The similarities between Prop 37 and Prop 65 are striking, even to the most casual observer: Both are labeling laws meant to inform consumers and influence their purchasing decisions, with significant implications for the food industry. Both have impacted, or have the potential to impact, businesses with compliance and litigation costs. Both allow individual citizens to sue as a method of enforcement. Both allow lawyers bringing such suits to collect attorneys' fees.
This last point has understandably become the focus of much of the commentary surrounding Prop 37. Prop 37's legal enforcement provisions resemble the "private attorney general" mechanism of Prop 65 that has resulted in more than 15,000 lawsuits over the past 20-plus years. A comparison of the enforcement provisions of Prop 37 and Prop 65 shows that, should Prop 37 pass in November, the new initiative is likely to surpass Prop 65 as a source of consumer litigation in California.
GOVERNMENT OVERSIGHT—OR LACK THEREOF
Although both propositions contain enforcement provisions that allow individual citizens to sue, Prop 65 requires that such suits be "in the public interest." Prop 37 has no such requirement.
Prop 65 also provides oversight by the state's enforcement authorities—city attorneys, district attorneys, and the attorney general—while Prop 37 eliminates any role for public prosecutors. Under Prop 65 the attorney general has intervened in a number of cases where private enforcers were abusing the process. Prop 37 allows no such oversight.
Defining the Products at Issue
At the heart of Prop 65 is a list of the chemicals that California has determined cause cancer or reproductive toxicity. In listing chemicals, the state must consult "qualified experts" who review "scientifically valid testing according to generally accepted principles." The list is updated periodically.
Prop 37 does not turn upon any findings of actual or potential public health risk. It applies by its terms to foods made with genetic engineering, without regard to whether a public health issue exists or not.
If Prop 37 passes, we expect plaintiffs' attorneys to argue that Prop 37 even extends its reach to foods that have no biotech or genetic engineering. Prop 37 prohibits labeling "processed food as "natural." The initiative defines the term "processed food" without any reference to genetic engineering; it includes any food that has been processed through "canning, smoking, pressing, cooking, freezing, dehydration, fermentation or milling." So, under this reading, canned fruit, smoked nuts, olive oil, cooked carrots, frozen peas, dried apples, vinegar and steel cut oatmeal could not be called "natural" simply because they were processed as described in the law.
Notice Requirements
In order for a private citizen to bring suit under Prop 65, certain notice requirements must be met. First, the citizen enforcer must notify the target of any proposed legal action at least 60 days prior to filing the lawsuit with the court. Second, the citizen enforcer must give notice of the alleged violation to the California attorney general and the district attorney, city attorney, or prosecutor in whose jurisdiction the violation is alleged to have occurred. That notice must include a "certificate of merit" that certifies that the citizen enforcer has consulted with an expert who agrees that there is a "reasonable and meritorious case" for the proposed legal action.
The attorney general, or any of the other notified government authorities, may then choose to prosecute the alleged violation themselves. Even when the attorney general decides not to take enforcement action, he or she may still appear and participate in all Prop 65 court proceedings.
Under Prop 65, plaintiffs must also submit settlements to the attorney general, who may oppose a settlement if he or she concludes that it was not in the public interest, was unnecessary, or resulted in unreasonable fees to the attorneys.
There are no such provisions in Prop 37.
LITIGATION
Prop 37 gives citizen enforcers monetary incentives to sue that go beyond those provided by Prop 65. Prop 65 allows penalties of up to $2,500 per day, per violation, with 25 percent of the penalty being payable to the plaintiff as a "bounty." Successful plaintiffs may also obtain attorney fees.
Plaintiffs suing under Prop 37 may be able to recover both actual and punitive damages. The measure of actual damages under Prop 37, however, is the "actual or offered retail price of each package or product alleged to be in violation." Because none of the people who might be sued under Prop 37—farmers, processors, retailers—ever earns more than a few percent profit on the products they grow, make or sell, this measure of damages bears no relationship to the economics of the businesses being sued, any one of which could be forced to pay the full retail price of every package sold as damages. On top of these damages, Prop 37 plaintiffs may also be able to collect not only attorney fees, but the costs of investigating and prosecuting the action.
Proposition 37 has the potential to be a game-changer for many of our clients both large and small. If you are interested in learning more, we will be providing continuous coverage of Proposition 37 through our website over the next few months. http://www.mofo.com/prop37 / On our Proposition 37 homepage, you'll be able to find our most up-to-date client alerts, recent news, links to important materials and websites, and contact information for our attorneys, who are monitoring the initiative on a daily basis.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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