Conkle Kremer & Engel Presents Brand Protection in Brazil

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Daniel Advogados presenting at CK&E's Brand Protection in Brazil

Daniel Advogados presenting at CK&E’s Brand Protection in Brazil

Conkle, Kremer & Engel recently teamed up with its international correspondent lawyers from the Brazilian intellectual property firm Daniel Advogados, Andrew Bellingall and George de Lucena, to give a presentation about what companies can do to protect their brands in Brazil, including helpful information about doing business in Brazil.  Conkle, Kremer & Engel’s Mark D. Kremer emceed the event and moderated the informative Q&A that followed the presentation.

Brazil is the world’s fifth-largest country in the world in terms of land mass and population.  Brazil is also a founding member of BRICS – the acronym for the five major emerging economies of Brazil, Russia, India, China and South Africa.  Its growing middle class, stable currency, and high demand for its commodity exports have all made Brazil a very desirable place for companies to expand. And it does not hurt that Brazil will host both the 2014 World Cup and the 2016 Olympic games.

Kyle Baker shows his 3Expressions 3D Tablet innovation to John Conkle and George Mendonça de Lucena

Kyle Baker shows his 3Expressions 3D Tablet innovation to John Conkle and George Mendonça de Lucena

Because our clients’ intellectual property and brand protection needs extend beyond the U.S. border, Conkle, Kremer & Engel has established working teams with leading international intellectual property law firms around the world.  It is Conkle, Kremer & Engel’s mission to stay on top of developments in all foreign and domestic markets where our clients currently operate or look to expand.

Conkle, Kremer & Engel wishes to thank all those who attended the presentation, as well as our friends and colleagues from Daniel Advogados, Andrew Bellingall and George de Lucena.   We are pleased to be able to confirm that the presentation was approved by the State Bar of California for 1.0 hour of participatory MCLE credit for all lawyers and paralegals in attendance.  For all questions regarding MCLE credit, please contact Martinique E. Busino at 310-998-9100.

Slideshows from Brand Protection in Brazil:

Daniel Advogados – Doing Business in Brazil

Daniel Advogados – Combating Counterfeiting and Piracy in Brazil

Topics covered in the presentation and the Q&A session included:

Strategies for entering the Brazilian market

  • Exporting goods bearing the owner’s trademark
  • Doing business through a subsidiary
  • Licensing use of trademarks to an unrelated third-party
  • Joint ventures with Brazilian companies
  • Franchise agreements with Brazilian companies

 Protection of trademarks in Brazil

  • Best practices for brand protection
  • An overview of trademark prosecution and enforcement in Brazil
  • Procedures and delays at the Brazilian Patent and Trademark Office
  • Legal remedies available to intellectual property owners
  • Court procedures in Brazil for actions involving intellectual property
  • Registration of domain names in Brazil

The latest developments at the Brazilian Patent and Trademark Office regarding trademarks

  • Issues related to Brazil’s possible adoption of the Madrid Protocol
  • Adoption of multi-class and multiple owner applications

Combating counterfeiting and piracy in Brazil

  • Ramifications of intellectual property infringements, which are crimes in Brazil
  • Using criminal remedies and border control measures as intellectual property protection solutions

 

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Five Additions to Prop 65 List of Regulated Chemicals

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The Proposition 65 list identifying chemicals known to the State of California to cause cancer or reproductive harm got a little longer in September 2013, with the addition of five new chemicals by the Office of Environmental Health Hazard Assessment (OEHHA).

Effective September 13, 2013, chloral, chloral hydrate, 1,1,1,2-tetrachloroethane, and trichloroacetic acid are chemicals known to the State of California to cause cancer for purposes of Proposition 65.  1,1,1,2- tetrachloroethane is commonly used as a solvent and in the production of wood stains and varnishes.  Trichloroacetic acid is commonly used in cosmetic treatments such as chemical peels and for the removal of tattoos and treatment of skin tags, warts and moles.

Effective September 27, 2013, chloramphenicol sodium succinate became a chemical known to the State of California to cause cancer for purposes of Proposition 65.

The effect of the listings is that anyone doing business in California must provide a clear and reasonable warning before they expose consumers to any of these chemicals.  None of the five chemicals has an established safe harbor level for exposure, although Proposition 65 generally provides that there is no warning requirement if the exposures caused are so low as to create no significant risk of cancer.

Businesses have some breathing room to comply with the listings under Proposition 65’s safe harbor provision: No action can be taken by the Attorney General, district attorneys or private enforcers until 12 months after the listing of that chemical.  Thus, businesses will have until September 13, 2014 (for chloral, chloral hydrate, 1,1,1,2-tetrachloroethane, and trichloroacetic acid) and September 27, 2014 (for chloramphenicol sodium succinate) before any alleged failure to comply is legally actionable.

Proposition 65 applies to everyone in the supply chain.  Manufacturers, distributors, suppliers, retailers and other entities doing business in California should take advantage of the safe harbor period and review the products they sell to determine whether chloral, chloral hydrate, 1,1,1,2-tetrachloroethane, trichloroacetic acid or chloramphenicol sodium succinate is present in any of their products.  If so, they should consider scientific testing to determine exposure levels.  Possible action that can be taken to proactively handle the new listings include reformulation or providing a clear and reasonable warning to California consumers.  Conkle, Kremer & Engel has substantial experience in helping businesses understand and comply with the requirements of Proposition 65 and other regulations to avoid exposure to liability, and to respond efficiently and effectively if a Notice of Violation is received.

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A Proposition 65 Reform Bill Becomes Law: California Health & Safety Code Section 25249.7 Amended by AB 227

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On October 5, 2013, Governor Brown signed into law a bill that makes immediate changes to Proposition 65.  The amendments, which passed the California Legislature last month, impose a number of restrictions on private enforcers seeking to enforce Prop 65 against businesses that allegedly fail to provide a warning as required by Prop 65.  The bill that became law is Assembly Bill 227 (AB 227), introduced by Assemblymember Mike Gatto (Forty-Third District of California) in February 2013, and discussed in our March 13, 2013 blog post.

However, as AB 227 was enacted, only limited types of businesses are likely to benefit.  The amendments are very narrow, covering only certain exposures to alcohol or food-related chemicals, vehicle exhaust and tobacco smoke.  Thus, the only businesses that are likely to benefit from the amendments are bars, restaurants, parking garages, and those who own or operate premises where smoking is permitted.

In general, the amendments establish a new “safe harbor”:  AB 227 prohibits a Prop 65 lawsuit from being filed by a private enforcer over an alleged failure to provide a warning concerning one of the specified exposures, if the business takes specified action within 14 days of receipt of the notice of violation.   The targeted business can escape a Prop 65 action if, within 14 days, the business:  (1) actually corrects the alleged violation; (2) agrees to pay a civil penalty of $500 per facility or premises within 30 days; and (3) submits a “Proof of Compliance” notifying the private enforcer that the violation has been corrected.  If the business takes the so-called “safe harbor” action in response to the notice of violation alleging failure to warn about exposure to alcohol or food-related chemicals, vehicle exhaust or tobacco smoke, the private enforcer is precluded from filing a lawsuit or collect additional civil penalties or attorneys’ fees from the business.

These types of piecemeal amendments to Prop 65 may increase public demand and political pressure for additional reform.  In May 2013, Governor Brown proposed sweeping, substantive reform to Prop 65, intended to end decades of “frivolous ‘shake-down’ lawsuits” by Prop 65 bounty hunters and their lawyers.  But by September 2013, those efforts stalled as stakeholders involved in the reform effort were unable to reach the consensus needed to generate the two-thirds majority approval that is required for any amendment of Prop 65 in the Legislature.

Conkle, Kremer & Engel constantly tracks the latest developments in Prop 65 in order to provide expert guidance and counseling to clients.  This latest amendment is a demonstration that businesses who receive a Prop 65 warning should immediately seek qualified legal counsel to help them avoid liability and unnecessary payments to Prop 65 claimants and their lawyers.  In fact, businesses are well advised to consult qualified legal counsel to review their compliance with Prop 65 before an immediate response becomes necessary.

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California Green Chemistry Initiative: Are You Manufacturing or Selling a “Priority Product”?

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The new Safer Consumer Products (SCP) regulations require the California Department of Toxic Substances Control (DTSC) to initially identify up to five proposed “Priority Products” or categories of products containing what DTSC regards as “Chemicals of Concern.”  By April 1, 2014, DTSC will publish a list of Priority Products selected because of their use of one or more of 164 “Priority Chemicals” listed on the “Initial Candidate Chemicals” list.  Scroll to the bottom of this post for the full list of the 164 Priority Chemicals.

There will be a public review and comment period following publication of the Priority Products list.  It has been widely speculated that nail polish, formaldehyde-based hair straighteners, carpet adhesives and furniture seating foam are among the possible Priority Products that may be identified first by DTSC.

Once a product is identified as a Priority Product, manufacturers or other responsible entities (including importers, assemblers and even retailers) will be required to notify DTSC that their product is a priority product.  The manufacturer or other responsible entity then has some unpleasant options:  It can remove the product from sale, reformulate to remove or replace the chemical of concern in the product, or perform a complex “Alternatives Analysis” to retain the chemical in the product.  The Alternatives Analysis report must be submitted to DTCS for evaluation to determine if there are adverse environmental or public health impacts associated with the product that can be remedied by regulatory responses.  The regulatory responses could require product warnings to consumers, restrictions on the use of the chemical during manufacture, place of sale restrictions, administrative controls, further research regarding alternative ingredients, end-of-life disposal requirements, or even a ban on sales of the product in California.

Manufacturers, retailers, importers and assemblers of consumer products for sale or distribution in California should diligently keep informed about developments in the DTSC’s “Candidate Chemicals” list (currently 1,060 chemicals),  as well as the development of the Priority Products list.  Manufacturers should also consider whether reformulation of their products to exclude the priority chemicals from the “Initial Candidate Chemicals” list is possible.  In addition, it is important that businesses establish clear agreements among manufacturers, importers, distributors, retailers and others in the supply chain specifying who will be responsible for complying with California’s tough new regulatory program, including responding to DTSC if a product is identified as a priority product.  Conkle, Kremer & Engel’s lawyers stay current on the latest developments, and guide the firm’s clients through the thicket of expanding regulatory issues affecting their businesses.

The 164 chemicals found on the “Initial Candidate Chemicals” list, from which the Priority Products will be identified by DTSC, are:

1,1,1,2-Tetrachloroethane 1,1,1-Trichloroethane; Methyl chloroform
1,1,2,2-Tetrachloroethane 1,1,2-Trichloroethane
1,1-Dichloroethane 1,2,3-Trichloropropane
1,2-Diphenylhydrazine; Hydrazobenzene 1,2-Epoxybutane
1,3-Butadiene 1,3-Propane sultone; 1,2-Oxathiolane 2,2-dioxide
1,4-Dioxane 2,2-Bis(bromomethyl)propane-1,3-diol
2,4,6-Trinitro-1,3-dimethyl-5-tert-butylbenzene; musk xylene 2,4,6-Tri-tert-butylphenol
2,4.6-Trinitrotoluene (TNT) 2?Acetylaminofluorene
2-Methylaziridine (Propyleneimine) 2-Methylphenol, o-Cresol
2-Nitropropane 3-Methylphenol; m-Cresol
4,4′-Methylenedianiline; 4,4’-Diaminodiphenylmethane (MDA) 4-Bromophenyl phenyl ether, Bromophenyl Phenyl Ether
4-Nitrobiphenyl 4-Tert-Octylphenol; 1,1,3,3-Tetramethyl-4-butylphenol
Acetaldehyde Acetamide
Acrylamide Acrylonitrile
Allyl chloride Aluminum
Aniline Aromatic amines
Aromatic Azo Compounds Arsenic and inorganic arsenic compounds
Asbestos (all forms, including actinolite, amosite, anthophyllite, chrysotile, crocidolite, tremolite) Benzene
Benzene, Halogenated derivatives Benzotrichloride
Benzyl chloride Beryllium and Beryllium compounds
Biphenyl-3,3′,4,4′-tetrayltetraamine; Diaminobenzidine Bisphenol A
Bisphenol A diglycidyl ether polymer; [2,2′-bis(2-(2,3-epoxypropoxy)phenyl)-propane] Bisphenol B;  (2,2-Bis(4-hydroxyphenyl)-n-butan)
Bromate Butylbenzyl phthalate and metabolite
Cadmium and cadmium compounds Captan
Carbon monoxide Carbon tetrachloride; CCl4
Catechol Chlorendic acid
Chlorinated Paraffins Chlorine dioxide
Chlorite Chloroalkyl ethers
Chloroethane; ethyl chloride Chloroprene; 2-chlorobuta-1,3-diene
Chromium hexavalent compounds (Cr (VI) Chromium trioxide
Cobalt metal without tungsten carbide (including dust and cobalt compounds) Cresols, Cresol mixtures
Cumene, [ isopropylbenzene] Cyanide and Cyanide compounds
Cyclotetrasiloxane; Octamethylcyclotetrasiloxane (D4) Diazomethane
Dibromoacetic acid Dibutyl phthalate and metabolites
Dichloroacetic acid Dichloroethylenes
Dichloromethane; methylene chloride Dicyclohexyl phthalate and metabolite
Diesel engine exhaust Diethanolamine
Diethyl hexyl phthalate and metabolites Diethyl phthalate and metabolite
Diisobutyl phthalate and metabolite Di-isodecyl phthalate and metabolite
Di-isononyl phthalate and metabolites Dimethyl sulfate
Dimethylcarbamoyl chloride Dinitrotoluenes
Di-n-Octyl Phthalate and metabolites Dodecamethylcyclohexasiloxane (D6)
Emissions, Cokeoven Epichlorohydrin; 1-Chloro-2,3-epoxypropane
Ethyl acrylate Ethylbenzene
Ethylene dichloride; 1,2-Dichloroethane Ethylene Glycol
Ethylene oxide; oxirane Ethylene Thiourea
Ethyleneimine, Aziridine Ethyl-tert-butyl ether
Formaldehyde Fuel oils, high-sulfur; Heavy Fuel oil; (and other residual oils)
Gasoline (automotive, refined, processed, recovered, and other unspecified fractions) Glutaraldehyde
Glycol ethers Glycol ethers acetate
Hexabromocyclododecane (HBCD), and mixed isomers Hexachlorobuta1,3-diene
Hexachloroethane Hexamethylene-1,6-diisocyanate
Hexamethylphosphoramide HMX
Hydrazine, Hydrazine compounds and salts Hydrogen sulfide
Jet Fuels, JP-4, JP-5, JP-7 and JP-8 Lead and Lead Compounds
Maleic anhydride Manganese and manganese compounds
Mercury and mercury compounds Methanol
Methyl chloride Methyl isobutyl ketone, Isopropyl acetone; (MIBK)
Methyl isocyanate Methylene diphenyl diisocyanates
Methylhydrazine and its salts Methylnaphthalene; 2-Methylnaphthalene
Mineral Oils: Untreated and Mildly Treated N,N-dimethylformamide; dimethyl formamide
N,N-Dimethylhydrazine Naphthalene
n-Hexane Nickel and Nickel Compounds; Nickel refinery dust from the pyrometallurgical process
Nickel oxides Nickel, metallic and alloys
Nitrate+Nitrite Nitrobenzene
Nitrosamines Nonylphenol, nonylphenol ethoxylates (NP/NPEs) (and related substances)
Parabens Pentabromophenol
Perfluorochemicals Petroleum; Crude oil
Phthalic anhydride Polybrominated diphenyl ethers (PBDEs) congeners
Polychlorinated biphenyl (PCB) congeners Polychlorinated dibenzo-p-dioxins (PCDDs)
Polychlorinated dibenzo-p-furans (PCDFs) and Furan Compounds Polycyclic Aromatic Hydrocarbons (PAHs)
Propylene oxide Quinoline and its strong acid salts
Silica, Crystalline (Respirable Size) Stoddard solvent; Low boiling point naphtha – unspecified;
Strong Inorganic Acid Mists Containing Sulfuric Acid Styrene and derrivatives
Sulfur dioxide Tetrabromobisphenol A (TBBPA)
Tetrachloroethylene; Perchloroethylene; (PERC) Thallium
Toluene Toluene Diisocyanates
Trichloroethene (TCE) Trihalomethanes
Tris(1,3-dichloro-2-propyl) phosphate (TDCPP) Tris(2,3-dibromopropyl) phosphate
Tris(2-chloroethyl)phosphate (TCEP) Vanadium pentoxide
Vinyl acetate Vinyl Bromide, Bromoethylene
Vinyl chloride; chloroethylene Xylenes; [o-xylene (95-47-6), m-xylene(108-38-3)and p-xylene (106-42-3)]

 

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California Green Chemistry Initiative: Does Your Product Contain a "Candidate Chemical” that Could Become a “Chemical of Concern” to the California Department of Toxic Substances Control?

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Effective October 1, 2013, companies doing business in California will have to navigate and comply with yet another system of complex regulations:  The Safer Consumer Products (SCP) regulations adopted by the California Department of Toxic Substances Control (DTSC) will require manufacturers, importers, assemblers and retailers to seek safer alternatives to certain harmful chemical ingredients in widely used products.

The SCP regulations are the first step in implementing California’s Green Chemistry Initiative. The goal of the SCP regulations is to accelerate the manufacture and use of safer versions of products in California by:  (1) establishing a process to identify and prioritize chemical ingredients in consumer products that may be considered “chemicals of concern,” and (2) establishing a process for evaluating chemicals of concern and their potential alternatives, to determine how best to limit exposure to or to reduce the level of hazard posed by chemicals of concern.

The SCP regulations apply to all consumer products that contain a “Candidate Chemical” and are sold, offered for sale, distributed, supplied, or manufactured in California.  The regulations do not apply to food, pesticides, dangerous prescription drugs and devices, dental restorative materials or medical devices.  There are currently 1,060 “Candidate Chemicals” that DTSC believes have hazard traits or environmental or toxicological effects.

The DTSC has already released its list of  “Initial Candidate Chemicals” that will receive DTSC’s priority attention.  Toluene, formaldehyde and bisphenol A are among the 164 “Initial Candidate Chemicals” that DTSC will consider to identify the “priority products” that DTSC will address first.

Conkle, Kremer & Engel’s lawyers stay current on the latest developments, and guide the firm’s clients through the thicket of expanding regulatory issues affecting their businesses.  Watch for our next post on Green Chemistry, identifying the chemicals that can make your product a candidate to be a “priority product” for the DTSC.

 

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CKE’s L.A. Daily Journal Article: Treble Damages for Breach of Oral Contract

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The article “Breach of Oral Contract, Treble Damages,” was published in the Los Angeles Daily Journal on August 13, 2013.  The article discusses the importance for manufacturers, distributors and sales representatives of the published decision of Reilly v. Inquest Technology, Inc., 2013 DJDAR 10164 (Cal. App. 4th Dist. July 31, 2013).  The Reilly decision is the first precedent in California to uphold a jury verdict and judgment of treble damages and attorney fees against a manufacturer who failed to pay all sales commissions owed to an independent sales representative.  Eric S. Engel and H. Kim Sim represented Peter Reilly, the sales representative, at trial in Orange County Superior Court.  They obtained a unanimous jury verdict awarding Reilly $2.1 million in unpaid commissions.  Using the Independent Wholesale Sales Representatives Contractual Relations Act, CK&E then obtained an order from Judge Frederick Horn multiplying the jury’s award by a factor of three, for a judgment of $6.2 million plus attorney’s fees and interest.  That judgment was fully upheld by the California Court of Appeal in its July 31, 2013 decision.  The decision provides a template for future cases seeking treble damages for breach of commission contracts made with independent sales representatives, and can serve as a guide to manufacturers and distributors who want to avoid exposure to such liability.

Click here for the full text of the article, “Breach of oral contract, treble damages”:  Reilly v Inquest Daily Journal Article

Click here for the full copy of the California Court of Appeal decision:  Reilly v Inquest Court of Appeal Decision, Case No. G046291 (July 31, 2013)

 

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Naked Juice Labels to be Stripped of "All Natural" and "Non-GMO" Claims in False Advertising Settlement

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PepsiCo has agreed to pay $9 million to settle a class action battle over its use of the words “All Natural” and “Non-GMO” (non-Genetically Modified Organism) on its Naked Juice drink products.  As part of the settlement, PepsiCo agreed to change its labeling.

If approved by the district court, the settlement would resolve five separate class action lawsuits, which were consolidated with the lead case Pappas v. Naked Juice Co. of Glendora, Inc., in March 2012.

The case against PepsiCo stems from allegations that statements on the Naked Juice labels constitute false advertising.  The plaintiffs sued for violation of a number of California statutes – the Consumer Legal Remedies Act (CLRA) and False Advertising and Unfair Competition Laws.

According to the plaintiffs, independent testing revealed genetically modified soy protein in some Naked Juice products.  The plaintiffs also alleged that several ingredients in the Naked Juice products are non-natural, including ingredients like beta carotene and biotin which do occur naturally but are produced synthetically when added as supplements to foods, and a fiber ingredient that is produced by chemically rearranging corn starch molecules.  All of these ingredients are listed in the ingredient panel, but according to the plaintiffs, a reasonable consumer wouldn’t scrutinize the ingredient list for information contradicting the plain, conspicuous statements “All Natural” and “Non-GMO.”

The settlement in the PepsiCo case is likely to lead to many more class action lawsuits against businesses that advertise their products as “natural” or “all natural.”  Unlike use of the word “organic,” use of the word “natural” is not explicitly regulated by federal or state law, leaving the door open for claims of false or misleading advertising by consumers.

What’s the moral of this story?  An ounce of prevention is worth a pound of cure.  It is important to scrutinize health-related language used in advertising, especially on food products, and ensure there is documentation to back up claims.  CK&E routinely works with clients to evaluate the language on product packaging and in advertising as part of a comprehensive risk analysis so they can make informed choices for their businesses.  CK&E also has extensive experience defending clients against consumer false advertising claims.

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CK&E’s Judgment of $6.2 million for Unpaid Sales Commissions Upheld on Appeal

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The California Court of Appeal has unanimously upheld the $6.2 million judgment that Conkle, Kremer & Engel won at trial for a sales representative who had been deprived of $2 million in commissions he had earned.

Peter Reilly was a retired electronics industry executive who agreed to use his extensive contacts in the industry to bring new business to a growing manufacturing company, Inquest Technology, Inc.  After Reilly was not paid commissions for the contacts that he brought to Inquest, he asked Conkle, Kremer & Engel for help.

Reilly-Inquest_Team

Reilly v. Inquest – Plaintiff’s Trial and Appeal Team

CK&E’s Eric S. Engel and H. Kim Sim were the trial lawyers who devised the case strategy.  Key to the strategy was establishing by discovery and summary judgment motion the intricate requirements to impose liability against Inquest under a rarely-used law called the Independent Wholesale Sales Representatives Contractual Relations Act of 1990, California Civil Code section 1738.10 (“the Act”).  The main attraction of the Act is that jury awards for willful violations are trebled by the court and attorneys’ fees are awarded to a successful plaintiff.  Few laws in commercial litigation impose a penalty of three-times actual damages – that is a greater multiplier than most permissible punitive damages awards.

CK&E was able to prove that the sales representative relationship that Reilly had with Inquest met the particular requirements of the Act.  At trial, a unanimous jury found that Reilly procured sales for which he should have been paid $2,065,702 in commissions, based on the testimony of Reilly’s damages expert Thomas Neches.  The trial court then applied the Act’s penalty of treble damages to award Reilly a $6.2 million judgment, plus attorneys’ fees and interest, to enter the Judgment for Peter Reilly against Inquest Technology on Jury Verdict.

Of course, the Defendants appealed the judgment.  On July 31, 2013, the Reilly v. Inquest Technology case led to the first published decision of a California Court of Appeal to uphold a judgment trebling damages and awarding attorneys’ fees under the Act.  Anthony Kornarens was the appellate lawyer for Reilly, with assistance by CK&E.  In a unanimous decision, the Court of Appeal determined that Reilly’s judgment of $6.2 million was well supported by the evidence presented at trial, and that Reilly’s claims for unpaid sales commissions were within the special protections of the Act.

Click here for the full copy of the California Court of Appeal decision:  Reilly v Inquest Court of Appeal Decision, Case No. G046291 (July 31, 2013)

Watch for our future posts about the Act, including how CK&E proved that Inquest’s owners were also liable for the full amount of the $6.2 million judgment even though they were not subject to the Act.

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2012: A Bountiful Year for Prop 65 Plaintiffs and Their Lawyers

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Proposition 65 requires that businesses warn about the presence of chemicals believed by the State of California to cause cancer or reproductive harm.  Private citizens may file lawsuits “in the public interest” against businesses alleging a failure to provide the required warning.  Such lawsuits are often filed by private law firms (sometimes called “bounty hunters”), in the names of repeat-plaintiffs like “Center for Environmental Health,”  after sending Notices of Violation. The apparent primary purpose is to obtain quick cash settlements from bewildered, unsuspecting businesses.

2012 Prop 65 Settlements Bar Chart by Year2012 was a particularly “bountiful” year for Prop 65 private plaintiffs, according to data recently released by the California Attorney General’s Office. In 2012, private plaintiffs settled 397 cases.  The settlements totaled nearly $20.5 million. When combined with the additional settlements by District Attorneys and the Attorney General’s Office, there were 437 Prop 65 settlements during 2012, totaling over $22.5 million.  2012 was the second-highest annual dollar total for Prop 65 settlements since 2000, and shows a clear upward trend in the settlements extracted from businesses that receive Prop 65 Notices of Violation.

It should surprise no one who studies Prop 65 issues that the bulk of the $22.5 million paid in Prop 65 settlements during 2012 went to the plaintiffs’ attorneys:  Attorneys’ fees made up more than $14.5 million, or 71.34% of all private settlements.  Private plaintiffs can also take 25% of any civil penalty assessed as a “bounty”.  In 2012, the civil penalties retained by plaintiffs represented an additional $755,000 or 3.7% of all private settlements.

2012 Prop 65 Settlement Pie ChartA lesser-known fact is that private plaintiffs and their attorneys can and do make even more money from Prop 65 settlements.  A portion of each Prop. 65 settlement is supposed to go toward causes or activities that further the purpose of Prop 65, so Prop 65 allows parties to structure some of their civil penalty allocation as a “Payment in Lieu of Penalties” (aka “PILP”).  Some Prop 65 plaintiffs have kept such PILP recoveries to support vaguely stated causes; some Prop 65 plaintiffs have even argued that funding more private litigation itself is activity that furthers the purpose of Prop 65, justifying PILP recoveries from settlements.  In 2012, PILP money made up 13.88% of all private settlements.  That means almost $3 million landed in the hands of private plaintiffs and their attorneys, in addition to the attorneys’ fees and civil penalty bounties they received.

Statewide, there are only a few active Prop 65 plaintiffs.  Aggregated settlement data can be useful in achieving cost-effective resolutions of Prop 65 claims.  CK&E routinely defends businesses who have received Prop 65 Notices of Violation.  CK&E also works with businesses to develop compliance strategies to minimize the risk that they will be future targets of Prop 65 plaintiffs.

This Blog Post was Co-Authored by Jackson McNeill, Law Clerk, UCLA School of Law, Class of 2014

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Proposition 65 Bounty Hunters Target Titanium Dioxide in Personal Care Products

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Titanium dioxide (TiO2) is commonly used in personal care products.  It can be found in cosmetics, skincare products, and sunscreens.  Products that may contain titanium dioxide include nail acrylic powders, eye shadows, loose and pressed face powder, powder foundation, bronzers, blushes and spray-on sunscreens.

Titanium dioxide was added to the list of Proposition 65 chemicals in September 2011, and warning requirements took effect in September 2012.  The addition of titanium dioxide (airborne, unbound particles of respirable size) to the Office of Environmental Health Hazard Assessment (OEHHA)’s list of chemicals subject to regulation under Proposition 65 has caused professional Prop 65 plaintiffs to send out a number of “Notices of Violation” to manufacturers and distributors in the personal care products industry.  They do this because the law requires that a Notice of Violation be served before a private party may commence a Prop 65 lawsuit.

Prop 65 plaintiffs – motivated by the potential to recover civil penalties and attorney’s fees – have seized on the new listing to go after numerous companies, including those in the beauty products business, for failing to provide a warning that titanium dioxide is known to the State of California to cause cancer.  Often, such Prop 65 Notices of Violation are motivated more by a desire for a quick settlement than for a long dispute.

Since its listing, titanium dioxide has been the subject of four Notice of Violations – two by the Center for Environmental Health, and two by the Public Interest Alliance.  The Center for Environmental Health is a well known Prop 65 plaintiff represented by Mark N. Todzo of Lexington Law Group in San Francisco.  Its Notices of Violation with respect to titanium dioxide have attacked manufacturers and distributors of spray-on sunscreens.

The Public Interest Alliance is new to the group of Prop 65 plaintiffs and is represented by Jeffrey M. Judd of Judd Law Group in San Francisco.  It has only sent out two Notices of Violation since it appeared on the Prop 65 scene, but both have been over titanium dioxide, and the two Notices combined attack more than 100 companies.

Manufacturers and distributors of personal care products should carefully review the contents of products that may contain titanium dioxide.  CK&E has helped clients with personal care products businesses understand and comply with the requirements of Prop 65, to avoid being one of those who receive a Notice of Violation.  If a Notice of Violation is received, CK&E works aggressively to help clients resolve the claims as quickly and economically as possible, without being held captive to the bounty hunters’ demands.

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