"When the facts change, I change my mind. What do you do, sir?" asked the great economist John Maynard Keynes.
Much has changed since California voters approved Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986. Twenty-five years later, the facts about the law's enforcement mechanism - and some very jarring statistics - make a strong case that the time has come for some common-sense reform.
Proposition 65's enforcement mechanism, commonly known as the "bounty-hunter provision," empowers trial lawyers to mete out punishment to businesses as if they were legitimate, deputized members of the Attorney General's office.
And the trial lawyers haven't exactly exercised restraint or discretion. Instead, they've made the most of this codified system of frontier justice by filing some of the most frivolous lawsuits imaginable.
Take, for example, the famous case of a company that made a costly mistake with a comma in publishing a Proposition 65 warning notice. Back in 1995, Ellis Paint Company combined two required warnings - one for cancer and one for birth defects and reproductive harm - into one sentence, separated by a comma. One enterprising and creative bounty hunter naturally sued. Faced with mounting costs of a protracted trial, the Los Angeles business settled for $54,000.
More recently, take the case of Dr. Soda Company, a 21-employee Pacoima firm that ships drinks and snacks. This spring the law firm of Rose, Klein & Marias LLP wrote requesting $60,000 as the price to opt in to a settlement to avoid legal action under Proposition 65. The law firm contended that company owner Don Rubenstein had violated the law by failing to properly notify consumers that one brand of chips it sold contain high levels of acrylamide.
But traces of acrylamide can be found in many products, from olives to cigarettes. So why is Mr. Rubenstein's small business being threatened, and not a cigar shop in Indiana or an olive store in Texas? Because California is the only state with an enforcement mechanism like the bounty-hunter provision.
While trial lawyers have taken home millions upon millions in profits, they've left little more than table scraps for the government and the environment.
The California Attorney General's 2010 summary of Proposition 65 settlements reported that an astounding $7.8 million in Proposition 65 settlements - about 57 percent of the total - went to lawyers' fees. Tom Scott of California Citizens Against Lawsuit Abuse tallied the numbers in the report and found that two of the attorneys, Russell Brimer and Anthony Held, were involved in 83 of the 187 settlements.
Bruce Nye, a well-respected trial lawyer, analyzed Attorney General reports from 2007 to 2010 and found that Brimer helped himself to $3.4 million of the nearly $4.2 million in Proposition 65 settlements that he won over that period. The state of California's share was a paltry $733,000.
And he's not alone. Another bounty hunter, the Consumer Advocacy Group, helped itself to 93 percent of $3.3 million it won in settlements.
Unless it is reformed, Proposition 65's enforcement mechanism will continue to shortchange the state while creating grotesque profits for a handful of trial lawyers at the expense of our small businesses. With a state unemployment rate at 11.7 percent, and unemployment in Sacramento County in excess of 12 percent, the state cannot afford to discourage entrepreneurs.
A sensible reform to Proposition 65 would cap the amount that trial lawyers can skim off of Proposition 65 settlements. If a company violates the law, it should be held responsible. But those penalties should go to the state or local government to support environmental causes, instead of lining the pockets of trial lawyers who abuse Proposition 65 as a vehicle for extorting businesses.
We may not have known all the facts 25 years ago, but we know them now. It's time we changed our collective minds on how Proposition 65 is enforced.
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Jim Conran, former director of the California Department of Consumer Affairs, is an adjunct professor in the graduate business school at Golden Gate University in San Francisco. This article first appeared in the Sacramento Business Journal.
