A New Outbreak of Prop. 65 Lawsuit Abuse Underscores Need for Reform

Tom Scott
CA Executive Director, National Federation of Independent Business

CALA has documented the lawsuit abuse related to Proposition 65 for quite some time. Despite minimal reform (like Assemblyman Gatto’s AB 227 passed last year) the lawsuits have continued. With the state considering new regulations related to warnings that could actually bring more lawsuits, I thought it might be helpful to show one example of just how out-of-control Prop. 65 lawsuit abuse is getting, even though few in the news media are paying attention.

A little background: if your business is in violation of Proposition 65 (i.e., you don’t have a bland, useless warning sign about the presence of chemicals at your business) you can be sued for $2,500 per day either by the Attorney General, the District Attorney or a City Attorney. However, a private citizen can also bring a case against a business, which increases the likelihood of a business without a sign being sued.

As you can imagine, with potential penalties at $2,500 a day, the amount of money at stake can add up quickly, and the incentive to sue a business is quite high. Because the cost of mounting a legal defense can be ruinous, even if it is successful, many businesses simply choose to settle rather than fight these lawsuits. Some business owners I’ve spoken with have told me the average settlement in a Prop. 65 case is about $60,000, not including when the case enters into a private settlement.

These easy paydays attract even more lawsuits. Recently, I’ve noticed that lawyers have even begun to specialize in targeting certain types of businesses, becoming more efficient at filing these shakedown lawsuits against businesses.

For example, there is a law firm in Pasadena named Custodio and Dubey. It is a personal injury law firm that primarily focuses on lawsuits relating to Prop. 65 and the Americans With Disabilities Act (another law that invites abuse). They represent two individuals who feel they have been harmed under Prop. 65, Jesse Garett and John Bonilla, and have targeted a booming industry in California: microbreweries and wineries.

Over the course of roughly two months, these two individuals “visited” over 300 businesses that have wine and beer throughout the state of California. After their “visit,” they did not feel that they received warnings meeting the Prop. 65 guidelines about the potential harm of the alcohol in wine and beer, so the law firm of Custodio and Dubey sent 60-day notice letters (in which they notify the attorney general of their intention to file a lawsuit) to the 300 + businesses on behalf of Mr. Garett and Mr. Bonilla. Over the course of one three-day period in this time, the law firm sent 41 of these notices. These letters went to a multitude of microbrew companies and every winery you can imagine. To verify this you simply need to go to website of the Office of the Attorney General and type in the year (2014) and dates (9/1/2014 to 11/18/14).

When they passed Prop. 65 in 1986, voters surely did not intend for it to be used by shakedown artists to bankrupt entire industries through lawsuit abuse.

These abusive legal actions against our state’s businesses are going to wreak havoc on one of the few industries that is growing in California. The result will be countless dollars being spent on legal fees, and undoubtedly, these plaintiffs and lawyers will be paid off to make these lawsuits go away. Some businesses will have to lay off workers, and others will close down altogether because they can’t afford the amounts demanded. The state will lose jobs, and the plaintiffs and lawyers will get rich. And so the cycle of abuse continues.

Business owners: if you are not aware of Prop. 65 requirements, educate yourself about what you can do to avoid a lawsuit from these bottom-feeding attorneys. If you think your business or facility contains chemicals listed under Prop. 65 you should place warning signs on your property.

I hope this story will convince lawmakers and regulators to tackle the issue of abuse of the law in their efforts to reform it. Until that happens, small businesses will be at risk from Prop. 65 lawsuit abuse, and jobs will continue to be lost. Just ask the beer and wine makers.

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