The mysterious world of Prop 65, part 6: The private plaintiffs

When Prop 65 passed by voter initiative in 1986, the public undoubtedly hoped it would provide greater protections to consumers by warning them of potential exposure to chemicals. It is unlikely they envisioned Prop 65 becoming what it is today: a vehicle for the generation of bounties to private plaintiffs and their attorneys.

What’s a Private Settlement Worth? (2013) 

Lawsuits for violation of Prop 65 are initiated by two sources: public enforcers (the Attorney General, district and city attorneys) and private citizens. The second group, the so-called “Private Enforcers” bring the vast majority of Prop 65 actions and are responsible for spawning a veritable cottage industry of plaintiffs’ firms that do little else but file these claims.

Why do private citizens bring these claims?

What motivates a private person to bring a lawsuit about, for example, lead in handbags  “in the public interest?” One thing’s for sure: it’s probably not altruism.

Private plaintiffs stand to benefit handsomely from the filing of successful Prop 65 actions. Of the penalties collected for Prop 65 violations (up to US$2,500 per day per violation), a private plaintiff may personally recoup 25 percent, which can come out to a hefty sum depending on how the penalties are calculated.

Also, there is little downside to bringing these lawsuits, as private plaintiffs most likely never pay any attorneys’ fees to plaintiffs’ firms (which are the ones who stand to benefit most from these lawsuits) and generally do not have to go through the arduous aspects of typical litigation, including discovery and depositions because Prop 65 cases focus on the products—not the plaintiffs.

Why do attorneys bring these claims?

The amount private plaintiffs stand to collect from penalty payouts pales in comparison to the benefits their attorneys reap.

Although Prop 65 does not provide for the collection of attorneys’ fees, California’s Private Attorney General Fee statute allows recovery of fees if:

1. an attorney has conferred a “significant benefit” on the public;
2. a private individual is unlikely to foot the bill themselves because of the financial burden; and
3. the fees should not be paid out of the recovery in the interest of justice.

Using this statute, plaintiffs’ attorneys are typically able to recover all of their fees if they prevail in a Prop 65 lawsuit, assuming that the court determines it is “reasonable under California law.”

Plaintiffs’ firms have been cashing in on this provision, earning the moniker of “bounty hunters,” as they have become known in the industry, as evidenced by the increasing amount of fees paid year after year.

In 2013, of the US$16.8 million in private Prop 65 settlement payments, attorneys took home an astonishing 75 percent. While 2014 numbers are not yet available, it is unlikely that fee awards are going to go down, especially with the hundreds of TDCPP and cocamide DEA cases settled in late 2013 and continuing into 2014.

The large incentives for both private plaintiffs and private attorneys to bring Prop 65 lawsuits (and the very small amount of evidence necessary to file a claim) has led to some critics calling Prop 65 a scam. Indeed, many businesses determine that it is less expensive to enter into a quick settlement than pay the high costs of defense. These claims can be especially hard on very small businesses that lack the resources to spend large amounts in private defense costs.

At the end of the day, the reality is that there are huge benefits to bringing these lawsuits, and very little downside. This can be frustrating for many businesses, especially when they believe have not done anything wrong and are not selling a product that has the potential to harm anyone.

There really is no silver lining here, except to say that parties continue to call for Prop 65 reform to eliminate these lawyer-driven lawsuits. Maybe one day (hopefully) someone will listen.