Oregon children’s product reporting instructions and portal go live

With less than three months to go before the first biennial reporting deadline, the Oregon Health Authority has opened its reporting portal and issued instructions for reporting under the Oregon Toxic Free Kids Act. The Act requires manufacturers (or importers into the state) to report the existence of “High Priority Chemicals of Concern for Children’s Health” (HPCCCH) contained in children’s products offered for sale in Oregon, if the HPCCCH are intentionally added above de minimis levels or are present as contaminants above 100 parts per million. The first reporting deadline is January 1, 2018, for all covered products sold offered for sale or sold in the state in 2017.

Manufacturers are “any person that produces a children’s product or an importer or domestic distributor of a children’s product.” An importer is “the owner of the children’s product.”

“Children’s products” are:

(A) Any of the following products that are made for, marketed for use by or marketed to children under 12 years of age:

(i) A product designed or intended by the manufacturer to facilitate sucking, teething, sleep, relaxation, feeding or drinking.

(ii) Children’s clothing and footwear.

(iii) Car seats.

(iv) Children’s cosmetics.

(v) Children’s jewelry.

(vi) Toys.

The Act specifically exempts a number of products, ranging from athletic shoes with cleats/spikes to bicycles to scooters.

The reporting form and required information appear to track closely to the Washington Children’s Safe Products Act. Key differences are that:

  • Reporting entities must pay a $250 fee for each HPCCCH reported, regardless of how many different products contain that HPCCCH; and
  • There is NO exception for inaccessible components.

To report, a manufacturer/importer must first fill out a “Notice Template” identifying:

  • Manufacturer/importer
  • Product brick
  • Component name
  • Chemical name and CAS number of each HPCCCH
  • Concentration range
  • Chemical function
  • Target age
  • Number of bricks sold in Oregon in 2017; and
  • Number of bricks offered for sale in Oregon in 2017.

The Notice Template is a downloadable spreadsheet.

Second, the manufacturer/importer must submit the appropriate fee amount (by check or credit/debit) to the OHA (as noted above, each HPCCCH requires a $250 payment, regardless of how many product bricks contain that HPCCCH).

Finally, the manufacturer/importer must go to the OHA reporting portal to upload and submit the completed Notice Template and payment receipt ID.

California Governor signs Proposition 65 amendment

Updating our prior post, California Governor Jerry Brown has signed the Proposition 65 amendment bill. As of January 1, 2018, Proposition 65’s certificate of merit requirements will be amended to:

  • Require the Attorney General to send a letter to the private enforcer and the recipients of the 60-day notice when the Attorney General has reviewed the certificate of merit and determined that there is no merit to an action;
  • Make the basis for the certificate of merit discoverable in litigation, to the extent that the information is relevant to the subject matter of the action and not subject to the attorney-client privilege, the attorney work product privilege, or any other legal privilege.

You can read more about the bill here.

California legislature seeks to clarify Prop 65 certificate of merit discovery rules

The California Legislature has done something it’s found exceedingly difficult to do since Proposition 65’s adoption by ballot initiative 31 years ago: amend the law.

For only the third time since 1986, the Legislature has made substantive revisions to Prop 65 that focus on the private enforcement mechanism.

Since 2001, private enforcers who serve a pre-suit notice alleging a violation of Prop 65’s warning requirement must include with the notice a “certificate of merit.” The certificate must recite that the enforcer:

has consulted with one or more persons with relevant and appropriate experience or expertise who has reviewed facts, studies, or other data regarding the exposure to the listed chemical that is the subject of the action, and that, based on that information, the person executing the certificate believes there is a reasonable and meritorious case for the private action.

Private enforcers must also attach “factual information sufficient to establish the basis of the certificate of merit” to the copy of the certificate served on the California Attorney General, but need not provide it to the noticed company. This factual information is generally not discoverable in litigation, unless the court finds that there was no credible basis for an exposure to a listed chemical after an in camera hearing, in which the noticed company does not get to see the information.

On September 14, 2017, the Legislature amended the certificate of merit provisions and sent AB 1583 to Governor Brown for signature. AB 1583 would do two things:

  • Require the Attorney General to send a letter to the private enforcer and the recipients of the 60-day notice when the Attorney General has reviewed the certificate of merit and determined that there is no merit to an action;
  • Make the basis for the certificate of merit discoverable in litigation, to the extent that the information is relevant to the subject matter of the action and not subject to the attorney-client privilege, the attorney work product privilege, or any other legal privilege.

The first revision codifies the Attorney General’s current practice of sending letters when his office determines that an action has no merit, although it is not clear how the Attorney General currently reaches such determinations, and whether this will have an impact going forward.

The second revision address ambiguity in the current statute, which provides that the factual basis of a certificate of merit is not discoverable, unless it is relevant to the subject matter and otherwise discoverable. This confusing language—nothing is discoverable unless it is relevant to the subject matter of the litigation—resulted in many private plaintiffs taking the position that the basis of the certificate of merit was never discoverable, forcing defendants seeking such information to try to pierce the privilege and what appeared to be a presumption of non-discoverability.

Under the amendment, defendants would have a prima facie right to seek discovery of the factual basis for the certificate, and the burden would be on the private enforcer to justify any privilege or work product objections, as is the case with any other assertion of privilege.

AB 1583 is widely supported by the business community and had no recorded opposition. The Governor is expected to sign it, and assuming he does, it would become effective on January 1, 2018. As was the case after the adoption of SB 471 in 2001, there may be litigation over the retroactive application of the amendment to notices served prior to its effective date (the 2001 amendments were deemed retroactively applicable procedural rules, and there is every reason to believe that this amendment will be treated similarly).

CPSC removes seven plastic types from CPSIA third party testing for phthalates

In an effort to reduce the burdens of compliance with the U.S. Consumer Product Safety Improvement Act, the U.S. Consumer Product Safety Commission has voted to remove seven types of plastics (containing specified additives) from the CPSIA’s mandatory third party testing requirement for phthalates in children’s toys and child care articles.  The Commission determined that the following types of plastics with specified additives do not contain regulated phthalates above the 1,000 parts per million limit in the CPSIA:

  • polypropylene (PP)
  • polyethylene (PE)
  • high-impact polystyrene (HIPS)
  • acrylonitrile butadiene styrene (ABS)
  • general-purpose polystyrene (GPPS)
  • medium-impact polystyrene (MIPS)
  • super-high-impact polystyrene (SHIPS)

The applicable lists of specified additives in each type of plastic can be found in the draft final rule until the final rule is published in the Federal Register.

New Jersey passes new drivers license swipe law

In enacting the Personal Information and Privacy Protection Act (S-1913), New Jersey joins a growing minority of states with so-called “swipe laws.” New Jersey’s law generally aligns with swipe laws in the approximately one-third of other states with such laws, limiting the purposes and type of information a retailer may scan and retain from identification cards. However, New Jersey goes a step further than most in specifying data storage requirements and requiring notification directly to the consumer when ID information is compromised.

Permissible uses

As of October 1, 2017, retailers will only be permitted to scan customers’ drivers’ licenses or other identification cards for specific purposes and can only collect certain data from those scans.

Retailers may scan ID cards to:

  • verify authenticity of the card
  • verify identity of the person if the person does not pay with cash, returns an item, or requests a refund or exchange
  • verify a customer’s age when buying age-restricted goods or services
  • prevent fraud or other criminal activity if the person returns an item or requests a refund or an exchange and the business uses a fraud prevention service company or system.

Additional permitted uses pertain to retailers’ state and federal reporting requirements, including transmitting information to a consumer reporting agency, financial institution or debt collector under the various federal credit statutes, and to an entity as permitted under HIPAA.

Limits on data

When scanning, retailers may only collect the person’s name, address, date of birth, the state issuing the identification card, and the identification card number.

The legislation also imposes new restrictions on the retention, storage, and dissemination of information gathered through ID scans. Retailers are prohibited from retaining customer information when a customer pays with a method other than cash, returns an item or requests a refund or exchange, or when purchasing age-restricted goods or services. For any permitted retention of identification card data, retailers are required to “securely store” this data and report any security breaches to the Division of State Police in the Department of Law and Public Safety, as well as notify “any affected person.” Retailers are further barred from selling or disseminating this information for any purpose, including marketing and advertising. Retailers that violate the law face fines as well as the potential for lawsuits brought by “any person aggrieved by a violation.”

EPA formaldehyde saga continues

Back in January, the EPA published its final rule restricting formaldehyde emissions from composite wood. While the original rule set compliance dates starting December 12, 2017 (with additional dates in 2018 and 2023), the rule has undergone a tumultuous several months. Where it stands now is anybody’s guess, but the prudent course is to plan for December 2017 implementation.

First, the Trump administration regulatory freeze delayed the effective date by 30 days, but this delay did not impact the compliance dates, which were triggered by publication of the rule. Then EPA issued a new “direct final rule” extending the compliance dates by three months, meaning the rule bumped the first compliance deadline from December 12, 2017 to March 22, 2018 (and others to 2018 and 2024, respectively).

But that direct final rule had one big caveat – EPA conditioned it on not receiving any negative comments, stating:

If the Agency receives no adverse comments on the direct final rule or proposed rule, EPA will take no further action on the proposed rule, and the direct final rule will become effective. If EPA receives relevant, adverse comments on either rule, the Agency will withdraw the direct final rule and proceed with the proposed rule through the normal rulemaking process.

EPA did not expect any negative comments, but as you can guess, several commenters objected to the extensions. As a result, EPA withdrew the direct final rule, returning for now to the original December 2017 deadline.

EPA has stated that it will “proceed with a final rule based on the proposed rule after considering all public comments.” While EPA has said it will proceed as quickly as possible, it is unclear whether it can get through the regulatory process fast enough to make it meaningful for a December compliance date – we assume that many products for December sales have already been ordered and are in production.

In addition to controversy over compliance dates, substantive concerns over the rule still remain. For example, the rule’s labeling provision prohibits labeling products “manufactured before the manufactured-by date as TSCA Title VI compliant.” But the rule uses “manufacture” and “import” interchangeably. As a result, the rule can be read as prohibiting labeling of imported before December 12, but requires labeling on products imported on and after December 12, regardless of when the products were actually manufactured. Given the practical impossibility of complying with this, impacted parties and trade associations representing the composite wood industry have implored EPA to clarify the rule, but this has not yet occurred. If EPA takes this up in any new proposed rule, it could further delay implementation of compliance date extensions.

Specific jurisdiction ruling gives companies a new weapon in combatting mass consumer actions

On June 19, 2017, the United States Supreme Court limited the ability of plaintiffs to pursue mass consumer actions in state court. In Bristol-Myers Squibb Co. v. Superior Court, the Supreme Court limited personal jurisdiction over corporations in state courts on due process grounds, holding that persons purportedly injured outside of the forum state did not have jurisdiction to prosecute claims against a corporation who was not a resident or incorporated in that state.

The consolidated actions sought relief in California state court for 678 plaintiffs who used a BMS drug called Plavix – the vast majority of whom were not California residents. BMS is a Delaware corporation that maintains substantial operations in both New York and New Jersey. BMS moved to quash service of summons on the nonresidents’ claims for lack of personal jurisdiction.

The California Court of Appeal and California Supreme Court found that there was no general jurisdiction over BMS in the wake of the Supreme Court’s Daimler AG v. Bauman decision (limiting general jurisdiction to a company’s state of incorporation and principal place of business), but found that there was specific jurisdiction based on the similarity of the claims by California residents and the nonresidents, BMS’ “extensive contacts with California,” and the fact that the California distributor of Plavix was also a named defendant.

Reversing the California courts, the Supreme Court was clear that specific jurisdiction can only be exercised if the suit arises out of the defendant’s contacts with the forum, and here “the nonresidents were not prescribed Plavix in California, did not purchase Plavix in California, and were not injured by Plavix in California.” Because “all the conduct giving rise to the nonresidents’ claims occurred elsewhere,” California had no specific jurisdiction over BMS. Neither BMS’s “substantial” operations in the state, nor the fact that the Plavix distributor was a California corporation were relevant to establishing personal jurisdiction because BMS’s California operations were unrelated to Plavix and jurisdictional requirements cannot be met through a third-party.

This decision raises the question of whether nationwide class actions can proceed in jurisdictions where a defendant is not subject to general jurisdiction. Previously, and relying on the Court’s opinion in Phillips Petroleum Co. v. Shutts, it was taken for granted that so long as the forum state had personal jurisdiction over the named plaintiffs’ claims, it could also exercise jurisdiction over the out-of-state class members claims. The Court rejected that Shutts had any bearing on the issue here because “the authority of a State to entertain the claims of nonresident class members is entirely different from its authority to exercise jurisdiction over an out-of-state defendant.”

The ruling therefore appears to give defendants another weapon for challenging the scope of state court class actions. Cutting down the size of the class is one of the primary goals during class certification, and this ruling could give defendants a means for doing so much earlier in the case.

In single defendant cases, it could push mass or class action matters to states where the defendant is unquestionably a citizen, and away from preferred jurisdictions favored by the plaintiffs’ bar, like California. Alternatively, it could cause counsel to limit the plaintiffs to state residents and file multiple cases in preferred jurisdictions. In multiple defendant cases where general jurisdiction over each defendant is not appropriate in a single state, plaintiffs must now decide whether they really want the headache of prosecuting multiple suits against multiple defendants in differing jurisdictions.

On the other hand, the decision could also create headaches for defendants, potentially forcing them to defend multiple suits across many states. Moreover, it could complicate settling national class actions, as defendants will have trouble arguing that jurisdiction is not appropriate in the first instance but that a national settlement should be approved if it ultimately suits them.

Washington restricts flame retardants in children’s products and upholstered furniture

On July 1, 2017, Washington’s “Toxic-Free Kids and Families Act” goes into effect, restricting the use of the following five flame retardants in children’s products and residential upholstered furniture:

  • Additive TBBPA
  • Deca-BDE
  • TCEP

Under the Act, manufacturers, wholesalers, and retailers are prohibited from manufacturing, knowingly selling, offering for sale, or distributing for sale or use in Washington children’s products and residential upholstered furniture containing these five flame retardants in amounts greater than 1,000 ppm in any product component.

While the impact may be muted because several states, including California, New York, Vermont and Maryland, have already passed laws more or less regulating Deca-BDE, TDCPP and TCEP out of the market, the Act presents two concerns.

First, Washington is the first state to restrict TBBPA. Manufacturers, wholesalers, and retailers may need to do some prep work to determine whether this substance is in their covered products.

Second, the Act contains no sell through period or “manufactured by” date. The restriction applies to covered products whether or not they were manufactured prior to July 1, 2017, including any existing inventory retailers have on sales floors or available on ecomm sites.

In addition, the Act directs the Washington Departments of Health and Ecology to evaluate six additional flame retardants (IPTPP, TBB, TBPH, TCPP, TPP and V6) and make recommendations to the Washington Legislature for possible future restrictions.

Drone registry rule grounded by court

Updating our previous post about the Federal Aviation Administration’s rules and regulations regarding the use of drones, an appeals court has struck down one of the more hotly disputed aspects of the program – the FAA’s registration requirement for recreational drone owners.

As part of the FAA’s drone program, FAA regulations require recreational drone users to register their drones. Registration requires users to provide their names, email and physical addresses, pay a $5 registration fee, and display a unique ID number on their drones. Nearly 300,000 drone owners registered within a month of the program’s unveiling.

The registration rule was controversial, not only because drone hobbyists complained that the requirement was burdensome, but also because many argued that 2012 legislation directing the FAA to safely integrate drones into national airspace specifically exempted model aircraft, including recreational drones, from any requirements.

The controversy ultimately led drone user John Taylor to sue the FAA. In a decision published late last week, the D.C. Court of Appeals agreed.  As the opinion states:

The FAA’s 2015 registration rule, which applies to model aircraft, directly violates that clear statutory prohibition.  We therefore grant Taylor’s petition and vacate the registration rule to the extent it applies to model aircraft.

Note that this decision applies only to recreational drone users – not commercial drone users, who are subject to more stringent standards, including pilot certification requirements.

The full decision is available here. The FAA has 90 days to either ask for a rehearing from the D.C. Circuit or appeal to the Supreme Court.  We will keep you updated with any developments. If the decision stands, recreational drones of any size will not be subject to registration (currently, recreational drones under 0.55 lbs are exempt from registration, but recreational drones between 0.55 and 55 lbs must be registered).

Your product labels could be deceptive based on what’s on a competitor’s labels

In what seems to be an ever-expanding zone of liability for false advertising claims on food products, the Ninth Circuit ruled this week that “external facts” – aka what a competitor does or does not put on their labels – can make the labels of another product misleading by implication.

In Bruton v. Gerber, plaintiff Natalia Bruton alleged that labels on Gerber baby food products advertising nutrient and sugar content were impermissible under FDA regulations (thereby creating a UCL unlawful advertising claim). Bruton’s theory of deception was a combination of two factors: 1) presence of “attractive label” claims such as “Supports Health Growth & Development” or “As Healthy As Fresh” violate strict FDA regulations regarding health content and 2) the lack of similar claims on competitors’ products (in compliance with FDA regulations) made Gerber products appear superior.

The district court, among other holdings, dismissed UCL claims because there was no genuine dispute of material fact regarding deception. The court held that Bruton’s evidence of consumer deception – FDA warning letters and her own testimony that she was deceived – did not establish that a reasonable consumer was likely to be deceived by the representations.

Overturning the lower court’s dismissal of these claims, the Ninth Circuit held that a viable claim of consumer deception was alleged because “when the maker of one product complies with a ban on attractive label claims, and its competitor does not do so, the normal assumptions no longer, and consumers will possibly be left deceived.” The Court also determined that simply the labels themselves were enough to create a triable issue of fact because, when comparing the labels to other products, a reasonable jury could conclude that Gerber’s labels were deceptive.

The major takeaway from this decision is that so-called “attractive labels” cannot only subject a manufacturer to strict scrutiny from the FDA (and penalties, etc.), but can also give rise to actions for liability for false advertising. Even though the statements may be true (even if not strictly compliant with tight restrictions from the FDA), the fact that other FDA-compliant products do not have such statements means the product quality could be unnecessarily inflated in the eyes of the consumer.

Bottom line: false advertising liability is not only based on what is on your product’s label, but can now depend on the absence of similar statements on other labels.