A (Non)-Sight for Sore Eyes: One Less Prop 65 Warning in California

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We’ve commented before on both the ubiquity and increasing comic absurdity of Prop 65 warnings in California.  Prop 65—which requires warning labels on products that contain materials the state deems carcinogenic (including chemicals that are solely carcinogenic in animals)—has been a goldmine for plaintiffs’ lawyers.  Its private attorney general provisions provide an abundant source of plaintiffs, who don’t have to show harm to enforce the measure in court.  And the promise of attorneys’ fees have provided more than an adequate incentive to ensure that strike suits will be brought.  The whole endeavor has resulted in companies defensively labeling everything, and a state plastered in Prop 65 signs whose content has been rendered meaningless by its omnipresence.

While a treasure-trove for lawyers, it can hardly be said that Californians have benefitted from these lawsuits.  Attorneys walked away with 74% of Prop 65 settlement awards in 2011, and Californians in turn received the benefit of having been conditioned to the pervasive warnings.  Like a cliché, the intentions behind the law (if there were ever were good ones) have been lost.  Instead of signifying a warning, the signs now signify something else: frivolous litigation.  In other words, to many Californians, the law is one brick short of a load.

Fortunately the Court of Appeals for the Third District of Sacramento has refused to take residents one step further down the path laid with good intentions (and that leads you know where) by rejecting the state’s attempt to list two chemicals “possibly” linked to cancer.  In Styrene Information and Research Center v. Office of Environmental Health Hazard Assessment, The court found instead that only those chemicals known to cause cancer may be listed, saving Californians’ eyes from a whole new host of warnings on the several products that contain styrene and vinyl acetate—the chemicals at issue.

Based on its prior cases and maxims of statutory interpretation, the court determined that “chemicals may be included on the Proposition 65 list only if there is a sufficient showing that they in fact cause cancer or reproductive toxicity.”  That is, the OEHHA can’t list chemicals subject to Prop 65 warning labels willy-nilly.

Not one regulatory body, international or domestic, has deemed styrene a known human carcinogen (though many have raised the issue of it being a “potential” human carcinogen.)  That’s not to say that it’s not carcinogenic.  Rather, our sore eyes merely ask for prudence before hampering industry and contributing to the lawsuit mill.  Currently, one often learns a new cause of action every day, but thankfully the Court of Appeals is attempting to limit those causes of action to where they are truly appropriate.

Another Judge Derails Activist Groups’ “Cy Pres” Settlement Gravy Train

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Cross-posted at WLF’s Forbes.com contributor page

As class-actions continue to proliferate and cy pres provisions become increasingly common in settlement agreements, judicial oversight of these provisions has become increasingly meaningful.  Cy pres provisions–which allocate a portion of the settlement funds to charities–are meant to compensate absent class members and prevent the defendant from benefitting from any unclaimed funds.  The rise of cy pres has been followed by the specter of impropriety, as plaintiffs’ firms, defendants or judges may be connected to the benefitting organization.  Cy pres arrangements further undermine the benevolent pretense of class action lawsuits, as they do precious little to compensate the supposedly injured class members.  However, judges have recently been signaling their willingness to reject cy pres terms where they do not fulfill their purpose.  A judge in the Southern District of California recently rejected an entire settlement agreement based on its cy pres provisions, following on the heels of Dennis v. Kellogg (which we blogged about here) and expressly relying on that case.

The case, In Re: Groupon, Inc. had been brought based on Groupon’s “allegedly improper expiration dates and other purportedly objectionable provisions (e.g., requirements that gift certificates be used in a single transaction, that cash refunds will not be made for unused portion, and inclusion of class action waivers and mandatory arbitration provisions)”–stipulations which hardly shock the conscience.  Before the parties could agree on a forum for adjudication, the parties entered into settlement negotiations and jointly supported the proposed settlement. Continue reading

Arbitration Round Up: Some Courts Still Won’t Respect Voluntary Contracts

Cross-posted at WLF’s Forbes.com contributor site

Despite the Supreme Court’s recent affirmation that arbitration agreements must be enforced by their terms (AT&T Mobility v. Concepcion), some courts continue to go to great lengths to avoid them.  Take for instance the California Court of Appeal that recently held an arbitration agreement unenforceable because it wasn’t signed, despite that the employee was herself tasked with obtaining signed arbitration agreements from the other employees, she represented to the company that she had signed it, and the company had required she sign it as a condition of her employment.

Of course, the National Labor Relations Board (NLRB) made it easier for judges to flout the Supreme Court’s decision in Concepcion when it ruled in D. R. Horton Inc. that to include a mandatory class arbitration waiver in an employment agreement is to commit an unfair labor practice, as it violates the employees’ right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection..”.  Continue reading

Plaintiffs in Playstation Data Security Class Action Back to the Drawing Board

Cross-posted at Forbes.com’s WLF contributor site

One of the hallmarks of frivolous litigation is a class composed of arguably uninjured plaintiffs who often receive little in the way of remuneration for the asserted wrong.  That remuneration is reserved for the lawyers, and the class is thus relegated to receiving coupons or promises to refrain from future behavior.  Where the plaintiffs have not endured any real harm, litigation merely burdens the docket while enriching plaintiffs’ lawyers.  However, a recent opinion in the United States District Court for the Southern District of California may bode well for defendants who encounter this type of litigation, particularly in data breach cases.

In an order for In re: Sony Gaming Networks, the district court granted leave for plaintiffs to amend their complaint after determining that they had not satisfied the burden of pleading a cognizable injury.  This opinion adds to case-law saying the same; in 2011, another California court dismissed some of the claims against Google for its data collection under the Google Street View program due to the plaintiffs’ lack of monetary damages. Continue reading

Federal Circuit Slaps Hand of Congress Away From Judges’ Wallets

After any Supreme Court ruling, inevitable accusations of judicial politicking ensue.  The focus on the identities of the voters often obscures the legal analysis behind the vote.  However, this public discourse also underscores the fact that, in theory at least, we believe that adjudicators should be unbiased.  What is law if not fair, and what is fairness without dispassionate adjudicators?

The founding fathers, aware of the danger of a corrupt judiciary, explicitly enshrined the notion of judicial independence in the Constitution, mandating that judicial compensation “shall not be diminished during their continuance in office.” U.S. Const. Art. III §1.  The thought was the congressional and executive branches should not be able to leverage the judiciary by threatening its compensation.  Additionally, reasonable compensation attracts talented lawyers to the bench, thereby improving the administration of justice.  So long as that compensation is maintained, judges will not be tempted to leave the bench–where subsequent private practice could be threatened by one’s previous judicial decisions, or vice versa. Continue reading

California’s Proposition 37: An Impending “Natural” Disaster?

Cross-posted at WLF’s Forbes.com contributor site

In a 1960 opinion, Judge Henry Friendly began by asking “what is chicken?”  While an amusing question–even children know a chicken when they see one–the query was more nuanced as a matter of law.  California courts are finding themselves asking a similar question: what is “natural?”

Some products are intuitively so: with raw apples, almonds, or broccoli, it seems apparent.  But what happens when you make apples into apple juice, or roast those almonds, or blanch that broccoli before freezing it for later use?  These finished products are widely considered wholesome, and many would argue an almond is an almond (with the exception of the raw foods movement.)

The dictionary has fifteen different definitions for “natural”.  The first is: “based on an inherent sense of right or wrong”–an intrinsically subjective definition.  Given the ambiguous nature of the term, it’s no wonder the federal Food and Drug Administration (FDA) has been loath to come out and define “natural” for advertising and promotional purposes.  But when businesses are begging the FDA to come in and regulate them, something must be amiss.  And indeed, it is.  Lawsuits contesting food companies’ use of the term “natural” have proliferated, most notably in the “Food Court,” i.e. the U.S. District Court for the Northern District of California.  Businesses now simply want clarity.  And if these lawsuits are really driven by concern for consumers’ well-being, so should the plaintiffs. Continue reading

Prop 65 Has its Perks for Plaintiffs’ Lawyers in Coffee Litigation

Cross-posted at WLF’s Forbes.com contributor site

First, they argued that Californians must be warned of the possible carcinogenic effects of driving in parking garages.  Then it was lighting matches, eating potato chips, and plugging in Christmas lights.  According to plaintiffs’ lawyers, our most innocuous habits must be warned against.  Now, drinking coffee is a purportedly dangerous practice–or so alleges The Council for Education and Research on Toxics (CERT).

CERT has brought a lawsuit against coffee roasting companies under California’s Proposition 65.  Prop 65, as many Californians are aware, requires warning labels to be placed on products that contain materials the state alleges are associated with cancer, and the act’s private attorney general provisions allow consumers–even those who cannot show they’ve been harmed–to bring lawsuits to enforce the act.  The act also provides for attorneys’ fees.

You can guess what Prop 65 hath wrought: litigation has erupted, and strike suits under the act have become a cottage industry.  Even the iPhone (not my iPhone!) has been targeted by environmental groups.

According to the California Office of the Attorney General, 74% of Prop 65 settlement awards in 2011 went to attorneys’ fees and costs.  Producers have responded accordingly, and companies now slap Prop 65 warnings on just about every product in an effort to not be sued.  This fact severely undermines the usefulness of the warnings. Continue reading

Compelled Speech: Is California the Too Much Information State?

Cross-posted at WLF’s Forbes.com contributor site

Can you hear me now?

It’s difficult to hear any meaningful information amongst the government mandated noise in California.  Several innocuous products now sport the ubiquitous Prop 65 warnings–which indicate that the product contains materials the state alleges are linked to cancer.  And should Prop 37 pass in November, genetically modified foods will have to be labeled as such, despite consensus among leading scientific organizations (such as the Food and Drug Administration and the World Health Organization) that genetically modified foods are perfectly safe for consumption.

Recently, the city of San Francisco endeavored to add to this noise, by enacting an ordinance that would mandate disclosures on the purported risk of cancer associated with cell phone emissions.  In CTIA-The Wireless Association v. City of San Francisco, however, the Ninth Circuit affirmed the lower court’s decision that the mandated disclosures themselves were “misleading and controversial,” and thus violated cellular retailers’ First Amendment rights.

Because mandated disclosures implicate First Amendment concerns, the Supreme Court has ruled that any governmentally compelled speech much be “purely factual and uncontroversial.” Zauderer v. Office of Disciplinary Counsel.  In CTIA, the court found that San Francisco’s compelled speech, including recommendations for consumers who wish to reduce their exposure to cell phone emissions, implied that the city adjudged cell phone use to be dangerous.  This implication was neither factual nor uncontroversial.  As the court noted, the FCC has determined what levels of radio frequency energy exposure are safe, and has concluded that cell phones are squarely within these limits.  Further, the scientific community lacks consensus on the matter, and the city itself admitted that there is no evidence that cell phones cause cancer.  The relation between cell phone emissions and cancer risks apparently amounts to mere conjecture, a conjecture that the government could not force businesses to disseminate.

But there’s the rub.   Government compelled speech, even where factual, implies that there is a danger that must be warned of.  With regard to Prop 37, the mandatory disclosures only require that genetically modified food have a label to that effect.  But this label implies a hazard that the scientific community has yet to confirm the existence of.  Further, we now know that the act’s regulation of the use of the term “all natural” pertains not only to genetically modified foods, but to plain old processed foods as well–which means that the purveyors of frozen or canned foods can no longer call their products “natural.”  Under this rationale, frozen broccoli is not natural. Continue reading

NYC Department of Health Supersizes Government, Approves Sugary Beverage Ban

Individual choice is so last season.  As anticipated, the New York City Board of Health passed Mayor Bloomberg’s ban on large sugary beverages, and beginning March 12, 2013, New Yorkers will no longer be able to satisfy their sweet teeth with sugary drinks over 16 ounces (read WLF’s public comments on the proposed ban here).  But it’s not over until the, ahem, obese lady sings.  And with a large proportion of the population opposed to his ban, Mayor Bloomberg should brace himself for the legal challenges sure to come.

In WLF’s comments, we identified New York state separation of powers provisions that could potentially serve as causes of action.  Further claims could be based on the dormant commerce clause, Substantive Due Process, or the Equal Protection Clause.

In the court of common sense, the ban is similarly in trouble.  Leaving aside the fact that residents can (and will) purchase two small beverages instead of one large, meaning the “ban” effectively acts like a tax (which will especially burden low-income families), the ban doesn’t apply to those establishments regulated by the state Department of Agriculture and Markets–including stores with food service totaling less than 50% of annual sales (think 7-Elevens and grocery stores).  This means that in some cases, one business will have to cease sales of the banned drinks while another business on the same street will not.

No one doubts the health risks associated with obesity.  But that sentiment alone doesn’t justify encroachment on individual choice.  Mayor Bloomberg and the Department of Health failed to give credence to the serious impact this ban will have on the economy–those businesses that rely on the sales of these beverages and their cups and containers are facing a new burden on their business.  Just ask the maker of Honest Tea, who, because of his use of 16.9 ounce jars to bottle his teas (a mere .9 ounces over Bloomberg’s arbitrary cap), will have to make expensive changes to his manufacturing process.  Alternatively, he could just stop selling his beverages in New York.  Either way: what a (sugar) buzz kill.

Let the legal challenges begin.

1st Circuit Holds No Right to Remain Silent When it Comes to Arbitration Agreements

Cross-posted at WLF’s Forbes.com contributor site

In raising the bar for what’s required to avoid class action arbitration, the U.S. Court of Appeals for the First Circuit may not only have run afoul of the Supreme Court’s ruling in Stolt-Nielsen, but effectively limited the possibility that the case will apply in the future.  In Fantastic Sams Franchise Corp. v. FSRO Association Ltd., the court held that silence in an arbitration agreement as to whether class wide arbitration is permissible does not bar the imposition of class arbitration.  Following Stolt-Nielsen v. AnimalFeeds International Corp.in which the Supreme Court had ruled that class arbitration could not be imposed on parties “who have not agreed to authorize class arbitration”–it was believed by some that class arbitration could only result if the agreement explicitly authorized it.  The First Circuit, however, factually distinguished Stolt-Nielsen, and in doing so limited its holding to the circumstances in that case.

In Fantastic Sams, plaintiff FSRO–an association of Fantastic Sams franchisees–brought suit against Fantastic Sams for alleged license agreement violations.  Because the license agreements of 25 of those franchisees explicitly provided for individual arbitration, the district court held that those parties could not move forward on a class-wide basis.  With respect to the remaining ten franchisees, whose license agreements were silent on the subject, Fantastic Sams argued that–pursuant to Stolt-Nielsen–collective arbitration similarly could not proceed.

The court, however, distinguished Stolt-Nielsen based on the fact that, in that case, not only was the contract silent as to class, but further both parties stipulated that they had reached no agreement as to the matter.  The determinative fact was not the contract’s silence, but rather that both parties agreed that they had not agreed as to class arbitration.  Thus, while in Stolt-Nielsen there was “no room for an inquiry regarding the parties’ intent,” in Fantastic Sams the agreements were merely silent, and the parties’ intent as to class arbitration was unclear. (After Fantastic Sams, one will be hard pressed to find a plaintiff willing to make the same stipulation.)  Subsequently it was for the arbitrator to determine if class arbitration was contemplated–as a matter of contract interpretation.  Continue reading