Gatto’s bill to protect small businesses from prop. 65 lawsuits passes first committee

Small businesses looking for protection from meritless lawsuits received good news from Sacramento yesterday as legislation authored by Assemblyman Mike Gatto passed the Assembly Environmental Safety and Toxic Materials committee with a unanimous, bipartisan vote of 7-0. The bill, AB 227, seeks to allow business owners who receive notice of a technical Proposition 65 violation to remedy a signage violation, and achieve compliance within 14 days, without facing exorbitant retrospective fines.
Prop. 65, the Safe Drinking Water and Toxic Enforcement Act, was passed by voters in 1986 and provides that a business in California may not expose individuals to certain chemicals without first giving warning. The State of California publishes a list of more than 800 chemicals that require such a warning. The list includes some common consumer products like alcohol and acrylamide, which forms naturally during the baking, frying, or roasting of plant-based foods like coffee, potatoes, and asparagus.
The idea for the legislation came from Assemblyman Gatto’s Small Business Advisory Commission, formed earlier this year to advise him on challenges facing local small-business owners. The eight member commission discussed a variety of concerns impacting small businesses and voted unanimously for Gatto to introduce the bill to reform Prop. 65 so that the law’s intent is not undermined.
“I had the opportunity to listen to concerns of local business owners on my Small Business Advisory Commission. The severe negative impact of harassing lawsuits under Prop. 65 was immediately apparent,” said Gatto. “Most business owners work hard to protect customers so that the customers return. This is especially true with small-business owners whose customers are neighbors, friends, and relatives. This common-sense bill will help small businesses avoid costly litigation while ensuring that the public has prompt and proper warnings about potentially dangerous chemicals.”
Gatto’s bill and his Small Business Advisory Commission have already helped create change on the issue of Prop. 65 abuse. After AB 227 was introduced, a member of the commission whose business had received a Prop. 65 notice was informed by the plaintiff’s attorney that the case would not be pursued. Assemblyman Gatto was happy to know that he had helped a constituent but noted that there were still many more businesses being threatened.
Although the law originally intended to apply to serious exposures or failures to warn, a small number of attorneys have recently abused Prop. 65 by targeting local small businesses that lack significant resources for legal defense. In 2012, more than two-dozen brick-and-mortar businesses in Southern California, including restaurants and cafés in Burbank, Glendale, Pasadena, and Los Angeles, have been threatened with Prop. 65 lawsuits.
“Threatening a small business with a lawsuit for serving its customers coffee with their breakfast, vegetables with their lunch, or a glass of beer or wine with dinner is absurd,” said Gatto. “The vast majority of California’s attorneys behave ethically, but a few bad apples are giving the profession a bad name by threatening people who are just trying to make a living.”
Prop. 65 allows for fines of $2,500 per day, enforced by any person. Some people suing businesses expect that a small business, wary of litigation costs, will opt for a quick settlement to make the lawsuit go away.
AB 227 would further the original intent of Prop. 65, which was obtaining compliance with warning requirements for chemicals present on a site. It would therefore allow a business that receives a notice of a private action to correct the violation, i.e., post the Prop. 65 warning, within fourteen days without being subject to the retroactive $2,500 per day fine.
“The voters passed Prop. 65 to be protected from chemicals that would hurt them. They did not intend to create a situation where shakedowns of California’s small-business owners would cause businesses to want to close their doors,” said Gatto.

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