSC’s Deputy Executive Director issued a letter to “Manufacturers, Importers, and Retailers of Clothing Storage Units” that effectively makes this existing voluntary safety standard mandatory.

This substantial product hazard designation may signal CPSC’s intent to evaluate products for compliance with the standard through port inspections, direct inquiry of manufacturers, importers, and private labelers, and market surveillance; seek recalls of existing non-compliant products; and punish non-compliant entities through “failure to report” civil penalty proceedings, as it did with drawstrings in children’s upper outerwear and hoverboards.

The clothing storage unit standard

ASTM F2057-17 defines a “clothing storage unit” as a “furniture item intended for the storage of clothing typical of bedroom furniture.” The standard requires tip over testing and permanent warning labels for any clothing storage unit over 30 inches in height.

ASTM F2057 has been the industry standard for clothing storage units for many years, but CPSC’s actions last week, and CPSC’s prioritization of the hazards of furniture tip over for many years, suggest that CPSC has considered existing compliance efforts inadequate.

CPSC’s letter

CPSC’s letter states that

Children face an unreasonable risk of serious injury or death from clothing storage units that fall within the scope of the ASTM F2057-17 standard but do not meet its requirements. Accordingly, the CPSC’s Office of Compliance and Field Operations staff will regard such products as having a defect which could present a substantial product hazard under Section 15(a) of the CPSA, 15 U.S.C. § 2064(a). Should we encounter such products, we shall initiate an investigation and will seek the corrective action we believe is appropriate.

Consistent with this, the letter urges furniture companies to “review your product line immediately and ensure that all clothing storage units that you manufacture, import, distribute, or sell in the United States comply with ASTM F2057-17 standard where applicable.”

Finally, the letter emphasizes that Section 15(b) of the CPSA places a duty to report (within 24 hours) on all members of the supply chain if they obtain “information that reasonably supports the conclusion that a product distributed in commerce contains a defect that could create a substantial product hazard or that such product creates an unreasonable risk of serious injury or death.”

Failure to report, or report on time, can lead to criminal penalties, or civil penalties of up to ~$100,000 per violation, capped at ~$15 million for a related series of violation.

CPSC has consistently employed Section 15(b) enforcement as a tool to punish companies and send deterrent messages to the consumer products industry. Section 15(b) failure to report claims are one of the most flexible tools the Commission has to penalize a company in connection with a product. Claims only require a showing that a company obtained information triggering a report and did not report immediately—there is no requirement that a product actually result in an injury.

What should we expect?

CPSC took a similar approach with drawstrings, as mentioned above, but more recently with hoverboards. In February 2016, CPSC issued an open letter to industry designating an industry standard for hoverboards as mandatory. CPSC then sent investigation letters to sellers of hoverboards requesting (demanding) that they either provide information demonstrating compliance with the industry standard or stop selling the products. Then, over the course of 2016 and 2017, CPSC announced more than 20 recalls of hoverboards.

Since CPSC’s letter here states that manufacturers, importers, and retailers “should not” manufacture, import, distribute, or sell non-compliant clothing storage units and urges firms to undertake a product line review, we would not be surprised to see CPSC issue investigation letters to furniture industry participants requesting that they verify compliance with ASTM F2057-17 or stop selling the products, signifying the start of a concerted compliance effort by CPSC.

California selects nail products containing toluene for Priority Product list

California’s Department of Toxic Substances Control (DTSC) has proposed listing nail products containing toluene as its latest priority product under its Safer Consumer Products program. If adopted, responsible parties will need to undertake remove impacted products from sale in California or undertake an alternatives analysis in order to continue selling in California.

The Safer Consumer Products regulation

California’s Safer Consumer Products regulation restricts the use of certain chemicals when used in specified products, based on various human health and the environmental risk factors. These product-chemical combinations are called “Priority Products.” When DTSC finalizes a Priority Product, manufacturers, distributors, and retailers must either conduct an alternatives analysis of the chemical, or remove the product from sale in California. The alternatives analysis can lead to identification of a safer alternative, or determine that there is no safer alternative–at which point DTSC can impose restrictions on use.

Priority products currently subject to SCP regulations include:

  • Paint or varnish paint strippers containing methylene chloride
  • Spray polyurethane foam with unreacted MDI
  • Children’s foam-padded sleeping products with the flame retardants TDCPP or TCEP

In addition to nail products with toluene, DTSC has also proposed the following as priority products:

  • Perfluoroalkyl and polyfluoroalkyl substances (PFASs) in carpets and rugs
  • Laundry detergents containing the surfactants nonylphenol ethoxylates (NPEs)
  • Paint and varnish strippers and graffiti removers containing n-methylpyrrolidone (NMP)

What is toluene?

Toluene is used as a solvent in a variety of nail products, including polishes, hardeners and thinners, and according to DTSC, has been detected in indoor air in nail salons and in the breathing zones of nail salon workers. DTSC also states that toluene exposure has been linked to health effects including adverse nervous system effects, respiratory tract effects, and developmental toxicity.

Next Steps

DTSC has released a draft technical report which discusses the scientific basis for listing nail products containing toluene. A public workshop will be held on March 13, 2019, and DTSC will accept public comments through March 15, 2019.

This is only the beginning of the regulatory review process—it is possible there will be additional revisions to the proposal and further opportunity for public comment—we anticipate it could take a year, and likely more, to get to a final regulation.

Will new House majority lead to a federal supply chain transparency law?

Privately, companies have long self-regulated supply chains to prevent human trafficking, forced labor, and child exploitation. Meanwhile, governmental efforts have lagged in the public sphere. But the past few years have shown a marked change. California, the United Kingdom, France, and Australia have enacted legislation requiring companies to publicly disclose the steps they are taking to eradicate slavery and human trafficking in their operations and supply chains for each financial year. Canada is currently considering similar legislation.

If at first you don’t succeed….

While the US government has not yet passed a comparable law, it is not for lack of trying—the Congressional Human Trafficking Caucus has introduced disclosure legislation at least five times since 2011—most recently this past October. The prior legislation, like its predecessors, uses the Securities Exchange Act as the lever to require all public companies with annual worldwide revenue over $100 million to disclose prescribed information to the SEC. In addition to this information being public via the SEC, the prior legislation would also require covered companies to publish the information on their websites. The disclosures would include all policies and measures a company is taking to identify, address, and remedy human trafficking, forced labor, and child exploitation occurring within its supply chain, including whether a company:

  • Maintains policies to identify and eliminate these practices within its supply chain
  • Requires downstream and upstream contractors to attest that the materials and labor used to manufacture its products are in compliance with laws and corporate standards regarding these practices
  • Implements any internal accountability standards and supply chain reporting procedures to address violations within the supply chain
  • Offers training to contractors within its supply chain
  • Verifies contractor compliance with relevant laws and corporate standards
  • Takes remedial actions if it becomes aware of a violation, and what those actions might be

Borrowing from existing law

The bill is strikingly similar to California’s Transparency in Supply Chains Act. The California law requires website disclosures of efforts to eradicate slavery and human trafficking from its direct supply chain, including information on verification, auditing, internal accountability, and training. California’s law is more limited in scope than the federal efforts, as it applies only to retailers and manufacturers doing business in California with annual worldwide revenue over $100 million—rather than any public company.

We expect that a similar bill will be introduced in the House this year, with its new Democratic majority. While the last iteration of the bill was dead-on-arrival in the lame duck Congress, the ushering in of a new session—and importantly a new Democratic majority—makes it far more likely that a similar version of this bill may become law within the next two years. Getting out of the House may be all that is needed to finally push this bill into law, as the prior efforts have all had bi-partisan co-sponsors.

Such a vast expansion of mandatory corporate disclosures would create not only additional legal obligations for covered companies, but could also have significant implications on social responsibility efforts, public relations campaigns, and corporate bottom-lines. Due to the public nature of the disclosures, covered companies can count on NGOs poring over their disclosures.

Proposition 65 survival guide

At long last, it’s here—OEHHA’s long-awaited amendments to the Proposition 65 “clear and reasonable warning” regulations become mandatory for products manufactured on and after August 30, 2018.

As we are sure you’ve probably heard ad nauseam by now, the revisions make two key changes to the Proposition 65 regulations: (1) for the first time, they allocate responsibility for warnings among suppliers and retailers; and (2) they make several substantive changes to the content and methods of transmission for “safe harbor” warnings.

While we have posted a detailed summary of the new amendments if you want to get into the weeds, here is a quick refresher. The amendments:

  • Place the primary responsibility for warnings on manufacturers, distributors, importers, and private label retailers, while providing an exception to liability for retailers functioning in a pure retail role;
  • Require the inclusion of a warning symbol, specific warning language, and identification of at least one chemical in the warning; and
  • Prescribe specific warning language and methods for certain product categories, including furniture, raw wood, food, and alcoholic beverages.

Proposition 65 Survival Guide

Based on the questions we’ve heard over the past year, the changes have created significant confusion and challenges for suppliers and retailers. In light of this, we thought it would be helpful to provide a “survival guide” of guidance and reference materials for businesses:

California Proposition 65 amended warning regulations

On August 30, 2016, OEHHA’s long-awaited amendments to the Proposition 65 clear and reasonable warning regulations became final.  The amendments bring two major changes: (1) an allocation of responsibility for providing warnings between retailers and suppliers; and (2) revisions to the safe harbor warning requirements, including warning content and methods of transmission.

Allocation of responsibility

Under the existing Proposition 65 regulations, any party in the supply chain could be held liable for failure to provide a warning.  The revised regulations allocate responsibility for warnings primarily to manufacturers, distributors, and importers (together, suppliers), with retailers responsible in specified circumstances.

Suppliers can meet their warning obligation “either by affixing a label to the product bearing a warning…, or by providing a written notice directly to the authorized agent for a retail seller.”  27 Cal. Code Regs. § 25600.2.

The only situations where a retailer is primarily responsible for providing a warning (i.e., may be liable in an enforcement action) are when:

  • The retailer sells the product under its private label, brand, or trademark.
  • The retailer has knowingly and intentionally introduced a listed chemical into the product, or caused a listed chemical to be created in the product.
  • The retailer has covered, obscured or altered a warning label.
  • The retailer has received warning information and materials from the supplier and does not post them—note that consent for the warnings from the retailer is not required; the supplier need only send the information to the retailer’s authorized agent.
  • The retailer has actual knowledge of the potential product exposure requiring the warning, and the suppliers are exempt

A retailer can modify this allocation by contract, requiring its suppliers and other vendors to provide a warning, as long as a required warning is ultimately provided.

If a warning is not provided and the retailer meets one of these conditions, it will find itself in the same situation as before the amendments: it can be sued by a private or public enforcer, and it will need to consider seeking defense and indemnity from its supplier.

The five business day exemption for retailers

The good news for retailers is that they will not be liable for an enforcement action in which a product was supplied by a foreign (i.e., no place of business or registered agent in California) or exempt entity that did not provide warning materials to the retailer, and none of the other four conditions apply, provided that they stop selling the product at issue or provide a warning for it within five business days of receipt of the 60-day Notice initiating the enforcement action.

Safe harbor warning methods for consumer products

Labeling

The regulation requires that warnings be “prominently displayed” on a label, labeling or sign.  The warning must be displayed such that, when compared with other words, statements, or designs on the label, the warning is “likely to be read and understood by an ordinary individual under customary conditions of purchase or use.”

Environmental warnings must be displayed so that they should be seen and understood by an “ordinary individual in the course of normal daily activity.”

In-store signage and catch-all warning

To meet the safe harbor method for brick-and-mortar stores, warnings must be provided on product labels or at the point of display (product-specific posted or shelf signs). Point of sale signs (other than the BPA signs) are not approved safe harbor warning methods.

A retailer may also provide a warning by any electronic device or process that provides the warning prior to or during the purchaser without requiring the consumer to seek out the warning.  Examples include electronic shopping carts, QR Codes, smart phone applications, barcode scanners, and self-checkout registers.

Online and catalog warnings

For online transactions, retailers must include 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.  For catalogs, warnings must be clearly associated with corresponding products.

According to OEHHA guidance, online and catalog warnings must be provided even if the product is already labeled with a warning.  Warnings contained within general website content will not meet the safe harbor method.

Safe harbor warning messages for consumer products

To meet the safe harbor, the amendments require the inclusion of a warning symbol and specific identification of at least one chemical in the product that is associated with the warning’s toxicological endpoint (cancer or reproductive harm). Warnings must be provided in the same language or languages as any other label, labeling or sign accompanying a product.

Standard warning language

Carcinogen or reproductive toxicant warning

 WARNING This product can expose you to [name of one or more chemicals], a chemical [or chemicals] known to the State of California to cause [cancer] [birth defects or other reproductive harm]. For more information go to www.P65Warnings.ca.gov/product.

Warnings for both cancer and reproductive toxicity

 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 [name of one or more chemicals], which is [are] known to the State of California to cause birth defects or other reproductive harm. For more information go to www.P65Warnings.ca.gov.

Short form warnings

The regulations permit the use of short form warnings on products that do not require chemical identification (OEHHA’s original purpose in permitting short form warnings was for products for which the standard warnings is not practical due to size or amount of packaging):

 WARNING–Cancer–P65Warnings.ca.gov/product.

 WARNING–Reproductive Harm–P65Warnings.ca.gov/product.

If a product is labeled with a short form warning, a retailer may provide the short form warning on the website for online transactions.

Warning language for specific products

The amendments contain several product-specific safe harbors that generally tweak the warning language or add additional requirements, including:

  • Food and dietary supplements
  • Alcoholic beverages
  • Food and non-alcoholic beverages in restaurants
  • Raw wood
  • Furniture
  • Prescription drugs and emergency medical or dental care
  • Diesel engine exhaust
  • Vehicle and RV exhaust
  • Parking garages
  • Amusement parks
  • Petroleum products in industrial settings
  • Service stations and automotive repair
  • Smoking areas.

Timing

The amendments are not mandatory until August 30, 2018.  Products manufactured prior to August 30, 2018 may either comply with the regulations as previously written or the new regulations.  Warnings imposed by court-ordered settlements or final judgments are grandfathered in and will still be deemed compliant with Proposition 65.

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