Office of the Attorney General s7

TITLE 11. DEPARTMENT OF JUSTICE OFFICE OF THE ATTORNEY GENERAL

NOTICE OF PROPOSED RULEMAKING

Notice is hereby given that the Department of Justice, Office of the Attorney General, proposes to revise Title 11, California Code of Regulations, Division 4, Chapter 1, sections 3000 through 3008, and to adopt new Chapters 2 and 3, sections 3100 through 3204, which would implement new statutory provisions governing civil actions filed by private persons in the public interest pursuant to the Safe Drinking Water and Toxic Enforcement Act of 1986, as amended by Chapter 599, Statutes of 1999, and Chapter 578, Statutes of 2001 (Proposition 65).

PUBLIC PROCEEDINGS: Two public hearings will be held, at which time any person may present statements or argument orally or in writing relevant to the action described in this notice, at the following times and places:

• April 23, 2002, commencing at 10:00 a.m., in the Auditorium at the Ronald Reagan State Office Building, 300 S. Spring Street, Los Angeles, California; and

• April 26, 2002, commencing at 10:00 a.m. in Room 1, Second Floor, at the Elihu Harris Building, 1515 Clay Street, Oakland, California.

Any written statements or arguments must be received by the Office of the Attorney General at the following address by 5:00 p.m. on April 26, 2002, which is hereby designated as the close of the written comment period. Comments sent by mail, courier, or fax, should be addressed to:

Edward G. Weil Deputy Attorney General Office of the Attorney General 1515 Clay Street 20th Floor P.O. Box 70550 Oakland, CA 94612 Fax: (510) 622-2270

It is requested, but not required, that written statements or argument be submitted in triplicate.

CONTACT: Inquiries concerning the proposed administrative action described in this notice may be directed to Edward G. Weil, Deputy Attorney General, in writing at the above address, or by telephone at (510) 622-2149. If Mr. Weil is not available, inquiries may be directed to Susan S. Fiering, Deputy Attorney General, at the same address, or by telephone at (510) 622-2142. Inquiries concerning the substance of the proposed regulations may be directed to Mr. Weil, or if he is not available, Ms. Fiering.

1 INFORMATIVE DIGEST/POLICY STATEMENT OVERVIEW

A. Private Enforcement of Proposition 65.

Under Proposition 65, enforcement actions may be brought by the Attorney General, District Attorneys, and certain City Attorneys. In addition, any person may sue "in the public interest" if they give notice of the violation to the alleged violator, the Attorney General, and those District Attorneys in whose jurisdiction the violation is alleged to occur. (Health and Safety Code §25249.7.) In the first few years of the statute, the Attorney General received a small number of notices. In the last two years, however, several thousand notices have been received.

Under SB 1269 (Statutes of 1999, Ch. 599), private plaintiffs must notify the Attorney General when they file a case under Proposition 65, and when an action is subject to a settlement. Certain information is required by the statute, and the Attorney General may require other information. The plaintiff must certify to the court that it has complied with this part of the law.

B. 2001 Legislative Amendment

SB 471 (Statutes of 2001, Ch. 578), adopted additional requirements for private enforcement of Proposition 65. The subjects of this proposed rulemaking are the Certificate of Merit Requirement and the requirement that courts and the Attorney General review settlements.

1. The Certificate of Merit Requirement

The statute states that sixty-day notices alleging failure to warn must be sent with a notice in which the attorney for the party states that they have consulted with someone 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. Factual information sufficient to establish the basis of the certificate of merit... shall be attached to the certificate of merit that is served on the Attorney General.

(§ 25249.7(d)(1); emphasis added.) Judicial review of this certificate is limited. A court may review the certificate, but only if the court rules for the defendant and finds that there was no actual exposure. Then, if the court further finds that “there was no credible factual basis for the certifier’s belief that an exposure had occurred,” the action is deemed frivolous under Code of Civil Procedure section 128.5. The legislation does not specify the necessary elements of the Certificate of Merit or any other consequences of failure to provide a proper certificate. Thus, there is a need to provide greater specificity. The Attorney General already has received a number of informal inquiries concerning the nature of a satisfactory Certificate of Merit and supporting information. These regulations include provisions describing the form and content of the Certificate of Merit, as well as potential consequences of failure to comply.

2 Although the Attorney General is not the Governor’s designated “lead agency” for Proposition 65 implementation, he is the official designated by the law to receive all sixty-day notices of violation, the Certificates of Merit, and the information in support of the Certificate of Merit. Moreover, the purpose of the Certificate of Merit and supporting information is in part to enable the Attorney General to determine whether he should pursue the alleged violation. Accordingly, the Attorney General is the appropriate state official to adopt requirements concerning the form and content of the Certificate of Merit and supporting information.

2. Judicial and Attorney General Review of Settlements.

The judicial review of settlements provision states that any settlement of an action brought by a person in the public interest under Health and Safety code section 25249.7(d) be submitted to the court upon noticed motion, and that the court may approve the settlement only if it finds that any warning required by the settlement complies with the law, that any attorney’s fees are reasonable, and that any civil penalty is reasonable. The plaintiff bears the burden of producing evidence necessary to sustain those findings. The statute also require that the plaintiff “serve the motion and all supporting papers on the Attorney General, who may appear and participate in any proceeding without intervening in the case.” (Health and Safety Code § 25249.7(f)(4).)

The Attorney General has received a number of informal inquiries concerning the Attorney General’s views about the type of information necessary to make the showings required by the new legislation. Ultimately, these decisions will be made by the court to which the settlement is submitted. The Attorney General, however, is served with all moving papers in support of the motion for approval, and expects to participate in a number of proceedings. The Attorney General has concluded that non-binding guidelines will assist the public by reducing litigation concerning the meaning of the new law and by enabling parties to follow the guidelines, thereby reducing the likelihood that the Attorney General will object to their settlement. The guidelines also will assist courts in reviewing settlements, particularly where a given court has not reviewed significant numbers of settlements in these cases. Even though the Settlement Guidelines portion of this rulemaking is non-binding, it must be adopted through an APA rulemaking process because it will affect the Attorney General’s policies, apply generally throughout the state, and involves a matter of serious consequence involving an important public interest. (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal4th 557; Grier v. Kizer (198 ) 219 Cal.App.3d 422.)

Although the Attorney General is not the Governor’s designated “lead agency” for implementation of Proposition 65, he is the official designated under SB 471 to review all settlements, and authorized to appear in settlement approval proceedings. Accordingly, he is the appropriate official to adopt Settlement Guidelines. C. Summary of Proposed Regulation

The Proposed Regulation has three primary parts. First, it makes some changes to the existing reporting requirements. The existing requirements were written before the law required that settlements in Proposition 65 Private Enforcement Matters be approved by courts on noticed

3 motion, and the timing and nature of the required submissions needed to be modified to fit that process. In addition, since other actions in which Proposition 65 violations are alleged have been added to the existing reporting requirements, changes needed to be made in the regulation to so state.

Second, it adopts binding requirements for the Certificate of Merit. These requirements set forth the form and content of the required certification, define the specific scope of the certification, and also identify the type of supporting documentation that is necessary.

Third, it adopts guidelines to be used by the Attorney General, parties to litigation, and courts, in crafting and reviewing Proposition 65 settlements. These guidelines cover issues such as penalties, the form and content of clear and reasonable warnings, and evaluation of attorney’s fee awards.

4 AUTHORITY AND REFERENCE

The Department of Justice proposes to amend the regulations contained in sections 3000 through 3008 of Title 11 of the California Code of Regulations, and proposes to adopt sections 3100 through 3204 of Title 11 of the California Code of Regulations, pursuant to the authority granted in Health and Safety Code sections 25249.7(e) and (f). The statute being implemented, interpreted and made specific is Chapter 578, Statutes of 2001, amending Health and Safety Code sections 25249.7(e) and (f).

DISCLOSURES AND DETERMINATIONS REGARDING THE REGULATIONS

1. Regulations Mandated by Federal Law (Government Code § 11346.2(c).): This regulation is not mandated by federal law or regulations.

2. Other Statutory Requirements (Government Code § 11346.5(a)(4)): There are no other statutory requirements specific to this agency or type of regulation.

3. Local Mandate Determination (Government Code § 11346.5(a)(5)): These regulations would not impose a mandate on local agencies or school districts, nor are there any costs for which reimbursement is required by Part 7 (commencing with Section17500) of Division 4 of the Government Code.

4. Fiscal Impact (Government Code § 11345.5(a)(6)):

a. There are no costs to any local agency or school district for which Government Code sections 17500-17360 require reimbursement.

b. There are no other non-discretionary costs or savings that would be imposed on local agencies.

c. There are uncertain costs to the Attorney General for implementing the new law, which will be absorbed during the 2001-2002 fiscal year. There are no other costs to any other state agency.

d. There are no costs or savings in federal funding to the state.

5. Effect on Housing costs (Government Code § 11346.5(a)(12): There is no significant effect on housing costs.

6. Significant Statewide Adverse Economic Impact Directly Affecting Business, Including Ability to Compete (Government Code §§ 11346.3(a), 11346.5(a)(7), 11346.5(a)(8): The Department of Justice has initially determined that there will be no such impacts.

7. Assessment Regarding Effect on Jobs/Businesses (Government Code § 11346.5(a) (10):

5 (a) The creation or elimination of jobs within the State of California: None.

(b) The creation of new businesses or the elimination of existing businesses within the State of California: None.

(c) The expansion of businesses currently doing business within the State of California: None.

8. Cost Impacts on Representative Person or Business (Government Code § 11346.5(a) (9)): The proposed regulations affect private persons who bring certain civil actions in the public interest. The cost of filing certain documents with the Attorney General and filling out a form concerning those documents should be minor. Costs associated with the filing and support of a motion for approval of settlements with the court may be greater, but are mandated by the statute, not by this regulation. The costs associated with filing a motion for judicial approval of a settlement could be $1,500 (based on 15 hours of attorney time at $100 per hour), but the filing of the motion is mandated by the statute.

9. Effect on Small Business: Pursuant to 1 CCR section 4, DOJ has determined that this proposed regulation affects small business. Accordingly:

(A) A concise plain English policy statement overview regarding the proposed regulation that explains the broad objectives of the proposed regulation is included in this notice;

(B) The express terms of the proposed action written in plain English are available from the agency contact person named in this notice.

10. Alternatives considered (Government Code § 11346.5(a)(14): DOJ must determine that no reasonable alternative considered by DOJ would be more effective in carrying out the purpose for which the action is proposed or would be as effective and less burdensome to affected private persons than the proposed action.

11. Availability of Statement of Reasons, Express Terms, and Information: DOJ has prepared an initial statement of reasons for the proposed action, has available all the information upon which the proposal is based (the rulemaking file), and has available the express terms of the proposed action. The rulemaking file for this proposed regulatory action will be maintained at the Office of the Attorney General, 1515 Clay Street, 20th Floor, and is available for public review during the Office of the Attorney General's normal business hours (Monday through Friday, 8:30 a.m. to 5:00 p.m.). Requests to review the rulemaking file should be directed to the agency contact person named in this notice. When the rulemaking is completed, a Final Statement of Reasons for the proposed action will be completed, and it will be available, along with all of the other information described above, at the same address.

12. Availability of changes to text: The full text of a regulation changed pursuant to Government Code section 11346.8 will be available for at least 15 days prior to the date on which the agency adopts, amends, or repeals the resulting regulation.

6 13. Internet Access (Government Code §§ 11346.4(a)(6), 11346.5(a)(20): The text of the Proposed Regulation and this statement may be accessed at the Attorney General’s Website, doj.ca.gov.

7 TITLE 11-DEPARTMENT OF JUSTICE DIVISION 4-PROPOSITION 65 PRIVATE ENFORCEMENT

CHAPTER 1

§ 3000. Authority. This chapter sets forth procedures necessary to comply with Health and Safety Code section 25249.7(e) and (f) as amended by Ch.599, statutes of 1999.and Chapter 578, statutes of 2001. Any person proceeding "in the public interest" pursuant to Health and Safety Code §section 25249.7(d) or bringing any other action (hereinafter "Private Enforcer"), who alleges the existence of violations of the Safe Drinking Water and Toxic Enforcement Act of 1986 (Health and Safety Code sections§§ 25249.5 or 25249.6) (hereinafter “Proposition 65"), shall comply with the requirements of this chapter. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections 25249.7(e) and 25249.7(f), Health and Safety Code. § 3001. Definitions. (a) “Subject to a settlement” means that a written settlement agreement has been signed by the private enforcer and the alleged violator, or an oral agreement has been stated on the record in court in such manner as to render the agreement enforceable pursuant to Code of Civil Procedure section 664.6, even if the settlement is contingent on the entry of a judgment pursuant to stipulation or other judicial approval. (b) “Subject to a judgment,” other than a judgment pursuant to a settlement, means that the court has entered an order entitling a party to entry of judgment (e.g., order granting a motion for summary judgment, order sustaining demurrer), regardless of whether the actual form of judgment has yet been prepared, approved, or filed. (c) “Private Enforcement Matter,” means any complaint filed by a Private Enforcer in court in which a violation of Proposition 65 is alleged and the Private Enforcer is proceeding pursuant to Health and Safety Code section 25249.7(d). (d) “Other Private Action” means a complaint filed by a Private Enforcer in which a violation of Proposition 65 is alleged, but the plaintiff is not proceeding pursuant to Health and

1 Safety Code section 25249.7(d). Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections 25249.7(e) and 25249.7(f), Health and Safety Code. § 3002. Complaints. A Private Enforcer who commences a Private Enforcement Matter or an Other Private Action shall serve a file-endorsed copy of the complaint, and a completed version of the Report of Civil Complaint Filing form attached as Appendix A to these regulations, upon the Attorney General within five days after filing the complaint with the court. Any amended complaint shall be served upon the Attorney General within five days after filing with the court along with an updated version of the Report of Civil Complaint Filing. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections 25249.7(e) and 25249.7(f), Health and Safety Code. § 3003. Settlements. A Private Enforcer who agrees to a settlement of a Private Enforcement Matter or an Other Private Action shall serve the settlement upon the Attorney General within two five working days after the action is subject to a settlement, or concurrently with the motion for judicial approval of a settlement, whichever is sooner. (a) When a Private Enforcer in a Private Enforcement Matter files a motion for judicial approval of a settlement pursuant to Health and Safety Code section 25249.7(d)(4), it shall serve the Attorney General with the motion and all supporting papers and exhibits no later than forty- five days prior to the date of the hearing of the motion. If court rules or other applicable orders do not permit a forty-five day period, the Private Enforcer shall apply for permission to file the motion with a forty-five day notice period. If the court denies the request in whole or in part, the motion shall be noticed for the maximum time permitted by the court, and a copy of the application seeking a forty-five day time period and the court’s order shall be served on the Attorney General with the motion for approval. The forty-five day period shall not apply in any case in which the Attorney General is a plaintiff in consolidated or related matters with the Private Enforcer and the settlement is a Consent Judgment entered into by the Attorney General and the Private Enforcer. Where the settlement is submitted to a court for its approval, the

2 Private Enforcer shall notify the court in writing upon presentation of the settlement of its submission to the Attorney General pursuant to this regulation. The submission to the Attorney General shall contain the entire agreement between the parties. “Settlement” for these purposes includes any partial settlement by which injunctive relief, whether permanent or preliminary, is agreed upon, and also includes any agreement pursuant to which the case is dismissed, regardless of the type of relief, if any, obtained in exchange for the dismissal . In such instances, Private Enforcers shall comply with these requirements for each partial settlement and any final settlement. The submission shall include all information set forth in the Report of Settlement form attached as Appendix B. The Attorney General shall have thirty days after actual receipt to review the settlement. During the thirty-day period, the settlement shall not be submitted to the court, unless required by court order or rule or the Attorney General has stated in writing that he does not object to entry of the settlement. The papers filed with the court shall advise the court that the fact that the Attorney General does not object or otherwise respond to a settlement shall not be construed as endorsement of or concurrence in any settlement. (b) When a Private Enforcer in an Other Private Action submits a settlement to a court for its approval, the Private Enforcer shall notify the court in writing upon presentation of the settlement of its submission to the Attorney General pursuant to this regulation. The submission to the Attorney General shall contain the entire agreement between the parties. “Settlement” for these purposes includes any partial settlement by which injunctive relief, whether permanent or preliminary, is agreed upon, and also includes any agreement pursuant to which the case is dismissed, regardless of the type of relief, if any, obtained in exchange for the dismissal . In such instances, Private Enforcers shall comply with these requirements for each partial settlement and any final settlement. The submission shall include all information set forth in the Report of Settlement form attached as Appendix B. The Attorney General shall have thirty days after actual receipt to review the settlement. During the thirty-day period, the settlement shall not be submitted to the court, unless required by court order or rule or the Attorney General has stated in writing that he does not object to entry of the settlement. The fact that the Attorney

3 General does not object or otherwise respond to a settlement shall not be construed as endorsement of or concurrence in any settlement. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections 25249.7(e) and 25249.7(f), Health and Safety Code. § 3004. Judgments. Within ten days after a case is subject to a judgment, a Private Enforcer shall serve on the Attorney General a copy of any judgment or order entitling a party to entry of judgment entered in a Private Enforcement Matter and a completed version of the Report of Entry of Judgment form attached as Appendix C to this regulation. If the judgment does not become final because a notice of appeal is filed, the Private Enforcer shall serve a copy of the notice of appeal on the Attorney General within ten days after receipt. The Private Enforcer shall serve on the Attorney General a copy of any decision of an appellate court concerning the validity of the judgment within five working days after receipt. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections 25249.7(e) and 25249.7(f), Health and Safety Code. § 3005. Electronic filing. All documents required to be filed pursuant to sections 3002, 3003, and 3004 shall be filed electronically, by submitting the forms and the documents on-line to the Attorney General’s website, unless the website states that electronic filing is not currently available, or is not functioning for a twenty-four hour period when electronic filing is attempted. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections

25249.7(e) and 25249.7(f), Health and Safety Code. § 3006. Manner of Service. When this chapter requires that any document or information be provided to the Attorney General, unless the document is served electronically pursuant to section 3005, service shall be in a manner prescribed by Code of Civil Procedure section 1010-1020, except that any settlement shall be served by hand delivery or overnight mail service. The envelope in which the document is transmitted shall state prominently "Proposition 65 Private Enforcement Matter." After receipt of the Complaint, the Attorney General may then specify that future documents required by this chapter to be filed in that case be served upon a

4 particular office and deputy. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections 25249.7(e) and 25249.7(f), Health and Safety Code. § 3007. OSHA matters. For matters in which violations with respect to occupational exposures are alleged, compliance with the Director of the Division of Occupational Safety and Health’s Special Procedures for Supplementary Enforcement of State Plan Requirements concerning Proposition 65, 8 Cal.Code Regs., § 338, as adopted on October 12, 2000, constitutes compliance with these requirements, except for the filing of the Affidavit of Compliance required by section 3008 and the requirements of section 3003(a). That regulation is set forth in Appendix D to these regulations. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections 25249.7(e) and 25249.7(f), Health and Safety Code. § 3008. Affidavit of Compliance. At the time of filing of any judgment with the court, a Private Enforcer shall file with the court a declaration or affidavit, meeting all applicable requirements of the Code of Civil Procedure, verifying compliance with all requirements of this chapter. This declaration or affidavit shall include: (a) Proper proof of service on the Attorney General of all documents required to be served on the Attorney General by this regulation. (b) In an Other Private Action only, Iif the case is resolved by settlement, a statement that at least thirty days have elapsed since service of the settlement on the Attorney General or that fewer than thirty days have elapsed but the Attorney General has stated in writing that he does not object to entry of the settlement. Any written response by the Attorney General to the settlement shall be made an exhibit to the declaration or affidavit. The affidavit shall expressly advise the court that pursuant to section 3003 of this regulation, the failure of the Attorney General to comment on a settlement shall not be construed as endorsement of or concurrence in the settlement. Note: Authority cited: Section 25249.7(f), Health and Safety Code. Reference: Sections

5 25249.7(e) and 25249.7(f), Health and Safety Code.

CHAPTER 2-CERTIFICATES OF MERIT § 3100. General Any notice of alleged violations provided pursuant to Health and Safety Code section 25249.7(d) in which violations of Health and Safety Code section 25249.6 are alleged shall include a Certificate of Merit. The Certificate of Merit shall be attached to, and be served with, all copies of the notice of alleged violations. A second copy of the entire notice and Certificate of Merit served on the Attorney General, clearly marked “Attorney General Copy: Contains Official Information Pursuant to Evidence Code Section 1040" shall attach all supporting documentation required by Section 3102. The Attorney General Copy is deemed Official Information pursuant to Evidence Code section 1040. Note: Authority cited: Health and Safety Code Section 25249.7(d), (h),(i). Reference: Health and Safety Code Section 25249.7(d), (h), (i). § 3101. Contents. (a) Health and Safety Code section 25249.7(d)(1) requires that the certifier state that he or she “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.” “Reasonable and meritorious case for the private action” requires not only documentation of exposure to a listed chemical, but a reasonable basis for concluding that the entire action has merit. The certifier must have a basis to conclude that there is merit to each element of the action on which the plaintiff will have the burden of proof. The certifier does not need to have a basis to conclude that it will be able to negate all affirmative defenses, but must certify that the information relied upon does not prove that any affirmative defense has merit. (b) The Certificate of Merit shall contain all of the following statements, and appear in

6 the following form: CERTIFICATE OF MERIT Health and Safety Code Section 25249.7(d) I, (name of certifier), hereby declare: 1. This Certificate of Merit accompanies the attached sixty-day notice(s) in which it is alleged the parties identified in the notices have violated Health and Safety Code section 25249.6 by failing to provide clear and reasonable warnings. 2. I am the (noticing party/attorney for the noticing party). 3. I have 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. 4. Based on the information obtained through those consultations, and on all other information in my possession, I believe there is a reasonable and meritorious case for the private action. I understand that “reasonable and meritorious case for the private action” means that the information provides a credible basis that all elements of the plaintiffs’ case can be established and the information did not prove that the alleged violator will be able to establish any of the affirmative defenses set forth in the statute. 5. The copy of this Certificate of Merit served on the Attorney General attaches to it factual information sufficient to establish the basis for this certificate, including the information identified in Health and Safety Code section 25249.7(h)(2), i.e., (1) the identity of the persons consulted with and relied on by the certifier, and (2) the facts, studies, or other data reviewed by those persons. Dated: ______(Signature) § 3102 Supporting documentation (a) The “Attorney General Copy” of the notice of violation and Certificate of Merit shall physically attach the information set forth below. Supporting documentation shall be provided in

7 a legible and organized format, e.g., documentation shall be tabbed and identified. References to studies or other information are not sufficient. (b) Identification of the person or persons with relevant and appropriate experience or expertise shall include: (1) their full name and address; and (2) sufficient information concerning their background, training and knowledge to establish that they possess the necessary experience or expertise to render a competent opinion on the subject matter for which they have been consulted. (c) The “facts, studies, or other data regarding the exposure to the listed chemical that is the subject of the action” submitted shall support each violation alleged in the notice as follows: (1) For consumer product exposures, sufficient facts, studies, or other data shall be submitted for each consumer product or service, or each specific type of consumer product or service that cause the alleged violation as set forth in the notice; (2) For occupational exposures, sufficient facts, studies, or other data shall be submitted for each occupational exposure set forth in the notice, whether described by location of the employees, type of task performed, or product used by the employees; (3) For environmental exposures, sufficient facts, studies, or other data shall be submitted for each location and source of exposure set forth in the notice. § 3103 Effect of Failure to Comply (a) Where a Sixty-day notice does not attach a copy of the Certificate of Merit meeting the requirements of subsection 3101(b), the noticing party has no authority to commence an action pursuant to Health and Safety Code section 25249.7(d). (b) The Attorney General may contact the noticing party orally or in writing concerning the Certificate of Merit . If such communications include material from the supporting documentation, then those the portion of the communications containing or specifically describing the supporting documentation shall remain Official Information pursuant to Evidence Code section 1040. (c) Where the Attorney General makes no response concerning a Certificate of Merit, no

8 inference shall be drawn from the lack of response concerning the adequacy of the Certificate or supporting documentation. Note: Authority cited: Health and Safety Code Section 25249.7(d), (h),(i). Reference: Health and Safety Code Section 25249.7(d), (h), (i). CHAPTER 3-SETTLEMENT GUIDELINES § 3200. Authority and Scope. This chapter contains the Attorney General’s guidelines for review of settlements by persons proceeding “in the public interest” pursuant to Health and Safety Code section 25249.7(f)(4). The provisions of this chapter are guidelines, which are not binding on litigants or the courts, but provide the Attorney General’s view as to the legality and appropriateness of various types of settlement provisions, and the type of evidence sufficient for the private plaintiff to sustain its burden of supporting the proposed settlement. This should assist the parties in fashioning settlements to which the Attorney General is unlikely to object, and assist the courts in determining whether to approve settlements. § 3201. Attorney’s fees. Code of Civil Procedure section 1021.5 permits an award of attorney’s fees to a “successful party...in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit...has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement...are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any.” These guidelines are intended to be consistent with existing law interpreting Code of Civil Procedure section 1021.5, but provide assistance to the litigants and the court in applying them to issues commonly arising under Proposition 65. (a) Successful Party. The fact that a defendant changed its conduct prior to entry of a court order or judgment does not preclude a finding that the plaintiff was successful. If the plaintiffs’ action was the cause or “catalyst” of the change in conduct, it may be deemed successful.

9 (b) Public Benefit. A settlement that provides for the giving of a clear and reasonable warning, where there had been no warning provided prior to the sixty-day notice, for an exposure that appears to require a warning, is presumed to confer a significant benefit on the public, or the portion of the public exposed to a listed chemical. If there is no evidence of an exposure for which a warning plausibly is required; there is no public benefit, even if a warning is given. If the relief consists of minor or technical changes in the language, appearance, or location of a warning in a manner that is not likely to increase its visibility or effectiveness in communicating the warning to the exposed persons, there is no significant public benefit. (c) Necessity of Private Enforcement. To establish necessity of private enforcement, the plaintiff should establish that its continued prosecution of the action was necessary to obtain the relief in the settlement. For example, where a defendant proposed in writing to provide certain relief, and the settlement or judgment does not provide any significant additional relief, additional fees incurred after the time that the offer was rejected may not be reasonable or necessary. (d) Reasonable Fees. Hourly fees should be those reasonable for attorney of similar skill and experience in the relevant market area. Once a lodestar fee is a calculated, a multiplier of that amount is not reasonable unless a showing is made that the case involved a substantial investment of time and resources with a high risk of an adverse result, and obtained a substantial public benefit. No fees should be awarded based on additional time spent in response to the

Attorney General’s inquiries or participation in the case, unless specifically identified and approved by the court. (e) Documentation. All attorney’s fees should be justified by contemporaneously kept records of actual time spent, which describe the nature of the work performed. Declarations relying on memory or recreated, non-contemporaneously kept records may raise an issue concerning the accuracy of the time estimate. Note: Authority cited: Health and Safety Code Section 25249.7(f) (4), (5). Reference: Health and Safety Code Section 25249.7(f) (4)(5).

10 § 3202. Clear and Reasonable Warnings. Health and Safety Code section 25249.7(f)(4)(A) requires that, in order to approve a settlement, the court must find that “Any warning that is required by the settlement complies with” the clear and reasonable warning requirement of Proposition 65. This guideline provides additional information concerning the Attorney General’s interpretation of the statute and existing regulations governing clear and reasonable warnings. Nothing in this guideline shall be construed to authorize any warning that does not comply with the statute and regulations, or to preclude any warning that complies with the statute and regulations. This guideline is intended to address some of the types of warnings commonly found in settlements, not to provide comprehensive standards. (a) Supporting evidence. In order to sustain its burden of producing evidence sufficient to support the conclusion that the warning is legal, the plaintiff should provide (1) the text and appearance of the warning, along with a sufficient description of where the warning will appear in order to ascertain whether the warning will be “reasonably conspicuous” under the circumstances of purchase or use of the product; and (2) sufficient proof that the product causes exposure to a listed chemical to enable a finding that the warning would be truthful. (b) Warning language. Where the settling parties agree to language other than the “safe harbor” language set forth in the governing regulations (22 CCR § 12601(b)) the warning language should be analyzed to determine whether it is clear and reasonable. Certain phrases or statements in warnings are not clear and reasonable, such as (1) use of the adverb “may” to modify whether the chemical causes cancer or reproductive toxicity (as distinguished from use of “may” to modify whether the product itself causes cancer or reproductive toxicity); (2) additional words or phrases that contradict or obfuscate otherwise acceptable warning language. Certain other deviations from the safe-harbor warnings are generally clear and reasonable, such as (1) Using the language “Using this product will expose you to a chemical...” in lieu of “This product contains a chemical...”; or (2) deleting the reference to “the state of California” from the safe- harbor language.

11 (c) Premises warnings for environmental tobacco smoke. A number of cases involve provision of warnings due to exposure to environmental tobacco smoke caused by entry of persons (other than employees) on premises where smoking is permitted at any location on the premises. 1. Location of signs. (A) For hotels or apartment buildings in which entry to guest rooms or apartments is on an enclosed hallway and there is a common ventilation system, the sign should be posted at main and subsidiary entrances to the building (including any entrance from a parking structure), and at the registration counter or administrative office open to the public or guests. (B) For hotels or apartment complexes in which entry to guest rooms or apartments is to areas open to ambient air; signs should be posted at a kiosk or gate where cars drive in, if any, and at the registration counter or other administrative office open to the public or guests. 2. Language of Signs. The following language is appropriate and legally sufficient: “ WARNING: This facility allows smoking in some areas. Tobacco smoke, and many of the chemicals in it, are known to the state of California to cause cancer, and birth defects or other reproductive harm. [Optional: Smoking is permitted only in the following areas of this facility: (identify areas, e.g., “swimming pool area,” “foyers,” “designated guest rooms,” “outdoor patios.”]”

3. Successful parties. The plaintiff is not successful and has not conferred a substantial public benefit if the defendant had posted signs substantially complying with subparagraphs (1) and (2); and the only additional relief obtained is the posting of additional signs in guest rooms or in hallways that lead to guest rooms in which smoking is permitted. (d) Environmental Exposure Warnings. In determining whether environmental exposure warnings comply with the law, the parties should consider 22 CCR section 12601(d)(2), which requires, among other things, that the warning “be provided in a conspicuous manner and under such conditions as to make it likely to be read, seen or heard and understood by an ordinary

12 individual in the course of normal daily activity, and reasonably associated with the location and source of the exposure.” 22 CCR section 12601(d)(1) also requires that such warnings “target the affected area.” Settlements meeting these requirements should: (1) include a warning other than signs posted at the facility, wherever the area for which the exposure occurs at a level requiring a warning extends beyond the boundaries of the facility to an area of persons who do not actually enter or walk by the facility. (2) Use hand-delivered or mail-delivered notices rather than media advertisements unless the area of persons to be warned is so large as to make such delivery substantially more expensive than media advertisements; (3) If newspaper notices are used, they should appear in the main news section of the newspaper with the largest circulation in the area for which a warning is given, be at least 1/4 page in size, and contain a graphic depiction of the location of the facility for which the warning is given and the area for which the warning is given. Note: Authority cited: Health and Safety Code Section 25249.7(f) (4), (5). Reference: Health and Safety Code Section 25249.7(f) (4)(5). § 3203 Reasonable Civil Penalty. Penalties will be evaluated based on the factors set forth in the Health and Safety Code section 25249.7(b)(2). The following factors are “[other factors] which justice may require” to be considered within the meaning of Health and Safety Code section 25249.7(b)(2)(G):

(a) A settlement with little or no penalty may be entirely appropriate. Civil penalties, however (75% of which must be provided to the Department of Toxic Substances Control) should not be “traded” for payments of attorney’s fees. (b) Where a settlement provides additional payments to an entity in lieu of a civil penalty (including, for example, funds for environmental activities, public education programs, and funds to the plaintiff for additional enforcement of Proposition 65 or other laws), such payments may be a proper “offset” to the penalty amount or cy pres remedy, but are only proper if the following requirements are met:

13 (1) The funded activities have a nexus to the basis for the litigation, i.e., the funds should address the same public harm as that allegedly caused by the defendant(s) in the particular case. (2) The recipient should be a non-profit, governmental organization or court supervised entity that is accountable, i.e., is able to demonstrate how the funds will be spent and can assure that the funds are being spent for the proper, designated purpose. (3) the method of selection of a recipient of settlement funds must be set forth in the settlement agreement or in a separate public document referenced in the agreement. The selection procedure may vary depending on the facts of the particular case, but must give significant weight to a prospective grantee’s ability to perform the funded task and its reliability and accountability. (c) Where a settlement provides that certain penalties are assessed, but may be waived in exchange for certain conduct by the defendant, the necessary actions must be related to the purposes of the litigation, provide environmental and public health benefits, and provide a clear mechanism for verification that the qualifying conditions have been satisfied. Note: Authority cited: Health and Safety Code Section 25249.7(4) (4), (5). Reference: Health and Safety Code Section 25249.7(f) (4)(5); 25249.7(b)(2). § 3204 Other provisions. Certain other provisions of a settlement may either be unlawful or contrary to public policy, and could provide the basis for an objection by the Attorney General. (a) Releases or other language describing the intended scope of claims resolved or barred by the settlement shall not purport to: (1) Be on behalf of the People of the State of California. Appropriate language is that the plaintiffs “suing ‘in the public interest’ pursuant to Health and Safety Code section 25249.7(d)” and “suing ‘in the interest of...the general public’ pursuant to Business and Professions Code section 17204" (whichever applies to the action); (2) Release or resolve any claim by individuals with personal injuries, unless those claims

14 were properly raised in the complaint; (3) Release or resolve any claim concerning listed chemicals that are not present in the product at the time of entry of judgment, or any claim concerning chemicals that are not on the list of chemicals known to the state to cause cancer or reproductive toxicity, but may become listed in the future; (4) Release or resolve any claim concerning chemicals or exposures not set forth in the sixty-day notice of violation; (5) Immunize any defendant from any duty caused by a change in law, or to impose a duty that is removed by a change in law. Note: Authority cited: Health and Safety Code Section 25249.7(f) (4), (5). Reference: Health and Safety Code Section 25249.7(f) (4)(5).

15 INITIAL STATEMENT OF REASONS DIVISION 4-PROPOSITION 65 PRIVATE ENFORCEMENT

REVISION OF CHAPTER 1 ADOPTION OF CHAPTERS 2 AND 3 TITLE 11, CALIFORNIA CODE OF REGULATIONS

A. Summary of Legislation

The legislation being implemented, SB 471, is set forth and described in the Informative Digest/Plain English Policy Statement Overview above.

B. Section-by-Section Analysis

1. Chapter 1 Reporting Requirements

a. Section 3000: Authority

SB 471 also expanded the existing duty to notify the Attorney General of the filing and settlement of any action brought pursuant to Health and Safety Code section 25249.7(d) to include a duty to report the filing and settlement of any action in which violations of Proposition 65 are alleged, e.g., actions under Business and Professions Code section 17200 in which the predicate unlawful conduct is a violation of Proposition 65. SB 471 specifically states that it did not change existing law concerning whether other types of actions in which violations of Proposition 65 are alleged are proper, and this regulation also does not do so.

b. Section 3001: Definitions

Because the reporting requirement now covers private actions not brought under Proposition 65, but in which violations of Proposition 65 are alleged, but such actions are not covered by the new requirement of a motion for judicial approval, the requirements for the two types of cases are not the same. Accordingly, a definition of “Other Private Action,” has been added to use where necessary.

c. Section 3003: Settlements

The existing regulation provides that any settlement must be submitted to the Attorney General thirty days before it is submitted to the court. Since submission of settlements by noticed motion, with evidence sufficient to support certain required findings, was not required by the statute when the regulation was adopted, the regulation does not provide any timing for the submission of those materials to the Attorney General. Thus, under the existing regulation, the Attorney General would receive the settlement thirty days in advance of submission of the motion to the court, but might receive a relatively short time to review the supporting materials. Those materials may be key to determining whether the Attorney General objects to the settlement.

1 Since the Attorney General may not comment on a settlement in every instance, the regulation requires the Private Enforcer to advise the court that the lack of a response by the Attorney General does not constitute an endorsement of the settlement.

Accordingly, the proposed regulation dispenses with the requirement of submitting the settlement to the Attorney General thirty days before submission to the court, and replaces it with a provision that the settlement and all materials supporting the motion for approval of the settlement be submitted to the Attorney General forty-five days before the hearing. This should provide the Attorney General with sufficient time to conduct the proper review.

“Other Private Actions,” i.e., however, are not subject to the motion for approval requirement, and therefore are subject only to the thirty-day review period that existed for Proposition 65 settlements under prior law.

d. Section 3007: OSHA Matters

The emergency regulation makes a change to section 3007, which governs Proposition 65 cases concerning occupational exposures within the purview of the Division of Occupational Safety and Health (“Cal/OSHA”), in its implementation of the State Plan for Occupational Safety and Health as approved by the U.S. Occupational Safety and Health Administration. Cal/OSHA has its own regulation establishing reporting requirements for those cases, 8 Cal.Code Regs., § 338, as adopted on October 12, 2000. Compliance with those requirements had been deemed adequate to constitute compliance with the provisions of the prior regulation. Since adoption of SB 471 imposed new requirements, however, compliance with the Cal/OSHA regulation no longer is sufficient. Accordingly, the emergency regulation provides that Private Enforcers must comply with the existing regulation, and the new statute. This does not affect or change Cal/OSHA’s regulation in any way.

e. Section 3008: Affidavit of Compliance

Since Private Enforcement Matters are no longer subject to the thirty-day review period prior to submission of a settlement to the court, but Other Private actions are now subject to that requirement, the contents of the Affidavit of Compliance have been modified accordingly.

2. Chapter 2: Certificates of Merit

a. Section 3100: General

This section points out that all sixty-day notices alleging violations of the “warning” provision of the statute must include a Certificate of Merit. The statute requires that the notice attach specified documentation, which shall be treated as official information pursuant to Evidence Code section 1040. The remaining parts of the sixty-day notice, including the Certificate of Merit itself, are public information, however, and frequently are requested by members of the public under the Public Records Act. In order to easily respond to those requests, and minimize the possibility of an inadvertent disclosure of privileged information, this section would require that the noticing party provide a “public” copy and an “Attorney General”

2 copy, the latter of which would include the privileged material.

b. Section 3101: Contents

The statute states that the certifier must believe, and have factual support for its belief, that “there is a reasonable and meritorious case for the private action.” Even though sanctions at the termination of an action are limited to those situations in which the court finds that there was no credible evidence of an exposure (§ 25249.7(h)(2)), the face of the certification requirement is significantly more broad, requiring a belief that there “is a reasonable and meritorious case for the private action.” (§ 25249.7(d)(1)) To hold such a belief as to the entire action, the certifier must have some information concerning other elements required to prevail in the action: knowledge and intent, failure to warn, and that the alleged violator is a business with ten or more employees, i.e., each issue on which the plaintiff would bear the burden of proof.

At the same time, the issue of whether the exposure poses “no significant risk” (for carcinogens) or is less than one one-thousandth of the no observable effect level (for reproductive toxins) is clearly an affirmative defense, and the plaintiff is not required to produce any evidence on this issue in order to proceed with the matter. (See Consumer Cause, Inc., v. Smilecare (2001) 92 Cal.App.4th 454.) SB 471 was not intended to, nor did it in fact, change the statutory burden of proof on any issue. Thus, the regulation would not require the certifier to state, or support, a conclusion that affirmative defenses could be negated. All would agree that we cannot extend this provision to the point of requiring the noticing party to negate affirmative defenses such as no significant risk, because this would shift the burden of proof provided under the statute. In some situations, however, the noticing party may have discovered information during the course of its investigation that proves that the defendant, in fact, will be able to prove an affirmative defense (e.g., no significant risk). While the noticing party has no legal duty to seek such information, if it obtains such information, the certifier can no longer state a reasonable belief that the “action” is “meritorious.” Thus, the section requires that the certifier state that the information collected does not “prove that the alleged violator will be able to establish any of the affirmative defenses set forth in the statute.”

The section also requires that the certificate recite the fact that the appropriate persons were consulted, and that the supporting documentation has been provided to the Attorney General.

c. Section 3102: Supporting Documentation

In the small number of Certificates of Merit submitted to date, the form and content of the supporting information has varied widely. Standardizing the requirement will help assure that the proper information is provided, and that it is provided in a manner that eases review by the Attorney General.

This section would require that the information be physically attached to the Certificate of Merit in a legible, organized format. It would provide that citations to studies are not sufficient.

3 With respect to the experts consulted, it would require a description of the experts sufficient to demonstrate their competency.

Finally it would specify that the supporting documentation must be as specific as the types of exposures alleged. For example, if a number of different consumer product exposures are alleged, then the documentation must support the certifier’s belief with respect to each product identified in the notice. The section contains similar provisions for occupational and environmental exposures.

d. Section 3103: Effect of Failure to Comply

The only specific sanction under the law for inadequate certification is by the court at the conclusion of the case. (§ 25249.7(h)(2).) Since the statute specifically requires that each sixty- day notice to which it applies must include the certificate, and the regulatory requirements are binding, the regulation states that, in the absence of a proper Certificate of Merit, the noticing party has no authority to commence an action under Proposition 65. (It would appear that a demurrer or motion to strike would be appropriate if a complaint were filed under such circumstances.)

In addition, the statute does not specifically address any action the Attorney General may take where he concludes that a Certificate of Merit or the supporting documentation are inadequate. Certainly, the statute does not grant the Attorney General authority to prohibit the noticing party from filing a complaint. The Attorney General may, however, indicate orally or in writing his view of the adequacy of the Certificate or supporting documentation. Of course, in so doing, the Attorney General may not disclose information made privileged by the law. So long as no such information is disclosed, however, the Attorney General may choose to send a public letter advising the noticing party and alleged violators of his conclusions, for their use in determining how to proceed. Where the Attorney General does not provide any comment, this should not be interpreted as a comment on the validity of the Certificate of Merit.

4 3. Chapter 3: Settlement Guidelines

Under SB 471, settlements must be submitted to the court by noticed motion, and may be approved only if the court makes the following findings:

(A) Any warning that is required by the settlement complies with this chapter.

(B) Any award of attorney’s fees is reasonable under California law.

(C) Any penalty amount is reasonable based on the criteria set forth [in the penalty provision].

The plaintiff must produce the evidence necessary to sustain the findings. The penalty provision now includes seven specific factors, plus an eighth “anything that justice requires” provision. The Attorney General is permitted to appear in the case without intervening, and all of the papers must be served on him. Again, these are non-binding guidelines, intended to assist courts and parties in fashioning settlements that comply with the law, and identifying settlement provisions that may draw an objection from the Attorney General.

a. Section 3200: Authority and Scope

This section would clearly state that the Settlement Guidelines are not intended to be binding, but only to provide guidance in fashioning and reviewing settlements.

b. Section 3201: Attorney’s Fees

This section specifies certain principles that are consistent with current law under Code of Civil Procedure section 1021.5:

• Cases that accomplish only a trivial change in the existing wording of a warning have not conferred a substantial public benefit.

• The defendant’s offers to cure the violation at an early stage must be considered in determining whether all of the fees are justified if the plaintiff does not accomplish more than was originally offered.

• Fees should be justified by contemporaneously kept time records. Other methods of proving attorney time may leave questions as to their accuracy.

• Multipliers are justified only in extraordinary cases.

In addition, we would propose that the additional time spent responding to the Attorney General’s inquiries should not ordinarily be recoverable, unless specifically allowed by the court. Many settlements simply specify the amount of attorney’s fees, so judicial approval of the settlement would not result in any additional award. Some settlements, however, provide that the defendant must pay any additional fees incurred in responding to our inquiries about

5 settlements. It is appropriate that, in every case, the defendant should bear the burden of additional costs incurred due to the Attorney General’s inquiries. While case law under Code of Civil Procedure section 1021.5 allows for the collection for “fees on fees,” i.e., compensation for time spent preparing a fee application, those expenses are caused by the defendant’s opposition to the plaintiff’s fee application. In this instance, the defendant has agreed to the settlement, and is not the cause of the greater expenses. In particular, where the Attorney General’s participation results in changes to a settlement or judicial disapproval, it would be inappropriate for the defendant automatically to pay. Thus, the guideline provides that such fees should be awarded only if the court determines it is appropriate.

c. Section 3202: Clear and Reasonable Warnings

This section does not supersede or alter in any way the existing and legally valid regulations adopted by the Office of Environmental Health Hazard Assessment. Nonetheless, it provides certain additional guidance concerning the application of those regulations to particular fact situations. The section does the following:

• Identifies wording deviations from the approved “safe harbor” warning language that the Attorney General considers acceptable.

• Provides model environmental tobacco smoke warnings for hotels and apartments.

• Provides specific guidance concerning newspaper warnings for facilities warning residents of the surrounding community.

• Identifies certain words and phrases that should not appear in warnings.

The provision will help parties, whether in litigation or attempting to comply in advance of litigation, to provide appropriate warnings.

d. Section 3203: Reasonable Civil Penalty

This section does not give greater specificity to the specific factors set forth in the statute. It does, however, view “cy pres restitution” as effectively a payment in lieu of penalties, which should be reviewed by the court. This type of recovery has been abused by some private plaintiffs, who have traded penalties for cy pres funds, and then spent them in unrelated, unaccountable ways. These guidelines are similar to those adopted by the Attorney General for use in his own settlements in a publicly-available document, Management Bulletin No. 01-05, April 11, 2001, a copy of which is attached and incorporated by reference. Under this policy, payments should be related to the purpose of the law, be given to publicly accountable organizations, and be subject to an appropriate selection procedure.

e. Section 3204: Other Provisions

Even prior to SB 471, settlements in any case were subject to disapproval by a court if they contained provisions contrary to law or public policy. (California State Auto. Assn. Inter-

6 Ins. Bureau v. Superior Court (1990) 50 Cal.3d 658, 664; Mary R. v. B & R Corp. (1983) 149 Cal.App.3d 308, 316-317.)

Accordingly, the proposed guidelines address one area that has been a problem in a large number of settlements, i.e., the inclusion of language purporting to “release” claims that the private plaintiff has no authority to release. These include claims on behalf of the People of the State, claims about chemicals not subject to the statute, personal injury claims, or claims affected by future changes in the law.

The Attorney General invites comment on any other items that should be included in this section of the guidelines.