The prospect of facing bicoastal enforcement in two of the largest markets in the US could prove burdensome to businesses.

By Kegan A. Brown, Michael G. Romey, James A. Erselius, and Lucas I. Quass

On January 21, 2019, New York Governor Andrew M. Cuomo announced a proposal for the Consumer Right to Know Act — legislation that would authorize the Department of Environmental Conservation, in consultation with the Department of Health and the Department of State, to develop regulations establishing on-package labeling requirements for designated products indicating the presence of potentially hazardous chemicals, including carcinogens. If passed, the law would parallel California’s Proposition 65, which was enacted in 1986. Regulations updating Proposition 65 went into effect on August 30, 2018, which Latham & Watkins has summarized in previous blog posts.

One unique aspect of Proposition 65 is how the law is enforced. California allows lawsuits by private citizens as well as the California Attorney General or any city attorney, district attorney, or consumer advocacy group. Companies doing business in California have lamented the ease with which frivolous or “bounty hunter” lawsuits can be brought in the state. According to the California Attorney General’s office, from 2012 to 2017 companies paid US$129,036,408 in settlements in such bounty hunter lawsuits. There is no indication whether the proposed Consumer Right to Know Act in New York would allow for similar private citizen enforcement.

In California, Proposition 65 has had an economic impact on businesses. One study of Proposition 65 noted that “Industry costs include costs of testing and labeling, costs of lost sales from reduced consumption of a labeled product or withdrawal of a product to avoid the warning, and increased production costs from altering technology to eliminate the listed chemical.”[i] A 2018 study found that the total economic impact of Proposition 65 on businesses has been more than US$310.6 million since 2000.[ii] If the terms of Proposition 65 are extended to New York, businesses should expect similar economic impacts.

The areas of the proposed Consumer Right to Know Act that will prove important are whether and to what extent New York will emulate aspects of California’s law, such as the list of chemicals requiring a warning, what the required warning label will look like, which products will require a warning, and what level of exposure will trigger a warning requirement. The prospect of facing bicoastal enforcement in two of the largest markets in the US and lawsuits in two different jurisdictions could prove burdensome to businesses. To the extent the New York law will differ from California, this will only compound the difficulties that businesses face. As one study found, “Proposition 65-type legislation poses significant strategic problems in manufacturing and distribution for firms that operate across state and national lines. These problems are exacerbated if other states follow California by adopting similar, but not identical, requirements.”[iii]

Latham lawyers in the Environment, Land & Resources Department will be closely tracking developments on New York’s proposed law.

 

[i] Tim T. Phipps et al., The Political Economics of California Proposition 65, American Journal of Agricultural Economics 59, 1989.
[ii] Breanne Kincaid, 2018 Proposition 65 State Impact Report 8 (June 2018).
[iii] Phipps, supra.