(1)

PROPOSITION 65’S EFFECT ON SMALL

BUSINESS

THURSDAY, OCTOBER 28, 1999

COMMITTEE ON SMALL BUSINESS, HOUSE OF REPRESENTATIVES, Washington, DC.

The Committee met, pursuant to call, at 11:14 a.m., in room

2360, Rayburn House Office Building, Hon. Jim Talent [chairman

of the Committee] presiding.

Chairman TALENT. Good morning. Today the Committee will examine how Proposition 65, the California Safe Drinking Water and

Toxic Enforcement Act of 1986, effects small businesses.

Everyone here agrees that consumers have a right to know if a

product might harm them. As I have repeatedly stressed, conscientious small businesses should manufacture safe products that make

life more pleasurable for all consumers.

Furthermore we all agree that states have a right to protect their

citizens. Indeed, courts routinely hold that states traditionally have

had great latitude to legislate as to the protection of the lives,

limbs, health, comfort, and quiet of all persons. But that power

should not be used by the state or by private parties to extort payments out of small business people who have done nothing wrong.

In 1986, California passed Proposition 65. That proposition generally requires warnings for environmental, consumer, and occupational exposure to particular chemicals the State of California has

determined may cause cancer or reproductive toxicity. If a manufacturer, either in-state or out-of-state, fails to display the required

warnings, Proposition 65 empowers private attorneys to enforce the

statement in place of the California Attorney General.

In 1960, Congress passed the Federal Hazardous Substances Act

to provide for national uniform requirements for adequate cautionary labeling of consumer products containing hazardous substances which are sold in interstate commerce.

In passing the FHSA, Congress recognized uniform labeling benefits the public. For example, ‘‘such a labeling program would facilitate the education of the public in the cautionary use of these products. Informative, uniform labeling would enable physicians to administer antidotes immediately rather than waste precious time in

determining the active ingredients of the products.’’ That is from

the legislative history.

Absent federal legislation, Congress feared states would enact

their own labeling statutes ‘‘leading to a multiplicity of requirements and creating unnecessary confusion in labeling to the detriment of the public.’’ Indeed, Congress feared requiring multiple

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warnings would cause consumers ‘‘to disregard label warnings,

thus inviting indifference to cautionary statements on packages of

substances presenting a real hazard of substantial injury or illness.’’

To facilitate the national uniform labeling requirements, Congress expressly provided that the FHSA preempt state cautionary

labeling requirements. Congress empowered the Consumer Product

Safety Commission to enforce the statute, including the preemption

clause. The CPSC could use its authority to work with California

to insure that lawsuits are not used to force settlements out of

small businesses from around the country who have not violated

the law.

And that abuse is occurring. I expect testimony today that approximately 20 percent of all intent to sue notices filed with the

California Attorney General are frivolous. Furthermore, witnesses

will testify that Proposition 65 private enforcers target small businesses which must settle because they cannot afford to fight frivolous lawsuits and still meet their payrolls. Witnesses will also testify that Proposition 65 private enforcers often fail to inform small

businesses that Proposition 65 exempts businesses with less than

ten employees. Finally, I expect testimony that large businesses

refuse to distribute small business products without the required

warnings notwithstanding the fewer than ten employees exemption.

Between 1996 and 1997, this Committee worked with the Occupational Safety and Health Administration to utilize OSHA’s preemptive authority to preempt Proposition 65’s occupational application and limit it to the California work place. This limited the private enforcer’s ability to sue out of state manufacturers.

The Committee would like to work with the CPSC to determine

if similar action might be taken in the consumer product area to

protect against abusive lawsuits against small business people.

We have two panels of witnesses who have agreed to appear before the Committee today. The second panel includes Ann Brown,

who is the Chair of the Consumer Product Safety Commission.

Before we turn to the first panel of witnesses, I want to recognize

the distinguished Ranking Member from New York for any statement she may wish to make.

[Mr. Talent’s statement may be found in the appendix.]

Ms. VELA ́

ZQUEZ. Thank you, Mr. Chairman.

We are here to explore the enforcement of California’s Proposition 65, an innovative initiative passed by the voters of California

in 1986. Proposition 65 was designed to protect the public from possible carcinogens, and in many concrete ways it has worked.

There are numerous examples of certain chemicals that have

been phased out of the production of certain products. Most correction fluids have seen potentially dangerous ingredients removed.

Ceramic tableware now contains a lower concentration of lead, and

the full caps on wine bottles no longer contain lead at all thanks

to Proposition 65.

These are real changes that impact real people, and I strongly

agree with the motives that lead to Proposition 65. Other states

could benefit from similar initiatives, and I am committed to seekVerDate 11-MAY-2000 09:04 Oct 16, 2000 Jkt 010199 PO 00000 Frm 00002 Fmt 6633 Sfmt 6633 E:\HEARINGS\61647A.XXX pfrm01 PsN: 61647A
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ing innovative ways to address concerns regarding exposure to

these materials.

I have a personal concern. My district in Brooklyn-Manhattan in

New York has one of the highest cancer rates of any congressional

district in the country.

Today we will be exploring one aspect of Proposition 65. Specifically there are several questions regarding the third party enforcement provisions, which have raised several concerns.

Have they been implemented in an intelligent way? Have they

had an undue effect on small businesses? If so, what can we do to

make sure that Proposition 65 does the good work it was intended

to do without unfortunate consequences?

The Committee has received some disturbing anecdotal evidence

that some individuals are targeting small business through the

third party provision. I am even more disturbed when I hear that

some individuals have threatened legal action against businesses

with fewer than ten employees. This is not covered by Proposition

65. This was never the intent of Proposition 65, and hopefully today’s hearing will help find solutions to these types of problems.

These are the sorts of questions I am eager to begin to answer

today. I welcome all of the members of our panel who have come

here today, and I thank them for their time. I look forward to hearing what we can learn from them.

As I have mentioned in the past, one of the benefits that we have

on the Small Business Committee is that our members have such

diverse background and experience. Today once again we are in a

position to receive the benefit not only of the witnesses before us

today, but also from the members of the Committee.

I would like to yield to Congresswoman Grace Napolitano, who

has worked on this issue for some time.

[Ms. Vela ́zquez statement may be found in the appendix.]

Mrs. NAPOLITANO. Thank you, Ms. Vela ́

zquez.

I do appreciate the time to briefly address, Mr. Chair, if I may.

Chairman TALENT. Sure.

Mrs. NAPOLITANO. The Committee on the issue that is, of course,

extremely important to California, the health and welfare of the

people of California.

In the 13 years since the passage of Proposition 65 we have seen

dramatic evidence that fundamental changes in product safety can

be affected by ordinary people with the power of the vote. This important statute puts California in the forefront of efforts to protect

its men, women, especially pregnant women, and its children, all

Californians, from exposure to chemicals that are known to the

State of California to cause cancer, birth defects, or reproductive

toxicity.

The law allows Californians to make informed choices about

products they use and to take legal actions to protect themselves

against exposure through a variety of public and private enforcement measures.

One of the most laudable outcomes of Proposition 65 is the warning label now displayed on alcoholic beverages which warns pregnant women about effects alcohol may have on the developing

fetus.

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In other instances products have been reformulated to complete

eliminate known carcinogens and other agents. The other two cases

forcibly demonstrating the benefits of Proposition 65 were the case

initiated against Price Fiester and American Standard against the

use of high lead contact brass in faucet fixtures. As a result of the

settlement, upheld by the California Supreme Court, there was the

phaseout of lead containing brass.

That effort today continues with a targeted program to bring all

manufacturers and retailers in California into compliance with

California’s strictest in the nation’s standards for lead in drinking

water.

On behalf of Latino and Asian workers in a manufacturing plant

with high levels of reproductive toxins, workers prevailed in their

case and gained cessation of toxins in favor of safer alternatives.

With regards to concerns by the industry about any onerous burden that it may impose, I believe there have been numerous attempts to quantify the extent of that burden and to balance it with

the public good. Some of the facts are in 1988, at the industry’s request, the Council of Economic Advisors under President Ronald

Reagan found that the industry claim on 65’s burden and cost to

business were vastly overstated and recommended against federal

preemption.

Subsequent preemption requests, both during Presidents Reagan

and Bush administrations, have also been rejected.

In 1992, the administration of Governor Wilson found that by

any federal standard Proposition 65 has resulted in 100 years of

progress in the areas of hazard identification, risk assessment, and

exposure assessment.

A series of Proposition 65 preemption challenges have all been

rejected by California courts in the Ninth District Court. In 1992,

both the food and non-prescription drug industry conceded at a

state hearing that not one single product of thousands sold in California supermarkets would require a label or warning signs under

Proposition 65, nor is any fresh produce, brand name food product,

or brand name cosmetic sold in California required to have a label

or warning on it.

Just this month the State Attorney General sued over 13 key

manufacturers and distributors for failing to warn their products

exposed consumers to lead at levels that substantially exceed Proposition 65 level.

I believe consumers need to know this information so that they

can protect themselves and, most importantly, their small children

or their unborn children. Let’s keep in mind today that this is a

hearing process, and there may well be some unintended consequences on small business as a result of Proposition 65. However,

I very sincerely doubt that the law was intended to punish small

business, the backbone of our vibrant economy, especially in California, and force them into lengthy and costly legal battles against

the Proposition 65 compliance.

We must today hear from small business, both public and private, enforcers and others about how we may address these concerns fairly. At the same time, preemption of California’s Proposition 65 is not the focus of the hearing. That law has been tested

in the courts.

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I believe I personally am committed to working with small business in the state and out of state, especially here, to insure that

we can meet the standards imposed by 65 and still do business

without undue legal and regulatory constraints or being hounded

by the bounty hunting attorneys.

This Committee, more than any other, knows the value of small

business and its needs. We want to and we must work honestly

and directly and address their concerns.

Thank you very much, Mr. Chair and Madame.

[Mrs. Napolitano’s statement may be found in the appendix.]

Chairman TALENT. Well, I thank the gentle lady, and I want to

join my friend from New York in complimenting the gentle lady

from California for her work and her advocacy in this field, and

also thank her for her work in helping us prepare this hearing and

her input.

Mrs. NAPOLITANO. Thank you.

Chairman TALENT. It is appreciated, as always.

All right. Our first panel begins with Ms. Marianne LaMura.

The gentle lady from New York had a statement, but normally

we do not have extra opening statements, but if members feel

strongly, I am always inclined to bend the rules a little bit.

I will recognize the gentle lady from New York.

Mrs. KELLY. Thank you, Mr. Chairman.

I think the important thing here is when a state issue becomes

a federal issue and when a state requirement has an impact on

interstate commerce, it is important that the federal government

have a look at it.

And because this is really kind of a complicated factor, I was

thinking about this the other day, and you know, in that children’s

story about the three billy goats Gruff where a troll is guarding the

bridge, and the first billy goat is a little billy goat, and the billy

goat has to pay a toll to get across the bridge.

And of course, the troll says, ‘‘Who’s tripping over my bridge?’’

and threatens to eat the goat if they do not pay the toll.

Well, the second billy goat is a little bit bigger, and that same

troll comes out and says, ‘‘Who’s tripping over my bridge?’’ and the

second billy goat has to pay a toll.

But when the third billy goat, that is a big billy goat, crosses

that bridge and the troll threatens to eat the big billy goat, the big

billy goat jumps off the bridge and eats the troll.

And I think it is really important that people understand that

that is kind of the thing that is happening here. And I really feel

that the effect of Proposition 65, we have to make sure that a private enforcer does not wait. I mean that we do not have the private

enforcer out there being the troll, making sure that the billy goats

have to pay the toll.

So here we bring in the federal government, and maybe the federal government needs to take a look at what the troll is doing, and

that is what I hope this hearing will bring out today.

Thank you very much.

Chairman TALENT. I thank the gentle lady.

I have a three year old, and if it is not Barney or Winnie the

Pooh, she is not into it, but maybe. [Laughter.]

I thank the gentle lady.

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And we will start with our first panel now. Ms. Marianne

LaMura of East Hanover, New Jersey, who is from Chemcoat Labs,

Inc.

And I want to thank all of the members of both panels for being

here.

Ms. LaMura, please give us your statement.

STATEMENT OF MARIANNE LAMURA, EAST HANOVER, NEW

JERSEY

Ms. LAMURA. Good morning, ladies and gentlemen.

My name is Marianne LaMura, and I am the co-owner of a small,

privately held family business located in East Hanover, New Jersey. The name of the company is Chemcoat Labs, and we deal primarily in the manufacture of nail polish.

I have been invited here today to tell of my experiences relating

to California Proposition 65 and the adverse effect it has had on

small business.

To do so, I would first like to offer some background information

about our company. Chemcoat Labs was founded in 1971 by my father, the late Salvatore LaMura. Sam, as he was known, began

working in the paint industry at age 14 in Newark, New Jersey.

He eventually learned color matching of paints and lacquers and

began to color match opaque nail polish during the 1930s when it

was first invented by Ms. Helen Neushaefer.

During the 1940s, he went to work directly for Neushaefer at

Lacquerite Company using the formula she had created. He manufactured nail polish from the mid-1940s through 1969, running

Lacquerite for the family of Neushaefer, who passed away in 1959.

In 1971, he started his own company, Chemcoat Labs, again

using the same formulation. My partner and brother, Frank, started working at Chemcoat in 1973, while I came on board in 1981.

During the early years of my employ, there were not many state

or federal inspections at our facility because many of the regulatory

agencies which were created during the 1970s were first busy with

larger companies. It was not until the mid-1980s that we became

inundated with inspections from different state and federal agencies.

As each inspection would take place, I would work to see that all

requirements were met to bring our company into complete compliance with all laws.

In 1991, we were alerted by our nitrocellulose solution supplier,

AKZO Nobel Coatings that warnings were to be required for products containing certain ingredients if they were sold in California.

Proposition 65 would take effect beginning January 1, 1992.

I immediately sent out a letter advising approximately 80 of our

accounts to alert them of this new law which was about to take effect. As a professional courtesy, AKZO provided our company with

updated custom produced material safety data sheets which contained all necessary warnings and requirements for local state and

federal laws.

Unfortunately, no one really knew exactly how to comply with

the new labeling requirements for California, and there was no

agency to contact for instruction for compliance.

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Due to the fact that the CTFA had already done testing on exposure levels of toluene in nail polish with negative results, everyone,

including myself, believed there was no need for labeling because

the product was not considered harmful, and the warning went

unheeded. We labeled anyway.

In early 1993, one of my customers, American Manicure, called

to tell me that he had been contacted by a lawyer, Clifford Chanler,

representing a nonprofit organization called As You Sow, which

was headed by Thomas Van Dyck. He was given a 60-day notice

of violation which cited that his product, which contained toluene,

was being sold in California without a warning label and, therefore, was not in compliance with Proposition 65.

American Manicure was named in the first wave of the lawsuit

and was eventually given the opportunity to settle the matter for

$1,500.

Several other of my accounts also received warning notices, along

with many national brands of cosmetics. All were eventually named

in the litigation by Mr. Chanler. As time went on, the settlement

fees being demanded were growing larger and larger.

Over the next few weeks, the first wave of companies named in

the litigation had either settled with Mr. Chanler or were in the

process of doing so. Some had opted to place a warning label on the

products, with Mr. Chanler specifying the prescribed wording of the

warnings, while others opted to reformulate their product removing

toluene altogether.

It was quite burdensome for our company for the following reasons. Being the manufacturer of the product in question, we were

receiving numerous calls every day for information about the litigation to find out if nail polish was really harmful or was it just

harmful in California. Who was this Clifford Chanler and did he

have a right to do this? Who can we call for labeling requirements,

et cetera, et cetera?

I fielded many questions and tried to stay informed so that I

could help my accounts in any way possible, but at the same time

our phone was ringing off the hook, we were also being asked to

immediately submit samples without toluene, and at that time we

did not even have a working formula for a new product.

Once we did create a new product, it would require testing, new

labeling, new material safety data sheets, new ingredient lists, and

we had to start from scratch, and we needed it yesterday. And all

of this was very time consuming to do it right.

It was a heavy burden for a small company of only seven or eight

employees, and the newly created product would not be as good as

the original formula, but at a cost of approximately $3.00 more per

gallon.

By early summer of 1993, Mr. Chanler and AYS sent out the second wave of notices, and whoever he missed in his initial roundup

was now being named in the second wave. By then the entire industry knew about this litigation that was spreading like wildfire,

and many, fearing the high cost of litigation and also knowing that

there was a lack of proof that nail polish did not cause harm, everyone just buckled under and paid a settlement fee.

I do know of one company that tried to fight, but after spending

$100,000 in legal fees, gave up and settled.

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In late August 1993, our company was finally named. We were

part of the third and final wave of the lawsuit. Included with the

cosmetic companies that were being named were suppliers of raw

materials which are utilized in the manufacture of nail polish and

also filling companies, private label manufacturers like Chemcoat,

and just about anyone who ever touched the product. And still the

settlement fees being demanded were always growing larger as

time went on.

I had been in contact with the CTFA on a number of occasions.

Although I was not a member of the CTFA, they were extremely

helpful to me and offered as much information as they could to

help small business. For that I would like to take this opportunity

to personally thank that organization.

I believe they have the public interest in mind first and foremost.

In early September 1993, I received a letter from CTFA’s Thomas

Donegan, Vice President and General Counsel, advising of the latest information about the litigation. The letter also made me aware

that companies with less than ten employees were exempt from the

penalty phase of Proposition 65.

I immediately started to make all of my customers aware of this

fact, as many were small companies within this category. One such

customer was American Manicure with only one employee. When

I told him of this, his attorney sent a letter to Mr. Chanler complaining about the $1,500 settlement fee he had paid, despite the

fact he was exempt. He asked for the return of the fee.

He also sent a complaint letter to the Office of the Attorney General, explaining what had transpired, but to the best of my knowledge, the fee was never returned, and both letters were left unanswered.

On September 22nd, 1993, after receiving what was called a

courtesy call from Mr. Todres who worked for Mr. Chanler, I responded to my notice of violation. I sent a letter to Mr. Chanler advising that I was exempt from the penalty phase of Proposition 65

due to the fact that we have never employed more than eight employees. To prove this, I sent him a copy of my payroll journal,

along with our health care invoice which names all of our employees, and in addition to this information, I advised him that we had

been using a warning label for our bulk product since 1991, along

with a warning contained in our material safety data sheets which

was newly revised in April of 1991, at least seven months before

Proposition 65 took effect. In other words, we were in compliance.

I also questioned as to why Mr. Todres was concerned with my

annual sales figures at Chemcoat. I felt that he should be focusing

his concerns as to whether or not I was in compliance. My sales

figures were none of his business.

I then sent a complaint letter to the Attorney General in California. I also sent a form letter to all of my accounts with a cover

letter asking them to Xerox the form letter onto their own letterhead and send it to the Attorney General, along with a map which

painted off California and labeled it ‘‘the Shakedown State.’’

Basically everyone wanted to know where all of this settlement

money was going. As of today that question has never been answered, and I have never heard of even one case where someone

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or anyone has sued for birth defects or getting cancer from the use

of nail polish.

When the Attorney General’s office did answer my letter about

one month later, I was told there was nothing they could do because it was a civil matter, and that AYS and Mr. Chanler were

within the law.

This Proposition 65 law is plagued with flaws, and all are at the

expense of innocent businesses, both large and small. As You Sow

(AYS) used exaggerated usage data to claim that exposure levels of

toluene contained in nail polish were harmful.

The CTFA ran independent tests before this law ever took effect

and claimed that the product was not harmful. I will offer the following information as further proof.

Our company uses toluene in our formula, the formula which

originated in the 1930s. Our factory has been checked by OSHA to

insure that the air quality is within permissible exposure limits for

our employees. The levels of exposure for a manufacturing plant

are within the requirements for OSHA, while AYS will have you

believe that the vapors escaping from the quarter of an inch opening of a bottle of nail polish are harmful and require a warning

label.

This is clearly a misuse of the law, and I do not believe that the

law was intended for this purpose. An entire industry has been penalized unfairly to the tune of $993,000 in settlements. Proposition

65 is a paradise for lawyers that want to file frivolous lawsuits

and, worse yet, it is a revolving door that never closes, allowing numerous lawsuits against the same company for the same violation

from multiple parties.

This has recently happened with a hair color manufacturer,

Combe Incorporated and American International Industries. Two

suits were filed for the same violation, but the second suit was

eventually dismissed by appeal. Now the consumer groups are asking the Supreme Court to de-publish the opinion so that it could

not be cited in subsequent Court cases.

To me this appears to be more about money than compliance.

Earlier this year one of my accounts with less than ten employees

was forced to pay into a settlement or risk losing the business of

a large chain store who was cited with violation for selling the

product.

Mr. Van Dyck claims that AYS takes the more difficult cases

that the Attorney General passes on. In truth, the cases that the

Attorney General passes on are the ones that are without merit

and that they feel do not pose a risk to the public.

The nail polish industry is again being targeted for round two of

litigation by AYS. Clifford Chanler has been replaced as counsel by

Larry Fahn, a newly elected board member of the Sierra Club.

Some time last year a second ingredient has been named, and a

number of companies have already faced citations. One such account that paid a settlement for the toluene suit has just paid a

second settlement.

Strangely, while this ingredient was present in nail polish at the

time of the first wave of lawsuits, it was never named along with

the toluene. I refer to tosylamide-formaldehyde resin. I have a sample of it here so that we can put a face on it.

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Several companies have been forced to reformulate their product

despite already providing warning labels. The resin contains a byproduct of less than .3 of one percent of formaldehyde. The resin

content in nail polish is seven percent, which would mean that it

is a trace amount. Yet I am sure that many companies will be

forced to pay thousands of dollars just because of this small byproduct content.

The law is about to be stretched again for the purpose of extracting settlement money from innocent companies just trying to earn

a living. This law is out of control, and I do not know what would

happen if more states were to pass laws similar to Proposition 65.

It would certainly kill interstate commerce.

What we need to do is close this loophole in the law once and

for all, to put an end to these frivolous lawsuits.

We also need national uniformity for interstate commerce so that

all consumers are provided with the same relevant safety standards.

Since Proposition 65 has passed in California, it has cost small

business thousands of dollars defending itself against false allegations. Lawyers, not consumers, have benefited. Please help.

Thank you.

[Ms. LaMura’s statement may be found in the appendix.]

Chairman TALENT. Thank you, Ms. LaMura.

Our next witness is Frank Strauss from Marshall, Texas with

Activa Products, Inc.

Mr. Strauss.

STATEMENT OF FRANK STRAUSS, MARSHALL, TX

Mr. STRAUSS. Thank you, sir,.

Chairman TALENT. And those who wish to and can summarize

statements, that would be helpful. I know you all have come a long

way, and the Committee wants to hear you, but we also want to

have time for the members to ask questions.

Go ahead, Mr. Strauss.

Mr. STRAUSS. My name is Frank Strauss. I am the President of

Activa Products, Incorporated. It is a woman owned, family run

company with 22 employees. We manufacture and sell art and craft

materials to distributors, retailers, schools, and others since 1959.

As your Chairman has informed you, we are headquartered in

Marshall, Texas. The majority of our employees are minorities,

with full medical and retirement benefits.

And let me state that my company is not against Proposition 65.

We do not think, however, that Congress intended when LHAMA

was passed that the art material companies would be forced to adhere to chronic health hazard labeling requirements.

Recently a bounty hunter sued my company under Proposition 65

regarding a product called Scenic Sand. Now, this is the first lawsuit against any of our products in the 20 years that I have been

with the company.

Scenic Sand is just what the name implies: sand that is coated

and baked with various colors for uses and designs in sand sculptures that I am sure all of the mothers and fathers in this room

have bought for their children. Scenic Sand has received the ACMI

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AP seal, which indicates that the product is the safest, least toxic

category in the ACMI certification program.

Now, this sand is essentially no different than the sand you

would find on any beach, including the beaches in California. Another name for sand, however, is crystalline silica. Proposition 65

requires a warning for crystalline silica.

In response to the lawsuit, we requested our toxicologist to conduct a Proposition 65 exposure assessment of our product. The toxicologist concluded that the potential exposure for the respirable

fraction of crystalline silica in Scenic Sand is one percent of the

amount that would require a Proposition 65 label.

Chairman TALENT. Mr. Strauss, let me interrupt. I feel responsible here because I asked you to summarize, and you omitted a

part that I think would help members understand your testimony.

People who belong to your association, the people who sell art

products like this, the association has toxicologists, and you submit

the products to them before you market them.

Mr. STRAUSS. We submit every product that we sell to the toxicologist, who is the leading toxicologist in the country, if not the

world, that I know of from Duke University, and none of the 300

manufacturers that belong to this association may sell a product

that is not approved by the toxicologist.

Chairman TALENT. I want members to understand that when you

refer to an AP seal on your product, that is the seal that people

in your association put on the products after they have submitted

it to the toxicologist.

Mr. STRAUSS. That is correct, sir.

Chairman TALENT. Okay. I just wanted the people to understand.

Go ahead now.

Mr. STRAUSS. As I said, this sand is essentially no different from

the sand you would find in any beach, including the beaches in

California, but this is also called crystalline silica, and Proposition

65 requires that approval.

I would return again that the toxicologist concluded that the potential exposure to the respirable fraction of crystalline silica in

Scenic Sand is .01 of the amount that would require a Proposition

65 warning, and that assumes that the user made sand designs in

a poorly ventilated room every day for 21 years. That is one percent to the required level for 21 years every day.

The manner in which these proposition bounty hunters enforce

Proposition 65 acts as a sledgehammer against small businesses.

We requested that the plaintiff’s attorney did not file the lawsuit

until the toxicologist could finish his exposure testing that demonstrated that Proposition 65 warning was not needed. The plaintiff’s attorney refused and filed suit anyway.

It concerns me that bounty hunters can file these suits so easily

against small companies like mine without any proof that the products at issue are unsafe or any proof that the AP certification is

wrong.

Equally frustrating is the fact that we have had to hire a toxicologist just to sell our products, while a citizen enforcer need only

to determine that the product contains a Proposition 65 chemical.

A company like Activa faces substantial costs in attorney fees

and expert fees to defend itself fully. My company, along with other

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small businesses face potential penalties of up to $2,500 per day of

violation for each product used by any California consumer, these

penalties for failure to provide a warning on the product that our

toxicologist has told us would be misleading and inaccurate.

My choices are few. I can settle the lawsuit as best I can so that

the business and my employees do not suffer, or I can fight the

lawsuit at considerable cost and at risk to my company and my employees.

Even if we settle, we will still lose because our customers become

the next target, and we must indemnify our customers in order to

stay in business. The domino effect of a successive payment to resolve Proposition 65 enforcement lawsuits could eventually put our

company out of business.

In conclusion, before we were sued we believed that by complying

with the federal laws and requirements, we effectively would be

complying with state laws requiring the same kind of health warnings. We are now concerned that we will be forced to comply with

different requirements not only in California, but for each state in

which our products are sold.

In the light of the burden that Proposition 65 is placing on

Activa, we are evaluating whether we should continue to sell our

products in California. This may be the only way to insure that we

will not be subject to repetitious health hazard warning requirements and to the potential for successive and unfounded lawsuits.

However, even if we stop sales to California, there is still a likelihood that our products could be distributed in California without

our knowledge, for example, a shipment from a distributor in Arizona into California and under those circumstances we will again

face the policy of the impossibility of enforcement lawsuits against

us and our distributors and retail customers.

Thank you for providing me with this opportunity to speak before

the Committee, and I would just like in passing to mention to Madame Chairman from New York that we are aware of only one

bounty hunter lawsuit that has gone to trial of the many thousands

that have been filed in over 12 years.

Thank you, Madame Chairman.

[Mr. Strauss’ statement may be found in the appendix.]

Mrs. KELLY. [presiding]. Thank you very much, Mr. Strauss.

Next we move to Mr. Klein.

STATEMENT OF ROBERT KLEIN, BALTIMORE, MD

Mr. KLEIN. Mr. Chairman or Madame Assistant Chairman, I accept the invitation not to read my three pages verbatim. I believe

you have all gotten copies of it, and you will be proud that I had

Spell Check on my word processor so that there are no spelling

mistakes, and I think it speaks for itself.

I would like to, since I came all the way over from Baltimore

where we are in the paint business, and I consider our company

a small company, I would just like to verbalize some thoughts here.

I bought this company called Lenmar. It was called Lenmar Lacquers. We make industrial coatings or specialty paints. It is unlikely that anybody in this room would ever buy, use our paints or

ever hear of us. We make about four different product lines. One

of them is aerosol paint concentrate that we sell to the manufacturVerDate 11-MAY-2000 09:04 Oct 16, 2000 Jkt 010199 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 E:\HEARINGS\61647A.XXX pfrm01 PsN: 61647A
13

ers of aerosol paint. If you are familiar with Krylon, it is the stuff

that you push the button, and it gets sprayed out of the can. We

supply a concentrate. The packager will package it, add solvents,

propellant, and so on, and that is sort of considered a raw material.

We do make floor finishes that are used by professional floor finishing contractors, and I doubt whether any of you would go out

and rent a sanding machine and apply our floor finishes.

We also make cabinet finishes that are used by professional cabinet shops, and the item which we first heard about from the bounty hunters in California were military specification coatings which

are used to paint airplanes and tanks and weaponry, and so forth.

These military specification coatings, in fact, the formulas were developed by government agencies, and you have to comply with the

governmental requirements.

We received a letter from Mr. Chanler at the middle of December

1994 actually, but it is dated the beginning of December 1994, and

this was about a month or so after I had attended the annual convention of the National Paint and Coatings Association, of which

we are members. At that meeting there was a seminar specifically

on Proposition 65, which had very large attendance, and I suspect

that they had a spy there checking who was there so they could

come after them post meeting and send them these threatening letters and sue them or threaten to sue them.

Anyway, I am not accusing NPCA of selling membership lists because it is a great industry association. They are very helpful in

all environmental compliance, the labeling acts, and so on.

My company has always been most assiduous in following the

HMIS. We supply material safety data sheets to our customers. We

revise them, send them out. I think you still have to send them out

every year to existing customers.

And after this meeting in November 1994 of the NPCA, one thing

I did when I got back to the office because to the best of my knowledge we did no business in the State of California, and before I got

Chanler’s letter, I said, ‘‘Let’s check into the law,’’ and we got their

list of 600 different chemicals, including aspirin, that have to be labeled.

There are two products in this list used in paints. One is a product called toluene, which was mentioned here, which is a common

hydrocarbon solvent, and the other is DOP, which is a plasticizer,

which I have never heard of being on any hazardous products list,

but California had it.

What we did immediately upon getting this letter, the product

that they (Chanler, as you saw) claimed they found was a military

specification item, and we track all the products by the product

code numbers of where we ship them. We had never shipped, since

1986, any of that product outside the States of New York, Pennsylvania, and one other state. Nowhere near California.

Plus the fact that since I had a couple of business courses in law

when I was in college, I felt pretty smug by the fact that we had

no distributors; we had no salesmen; we had no warehouses, and

by federal standards we did not do business in the State of California anyway. So I was sure nobody was going to contact us.

14

When I got the letter from Chanler and it named this product,

we had shipped none of it into that area, and of course, they had

the add on ‘‘or possible other products.’’

So I answered them on January 17th, but what I had done immediately, we do have a way of determining what raw materials

are used in our products. We made up a list of all products we

manufactured containing toluol. We told our shipping department,

and this was effective January 1st, 1995 which was within a month

after getting this letter, to label anything that goes into California

per the requirements of Proposition 65 DOP, will cause birth defects or the toluol could cause cancer according to the State of California.

At the same time, when I first heard of this I called up the California Paint Council, which was a group representing the paint

makers in the State of California, and was affiliated in some respect to the National Paint and Coatings Association. I called Matt

Duston, who was the man who was running this office.

I said, ‘‘What do these guys want?’’

He said, ‘‘They want a little bit of money.’’

I said, ‘‘What is a little bit of money?’’

He said, ‘‘Ten thousand, $20,000, maybe a little more.‘‘

And I said, ‘‘Well, maybe to you that is a little bit of money, but

I own this company, and it is out of my pocket. I don’t consider

that a little bit of money.’’

I wish I had given them a little bit of money up front. My initial

investment in Lenmar, my capital investment was roughly

$100,000. Just in direct costs, this Proposition 65 action has cost

me $50,000, and you can read all of the details in between.

I ended up hiring a California law firm Haight, Brown &

Bonesteel, Jeff Margulies who is here, who are expert in Proposition 65, to represent us, and I was just stubborn enough that I

was not going to give into a bounty hunter until it got to the point

that if I continued, whether I am a little goat or a big goat or whatever the animals are, I think I was a big goat that got swallowed

up by the troll, anyway.

But it gets to the point that you say how much money are you

going to throw after it. I really detested the idea of giving into a

bounty hunter. Our company, every company I have ever been connected with has complied with the laws assiduously. We follow the

labeling laws, the air toxicity laws, etc.

I can understand where local jurisdiction, and I know in the air

tox. laws—I do not know about Washington, but the Baltimore area

is a non-attainment area. So their laws have to be more strict than

when you are out in the Midwest where the air is nice and pure.

In California, the South Coast Air Quality Management District

came out with their own laws concerning air toxicity and labeling.

There is quite a bit of reasoning for local laws, although CARB, the

California Air Resources Board, tried to make every part of California at least be uniform.

My plea to you is from whatever I know of laws, if I were to say

that there has to be a change, the number one change, is if somebody is going to go after you, I think they should warn you first.

If I were driving down a dark road without a speed sign and I got

15

stopped for speeding, I would expect to get a warning, and then

next time I would not speed.

I do not think it is possible for us to know every law in every

jurisdiction and comply 100 percent, particularly in our case. We

did not think we were shipping anything to the State of California.

This was government purchases, and what I did when this first

happened, I called up every customer that I could find who bought

the MIL spec. paints from us located in the State of California. Of

the government ones, most of our purchases or our sales or shipments went to a place that was the U.S. government, Rough and

Ready Island, where they exported overseas.

There were other military installations. We tried to find out who

was usually the transportation officer. I called up eight companies

that were not government installations. ‘‘The materials that you

bought from us, where did they go?’’

And all but one said they were all export. The other one ‘‘was not

sure’’. Now, what kind of laws are they that somebody comes after

you and extorts money from you without any full knowledge. We

finally found that Chanler got this information under the rights of

information act. All of these sales are to the GSA, the Government

Services Administration office in Auburn, Washington State, and

they have probably got ten lists of everything we had bid in military specification coatings.

The first one they grabbed we had never shipped into the State

of California, but they kept coming back and coming back.

After consulting with Jeff Margulies of Haight, Brown &

Bonesteel, and feeling that it was a bottomless hole, he said, ‘‘Let’s

settle.’’ And we had sort of mentioned settling with Chanler, and

whatever you said was not enough, and if you said $20,000, they

would talk more. Jeff finally went to them and said, ‘‘Well, we are

interested in talking settlement.’’ I think the number from Chanler

was $70,000 or $80,000.

And to me this is not the way to do business between nations,

let alone between states.

Thank you.

[Mr. Klein’s statement may be found in the appendix.]

Mrs. KELLY. Thank you very much, Mr. Klein.

Mr. Golden.

STATEMENT OF MARK GOLDEN, NEW BERLIN, NY

Mr. GOLDEN. Thank you.

Good morning, Madame Chairwoman and members of the Committee. Can you hear me?

Mrs. KELLY. It would be helpful if you pulled the microphone a

little closer. Thank you.

Mr. GOLDEN. I have summarized way too much information, and

I would appreciate if it is possible if that testimony can be incorporated into this hearing.

Thank you for the opportunity to talk about my company’s experience with private enforcement of California’s Proposition 65.

My name is Mark Golden. I am President of Golden Artists Colors, Incorporated, a family owned business with about 100 employees.

16

We manufacture acrylic water-based paints primarily for professional artists, serious painters and students. We are located in the

town of Columbus, a community of about 600 families in upstate

New York.

I must admit I am a bit anxious about this process here today,

but I am most anxious about properly summarizing the impact that

private enforcement of Proposition 65 is and will continue to have

on our small business and others like ours, and anxious actually

that anything will be done about it.

If you think Proposition 65 is just a California issue, obviously

it is not. If you think it is just an insignificant labeling issue and

why don’t we just label the product, it is not. If you think it is the

best way of serving the public health in the current form, it is not.

My company, along with most other small businesses, does not

have the financial resources to fight these lawsuits, and we find

ourselves reaching settlements on products that have otherwise

been deemed safe under stringent federal standards and laws.

My sense of right and wrong tells me we should fight these suits.

Our costs if we win are estimated in the hundreds of thousands of

dollars, plus all the energies of my staff.

Should we lose, the cost is potentially the entire business. My

sense of protecting our business and the many families that depend

on Golden Artists Colors to provide employment and full benefits

leaves no choice but to settle.

Even after reaching a settlement agreement for a Proposition 65

lawsuit, we soon received a new Proposition 65 notice of intent to

sue over the same products covered in the first settlement. We

truly fear this costly cycle of litigation has no end for us.

My company complies with the federal labeling requirements

through participating in the ACMI certification program, which

covers even broader health requirements than the federal law.

We have included packets by your desk, those red packets, which

include the information from ACMI.

Our expectations of the Federal Hazardous Substances Act, as

amended by the Labeling of Hazardous Art Materials Act, or

LHAMA, was that it was to protect public health first, and also to

protect us from states creating duplicate and contradictory guidelines.

To meet the requirement of LHAMA, my company submits the

formulas of our products to a board certified toxicologist, who reviews the formulations and advises us of the appropriate health labeling for each product. In fact, the guidelines used have included

California’s no significant risk levels requirements.

With very few exceptions, our products have been deemed safe

for use by people of all ages.

The results of the toxicological review are relayed to consumers

by the Art and Creative Material Institutes AP seal, which is recognized internationally as assuring safe products. In fact, many

school organizations strongly recommend purchases of only ACMI

AP approved products.

The Proposition 65 labeling requirements provide inaccurate information to our customers. The Proposition 65 warning labels will

be viewed by all our customers throughout the country, promoting

confusion and concern.

17

Before our customers were purchasing products that they considered to be safe. Now they’ll be seeing the same products with warnings of health hazards. The only effect is to diminish our credibility

with our customers that we hold dearly, without providing any additional benefit to consumers.

Before this process is through, if nothing is changed, it will cost

us hundreds of thousands of dollars with the potential of millions

and the jeopardy of our business and the jobs my small company

has provided.

In summary, we thought Congress in 1988 indicated through the

passage of LHAMA that our small industry would not be faced

with conflicting state laws. LHAMA has addressed the identical

health issues that Proposition 65 addresses, and we do more than

any other industry in the United States to comply with the FHSA

requirements as amended by LHAMA.

The issues of Proposition 65 enforcement have nothing to do with

protecting public health, especially within our industry. We have

worked too hard and too conscientiously to maintain public confidence in our product, in our integrity, in our desire to protect our

customers, to be framed by Proposition 65 advocates as being

against the concerns of public well-being.

We are simply easy targets by a flawed system that Congress

recognized years ago we need protection from. I strongly urge this

Committee and Congress to take action to protect small businesses

like mine from the economic jeopardy of Proposition 65.

And I thank you, again, for this opportunity to be heard.

Thank you.

[Mr. Golden’s statement may be found in the appendix.]

Mrs. KELLY. Thank you very much, Mr. Golden.

Ms. Skommesa.

STATEMENT OF SANDRA SKOMMESA, LOS ANGELES, CA

Ms. SKOMMESA. Good afternoon.

Mrs. KELLY. Sorry. I pronounced that wrong, didn’t I? It is Ms.

Skommesa.

Ms. SKOMMESA. Yes it is. Thank you very much, Madame Chairwoman.

My name is Sandy Skommesa, and I am President and CEO of

Ellis Paint Company. We are in Los Angeles, California.

Ellis Paint Company was founded in 1887, and by the Ellis family and sold to my family in 1969. Today we remain a small, family

owned specialty paint manufacturer, and we have about $18 million in sales, and we employ about 85 people.

My testimony, like my fellow panelists, is not about a small company that cannot comply with over complicated and over burdensome regulation because of our size. Quite the contrary, we are a

proactive, pro solution oriented company.

Early in the regulatory process we took a strong position to be

a leader in environmentally responsible products. We manufacture

products that comply with the South Coast Air Quality Management District’s rules and regulations, and we have done that since

1985.

We are also a hazardous waste facility site, and we recycle paint

related waste streams. We have recycled over half a million gallons

18

a year for the last 20 years. We took that action in 1980 to recycle

solvents, to be a solution for our customers that utilize our products.

With a company who is so proactive in their commitment to environmental responsibility and being a manufacturer in California,

unlike the other testimony you have heard, how could a company

like mine have gotten at odds with the bounty hunter groups?

Well, I would like to explain to you today that I got at odds with

them over a comma. I put Proposition 65 warning on my product

from the very beginning. I have a chart to show to you today the

warning that I have on my product.

Here we see the safe harbor warning. In the case of a dual risk,

we combined both the cancer and the birth defect and reproductive

harm into one warning, and we separated it by a comma. We were

sued by As You Sow and Mr. Chanler for that comma.

I, like Mr. Klein, felt that they had met their match because

there was not a company that was more concerned about the environment, our community, and our employees than Ellis Paint Company, and we were going to stand firm.

But I thought that this was about fairness. I thought it was

about warning the consumer, and I was mistaken about that. The

bounty hunter requirements are about money, and against the advice of my attorney I did not settle. Mr. Chanler offered to settle with me for $5,000, and I did not

accept that. He did file a suit, and as I was preparing my testimony today I had forgotten how angry I had gotten. When I got

the lawsuit, it did not even have my name on it. This lawsuit is

made out to Star Finishes Products, Inc. and Does 1 through 1,000.

I am one of those Does 1 through 1,000.

Mr. Chanler does not even take the time to see who he is suing.

He just opens up the SIC code and finds the address and sends out

these lawsuits.

We did settle this case. The discovery is incredible. The wear and

tear on my company was also incredible. It was during the time in

the 1990s, if you remember, was during the California recession. It

was a very hard time for business. Our total cash outlay, as outlined in my testimony, was $54,000. The amounts shown on the

chart of $68,000 includes the one administrative person from my

company that also spent time on this lawsuit.

To put the cost in perspective, in 1995, my company lost

$178,000. There were no raises for my employees, but I had the

money to give to Cliff Chanler over a comma.

I do not think anybody at this table has expressed that we are

against Proposition 65. We are not, and we would agree with you

that better products have come as a result of Proposition 65

I am a California resident. I am a California voter. I have children and grandchildren in that state, and I believe in better products and certainly safer products.

But I can tell you I would fight with all of my being against this

bounty hunter that robs us of resources that should be used in our

state.

Thank you very much.

[Ms. Skommesa’s statement may be found in the appendix.]

Mrs. KELLY. Thank you very much, Ms. Skommesa.

19

We invited Mr. Chanler. This panel may be interested to know

we invited him to come and testify, and I have in my hand a letter

from him which we will insert in the record. He declined our invitation, and I will insert this letter into the record, with no objection.

[The information may be found in the appendix.]

Mrs. KELLY. I have a few questions.

Yes?

Mr. STRAUSS. Would you read us that letter?

Mrs. KELLY. I would be glad to read you that letter if you would

all like to hear that letter. It was written to Roger Keller, our General Counsel here at the Small Business Committee. ‘‘Dear Mr.

Keller: ‘Thank you for your recent telephone call in which your

Committee invited me to join a panel relating to a discussion concerning California’s Safe Drinking and Toxic Enforcement Act of

1986. While I intend to submit written comments on one or more

of the issues before the Committee and/or the CPSC, I respectfully

decline to appear as a participant on the panel. If you would like

the names of other potential participants, please feel free to contact

me.’ ’’

‘‘Very truly yours, ‘Clifford A. Chanler.’ ’’

Mrs. NAPOLITANO. We have identified the troll. [Laughter.]

Mrs. KELLY. I have a couple of questions.

Since, Ms. Skommesa, you were the last person to speak, I just

want to ask you a question. It seems that Mr. Chanler and nobody

in California really cared about whether they were being grammatically correct with your warning.

Ms. SKOMMESA. No, and we did point that out to them, and you

are right. They did not care.

We have now made a decision to put two sentences on our label.

So on our products that do represent both a carcinogen and a birth

defect warning, we repeat the sentence twice.

Mrs. KELLY. Which costs a little bit more money and enlarges

the label; is that correct?

Ms. SKOMMESA. Well, unfortunately on a paint can, you only

have a limited space. This is the size of a gallon paint can warning.

This is the back; this is the front.

When you make quarts, which we also make quarts, the quart

paint label is smaller than the yellow, and we have to put all of

the product information on that space, and we do.

It was the only way I could assure that I would not be re-sued,

as you have also heard testimony on this panel.

Mrs. KELLY. You spoke about the warehouse people requiring a

sticker, the current inventory as well as the new materials. I would

like to know how many people that involved and what that really

did entail.

Ms. SKOMMESA. Once California voters passed Proposition 65,

rather than grandfather in our current inventory, we made a decision to sticker it, and that way to the best of our knowledge, everything that was for sale would be in compliance, and this involved

five people in our warehouse. We went out and had stickers with

the warning printed on it, and we went through and stickered our

entire inventory, which is about $750,000 worth of inventory. The

units would probably be around 2,500 units.

20

But not only that; we sell thorough independent paint dealers.

We also sent the stickers and a letter out by product, which stickers went on which product. Our sales people when they made their

sales calls, went out and checked our inventory.

Mrs. KELLY. And have you any estimate on not the product cost

itself, but how much it cost you for those five employees and the

cost of the stickers and the time and so forth to get out there to

do that?

Ms. SKOMMESA. I really do not, Madame Chairwoman. I think

that it is hard sometimes when you try to put all of the soft cost

together, and what happens is then we overestimate or we underestimate.

We are very proactive in our approach to the consumer, and so

we did not consider it to be too costly. We would not have said you

should not label because it would cost us too much money, but

what incenses us is that we do not get credit for the work that we

do, and then we end up spending an exorbitant amount of time defending ourselves. Maybe because of our pride.

Maybe I should have just paid the $5,000 and been on my way,

but I did not. It is those costs, Madame Chairwoman, on the bounty hunter side that is to me just so unreasonable.

Mrs. KELLY. You heard Mr. Golden’s testimony. How does this

warning—I am just interested in how the warning differs, your

warning label would differ from Mr. Golden’s.

Ms. SKOMMESA. His warning label would not differ from mine at

all. My industry being in the industrial paint does use hazardous

materials, and the warning would apply to my industry. Where in

Mr. Golden’s industry, he actually participates with a group of toxicologists that state that his product does not need the warning.

That is the other part of Proposition 65 that is so difficult. There

are no guidelines that give somebody like Mr. Golden an opportunity to say, ‘‘This does not apply to me. I not only paid the toxicologist, but I have the information to prove the product does not

require a warning.’’ So you have nowhere to turn.

I agree that my product should be labeled. I do not have a problem with that, but some of our other panelist members, clearly

their products should not have been labeled, and they should not

have to be subject to bounty hunter where they have no opportunity to bring closure to it.

That is the loopholes. If we could close that loophole within Proposition 65 we would get the best of both worlds, the proper labeling

for the consumer, and companies in compliance. Just let us know

what you want us to do. We will do it.

Mrs. KELLY. I just would like to ask a question of you, Mr. Golden. If you continue to have these suits brought against you, you

have stated in your testimony that you provide your employees

with subsidized child care, educational allowances, 401(k) plans,

profit sharing, and full health benefits. Would any of these be affected if ultimately you continue to be sued with this type of suit?

Mr. GOLDEN. I believe all of those things will be affected even

without the continuation. We are going to have to go through a

process of relabeling product, and that is going to immediately affect our income. We will be losing sales. We will be losing school

21

sales. So even without continued suits, yes, absolutely, those things

will be affected.

We will potentially lose jobs, potentially lose benefits for employees.

Mrs. KELLY. Ms. LaMura, why do you think that Mr. Todres was

interested in your annual sales figures?

Ms. LAMURA. I think that he was trying to, because I was claiming that I was already in compliance, that I had been labeling, and

that I had less than ten employees, and he was disputing that. He

did not believe me, and I believe that he was sizing up his losses.

He was trying to size up his losses because he could not get at me

because at the end, when there were opt in, in the third wave of

the lawsuit, the third wave of people that were named, there was

what was called an opt in settlement which was handled by the

Nail Manufacturing Council, and all of the people that were named

were given the opportunity to settle, but the settlement was based

upon what their sales figures.

And because I was part of the third wave, that is what they were

trying to figure out, but you know, I was stating that I was exempt,

and they were annoyed that I knew that.

And when my other customer who paid the settlement, you

know, was notified by me that he really should not have had to pay

it, he did not get his money back. He never got his money back.

He never got any kind of a response from Mr. Chanler or AYS or

the Attorney General.

Mrs. KELLY. How do you think Mr. Chanler got the additional

names? Where do you think he got those names?

Ms. LAMURA. I know where he was getting them. He was going

through our trade magazines. He was relying upon people that he

was naming. He was asking them to provide who their suppliers

were.

Mrs. KELLY. Was he making a settlement, do you think; was he

making some kind of a settlement with them as a tradeoff for them

giving him names?

Ms. LAMURA. No, I do not think so. I do not think he did that,

no. But he got the names through perhaps like getting his hands

on one of our insurance booklets because we all belong to a group,

the ICMAD, and all he needs to do is get his hands on one of the

booklets. It has everybody’s name and address in it, or he can get

it from the ‘‘Drug and Cosmetic Industry Magazine where they

have a yearly catalog that comes out that lists everybody in the industry.

And he just went through it, just like the lawsuit that one of

these gentlemen had where he just had one name and then John

Does 1 through 1,000, and that is how he did it.

Mrs. KELLY. Do you know if any of this has caused any business

to go out of business?

Ms. LAMURA. To the best of my knowledge, no, but I know that

companies were penalized up to $50,000. I know that Revlon had

reformulated long before the law took effect, and they were charged

$20,000. They were named in the first wave.

I am sure it did not help anybody.

Mrs. KELLY. Ms. Skommesa, do you want to add to that?

22

Ms. SKOMMESA. Yes. In my settlement, what was paramount to

Mr. Chanler was a copy of every MSDS sheet that I had at my facility, and that was over 1,000 records. We had to copy every raw

material’s MSDS sheet, and they would be able to put those into

a computer and just randomly select depending on which chemical

that they wanted to go after.

Mrs. KELLY. I have more questions of all of you, but in the interest of allowing some of my fellow members here to ask questions,

I am going to turn this panel over to the Ranking Member.

Ms. VELA ́ZQUEZ. Thank you.

I would like to ask each of the panelists if you have complied

with Proposition 65 by labeling your product, and how many made

changes to the products that you offer, and also what has been the

cost involved.

Ms. LAMURA. We were labeling. At the time we were notified, we

were labeling before the law took effect. We did have it included

in our material safety data sheet.

We did have to reformulate very quickly. We made an alternate

product which we aptly named P 65. [Laughter.]

We created a suspension based lacquer. We removed the toluene

and added more of the more expensive solvents, and we removed

the tosylamide-formaldehyde resin and replaced it with polyester

resin so that they would have a toluene and formaldehyde free

product if they wanted to not have to label, and it would be acceptable for California.

Ms. VELA ́ZQUEZ. Can you tell me what was the cost involved?

Ms. LAMURA. That, because we are a small company and it was

just a lot of hours for me, a lot of hours for production, testing, a

lot of office clerk hours typing up all new sheets and having to go

through all of the red tape sampling all of the customers. It was

a lot of money. It was a lot of money, but to put a dollar figure

on it, I could not do it.

Ms. VELA ́ZQUEZ. Mr. Strauss?

Mr. STRAUSS. Ms. Vela ́zquez, number one, we would not change

our formula because what we are selling is sand, and God created

that sand, and I have not been able to get to him yet. [Laughter.]

I have not changed my labeling because my toxicologist has

sworn to me that our products are not a safety hazard, and if we

did it, as I stated in my notes to you, it would be hard to say that

this is a chronic problem when we have no problem. We are not

right now required by the LHAMA to label our products as having

any toxic problem.

So we, frankly, are in firm belief that we do not have a problem.

Ms. VELA ́ZQUEZ. Mr. Klein.

Mr. KLEIN. It has made absolutely no change to us. We have

made no changes at all. First of all, the military specification coatings are approved, what are called—I forget the name, but the

qualified products list—QPL, and we could not change them from

those ingredients without getting it retested by the government.

And for many years now the government agencies involved have

not had the money to do any retesting, and they would not retest

it. We would be out of business.

Also, it would have been easier for us to just stop shipping anything into the State of California and just turning down any govVerDate 11-MAY-2000 09:04 Oct 16, 2000 Jkt 010199 PO 00000 Frm 00022 Fmt 6633 Sfmt 6602 E:\HEARINGS\61647A.XXX pfrm01 PsN: 61647A
23

ernment bids that involved California shipments. It was the easier

way out for us to just label the items. When the shipping department got something we were shipping to California or we thought

it might end up in California, we would put a label on it. It was

not a great number of our products.

So we did not make any changes for those reasons. It was not

economically feasible.

Ms. VELA ́ZQUEZ. Mr. Golden.

Mr. GOLDEN. We have not made the changes yet, but the estimate in terms of the first round, there are potentially 1,100 items

in the first group. It is going to be well over $150,000 to do the second round, whatever that may be. It could be close to a quarter of

a million dollars in changes in labeling.

I am not afraid of making changes in labeling. We have done

that in the past as we need to. We have a pretty fluid procedure

to be able to change labeling. Every year we spend at least 20,

$25,000 in updating our standards and making sure we do regular

toxicological review so that we do not sit on our laurels or past successes of labeling. We make sure that it is up to the latest standards of labeling.

So we are not afraid of spending the money to adequately protect

the public health.

Ms. VELA ́ZQUEZ. Ms. Skommesa?

Ms. SKOMMESA. Thank you.

We have about 600 products that we carry on a regular basis,

and with the labeling and the man-hours, it costs us about

$175,000, but like Mr. Golden, we do not have a problem relabeling. We get new information, more updated information. We

check our MSDS sheets against our labels on a regular basis, and

so we have a system in place to do that, and we do consider that

to be a regular part of our business and a regular part of our responsibility.

Ms. VELA ́

ZQUEZ. Thank you.

Mr. Strauss, you state in your testimony that your product

passes the most stringent labeling and warning requirements than

those included in Proposition 65.

Mr. STRAUSS. Yes, ma’am.

Ms. VELA ́ZQUEZ. And you also state that although you paid for

the private toxicology study, the party suing you has not agreed to

sit down and compare their study and yours.

And if there is some type of standard on who can make these

studies in order for them to be accepted under the Proposition 65?

Mr. STRAUSS. I believe what little I know, and I am not a toxicologist, he used some of the standards from the State of California

when he did the study, and I might say to Mrs. Napolitano I also

have a child in California, and I have grandchildren in California.

So it is very important to me also.

Have I answered your question? Yes, there are standards. There

are standards the CPSC has. There are standards that LHAMA

has. There are some of the standards in California, and all of these

standards were looked at in the test that we came up with that’s

only .01 of the threshold that California is talking about.

24

And that is what bothers us, and the bounty hunter thought

nothing of that and went after us anyway and will not check our

tests about what tests he has.

I do not frankly think he has ever tested.

Ms. VELA ́ZQUEZ. Could you tell me why in your opinion there is

enough difference between both studies that you are still in compliance?

Mr. STRAUSS. In my opinion, they are just trying to get money

out of us, quite frankly. I do not think they have any tests whatsoever that shows that we meet any closer to that threshold.

Quite frankly, our toxicologist is chairman of the ASTM D–4236

committee that is accepted nationally, if not accepted internationally, on the type of testing that they do, and even conservatively

.01 of the threshold limit is this compared to this.

Ms. VELA ́ZQUEZ. Mr. Golden, you know, we are here today to look

at potential problems with the third party enforcement, and I have

to tell you, sir, that there is one statement in your testimony that

really troubles me.

You stated that placement of Proposition 65 warning labels diminishes your credibility with your customer without any accompanying benefit to them. Can you please explain that to me because I believe that if what you are saying is that if knowing that

a product may expose someone to health risk is not important, I

need for you to clarify that to me?

Mr. GOLDEN. I am glad you asked the question. Thank you.

First of all, our products do require health labeling. They require

and go through a very stringent review and toxicological review.

The products are reviewed for the amount of potentially hazardous

or toxic materials. They are reviewed for bioavailability of toxic materials. They are reviewed for use, and they are also even reviewed

for misuse, potential misuse of the product.

It is a pretty stringent standard that our products are asked to

pass. In doing so we have put together what we think is a very informative label for our customers, which we have worked with personally.

I mean that is how I started the business, actually making product, going down to customers in New York, and delivering. So I

have a very personal relationship with these artists. Many professionals expect our integrity for their product to last, to be safe, to

provide all of the properties that they are looking for.

But in our health and safety labeling we have Golden acrylics

with the Arts and Crafts Material Institute seal, are certified in

the program of toxicological evaluation by a medical expert to contain no material in sufficient quantities to be toxic or injurious to

humans or to cause acute or chronic health problems.

All Golden products should be used in accordance with safe handling practices. These include avoid contact with eyes, wash hands

after use; do not spray apply cadmium containing pigments.

We have felt that we have done a better job in terms of informing customers not on our own, but using the LHAMA legislation as

the background for creating this label. So we do not feel at all that

we have not done our due diligence; that we have; that Congress

has; that our toxicologist has; that our industry has done that level

of due diligence.

25

Ms. VELA ́ZQUEZ. You do see some benefit for having in this label

any hazardous chemicals or carcinogens to be included in those labels?

Mr. GOLDEN. If, again, it has to do with the level of toxicity, and

we cannot discount that. It is not just that a material is a carcinogen. It has to do with what are the levels, and I think probably

other people could better answer that kind of question who are

toxicologists, but that has been reviewed by, as well, the CPSC in

terms of how well we did our work as an independent group.

Not only that, the group that had done the work, we have been

part of ASTM D–4236, and that started for us in the early 1980s,

and that was a group of artists, art groups, material scientists,

toxicologists, and health advocates, as well as material manufacturers.

I am very proud to be part of that group that developed the first

standard for acute and chronic toxicity of materials. It was such a

good not compromise, but a good coming together of people that it

was actually incorporated almost in its entirety into the CPSC language, into the LHAMA language.

And I think that speaks for itself. We have done the work. We

are very proud of that work that we have done.

Mrs. KELLY. Will the gentlewoman yield?

Ms. VELA ́

ZQUEZ. Sure.

Mrs. KELLY. It is my understanding, Mr. Golden, that you all

and everyone at the table is covered by federal law that requires

labeling anyway; isn’t that correct?

Mr. KLEIN. That is correct.

Mrs. KELLY. Each of you has a little bit of different type of label,

but you all have federal hazardous warning labels from one or another of the federal agencies; is that not correct?

Ms. SKOMMESA. Yes.

Mrs. KELLY. And the problem here is that Proposition 65 is actually adding to this problem and making you pray to the troll under

the bridge.

Ms. SKOMMESA. It would be okay if it was consistent. I think the

problem with what Mr. Golden was trying to say is that he has one

label requirement as the result of all of his research and the toxicology reports. The Proposition 65 warning is absolutely in conflict.

He would lose credibility using two opposite warnings with his customers. They would wonder if he was sane or not.

If you left off the original warning and put the Proposition 65,

he would not be telling his customers the truth, and that is the

problem.

Ms. VELA ́

ZQUEZ. The issue is that if the label that they are putting in their product lists any carcinogens that are covered under

Proposition 65.

Ms. SKOMMESA. And we are very willing to label for those things.

Mr. STRAUSS. I would just like to mention here that it is very

hard to be found completely free of any toxicity in 49 states plus

six continents in the world, except California, and I do not see how

one could label safe and free in California and six—excuse me—not

safe in California, but safe everywhere else in the world. That is

my problem.

26

Mrs. KELLY. We have been called for a vote, and I want to give

Mrs. Napolitano and my colleagues here a chance to have a full

time of questioning. So I am going to adjourn for the time of the

vote. We will be back. I beg your indulgence in staying with us for

a bit.

Thank you.

[Recess.]

Chairman TALENT. If the witnesses would take their seats, I recognize it is Mrs. Napolitano’s time, and I will recognize her. In the

interest of time though I think I will go ahead with some of my

questions.

And I apologize to the panel for having to leave. I had a speaking

engagement over noon that I could not get out of, but I am back

now to stay.

And let me as a question just to clarify some points, and I

thought your testimony was excellent. I read it all, even that that

I was not here for.

Just a factual question here, Mr. Strauss. The sand, the Scenic

Sand, now, you mentioned that it had crystalline silica in it, and

that that is sand, right?

Mr. STRAUSS. Sand is crystalline silica, sir. It is the sand that

is on every beach in the world.

Chairman TALENT. See, I had assumed when I read your testimony that it was the coloring that you did that was the carcinogen.

Mr. STRAUSS. No, sir. The coloring is completely safe. It is a

baked on process where we take a granule of sand and coat it with

the color, and the color is completely safe. It is no problem.

Chairman TALENT. So that is not an issue.

Mr. STRAUSS. No, the color is no issue whatsoever.

Chairman TALENT. If you were just sending sand into California,

you would have to label it.

Mr. STRAUSS. Then it would be an issue, and we gratefully accept

that. Yes, sir.

Chairman TALENT. How does sand cause cancer?

Mr. STRAUSS. Sand, if you beat it up enough, it causes dust.

Chairman TALENT. Oh, and the dust.

Mr. STRAUSS. The dust gets in your lungs, and it is a carcinogen.

We have never said anything against that. The fact that it is completely coated and the fact that it is minuscule amounts, as I said,

to do what we are doing, it is once a day for 21 years would give

you one percent of the threshold that California says is the amount

of sand that you can use and which has tested out innumerable

times by very conservative toxicologists.

Chairman TALENT. Yes, and I’m asking this to satisfy my curiosity because, I mean, the point of the hearing is the abuse of the

remedial aspects of Proposition 65, although it does point out an

interesting thing. I mean, if you’re labeling sand the same way you

would label something that really is toxic with the same kind of

label, then the issue is how is the consumer to know whether it is

as hazardous as sand, which I do not think the average person

would be very concerned about, or as hazardous as something that

really is toxic, and yet you would use the same label, wouldn’t you?

Mr. STRAUSS. I do not have to label my sand as toxic, sir. That

is——

27

Chairman TALENT. ‘‘Toxic’’ is the wrong word. You don’t have to

have a Proposition 65 label in it?

Mr. STRAUSS. No, I do not have a Proposition 65 label on it. All

it says is that it is a nontoxic product that meets ASTM 4236 and

meets all the LHAMA requirements, and that there is no toxicity

whatsoever with the product that I sell.

Chairman TALENT. I am sorry. You been sued by somebody

claiming that you should have labeled it.

Mr. STRAUSS. That is correct, sir.

Chairman TALENT. I understand.

Mr. STRAUSS. And we will not accept that.

Chairman TALENT. Now, let me just bring out another issue here.

The Proposition 65 exempts manufacturers or, I guess, businesses

with under ten employees; is that correct?

Mr. STRAUSS. That is what we have been told.

Chairman TALENT. You have been told that. I think that is correct.

Mr. STRAUSS. That is what we have read. We have not been told.

Chairman TALENT. But if the business with under ten employees

sells to a distributor, let’s say, that has more than ten employees,

the distributor could still be liable; is that right?

Mr. STRAUSS. Absolutely.

Chairman TALENT. Okay.

Ms. LAMURA. No, it does not exempt you from the law, from the

labeling. It exempts you only from the penalty phase. So if you are

selling the product, you still have to do the labeling requirements,

but if you are caught not doing it, they cannot give you a penalty.

Chairman TALENT. They cannot give you the penalty.

Ms. LAMURA. Right.

Chairman TALENT. They can order you to change though.

Ms. LAMURA. But you still are supposed to follow the labeling requirements, as far as I know, yes.

Mr. STRAUSS. Well, if I had less than ten people, sir, and I sold

to a Wal-Mart, Wal-Mart would be liable for any penalty they

might have, and Wal-Mart would immediately assess us the money

that they give up, and it would immediately put us out of business.

Chairman TALENT. Right. That is the point I was making, that

the people who would be liable go back against you.

Mr. STRAUSS. Very definitely. To stay in business we would have

to do it.

Chairman TALENT. Mr. Golden, do you think, is there any way

to avoid this by not marketing in California? I mean, you lose the

market if you do not market in California, but is that an option for

you?

Mr. GOLDEN. To tell you the truth, we have had to look at the

possibility of not marketing the product in California, going

through routes of distribution. It is unlikely that we are going to

come up with that kind of solution just because of the risk of product still entering into the market.

Chairman TALENT. Yes, but if it still gets into the California

market, something you sell to somebody in New Jersey or something gets into California, you are still liable?

Mr. GOLDEN. We are still liable and still at risk, yes.

28

Chairman TALENT. Well, I will ask the experts about that, too,

later on.

I appreciate your testimony. I am trying to keep this open for

Mrs. Napolitano if she gets here. Is there anything any of you

would like to add before we go—yes.

Ms. SKOMMESA. As a resident of California, you asked a very

good question about the confusion to consumers. There are Proposition 65 warnings all over the place. They are at the gas stations.

They are at the grocery stores. They are in every restaurant, and

the consumers are becoming very anaesthetized to the warnings because when they look at one thing that they do not believe to be

toxic, then they just assume all of the rest of them are inaccurate.

It is an over warning situation.

We have even been threatened to be sued for over warning, and

so one of the big issues is we just have to have harmony between

the federal requirement and the states. What would you like us to

do?

If we could get some definition as to determining the toxicity

level so that manufacturers can be on the same page.

Chairman TALENT. Right. You know, one of the reasons I called

this hearing focusing on the process by which this law is enforced

is that my experience here, certainly since I began chairing the

Committee, is that if we are careful in how you enforce something

and you have clear standards, it does away with a lot of the other

problems that you might have.

In other words, even if the standard is a little too strong or whatever, if it is clear and people know what it is, they can usually find

some way to adjust around it, and if you have a penalty that is reasonably proportionate to the offense and a reasonably inexpensive

way of determining whether you have done something wrong, then

you can deal with this sort of thing a lot better.

And then you could have your standards without having injustice

as you all have been subjected to.

Well, let me ask you another question. Several of you have

fought these lawsuits even though it cost you a lot more money

than it would to just pay it. Why?

Ms. SKOMMESA. Well, I think it goes back to what America

stands for. I mean, America stands for fighting injustices, and here

you have companies up here represented that spend management

time and have visions and values for the consumer, and you have

a few, a handful of people that have found opportunity in extorting

money out of industry.

Out of a sense of fairness and this has got to stop, we are sure

that our specific case has the merits to be able to be the vehicle

to stop it from now going forward.

Chairman TALENT. Mr. Klein, do you want to add anything? You

raised your hand. Nobody has ever done that before, by the way,

raised their hand.

Mr. KLEIN. I guess there is a Biblical statement of ‘‘if not me,

who?‘‘ And I agreed with her. It just seems that when you think

something is wrong, you ought to stand up for it.

And of course, it gets to the point when you become a coward and

throw in the towel like I did, but you know, there are certain ecoVerDate 11-MAY-2000 09:04 Oct 16, 2000 Jkt 010199 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 E:\HEARINGS\61647A.XXX pfrm01 PsN: 61647A
29

nomic considerations. You just get to the point where you feel like

you are fighting city hall.

Chairman TALENT. Yes.

Mr. KLEIN. But if the citizens do not fight what they consider injustices, who is going to do it?

Chairman TALENT. Mr. Strauss?

Mr. STRAUSS. I have not gotten to the point where I have made

the decision yet that it is too expensive, putting too much of my

employees and my family in jeopardy and losing employees, but

perhaps I am one of the last angry men.

But I do feel that it is our right as a citizen and our responsibility as a citizen to stand up and see how people are taking advantage of other people and to fight it. You know, it is patently what

is wrong what is happening out there.

We are not against Proposition 65. I am definitely aware of the

problems with toxicity, having been active in the chemical business

since 1955, but when someone is doing something wrong, you have

to stand up and shout, and if we have to put your money with the

shouting, that is what we are going to do right now.

Chairman TALENT. Well, I thank you all. I wanted you to say

that, in part, because I am trying to get across to people here and

people in agencies and people in charge of enforcing these laws

that the small business people generally, in particular, take as

much pride in what they do and in their enterprises as the government people do in the sense of mission they have in enforcing their

laws.

And people do not like to be accused of doing something wrong

when they do not feel they have done something wrong, and that

happens a lot. It is kind of demoralizing when you feel like you

have not done anything wrong, and yet your own government is out

to get you, and I have encountered that a lot in small business people.

And I appreciate your coming by. I really hate to keep the second

panel waiting. They have been very, very patient, and they are

very distinguished people. So I will just thank you all for coming

and excuse you, and then ask the second panel to come up.

Ms. SKOMMESA. Thank you very much.

Chairman TALENT. Thank you.

We will hold the record open without objection for ten days after

the hearing so that members who wish to submit written questions

to any of these or the other witnesses can do so.

And I will ask the second panel to come forward.

I thank all of you for your patience, and some of you for coming

a very long way for this. In particular, Ann Brown, our first witness, who is the Chair of the Consumer Product Safety Commission, I want to thank you, very distinguished Chairwoman, for your

patience.

Ms. Brown has been on the Consumer Product Safety Commission since March of 1994. How long have you been the Chairman?

Ms. BROWN. Five years.

Chairman TALENT. Five years, and you were chairman ever since

you were nominated.

Ms. BROWN. Yes, sir.

30

Chairman TALENT. Well, thank you, ma’am. I appreciate you for

being here.

STATEMENT OF ANN BROWN, CHAIRWOMAN, CONSUMER

PRODUCT SAFETY COMMISSION ACCOMPANIED BY JEFFREY

S. BROMME, ESQ., GENERAL COUNSEL, CONSUMER PRODUCT SAFETY COMMISSION

Ms. BROWN. Thank you. I am glad to be here.

Chairman TALENT. We will be glad to hear your statement.

Ms. BROWN. Mr. Chairman and members of the Committee, as

you know, I am Ann Brown, and I am Chairman of the U.S. Consumer Product Safety Commission.

Since this is my first appearance before your Committee, I want

to begin with a brief summary of who we are, what we do, and how

we work with small business.

The Commission was created in 1972, as a five, now three member independent agency with a mission to protect the public

against unreasonable risk of injury or death from consumer products.

We enforce five federal statutes: the Consumer Product Safety

Act, the Flammable Fabrics Act, the Poison Prevention Packaging

Act, the Hazardous Substances Act, and the Refrigerator Safety

Act.

All told, we have jurisdiction over 15,000 different types of consumer products which are found in and around the house. Our task

is to prevent unintentional injuries and death to your family and

damage to your homes.

Our mission is strictly nonpartisan. Our job is to help you safeguard your children, families and possessions to make your home

a safe haven.

From my first day at the Commission, I have been especially sensitive to the interests and needs of small business for I am the

daughter of a small businessman in Washington, D.C. My father

owned a ladies clothing store, and I did my homework after school

in the back fitting rooms. So you see, I am familiar with the problems of small business, having been raised as the daughter of a

small businessman.

My views of the business and the consumer were shaped at that

store. My father, in fact, both my father and my mother who

worked at the store, taught me that respect for the consumer is the

basis of a good business relationship.

With this background, I have directed our staff to recognize and

respond to small business in all of our activities. For example, implementing the Small Business Regulatory Enforcement Fairness

Act, I appointed a small business ombudsman and established a

small business enforcement policy. At last count, our ombudsman

had responded to almost 2,000 questions and comments from the

small business community. Over 80 percent of the callers to the

ombudsman received a personal response to their inquiry within

three business days.

Our Web site provides a specific small business guide to the

Commission. It describes the Commission, the laws we enforce, the

ways we can help small business, and where a small business can

obtain additional information concerning the CPSC.

31

I have made a special effort to reach out to the small business

community. In June 1996, we had a small business conference in

New York City to assist more than 130 small businesses in their

efforts to comply with our laws and regulations.

Furthermore, in cooperation with the International Consumer

Product Health and Safety Organization, we provide educational

seminars on product safety issues to small business owners three

times a year at various locations across the country.

I believe it is important to recognize advances in product safety

by small businesses. I have presented special Chairmen’s commendation award to three small businesses for their safety, successful safety innovations.

Our efforts on behalf of small business have been commended by

the Fairness Boards and the national ombudsman of the Small

Business Administration. Our Commission was cited in the 1999

national ombudsman report in its description of the best practices.

Thus, Mr. Chairman, and members of the Committee, as you can

see, small business is a prime concern at the CPSC. We devote substantial energy and resources to this concern. We are proud of our

record of helping small business.

The issue before you today, the possible preemption of California

Proposition 65 by Section 18 of the Hazardous Substances Act, is

a complex and technical legal issue. Its origins predate my coming

to the Commission.

Accordingly, since I am not a lawyer, I have asked our General

Counsel, Jeff Bromme, to prepare the Commission’s written testimony on this subject and to respond to any questions that you may

have on this particular topic.

For now, I will simply repeat what I wrote Chairman Talent on

June 2nd, 1999. Since both the federal and California courts have

rejected the view that the Hazardous Substances Act preempts

Proposition 65, the Commission’s position is that it is not prudent

to spend more of our time and resources on this particular issue.

Furthermore, our staff has advised me that in the 13 years Proposition 65 has been in effect, the California law has not interfered

with our enforcement of the Hazardous Substances Act.

Thus, it does not appear that there is either a legal or factual

basis for the Commission to act to preempt the state law.

Finally, under our federal system, it is appropriate for the Commission to respect the health and safety laws of the states. I just

will add that, of course, having heard the rather heart rending testimony, that it does appear that the State of California, its voters

and legislators will have to do something to aid the very sad situations that we typically have heard about today.

This concludes my oral statement.

[Ms. Brown’s statement may be found in the appendix.]

Chairman TALENT. Thank you, Ms. Brown.

Our next witness is Ed Weil, who is the Deputy Attorney General of California in charge of Proposition 65 enforcement, I understand.

Mr. Weil.

32

STATEMENT OF ED WEIL, ESQ., CALIFORNIA DEPUTY

ATTORNEY GENERAL

Mr. WEIL. Thank you, Mr. Chairman and honorable members of

the Committee.

My name is Edward Weil, and I am Deputy Attorney General for

the State of California, and I have enforced and defended Proposition 65 since it took effect in 1988 under three different Attorneys

General.

On behalf of California’s chief law officer, Bill Lockyer, I appreciate the opportunity to testify before the Committee today.

For consumer products, the use of warnings rather than government set content standards has created a market incentive to reformulate products in order to reduce the use of toxic chemicals without driving needed products out of the market and without awaiting years long product-by-product standard setting.

In many instances, we have found that Proposition 65 has filled

gaps in regulatory networks. It also has prodded the federal government into action on many occasions. Whether the issue is lead

in plumbing products, trichloroethylene in typewriter correction

fluids, or lead in ceramic dishes, Proposition 65 has enabled California to act on levels of toxic chemicals in consumer products that

could not be defended as acceptable, safe products, but merely had

fallen through gaps in the federal regulatory system.

Moreover, this has been accomplished without establishing a

large bureaucracy or voluminous technical regulations. It not only

is the right of states to enact such laws to protect the health and

safety of their citizens, but any federal action to prevent states

from doing so ultimately would reduce the level of protection provided to the consuming public.

Let me provide two short examples. One, typewriter correction

fluids. These products, such as White-out and Liquid Paper, were

found to result in exposures to average users of several hundred

times the no significant risk limit of trichloroethylene, a known

carcinogen. That product was subject to regulation by the Consumer Product Safety Commission, but in fact had not been so regulated.

After the state and the Environmental Defense Fund took action,

the companies changed solvents to a less toxic material, and at

that point actually began to advertise the product as new and improved.

And I would add that the product as made by many companies

specifically said on it ‘‘nontoxic.‘‘

Another example would be mini-blinds. In 1996, the Arizona and

North Carolina state health departments found that plastic miniblinds made with lead as an intended constituent, not a trace contaminant, disintegrated over time forming a lead dust on the surface of the blind which could be spread throughout a household and

ingested by children.

The health departments linked these blinds to numerous cases of

acute lead poisoning in children. The Consumer Product Safety

Commission negotiated a voluntary agreement with industry under

which the blinds would be changed to eliminate added lead, and we

applaud them for doing that.

33

However, under that agreement, the retailers and manufacturers

were permitted to sell off all existing stock. In California, because

of Proposition 65, we immediately demanded that warnings be

posted at the point of sale in California only, advising consumers

of this potential hazard.

That resulted either in the warnings being provided or the retailers thinking of their customer, deciding that they would not continue to sell the old blinds and selling only new, lead free blinds.

In the other states in the union, consumers unwittingly continued to purchase those products, where they hang in people’s homes

today and will continue to hang in people’s homes for several years.

Unfortunately——

Chairman TALENT. Can I ask you a question to clarify for me?

Mr. WEIL. Certainly.

Chairman TALENT. Several examples you have in your statement. You mention that public or private actions were brought.

Just to clarify it for me, public actions are brought by the Attorney

General’s Office? When you say ‘‘public actions,’’ you mean actions

you took?

Mr. WEIL. We mean the Attorney General’s Office or our local

District Attorney.

Chairman TALENT. They also have the authority. Do they bring

many?

Mr. WEIL. They typically do not bring very many, but they do

have the authority, and they tend to focus more on local issues,

such as factory air emissions.

Chairman TALENT. So when we read about a public action being

taken, it is probably the Attorney General’s Office?

Mr. WEIL. Yes.

Chairman TALENT. Okay.

Mr. WEIL. However, we have taken a number of actions in concert with a number of very responsible and effective environmental

groups, such as Environmental Defense Fund, Natural Resources

Defense Council, who are not the people that were being spoken

about earlier today.

Unfortunately, however, a few plaintiffs’ law firms, one in particular that I seem to be hearing a lot about this morning, have

used Proposition 65 to bring cases of questionable significance

against small, out of state businesses that may not have been

aware of Proposition 65 requirements.

Of course, the great benefits of Proposition 65 clearly outweigh

these problems, but we nonetheless are addressing them in several

ways. First, we heard about the ten employee exemption problem.

All companies with less than ten employees are totally exempt, and

since we heard of those examples, a regulation has now been in effect for at least two years that requires every private citizen that

gives a notice of violation to a company to send out a state written

summary of the law, which includes all the available exemptions,

specifically including that any company with less than ten employees is exempt from the law, so that no——

Chairman TALENT. Clarify that. They are exempt entirely from

the law or just from certain remedial actions?

34

Mr. WEIL. They are exempt entirely from the law. If they have

an indemnity agreement with somebody, that is a matter of private

contract which we can do nothing about.

Chairman TALENT. But it is not a situation where they are exempt from penalties, but not injunctive relief or anything like that?

Mr. WEIL. They are totally exempt.

Chairman TALENT. Okay.

Mr. WEIL. In addition, in a number of cases involving nail polish,

lead wine bottle caps and crystalline silica, the Attorney General

has effectively taken over particular matters to assure that they

are handled properly.

In these instances, the Attorney General’s action has resulted in

a fair, uniform resolution of the legal and public health issues.

Chairman TALENT. And describe for the record. I am doing this

to make sure the record contains no gaps on how this thing is enforced.

So when you say you take over, tell us how you do that.

Mr. WEIL. Well, if we sue within 60 days of receiving the notice,

which is also served on the Attorney General, as well as the private

company, then the private party is not permitted to sue under

Proposition 65. They may file some sort of parallel unfair business

practice action, but the courts have been very uniform in California

about saying that once the Attorney General is involved, he basically will direct the litigation.

And, for example, on the crystalline silica in the products, we

have taken over the crystalline silica lawsuits, and we are handling

it in a way that will make sure that the products that are involved

in generating large amounts of cement dust, which does indeed

cause numerous cases of cancer, will have warnings, and the kiddy

play sand will not.

And when the toxicological evidence bears out that it is .1 of one

percent of the level requiring a warning, we will do our best to

make sure that the product does not have a warning because we

agree. Once everything has a warning, effectively nothing has a

warning.

Second, by filing amicus curiae briefs in certain cases, the Attorney General has helped assure that the courts reach a result on

important issues consistent with the requirements of the law. One

example alluded to today, not mentioned in my written statement,

is this issue about being sued twice for the same violations.

The Court of Appeals in California ruled that that was not permissible, and they did so largely in reliance on a brief filed by the

Attorney General in that case.

Finally, a recent statutory amendment to Proposition 65, supported by Attorney General Lockyer, will require private parties to

report to the Attorney General on the events of their cases, as well

as the terms of the settlements.

In turn, the Attorney General will be required to make that information available to the public. We think this change in the law

has great potential to further the purpose of the law by allowing

responsible private enforcers to continue unimpeded, while providing information to the public and the attorney general needed

to detect any abusive practices.

35

I would add that I think Mr. Chanler should be viewed as sui

generis to some degree. His former client, As You Sow, has, indeed,

ended up suing him over his practices conducted in their name.

Most of the suits are against large companies, not against the

small businesses, and I must add as much as I sympathize with

much of what I heard today, and we are doing everything in our

power to cut back on these abuses, if you are a consumer and a

product is potentially dangerous, it is not less dangerous to you because it was made by a small company. We need to have a level

playing field in that respect, and certainly we feel that at the state

level the Attorney General and the California government will do

everything we can and is open to anyone’s suggestions on limiting

the abusive practices and keeping the very many good things.

Thank you, Mr. Chairman.

[Mr. Weil’s statement may be found in the appendix.]

Chairman TALENT. I appreciate your coming here.

I think you probably know the statute better than just about

anybody, and the Committee really appreciates your expertise.

Mr. WEIL. Well, and I have not been called a troll so far today,

too. [Laughter.]

Chairman TALENT. Of course, there is still time. [Laughter.]

Our next witness is—oh, I am sorry. The gentle lady from New

York has to leave and wanted to ask some questions. So I will be

happy to recognize her.

Ms. VELA ́ZQUEZ. Thank you, Mr. Chairman.

Ms. Brown, it appears from your testimony that the Consumer

Product Safety Commission has gone out of its way to reach out to

the small business community. With your broad responsibility of

15,000 types of consumer products and the almost 2,000 questions

and comments from the small business community, have many individual business raised Proposition 65 as a specific issue?

Ms. BROWN. We have not been petitioned by any small businesses, and we have not had many communications by small businesses to the Consumer Product Safety Commission. I think the

problem lies in the State of California. We do not have experience

with Proposition 65.

Ms. VELA ́ZQUEZ. Ms. Brown, there has been some discussion

about changing FHSA to include in its labeling definition——

Ms. BROWN. Changing what?

Ms. VELA ́ZQUEZ. FHSA.

Ms. BROWN. Oh, FHSA. FHSA, yes. We are full of initials in

Washington. You know how it is.

Ms. VELA ́ZQUEZ. To include in its labeling definition similar to

those found in Proposition 65. Today has anyone petitioned you to

do this?

Ms. BROWN. No.

Ms. VELA ́ZQUEZ. Can you think of a time during your tenure

when you believe it was necessary to interfere with state safety efforts? And could you tell us some of these state efforts?

Ms. BROWN. No, the Commission has had no reason to interfere

with state safety efforts since I have been at the Commission, none

that I know about before. In fact, we work closely with the states.

They really are our eyes and ears.

36

We have a network of 54 state delegates in all of the states and

Puerto Rico, Virgin Islands, D.C., and Guam who participated in

our recall roundup campaign to get recalled products out of people’s

homes. We get some of our data from the states, especially from

the coroners who give us our death data. State commissioned officials conduct investigations for us, and they distribute product

safety information. They notify CPSC of potential hazards, and

from time to time the CPSC drafts model legislation for states to

consider enacting.

So actually we have a good, cooperative working relationship

with the states in order to enhance health and safety.

Ms. VELA ́ZQUEZ. Thank you, Ms. Brown.

Mr. Weil.

Mr. WEIL. Yes.

Ms. VELA ́

ZQUEZ. In enforcing Proposition 65, does your office

hear a complaint that smaller, out of state businesses were unfairly

surprised by Proposition 65?

Mr. WEIL. We do hear that complaint, and what we have tried

to do to address is it I speak constantly to very good trade associations, such as the National Paint and Coatings Association, which

in turn give information to their members about how to comply.

As I said, the 60-day notices now include a summary of the law.

We also make it clear that, as in many of the cases that were

described to me, where we think companies have very little liability, and in the case of the missing comma and so forth, I do not

know any California judge that is going to impose a substantial

penalty for something like that.

The problem is more the generic problem we have in this country

that litigation costs a lot, and it is not any different than when

somebody shows up saying they slipped and fell in your company

parking lot and they want a settlement.

Ms. VELA ́ZQUEZ. Mr. Weil, we have heard allegations of frivolous

lawsuits, and the person’s name—and we heard the testimony of

the small businesses that have been impacted by this type of lawsuits. How can we correct such a loophole in the law that prevents

people like him to just bring about frivolous lawsuits?

Mr. WEIL. Well, it is a combination of things that we are trying.

I think the new change in the law that will give us the ability to

pinpoint what someone like Mr. Chanler would be doing and see

when he is collecting small amounts of money from large numbers

of small companies will help us identify practices like that and determine which cases would be appropriate for us to get involved in.

Also, I think just sunshine will help. It turned out after the fact

it was discovered that Mr. Chanler was collecting most of this

money simply as attorney’s fees for his own office, not even for the

State of California, and now under the law as changed, we will

know that as it is happening and would be able to go into a court

and explain that we think an abuse is taking place here.

So that is one of the things that I think we can do.

The other problem is the word ‘‘frivolous’’ is tossed around a lot,

and frequently what happens is that the case is not frivolous per

se. There is, in fact, a violation. It is a matter of the appropriate

sanction and the cost of getting to the just result in the end.

37

Many of these companies did, in fact, have at least some kind of

minor violation about which we might send them a letter saying,

‘‘You should correct this practice.’’ But you do occasionally have a

private plaintiff who does not look at it that way, but most of the

private plaintiffs I do not believe are like that, and so we have to

be careful not to do anything that damages the ability to enforce

the law in the right cases.

Ms. VELA ́ZQUEZ. My last question is when a case is settled out

of court, how does the state benefit from that. In terms of the settlement, is there any participation by the state?

Mr. WEIL. Well, under the law as previously written, we would

not know that such a settlement took place. Now, when civil penalties are collected, the state gets 75 percent of those penalties, and

now under the law as changed, any settlement will be reported to

the state.

So if someone is out there entering into settlements that do not

benefit the state because they are just collecting attorney’s fees for

themselves, that will be brought to our attention and to the public’s

attention so that we can act on it.

Chairman TALENT. Thank you.

And again, to clarify, the way that might be done, I suppose, is

to attach a pendent claim to the Proposition 65 claim and then settle on the pendent claim, and then you could just keep it all,

couldn’t you? You would not have to do anything to the state.

Mr. WEIL. Well, I have found that there is a lot of creativity out

there.

Chairman TALENT. Yes.

Mr. WEIL. But under the new law, we will get all of the settlements that raised Proposition 65 claims, and so we will be able,

hopefully to be able to keep up with the creative forces out there.

Chairman TALENT. Now, what remedy do you have if, you know,

through this new law you hear a report that something like this

is happening? What can you do?

Mr. WEIL. Well, we have always felt that under existing law we

could go to any court and ask that any settlement that it had entered be vacated as inconsistent with public policy.

Now, I have to tell you, Mr. Chairman, that the Attorney General is primarily a prosecutor.

Chairman TALENT. Sure.

Mr. WEIL. And we try to spend most of our time prosecuting meritorious cases, and I have, indeed, been contacted quite personally

by some of the people who have been here today, and it is just not

always possible for us to intervene in their individual matter.

Chairman TALENT. I hear you.

All right. Our next witness is Mr. Shawn Khorrami of Van Nuys,

California, an attorney who specializes, among other things, in

Proposition 65 cases.

Mr. Khorrami.

STATEMENT OF SHAWN KHORRAMI, ESQ., VAN NUYS, CA

Mr. KHORRAMI. Thank you, Mr. Chairman.

Actually Mr. Weil went over many of the comments I wanted to

make, but one thing that I noticed that came up——

38

Chairman TALENT. Well, that was rude of him, but it happens

here, Mr. Khorrami, you know. You can feel free to drive the points

home again if you want to. I mean, I think they are important

points. So you have come a long way. So be certain and say what

you want to say.

Mr. KHORRAMI. Well, one thing that came up with the first panel,

and it seems to be the biggest concern that is raised, is the cost

that the defendants incur once one of these lawsuits is brought.

To begin with, I think that Proposition 65 is much kinder to the

small businesses than other statutes. One of the reasons is that it

basically exempts a very large percentage of small businesses, and

with the implementation of this new regulation, which is where we

could address problems that could come up, with the implementation of the new notice regulations, we have essentially taken care

of many of the horror stories you hear from small businesses.

Another thing that I have noticed in my experience and with my

clients, and I have a pretty diverse group of clients, is that, almost

always, from the outset my clients have on the table an offer to reformulate the product in exchange for a waiver of either all or a

significant portion of the cost and the penalties.

That is something that I have noticed pretty much across the

board in these cases with private enforcers. That is not to say that

there are not exceptions to this, but from what I know in my experience, that is what I have seen.

And invariably in almost every case, what you hear from the defendants is that reformulation as a way of compliance is either financially infeasible, technologically infeasible, or unduly burdensome. And equally often you will see defendants, as you go on in

the lawsuit, come to you and settle with a reformulation clause in

the settlement agreement and actually reformulate the product

within a reasonable time.

Now, to the extent that this offer is open, the low cost offer is

open to the defendant from the very outset. The refusal to take

that offer is what drives the cost of these lawsuits because the defendant has to then expend money doing discovery; the defendant

has to expend money getting experts, and the plaintiff has to do

the same. It is just as costly for the plaintiff if the plaintiff is actually litigating these cases.

So the cost is essentially driven by the refusal to take a settlement and reformulate a product that they can do from the beginning, in my experience, from the beginning anyway. And so to the

extent that they complain about having to pay attorney’s fees and/

or penalties, it really is something that could be avoided by taking

the easier route out at the beginning and going into the reformulation settlement.

One thing that was brought up by the lady that was sitting over

here testifying earlier on the panel was that, against the advice of

her attorney, she turned down a $5,000 offer and the case turned

out to be a $68,000 case.

I am not talking as to the merits of that case, but in cases that

I feel are meritorious, what I see is that exact attitude. That, no,

I am just not going to settle this case for any cost, and we will just

go on litigating the case.

39

That happens quite often, and the defendants will take any action they need to take in order to move the lawsuit forward.

Now, another——

Chairman TALENT. Let me ask you a question.

You know, Grace, you and I are the only ones left here, and if

you have something you would like to jump in and ask, go ahead

and do it, although I’m not going to go on at great length, but just

to clarify.

The point usually at issue in these cases is whether the amount

of the carcinogen is adequate to create some real risk under the

statute, isn’t it? Because the easy thing is to determine whether it

contains the chemical that is on the list. I am clarifying. The hard

thing is determining whether it is present or the exposure is

enough to make it a health hazard. That is the hard thing, isn’t

it, in most of these cases?

Mr. KHORRAMI. In most of these cases, I would not necessarily

say it is the hard thing. It is what is at issue.

Chairman TALENT. It is what is at issue, right.

Mr. KHORRAMI. There is not a dispute as to the existence of the

chemical.

Chairman TALENT. Right. Okay. Go ahead.

Mrs. NAPOLITANO. Could it be the labeling issue rather than a

content issue?

Mr. KHORRAMI. I would need a little bit of clarification.

Mrs. NAPOLITANO. Well, in the cases that you might want to take

on, is it a matter of the actual content violation or is it a matter

of the label violation, Proposition 65?

Mr. KHORRAMI. As I understand your question, in general I do

not recall a case where—well, actually in general what I would say

is that we do not take on cases where there is actually a warning

being given and we have a problem with the content. There are situations where we have taken on a case such as that.

Mr. WEIL. If I may, I think it might help answer the Congresswoman’s question that there are situations in which there is a lot

of dispute about whether the chemical is present at a level that requires a warning.

Mrs. NAPOLITANO. Right.

Mr. WEIL. And it is resolved simply by placing the appropriate

labeling on the product, and that is done when it is within reason.

I think it makes a lot of sense because in toxicology I can tell you

you have cases where you can bring in the battling toxicologists for

years to argue about it, and at some point our philosophy, as expressed by the voters in California, is if you know the chemical is

there and you know that it causes cancer and it cannot be proven

that it is at the safe level, then tell me before I spend my money

on that product and bring it into my home.

Mrs. NAPOLITANO. Thank you.

Chairman TALENT. Go ahead.

Mr. KHORRAMI. Essentially, what happens is that usually when

you get a company that comes in and reformulates, other companies will follow. That necessarily is one of the advantages that

Proposition 65 brings.

By providing the incentive for reformulation, Proposition 65 essentially creates a market for better, safer products. It has been

40

much more effective than many of the federal statutes and other

state statutes that are out there in actually bringing about change

in the products.

We would rather have safer products than just warnings on

these products. Where we cannot get the safer products, then we

would rather know.

But Proposition 65 has been very effective at creating this market. I have said it in my written testimony. I have given multiple

examples of creating a market for the better, safer product. To a

certain extent what you get from smaller companies is that they

cannot keep up with the market.

I would suggest that that is not so much a problem with Proposition 65 as it is with the marketplace. That’s an unfortunate consequence of how our system works.

In terms of the abuses that may go on, I find, generally, that

whenever we send out a 60-day notice, the Attorney General’s Office is extremely active in investigating it. I do not recall any of the

notices that we have sent, and we have sent individual notices, but

whenever we have sent notices, I do not recall any situation where

I have not received a call or I have not felt like the Attorney General has actually looked at my case. They may not take the case.

But I believe that that is more a consequence of not having the resources for handling absolutely every meritorious case.

But they do investigate. They do keep in touch with the plaintiff;

they do keep in touch with us as we are progressing through our

case. And I think in this statute, in particular, there is much less

of a potential for abuse because of the Attorney General’s presence,

particularly with this new amendment where the Attorney General

is going to be kept informed as to most of the actions taken in the

cases.

Mrs. NAPOLITANO. Has that new law been chaptered?

Mr. WEIL. That law has been chaptered and signed. It passed, I

believe, with only one negative vote in each house of the legislature, and it will take effect January 1st.

Mr. KHORRAMI. And what we have essentially heard about today

is a single enforcer and some practices that may be questionable.

I think to the extent that those are abusive practices, states have

the power. We have professional codes of conduct; we have the

state Bar; and we have the courts that would sanction those types

of conduct, those types of behavior in handling cases.

Mrs. NAPOLITANO. The only problem, small business does not

have the adequate manpower or the wherewithal to find out who

does it and how they can join forces in being able to take care of

this kind of a problem, and that to me is onerous on the part of

the attorneys who are, in essence, the ambulance chasers.

Mr. KHORRAMI. I agree with you on that point. However, in my

experience, small businesses are not typically singled out in these

cases. Most of the cases I have handled where small businesses

have been involved are cases that involve large companies, and

they may be in a group. The small companies are also included in

the group.

In those situations, usually the larger companies take the lead

role. They have the resources. The costs that dwindle down to the

41

smaller companies are minuscule because it is the large corporations that are driving the entire litigation.

Chairman TALENT. Anything further, Mr. Khorrami, that you

have to add? We will have some more questions later.

Mr. KHORRAMI. No.

[Mr. Khorrami’s statement may be found in the appendix.]

Chairman TALENT. Okay. Our next witness, Mr. Jeffrey

Margulies of Santa Monica, California, an attorney with—how do

you pronounce your firm? Haight, Brown?

Mr. MARGULIES. Haight, Brown & Bonesteel.

Chairman TALENT. Okay. Who will explain why the preceding

two experts were wrong.

Mr. Margulies.

STATEMENT OF JEFFREY MARGULIES, ESQ., SANTA MONICA,

CA

Mr. MARGULIES. Well, thank you, Mr. Chairman.

I am not sure that I find myself in a whole lot of disagreement

with a lot of what has been said today.

I work with businesses, small and larger, in helping them deal

with Proposition 65 issues on both the compliance and the enforcement end. I have been doing so for about the last ten years.

I am going to talk about three points today. First of all, we have

a conflict between a nationally uniform warning system for consumer products and a different or a nonidentical state regulatory

scheme that Congress sought to avoid.

Second, you have a burden on business, and especially on small

business, which is caused by the lack of certainty that we have

heard about from so many witnesses today, and the lack of control

over private enforcement, and this burden is ultimately shouldered

by each and every one of us. We all pay for the costs incurred by

small business.

And what I think this hearing can do is lead to harmonization

of the state and federal standard, much like this Committee prodded with the OSHA work place requirements in 1997.

I am going to agree with everybody who has spoken so far today.

I have no problem with requiring warnings for toxic exposures. I

live in California. I have two young children. I do not want them

exposed to chemicals that are going to harm them, and I do not

want to be exposed to them either.

That is the goal of Proposition 65, informing consumers about

risks, reducing exposures to toxins.

I would like to commend Mr. Weil for the efforts his office has

done in bringing about a change in California. I have a lot of respect for him. We have been on the same side of some issues and

opposite sides of others.

FHSA has the same goal though. It adds important elements

that are missing in Proposition 65 because it is addressed to how

likely the risk is to actually occur, and it also tells consumers how

to avoid the risk.

One issue I want to respond to very briefly is this fewer than ten

employee exemption, and it is true that small businesses with

fewer than ten employees are exempt. I got a call three weeks ago

from such a business. It had gotten a letter from one of its distribuVerDate 11-MAY-2000 09:04 Oct 16, 2000 Jkt 010199 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 E:\HEARINGS\61647A.XXX pfrm01 PsN: 61647A
42

tors saying, ‘‘Are you in compliance with Proposition 65? And indemnify us and send us all of your labels.’’

And they called me and said, ‘‘What do we do?’’

And one of the things I found out quickly was they had three employees, and I said, ‘‘Well, send them a letter saying you are exempt and you do not have to label.’’

And they said, ‘‘Well, wait a minute. They are not going to do

business with me anymore. If I do not agree to put a label on this

product, this large distributor that does business throughout the

United States will not buy my product. I will not be able to sell

in California and many other states as well.’’

So there is a practical problem that goes along. The exemption

keeps them out of litigation, but if their distributor gets sued, they

are going to turn around and put the cost on the small business,

and again, eventually on all of us.

And I think the other point that probably most people would

agree with is that litigation is not the forum to be answering these

questions. Mr. Weil, Mr. Khorrami, all of the private enforcers,

they all have a different view on what we should be doing here,

and ultimately the reason we are having this problem is that businesses do not have any certainty. They do not have an agency with

a track record. Each of these cases is filed as an enforcement action, and you will have a judge and jury deciding these very important and very complex technical questions.

In the FHSA, Congress set out a nationally uniform plan for

communicating information and has said states cannot conflict

with this by imposing nonidentical requirements unless they comply with the FHSA’s framework for harmonizing the conflict, the

exemption process.

And the conflict is there, and Ms. Skommesa showed the Committee her label before. In order to win the Proposition 65 case, the

plaintiff had to show this label was inadequate under state law,

that the judge or jury said this warning and all of this, except for

this very small, little bit in the yellow here, is FHSA labeling, and

the answer is not good enough for us in California, and as a matter

of law, it is inadequate.

That is the conflict. That is the problem we have got here. That

is what is undermining FHSA, and that is exactly what the courts

have held, that the FHSA labeling is no good in California.

We have uncertainty that is exploited by private enforcers. Unlike the FHSA, Proposition 65 does not tell a business how to warn.

It says, well, you can do this or you can do that. FHSA says put

it on the label; say this; put it here and make it that size. Proposition 65 does not say any of that.

And in a point of sale sign, as Mr. Weil talked about, put a warning at a store, and I do not mean to suggest by any means that

the case that he and I were involved in was frivolous; it was a very

important case with important issues. But when we asked the Attorney General’s Office on this board here, ‘‘Tell us what we did not

do right in putting the signs up,’’ we got an objection that it was

burdensome and harassing for the State of California to imagine

the hundreds or thousands of ways that my client could have complied with Proposition 65, and then went on to say, ‘‘You could

43

have done this. You could have done that, and you could have done

A, B, and C,’’ and none of that is in the regs.

My clients tell me they want certainty. They want to know what

they have to do to comply, and we will not be in these lawsuits.

There is uncertainty in the risk assessment proceedings. We

have heard about the risk assessment. Show that your warning is

not required because you are below the level.

Well, how do you prove that? You have to wait until somebody

sues you and you go to court. Businesses cannot take that uncertainty, and what happens? They put warnings on. They do not get

sued.

If they are lucky enough not to get sued, they put warnings on.

They do not have the resources to fight lawsuits, whether they are

frivolous or whether they are mere technicalities that an agency or,

as Mr. Weil noted, I will send you a letter. Please fix it up and go

on.

Those things turn into big lawsuit. So we have warnings everywhere. Ms. Skommesa told you you see them in the grocery stores,

the hardware stores, the hotels, the bars, the restaurants, everywhere.

And what happens? Consumers are confused. They do not know

what the real risks are. They do not know what the unreal risks

are, and I would invite any member of the Committee to come to

California and see these signs all over the place and realize what

is going on out there.

Chairman TALENT. These are signs on the products? These are

not warning signs in the retail establishments, are they?

Mr. MARGULIES. They are both. They are both.

Ultimately, the burden has been estimated by one of the com- mentators in California having been over $325 million through the

first ten years of Proposition 65, and that is the burden of everything from the litigation. I do not know if it includes the state’s

cost of enforcing, and the cost of relabeling, and ultimately everybody in this room is paying for that, and the question is: is it necessary?

Two years ago this Committee prodded harmonization of the

OSHA work place standards and Proposition 65 and required the

state to make sure that enforcement actions and private enforcement actions were consistent with what the OSHA standard was.

What has happened? Has it dramatically reduced uncertainty?

Yes. Has it eliminated frivolous lawsuits? To the best of my knowledge, it has. Has it effectuated the goals of Proposition 65 and

OSHA? Absolutely.

And the Committee has the opportunity to harmonize FHSA and

Proposition 65.

Before I forget I actually did bring a quote from Cliff Chanler for

everybody to read. It was in a court in the same case as the other

board we have put up, and Mr. Chanler on the record in a hearing

told the judge, ‘‘No one who knows anything about business would

go into this public interest field. If there is no economic incentive,

people like me would not be doing this.’’

Well, it is not just Cliff Chanler. The opportunity is there for

anybody to take advantage of the uncertainty and the risks that

business face, and as good a job as Mr. Weil is doing, he cannot

44

stop people from doing this, and I urge this Committee to take the

chance to direct CPSC to start the process to end the abuse.

Thank you.

[Mr. Margulies’ statement may be found in the appendix.]

Chairman TALENT. Yes, we invited Mr. Chanler, by the way. He

did not want to come.

Ms. Brown, let me ask you a couple of questions because as I understand the substance of your testimony, it is basically that the

courts have held that the federal law does not preempt this and

that, therefore, you just do not really have any authority to get involved. Is that basically it?

And if you want to defer to Mr. Bromme, that is fine, your counsel.

Do you want to state your name for the record?

Mr. BROMME. My name is Jeff Bromme, Mr. Chairman. I am the

General Counsel at the Commission.

Chairman TALENT. Okay.

Mr. BROMME. And I think you have accurately summarized the

written testimony of the Commission.

Chairman TALENT. Now, let me explore a way that you might do

this if you wanted to do it, and I guess the point I am driving at

here—I do not usually conceal the points I am driving at from witnesses, particularly smart lawyers, because they figure it out anyway—is that I think you maybe do have the authority if you want

to use.

I can understand why you would not want to get involved in this

thicket, but you do have the authority by regulation to define what

labeling is, don’t you, under the FHSA?

Mr. BROMME. Mr. Chairman, Section 10 of the FHSA does give

the Commission authority to promulgate regulations important for

the efficient enforcement of the act. So in theory the Commission

could define label.

On that particular point, of course, the act itself, Congress in

1960 provided a definition for us already.

Chairman TALENT. Right, and you could—is there a difference

between defining label and labeling? You would have the authority

to define labeling regulation.

Mr. BROMME. Yes, yes.

Chairman TALENT. Okay. And if you did that, you could define

it in a way that brought Proposition 65 within it. I mean, as I understand what the courts have said is that Proposition 65 does not

constitute cautionary labeling because cautionary labeling only applies to a label in connection with ‘‘direction’s for use.’’ So if it is

not in connection with ‘‘direction’s for use,’’ it is not a cautionary

labeling within the meaning of the federal law, and therefore, the

preemption provisions in FHSA do not apply.

If you were to define it differently by regulation, there would at

least be a question of whether the courts would respect your definition of it under, what is it, the Chevron doctrine where they defer

to your discretion in interpreting statutes?

What I am getting at is then there is a savings clause in the

FHSA which permits you to allow state regulatory models even

under the preemption rules if you think the public interest requires

it. So what you could do is if you defined labeling in the fashion

45

I have indicated, you could then invite the state to work with you

about how it might enforce Proposition 65 in a way that did not

have these abuses.

Now, wouldn’t that be worth an effort in trying to eliminate some

of these abuses and maybe create a little bit more uniformity?

Mr. BROMME. Mr. Chairman, you have isolated the very difficult

legal question in all of this. The correspondence that you and I

have had and that you have had with our Chairman and the conversations that I have had with Mr. Keller have at some length

elucidated these issues.

The OSHA parallel, which Mr. Margulies mentioned, does not

work for our situation in the same way that it worked with OSHA

for this reason. In 1992, the Supreme Court had joined a long line

of cases going all the way back to the 1970s in the whole federal

courts and in the state courts which had held that OSHA hazard

communication plans in the work place preempted state plans unless the state came forward and got permission from OSHA to put

its own plan in place.

So when California came forward with its Proposition 65 amendments to its plan which had been approved in 1973, OSHA had leverage to impose conditions on the approval of the state plan.

Now, interestingly enough it did not impose any restrictions on

the bounty hunter provision. OSHA specifically found that the private enforcement was something that the people of California had

the right to select, and it pointed out that a number of states have

private enforcement for their work place plans.

But OSHA had that leverage because of the Supreme Court case.

Now, the Commission is in exactly the opposite situation. We have

an opinion from the Ninth Circuit that says and uses the phrase

‘‘cautionary labeling’’ in saying so, that cautionary labeling does not

preempt Proposition 65 signs.

And then the Court of Appeals of California entered exactly the

same judgment. So whereas OSHA states are required to come forward to OSHA and get permission, under our statute the exemption provision that you referred to never comes into play because

California is not required to come and get permission from us for

Proposition 65.

Chairman TALENT. Yes. I guess what I am getting at is, and I

acknowledge a legitimate legal difficulty, but it also sounds a little

bit to me like a rationalization for not wanting to do something

when we do have a substantive interest here at stake that does

look an awful lot like what Congress was trying to protect against

when it provided for the preemption statute.

In other words, we have real concerns with an absence of uniformity, conflict in labeling type of requirements, a lack of certainty, and in an area where, yes, I know that the Ninth Circuit

said, but, boy, I will tell you what. What Proposition 65 requires

sure seems like labeling to me. Now, judges can jump through

hoops and say it is not, but I mean if it is not a label, I do not

know what a label is, and that is what you require under the

FHSA.

Mr. BROMME. And we had told the court in our advisory opinion

that in our view, the General Counsel’s view, and the Commission

did not object at that time to the definition, that a Proposition 65

46

sign was a label because it did constitute directions for us, and the

court called that view nonsensical, not comporting with common

sense, contrary to the intent of Congress, and plainly erroneous.

Chairman TALENT. Yes, you did try. That is true. You have done

a regulation, but you did do an advisory opinion which the court

rejected. It is not clear what the Supreme Court would do if they

ever took the case.

Mr. Margulies, did you have a point you wanted to make in connection with this?

Mr. MARGULIES. Yes, Mr. Chairman. Thank you.

I think that you isolated the point there, and that was that it

was not a regulation defining cautionary labeling. It was an advisory opinion, and I think the court missed the point, as well, on

what I was trying to make, and that is you have to prove this

FHSA label is inadequate, and if Congress said, you know, CPSC

set the standard and we do not want nonidentical laws, it seems

to me that if a regulation comes out and says any requirement for

a warning that is not required here is cautionary labeling, the

courts are really not going to have wiggle room to get out of that.

Chairman TALENT. Yes.

Mr. Weil, did you want to comment on that?

Mr. WEIL. Yes, I would like to comment on that, and I feel relatively certain that the Committee does not want to hear a rehash

of the cases that Mr. Margulies and I have been arguing about for

about the last ten years, but let me say a couple of things.

First of all, we agree that the Consumer Product Safety Commission would not have authority to adopt a regulation that expanded

the scope of preemption, and if we are looking at solutions to the

problem, adopting one that simply results in another round of litigation ultimately ending up, we think, in our favor, Mr. Margulies

thinks in his favor, may not be the way to go about it, especially

as I sit before this body.

Because I am accustomed to going into a court and saying, ‘‘Your

Honor, it is not for you to decide whether preemption is a good

idea. It is for Congress to decide.’’

And if the majority of Congress were to decide that this should

be preempted, they know how to do it, but as the courts have

looked at the existing law, they have all concluded that Congress

has not done that, and we think with good reason.

I would add one final point, which is we have already worked

with federal agencies on other occasions to harmonize Proposition

65 and federal labeling.

Chairman TALENT. Mr. Weil, let me interrupt you because you

are right. If at the end of this I may conclude that the only thing

we can do is to try and fix this through legislation.

But I argue with you that we tried. I mean, look. I am a Congressman, and if somebody read this language to me, ‘‘No state or

political subdivision of a state may establish or continue in effect

a cautionary labeling requirement applicable to such substance or

packaging and designed to protect against the same risk of illness

or injury unless such cautionary labeling requirement is identical

to the labeling requirement under Section 2(b) or 3(b),’’ I would

read that as saying we just preempted it.

47

Now, the way around it because the Ninth Circuit has defined

a label, a cautionary labeling to require in addition to just the existence of a label the attachment of the label to directions for use,

which of course courts do this, and whoever argued it came up with

a really ingenious interpretation.

But it seems to me Congress tried, didn’t they? I mean wouldn’t

you read that language and——

Mr. WEIL. No, I would not read it that way, with all due respect,

Mr. Chairman. A sign in a store——

Chairman TALENT. I am not a judge, and you do not have to be

particularly respectful to me. [Laughter.]

I understand.

Mr. WEIL. Well, you deserve as much respect as the judges do,

I think.

But a sign in a store is not a label. That is not a technical bit

of gymnastics. What the court was getting at and what we found

in the legislative history is that marketing a single nationwide

label was the idea, and where the state gives you the option of

complying in a way that still enables you to market that single nationwide label, then you have complied.

The reason we get into this directions for use is what the Commission tried to do and what Congress tried to do is say, ‘‘Look. If

we are telling you to put a warning in your labeling, we also want

to make sure you include it in any pamphlets that have directions

for use because those tend to go with the product and be seen.’’

But it is quite another thing to say anything that accompanies

a product at any time is labeling because if that is labeling, the

price sticker in the store is labeling; a sign that advertises the

product is labeling, and clearly it cannot be the case—we do not

think it is the case—that Congress intended to say, ‘‘Look. If you

want to tell people to post signs in stores in California only,’’ as we

did for the mini-blinds, so that people did not continue to purchase

those products, yet they continued to buy them in other states, that

did not prevent those companies from marketing their single nationwide labeling, and we think it is a good thing that Congress

chose not to do that.

Chairman TALENT. Mr. Margulies, and then Mrs. Napolitano had

another questions, but go ahead.

Mr. MARGULIES. Thank you, Mr. Chairman.

I think if you look at Congress’ intent, as Mr. Chairman has expressed, if you look at labeling, it is defined in a whole number of

statutes. There is a label, and then there is labeling.

And I would disagree with Mr. Weil that in all of these statutes

labeling is defined as something that accompanies the product, and

a price tag could be labeling. I think Congress has intended in the

preempting scope of a number of statutes or just simply in the definition of what labeling is to say it is not just what is on the label.

And I would ask if a manufacturer put a point of sale sign up

in California that said, ‘‘Ignore the warning,’’ would the Commission think it had no jurisdiction to call that product misbranded?

If the answer to that is that it does not have jurisdiction, I suspect that is an improper interpretation of the law, and if they do

have jurisdiction, then it is labeling.

Chairman TALENT. Mrs. Napolitano.

48

Mrs. NAPOLITANO. Thank you, Mr. Chair.

And I have sat here and listened to the attorneys go at it, and

I say bless you.

Chairman TALENT. This is what is known as a fine point of the

law.

Mrs. NAPOLITANO. They make a lot of money, and I am not one,

thank God. It is just one of those things that makes me shiver

sometimes because the taxpayer ends up paying in the end.

And the unfortunate part is that it is the small business that is

going to be hurting more than the larger business, and the consumer is the one that ends up paying for it because somebody has

got to pay for it, and that cost is passed on down.

Now, I have listened to the different scenarios or different comments about how we might be able to deal with it. I would totally

prefer, Mr. Chair, to have the business get with the different agencies, with the Attorney General, and with everybody else and begin

to look at how you can come to the table and say, ‘‘This is the label

that is going to protect the consumer,’’ bottom line, and quit messing around with trying to add labels or add words that are not

going to mean anything except to the attorneys.

You know, that to me is one of the most frustrating things.

California has already begun, apparently, and I have read about

it, but I have not read the proposed law, that they are already beginning to work on that. Now, one of the questions that I might

have, and we have 15 minutes, is this law going to close the loophole for the 60-day time frame that is allowed for you to take action before an attorney comes in and does their thing?

Mr. WEIL. Well, we still have the 60 days which we have always

had, and if we come in and take over a case in that time period,

then the private party is not permitted to pursue a Proposition 65

action.

Mrs. NAPOLITANO. Right, but it is still 60 days, and sometimes

that may not be enough time for that individual business to be able

to take corrective action or to develop the whole scheme of things

that are going to address the labeling, if you will.

Mr. WEIL. That is correct, but the Committee should understand

that the law also has a one year grace period built into it.

Once a chemical is placed on the Proposition 65 list, it is not actually subject to the law for 12 months, and so that time period is

there and available to do that initial type of compliance work.

Mrs. NAPOLITANO. Okay. Well, also, one of the comments that

was made was that Mr. Chanler had supposedly gone through the

SIC code and just sent lawsuits out literally en masse.

Is there any possibility that you may go after him personally?

Mr. WEIL. Well, I know the Attorney General does not like me

to talk about who he might think about suing at some time in the

future.

Mrs. NAPOLITANO. Oh, okay. I will talk to Bill.

Mr. WEIL. If I could respectfully not go into that, I would appreciate it.

Mrs. NAPOLITANO. I will talk to Bill. Okay.

Mr. WEIL. Yes.

49

Mrs. NAPOLITANO. That to me would be a great satisfier to know

that somebody who is perpetrating fraud upon the general public

is being pursued for his dastardly deeds, if you will.

One of the interesting statements that I heard just now is that,

Mr. Margulies, you said that you—well, Ms. Brown said that there

were no cases that she had known on 65. She does not have the

expertise.

You were looking at possibly asking for something to be looked

at. My understanding is that you can petition and have them develop that expertise.

Mr. MARGULIES. Yes. That is correct, and in fact, you will see,

I believe, in some of the written testimony, we were back with

CPSC back in, I think, 1990 originally when some of the early enforcement actions were going on, talking to the General Counsel’s

office about the advisory committee opinion that had been issued

in the Allenby case, which had said Proposition 65 point of sale

signs are cautionary labeling.

Until the Cotter decision came down, and that was the California

Court of Appeals decision on preemption, it was my feeling that

that letter clearly expressed the Commission’s position on point of

sale signs, and I frankly thought that the Court of Appeals in California was going to give deference. Mr. Weil had a differing view

of that and ultimately convinced the court not to give it deference.

So we have been working with CPSC for some time, and indeed,

I do understand that communication has been continuing between

the Chairman and Mr. Bromme and also Chairperson Brown on

this very issue, and I think a petition is something that very likely

will be seen in the near future.

Mr. BROMME. May I say one thing, Mr. Chairman, in response

to something you observed? You read the preemption language and

expressed surprise that the courts could come to the result they

have, and I just want to respond to that.

I think very reasonable, intelligent people can reach exactly the

same conclusion that you did. However, the point that I want to

emphasize, and that the Commission’s testimony emphasizes, is

that the courts have now ruled. There is in our judgment nothing

that the Commission can do at this point to affect the outcome of

future litigation.

Now, I understand, and I have had long conversations with your

staff and with industry where they have expressed the view that

if the Commission were to promulgate a rule, this would make a

difference.

I do not share those views for reasons that I will not take time

to go into. We have gone into them before. We are not here defending one way or the other what the courts did, but we are an agency

that is a creature of Congress, and the courts have now interpreted

the statute, and our very strongly held view is that if there is to

be a change in the law in this area, it would have to come through

an amendment to our legislation.

Mrs. NAPOLITANO. But would that necessitate a change in law if

maybe California comes up with some language that will help?

And that was my next question to you, Mr. Weil, is whether or

not, and you mentioned that this new law will only help in a certain way; I mean, in other words, it will close some of the loophole,

50

but as you are hearing, it may not close all of the loophole. Is there

something that you might be able to suggest that might further

clarify the intent, the law, and the ability for small business to not

get litigated?

Mr. WEIL. Let me address that, but first Mr. Bromme asked to

respond.

Mr. BROMME. I just wanted to clarify that my remarks to Mr.

Talent were not saying that we were advocating a change to the

legislation. It is just simply that there was nothing we could do.

Mrs. NAPOLITANO. Right. I understand.

Mr. WEIL. I think, you know, in preemption lingo they talk about

the states as laboratories for experimentation, and this has been a

live and learn process with us, and the regulations I have talked

about, the changes to the statute I have talked about are things

we have developed based on our experience over time, and as we

learn more and see how much the new legislation works, then

maybe we would be looking at other things if it turns out that the

new legislation does not do as much.

Let me point out one good story I can tell you about people getting guidance, and it relates to this crystalline silica issue. Crystalline silica is a known carcinogen, and there is a procedure under

the state law to get a nonbinding, safe use determination from the

state government about a product.

Thinking ahead, the people who make all of the kitty litter products went to the state and said, ‘‘This product has crystalline silica.

It kicks up dust, but we think it is below the safe level. Can you

give us a determination?’’

And they received the determination saying you are substantially

below the safe level. You do not have to give a warning. No one

has sued them, and I do not expect anybody will, and if somebody

does, although it would not be binding, I cannot imagine a court

ending up disagreeing with that.

So there are some mechanisms for the groups to go in and use

them to get this kind of guidance. It is a procedure that has not

been used much, but it could be used more under all of the existing

authorities.

Mrs. NAPOLITANO. Is there an ombudsman in the Attorney General’s office that can speak to the small business when they have

questions they have already gone through and now they are being

sued or have some question about whether or not they are in compliance?

Mr. WEIL. Well, I seem to be about as close to it as there is,

based on the phone calls I receive, and I actually do appreciate

them because it keeps me in contact with what’s really going on

out there.

Mr. KHORRAMI. Mrs. Napolitano, if I may speak for a moment,

I think you bring up a good point. From what I understand, the

issue is the abuse that is allegedly going on with respect to small

businesses. An exemption or getting essentially rid of enforcement

of the law is not necessarily an answer to a few isolated cases that

have been brought up.

We have mentioned one individual and one organization as potential abusers. Those issues are being addressed by the Attorney

51

General and through regulation, one of them being the notice regulation.

Mrs. NAPOLITANO. That is why I asked them if they were going

after Mr. Chanler.

Mr. KHORRAMI. Yes, I understand. I just think that a wholesale

change in the law or essentially taking away a big part of the law

in order to address a few isolated cases of abuse really does not

address——

Mrs. NAPOLITANO. That is not my intent. My intent is to try to

make it easier for business to be able to move forward and the consumer to know what they are actually dealing with.

Mr. KHORRAMI. Absolutely.

Chairman TALENT. Okay. What I am going to do now before we

go, because Ms. Brown has been around, and the Chairwoman has

been here probably longer than she anticipated. I have got a couple

more questions for you, and then I will go ahead and excuse you,

and if the other witnesses could remain, I have a few more after

this vote, and then we will be done.

What is it you would need to see in a petition before you would

consider a rulemaking? People are considering giving a petition to

you, and I do not want to go back and, you know, the petition does

not have enough in it, and then they have to add some more, and

then enough.

I understand that no matter what is in it you may not undertake

a rulemaking, but what would you like to see in a petition before

you would consider this?

Ms. BROWN. Well, of course, the outcome of a petition would depend on the vote of the Commissioners.

Chairman TALENT. Right.

Ms. BROWN. And, you know, as our Commission testimony states,

there are problems with Proposition 65 in the state itself, but Proposition 65 has not interfered at all with our safety mission, which

is the conclusion that we have to come to.

And since the courts have already rejected the statutory interpretation that any such position would seek, it would be extremely difficult to think that there would be any more success with a petition.

But we would, of course, consider that petition the way we would

consider any petition, the petitioning process is actually quite simple, and it is supposed to be written in English. It has to contain

the name and the address of the petitioner. It has to indicate the

type of rule involved. It has to include facts establishing claim that

the rule is needed, and it has to contain explicit requests for rulemaking and a brief description of the rule.

And anybody who wants to petition us can get advice from our

agency about petitioning.

I do just caution about the somewhat hopeless nature of a petition, but we would very seriously consider it. I just do not think

that a court would uphold it.

Chairman TALENT. What I hear you telling me is that until Mr.

Bromme or somebody tells you that there is a better legal chance

that some regulation you issue is going to have an impact on the

court’s determination, that you are not inclined to move forward.

52

Ms. BROWN. Well, we would consider it, but it is not Mr. Bromme

who is in the courts. We have had both federal and state rulings.

I did not know that he has been appointed to the court yet. He is

still the General Counsel, but it is the courts who have the ultimate decision

Chairman TALENT. Oh, I understand, but until your counsel or

somebody. I did not mean to be smart-alecky with that.

Ms. BROWN. Oh, no, no, no.

Chairman TALENT. But until your counsel advised you or somebody advises you that there is a greater room for the Commission

to operate here, it does not sound like you are inclined.

Ms. BROWN. Well, we would certainly have to consider it, and we

could grant a petition, you know, and go along with it. It is just

that the chances of doing what you are trying to do are very small

because of the opinions both of the state and federal court.

Chairman TALENT. All right. Well, the record is open in case we

have more questions for you along those lines, and I will excuse

you, Ms. Brown.

Ms. BROWN. Thank you very much.

Chairman TALENT. Thank you for coming.

If the other witnesses could wait, I will vote and get right back,

and we can wrap this up.

[Recess.]

Chairman TALENT. Okay. We will reconvene the hearing.

Let me go to an issue that developed because people have been

talking about this is one gentleman, and let’s say his name, Mr.

Chanler, abusing the situation. We, of course, do not know how

many of these frivolous or strike suits are being filed, but I think

we have some evidence that it is more than just him.

Mr. Weil, you complained, didn’t you, in 1995 to a newspaper

that you thought about 20 percent of the cases that had been filed

were frivolous?

Mr. WEIL. I think what I said was not frivolous, but either frivolous or what we would call trivial or de minimis, which would be

something like was mentioned where there may have been a minor

wording violation, but in our opinion it justified sending a letter

saying, ‘‘Change it,’’ and not a lawsuit.

Chairman TALENT. Right.

Mr. WEIL. But we are not designing this on the assumption that

if Mr. Chanler went out of the business then we could assume all

of these problems would go away.

Chairman TALENT. Right, and you also at that time, I think,

sought legislation which would permit you to actually intervene in

these lawsuits, didn’t you, at the time, in like 1995 and 1996?

Mr. WEIL. We sought legislation that would actually enable us to

make a finding that a suit would be trivial or frivolous and thereby

make it extremely difficult for a private party to go forward with

the suit, but that legislation was not passed.

Chairman TALENT. You were concerned enough about it to want

a legislative change at the time.

Mr. WEIL. That is correct, Mr. Chairman.

Chairman TALENT. And you have, and I agree with you; I am not

trying to downgrade this legislation that you have gotten. I think

it probably will help, particularly if somebody like you is actively

53

using this information that now comes to light. I did not mean to

suggest that it was not useful, but it is not everything that you

wanted several years ago, is it?

Mr. WEIL. It is not everything that was asked for several years

ago, correct.

Chairman TALENT. Now, another point I want to make, and it is

not strictly related to the abuse problem that I really called the

hearing to go into, but in discussing the benefits of Proposition 65,

you and Mr. Khorrami talked about products that have been reformulated in response to actions either by the Attorney General’s office or the Attorney General’s office and private litigants.

And, for example, the nail policy, toluene that is no longer——

Mr. WEIL. Correction fluids had trichloroethylene, is the one I referred to.

Chairman TALENT. Now, I think it is owing to the manufacturers

involved in that to make the point that the way the Proposition 65

statute is set up, it is the burden on the business to prove that the

carcinogen or the substance that might have a negative effect on

reproductive systems is not present in an amount that may cause

a health hazard; isn’t that right? The burden is on the business to

prove that?

Mr. WEIL. That is right. Once the plaintiff has shown that there

is an exposure, and we should keep this in mind. It is not enough

to show the chemical is present in the product. There has to be an

exposure. It has to be an exposure known to the manufacturer and

intentionally by the manufacturer.

And keeping in mind that we are starting with a list of chemicals

found by established scientists and scientific agencies to be known

to cause cancer or reproductive toxicity, at that point, once all of

those showings have been made, the burden shifts to the manufacturer to say, ‘‘All right. We can show by a preponderance of the evidence that the level here would not pose a significant risk.’’

Chairman TALENT. But known to cause cancer if exposure is adequate. I mean there are carcinogens all throughout the environment that occur naturally, aren’t there?

Mr. WEIL. Yes, there are.

Chairman TALENT. So, I mean, really, yes, that triggers sort of

a shifting of the burden of proof, but the fact that a product contains a carcinogen tells us really next to nothing about it, and we

have to know how much of that carcinogen is present and how

much people are going to be exposed to it; isn’t that right?

Mr. WEIL. That is correct, but we have to remember that, for example, foods which often have very small trace amounts do not end

up having labels and warnings under Proposition 65.

Chairman TALENT. Right.

Mr. WEIL. Because we have found that for the most part, even

where the chemicals are present, they are at a level that clearly

is not of significance, but there is somewhat of a philosophical difference here that I want to be quite plain about, which is that the

federal approach tends to be there will be no requirement whatsoever until we have absolutely determined what the proper level of

this chemical is, and the California approach is if we know the

chemical is hazardous, then at least disclose to the customer that

it is there unless you can show that it is at a safe level.

54

And we think that kind of approach is an appropriate one, given

how much uncertainty there is in this area of science, and given

that really consumers should get to make their own choice.

Some people are not worried about this kind of thing. Some people are very worried about it. Everyone gets their own option under

this approach.

Chairman TALENT. Sure, and I understand that.

The point I am getting at is the fact that a manufacturer reformulated a product in response to a lawsuit or the threat of a lawsuit really tells us nothing about whether that product was hazardous in the first place. What it tells us is that they did not want

to go through the hassle of litigating it.

Now, maybe had they litigated it and had there been a finding,

it would have been found to have been present in sufficient

amounts to cause a health hazard, but all it tells us is that they

decided to reformulate it rather than pay whatever they would

have had to pay to litigate it.

And that may be a public health gain, and it may not be a public

health gain.

Mr. WEIL. I think that is quite correct, Mr. Chairman, but I

would add that those circumstances by definition are circumstances

where the product easily could be reformulated and still be an effective product.

And we would submit that if a lot of industries do that, overall

that is beneficial. I know one gentleman who works in this area

who spoke before a group of maybe 100 people from the chemical

industry, and he said to them, ‘‘If you have ever, without ever

being sued or received a notice, changed a product to take a chemical out of it because that chemical was subject to regulation under

Proposition 65, raise your hand.’’

And he said 90 percent of them raised their hands, and I would

submit that without going through product by product, chemical by

chemical and ascertaining whether each one of those individually

eliminated a significant health risk, that in the long run, that kind

of reformulation is probably very good for all of us.

Chairman TALENT. Well, we have this disagreement. We are a

couple of lawyers talking about this, and another point I wanted

to make about the Proposition 65 method of regulation, and you

have put as good a face on it as you can, and I think a rather persuasive one, and it is pretty clear that this is what the people of

California wanted, and I think as long as it—except insofar as it

may unduly burden interstate commerce, they are entitled to it. I

mean, you know, that is the way the system works.

But we have not had a finding. I mean, we are talking about

these things. We have had no regulatory process to determine what

the proper level of exposure is, no statutory process with hearing,

and in most cases not even a trial. I mean how many of these cases

have even come to trial? Two?

Mr. WEIL. Two cases have come to trial.

Chairman TALENT. So all we have had is an assertion that it

might, and then in this huge veil of uncertainty manufacturers

take actions which cost them and, therefore, the consumers money,

and to reformulate products that for all we know were completely

safe.

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Mr. WEIL. Well, I do not think that is necessarily the case, Mr.

Chairman, because, for example, taking the correction fluids, we

sued. We had the data. We laid it on the table. The level of significant risk was under California regulation, which is not particularly

strict on cancer, which is a one in 100,000 risk level with 60

micrograms per day of exposure.

We tested the products, and the exposure to somebody who wrote

one word per hour with liquid paper was 30,000 micrograms per

day, and why did that happen when theoretically it should never

happen? Because the Consumer Product Safety Commission was

only going to go product by product, standard by standard.

And so a lot of these cases that settle in reformulation are, in

fact, high risks. I would not dispute, Mr. Chairman, your conclusion that sometimes they may not have been and they did it to

avoid litigation, but we certainly cannot assume that they all are

because in my experience frequently they are cases where they reformulated because, one, they knew they would lose and, two, they

knew it was a product that their customers would not buy with a

warning label on it.

Chairman TALENT. I just think that there is some value in having a legal mechanism here whereby we know, I mean, and to the

extent that California, which can choose what it wants for its own

people, is effecting products that are manufactured and delivered

all over the country because manufacturers do not want to have

two different products with all of these different labels, you see

how we have California basically making a decision for the rest of

the country in terms of how it is going to enforce these things.

I mean, I do not see why we have to have such uncertainty. I

do not see why we cannot have a situation where we have federal

agencies or some federal process, and, by heaven, they work hard

enough and fast enough and figure out what is safe and what is

not and tell people.

I mean, this is what the Consumer Product Safety Commission

is supposed to do, and one question that rises here is so they were

missing it all this time in terms of White-out. I mean, if that is

true, then what about the other 49 states?

Mr. BROMME. Well, it happens that——

Chairman TALENT. I figured that would get you going, Mr.

Bromme.

Mr. WEIL. Well, let me just add, Mr. Chairman, I should say, and

it is hard given the hyper regulation of so many products in this

country, it is hard to believe sometimes, but things fall through the

gaps. It just happens because they are outdated.

Nobody at CPSC defended trichlorethylene in correction fluids.

They just had not been able to get to it.

When we did lead in ceramic tableware, the FDA itself had proposed tightening the standard and had backed off in the fact of industry opposition.

And let me add you can warn in California. There are products

with California only labels. General Motors makes cars just for

California, and we have found when we have gotten into this in detail that a lot of companies, in fact, already have different types of

labels and different formulas for different states where it suits

their marketing needs.

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What we have found more frequently happens is the company

says, ‘‘Look. Okay. Only California is prohibiting this or saying give

a warning. Why wait for the other 49 states to get to it. If it is a

problem, it is more convenient.’’

And so we think sometimes it does benefit consumers in other

states, but we make no bones about it. We have our little province,

and we are not trying to tell anybody in the other 49 of them what

to do.

Chairman TALENT. Well, and I understand this. A lot of times

you focus on what you have got right in front of you and very zealously and understandably, and I have not seen many witnesses as

credible as you or Mr. Khorrami, for that matter. So I am really

not doubting at all your sincerity in this.

But when you drive to the extent you are driving on behalf of the

interest you are trying to protect and you cause a whole lot of attention and money and effort to be spent by manufacturers or business people on that, you have to ask yourself what other things are

they not paying attention to.

Some of it is just economic. Well, just economic; how many jobs

are they not creating? You know, how many people are not being

able to save for a better education for their kids?

And then maybe what other risks? What research are they not

investing in to find the cure for cancer? I mean, we’re debating on

a philosophical level, and California has made a choice, and I am

not talking about disturbing more than really a fraction of the remedial scheme. That is really all I would like to see come out of

it, but I do mean to make the point.

Grace, I am going to recognize you in just a minute, but let me

ask another question here, and it goes to the heart of this because

our job here is to some extent anyway to represent the perspective

of small business people that get lost. Now, let me put this to you

guys this way.

What I hear you telling me is that you think we need to have

this pretty comprehensive regulatory scheme where the burden is

shifted to small business people and where you do have a pretty

strong enforcement mechanism involving private litigants because

the problem is that there are a lot of business people, big and

small, out there and they are decent enough people, but they are

in the business of making money, and unless we have these comprehensive and detailed legal sanctions available, okay, they might

let their desire to make money get the better of them and put products on the market and expose people in California to products that

are unhealthy.

I mean that is really what this comes down to. You obviously

cannot trust them to do it on their own so you have to have this

pretty comprehensive scheme to control them, right?

Mr. WEIL. Well, Mr. Chairman, I do not believe in criticizing people for trying to make money. A lot of good things come out of that

in our society, but I think it is the government’s job to either impose limitations or at least try to create incentives to do the safe

thing, to assure that the good thinking, forward thinking companies do not lose their business to the few companies who would, in

fact, put the dollar over the safety of their customer.

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Chairman TALENT. In other words, the government needs to be

there as a watchdog to make sure that in the name of trying to

make money they do not hurt people or do something that is unjust.

Mr. WEIL. Exactly.

Chairman TALENT. All right. Now, look at it from the small business person’s point of view. All right?

Are lawyers any less subject to greed than small business people?

Mr. WEIL. Not that I have ever known.

Chairman TALENT. Exactly, and I am a lawyer.

In an attempt to control the small business people, because you

are concerned that in this desire to make money, they might put

something on the market that would hurt people, you have unleashed the private Bar against them.

Aren’t you a little bit concerned that some of those attorneys in

the desire to make money might do something that has an unjust

result?

Mr. WEIL. I am more than a little bit concerned about it.

Chairman TALENT. And I know you have been, but, I mean, Mr.

Khorrami, shouldn’t we really pay a little more attention? I mean,

it is fine to say it is just a few people out there, but shouldn’t we

pay a little bit more attention on behalf of these people who have

been harassed?

Mr. KHORRAMI. Mr. Chairman, with all due respect, the law goes

after people who knowingly and intentionally expose. There is no

surprise there. What ends up being the dispute is the policy decision that Proposition 65 makes. And that is that once a company

knowingly and intentionally exposes, then we expect it to also look

at the amounts, know the amounts, and see whether those present

a risk so that they require a warning, or whether they qualify

under an exemption.

Like I said in my written testimony, if the companies were actually looking at those issues, I think many of the problems with litigation would go away.

Chairman TALENT. Well, that is because you are showing a

greater trust in our brothers and sisters in the Bar than I do.

Okay? And just because it is human nature.

See, what Proposition 65 does is it empowers private enforcers

almost without risk to drive up the costs, to impose transaction

costs an economist would say, on business people, and then with

a view towards getting them in order to avoid that cost to pay them

off. Okay?

And there’s really no incentive for them not to do that. Human

nature being the very human nature that makes Proposition 65

necessary, because if everybody loved their neighbors and that is

why they did everything, all we would need to do is to make sure

these small business people just knew about these carcinogens and

then they would naturally do the right thing.

But we recognize we have to have a little more than that, and

see, from the small business person’s perspective, they are always

the one that the government has got to guard against, and from

that perspective, well, who guards against the government? Who

guards against the private enforcers out there who are sending

them hundreds of these notices to sue? And we just were so vigVerDate 11-MAY-2000 09:04 Oct 16, 2000 Jkt 010199 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 E:\HEARINGS\61647A.XXX pfrm01 PsN: 61647A
58

orous in trying to protect against them and very lax in trying to

protect them.

Mr. KHORRAMI. I agree with protection of the small business.

That is not at all the issue. However, this law essentially exempts

the majority of them because of the ten employee exemption.

And, again——

Chairman TALENT. In theory it does. In practice, we have heard.

Let me just suggest, and I do not want to put words in Grace’s

mouth, but her frustration before about the lawyers and why don’t

you just get together, you know, if those of you who are in that

part of the Bar that is privately enforcing this, who are responsible—and I have not even asked you whether you have ever filed

an harassing lawsuit because I do not think you would do that—

if you would get together with people like Mr. Weil, I bet you could

come up with changes, and if you got behind it, the legislature

would pass it.

Maybe give him a little more authority, a few things to try and

make certain that this sort of thing did not happen, so that if there

was no violation, you know, you could not go after people. If there

was a technical violation, you could just make sure that they fixed

the notice or whatever, and then you reserve the enforcement authority for the situations that you all really want to go after, the

serious ones.

I bet if you led your brothers and sisters in the Bar in doing that,

you could put together a piece of legislation.

Mr. WEIL. Well, I should add, Mr. Chairman, that you need to

keep in mind that this citizen suit provision is not born of a distrust of businesses. It is born of a distrust of people like me. The

public wants enforcement, and they do not trust the government to

be left alone to do it all by themselves because then it will be left

to someone like me, and I will decide not to do it.

And you need people at the very least watchdogging the government to make sure they do their job. So it is an important part of

the statute.

Chairman TALENT. A lot of what this Committee is about is trying to make certain because there is a consensus on this Committee on behalf of the following proposition: we do not want to

hurt small business people if it accomplishes nothing.

Now, we may disagree about how much of a burden we want to

put on them in behalf of an environmental interest or a social justice, but we do not want to hurt them and accomplish nothing.

And we have had a lot of testimony about people who have been

hurt, and I think we all agree it has accomplished nothing. So if

California is saying the federal government has no authority here,

I do not want to introduce a bill on this, and it just seems to me

you need to keep moving in the direction you are moving in with

this one piece of legislation.

And guys like you, Mr. Khorrami, are in the key position because

if you come forward and say, ‘‘Look. We have got a bill here. It will

protect against abuse, but will still allow us to enforce the spirit

of Proposition 65,’’ then I think the legislature will say, ‘‘Oh, well,

okay. We are not concerned about it.’’

Mr. KHORRAMI. Well, Mr. Chairman, we try to be as active as

possible, and certainly I do not advocate any sort of abuse of the

59

law, and you know, we would support anything that would protect

against it.

Chairman TALENT. Grace, I am sorry. I went on too long. Do you

have something?

Mrs. NAPOLITANO. Well, yes. I wanted to jump in, but I wanted

you to get your frustrations out because I had mine.

Actually I would be glad to find you a senator or assembly person

to carry the legislation in California. That would not be a problem.

Secondly, I can understand California, and I just about two

months ago met with the California Chemical Manufacturers Association. We were dealing with other issues that they find important. Not once, not one of them mentioned any problems with Proposition 65. It never even came into the conversation.

So California business is very well in tune with the need and

abide by it. They find that this, as was stated before and was stated by one of the members of your panel, that, Mr. Margulies, that

he has children that he wants to keep healthy and he wants to be

healthy.

Well, I have 13 grandchildren, all in California, that I am very,

very concerned about their safety. So to me business is very in tune

in California to it.

Somehow we have got to find the way to be able to do away with

the loopholes that allow the ambulance chasers to go in and do

what they are doing to some of the other businesses in the other

states, and that to me seems to be the more salient thing that I

am finding at this hearing.

But I have a question for the General Counsel of the Consumer

Product Safety Commission, and that has to do with the Commission’s previous counsel opinion. Do you support that, that the Proposition 65 warning signs were labels?

Mr. BROMME. Mrs. Napolitano, in view of the court decisions, the

Commission no longer adheres to that opinion.

Mrs. NAPOLITANO. Okay. That was something that was kind of

in the back.

Mr. BROMME. May I add one thing?

Mrs. NAPOLITANO. Sure.

Mr. BROMME. About our statute, in general, too, that responds to

something about the White-out example that was used. The Chairman was correct to see me pull the microphone towards me when

he expressed shock that the agency that I work for would not have

been on the job.

I want to just point out that our statute, the FHSA, does not require manufacturers to wait for the agency to act. It is a self-executing labeling statute that imposes the conditions under which the

manufacturer must then label.

So if any manufacturer is waiting for us to come to them, they

already have shown an ignorance of our statute, and so we think

our statute—although I certainly agree with Mr. Weil’s point; there

may be manufacturers who do not comply with it, and we cannot

catch everybody—I think our statute actually does impose a fairly

heavy burden on manufacturers to produce safe products.

Mrs. NAPOLITANO. Yes, and that makes sense.

In essence, if a state has more stringent laws, then the federal

does not over encompass themselves onto that state, do they?

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Mr. BROMME. Well, the Chairman pointed out in his opening remarks an acknowledgement that historically state health and safety laws have been a province that the courts and the Congress

have been very respectful of.

And there is a role to play, an important role to play, for states

in the protection of the state’s health. The only way in which a

state cannot go forward is if Congress has specifically said they

cannot.

Mrs. NAPOLITANO. Right, and I understand that it may have the

unintended consequence to other businesses outside the state, and

that is where we need to maybe begin to focus on how do we address it and how do we help deal with it so that the Attorney General’s office does not get complaint from frivolous lawsuits or other

minor issues that crop up.

But we do need to protect the small business.

Mr. BROMME. As my Chairman said in her comments, and I applaud what Chairman Talent was just dialoguing with the gentleman from California about, it is our view that the problems and

abuses of Proposition 65 are properly dealt with in the State of

California with the legislative processes that exist there.

Mrs. NAPOLITANO. Right. Thank you.

Chairman TALENT. Well, all right. I will allow your long ordeal

to end.

Mr. WEIL. If I might before it ends, Mr. Chairman.

Chairman TALENT. Sure.

Mr. WEIL. I noticed this very interesting correspondence between

the Committee and the Commission about preemption and the various actions that could be taken, and in the spirit of working together on these issues, we would appreciate it if we could receive

copies of that correspondence in the future.

Chairman TALENT. Oh, absolutely. We are working on the model

that we had with OSHA, which I think has been a pretty good result, and you know, speaking for myself, and that is where we get

four or five states doing this with some real problems.

I do not know that federal legislation is warranted, especially

since you are making progress in California towards correcting

these abuses.

I mean, you are right. I mean, the states are a laboratory in a

federal system and need to be given some leeway in trying to shape

these sorts of things. I am hopeful that this new statute will make

a difference.

Did you have another comment, Mr. Margulies?

Mr. MARGULIES. Yes. Thank you, Mr. Chairman.

We have heard this is a California problem. Well, it is an interstate commerce problem. There are small businesses throughout

the country, and what if four or five other states come up with a

law similar? Then we have a label that says this product contains

chemicals known to the States of California, Texas and Illinois to

cause cancer, but in Iowa, Ohio, and Michigan it does not, and that

is a real problem, and that is not just a California problem.

Second of all, I would offer some encouragement to Mr. Bromme

and his Chairperson. In the ITA v. Henry case, the district court

held Proposition 65 was not preempted by OSHA rulemaking or by

61

the federal work place standards. OSHA came up with an approval,

and in an appeal the Ninth Circuit held it was preempted.

And I think what we are talking about here is a regulation which

defines cautionary labeling and does not do what the letter or the

advisory opinion said, which was that warning signs are a label,

but one that defines cautionary labeling, that CPSC is empowered

to do I think will be upheld by the courts.

Chairman TALENT. Mr. Bromme, since none of you seem to want

to leave, respond to that point. [Laughter.]

I mean, there is a good point here, isn’t there? If the agency responsible for enforcing the relevant federal statute weighs in

through formal rulemaking to define cautionary labeling, wouldn’t

you at least have an argument before the Ninth Circuit that that

changed the landscape and that they ought to maybe reconsider in

light of the exercise of the discretion Congress has given you?

I take it that is basically what you are saying, right, Mr.

Margulies?

Mr. MARGULIES. Yes.

Mr. BROMME. Mr. Chairman, if I left you with the impression

that I was not eager to leave, I sincerely apologize. [Laughter.]

Chairman TALENT. Nothing like candor on behalf of one’s witnesses. Well, you do not have anything else to do this afternoon,

do you?

Mr. BROMME. The day is well nigh along, I agree.

The suggestion that we define cautionary labeling is a creative

suggestion that I think came to fruition after the other arguments

failed twice in the federal and state courts. It had never been suggested prior to that litigation, to my knowledge, that the Proposition 65 was not defined with reference to the statute’s definition

of label, which includes the direction of use requirement.

Once the courts rejected that argument pretty soundly, then the

thought has come along that perhaps we could define the phrase

cautionary labeling differently than the definition of label in the

FHSA on the theory that label is recognized in other federal statutes and defined somewhat separately from the word ‘‘labeling.’’

My view is that a regulation at this point by the Commission, in

view of the history of the litigation, to define labeling more broadly

than label, that is, to effectively drop the directions for use requirement from the definition of labeling, would be seen by the courts

as not entitled to deference because it wouldn’t comport with the

definition that Congress gave us of label.

And in the very statute where cautionary labeling is used, it is

used in two ways, first with reference to federal labeling requirements, and second with reference to states.

62

And so the rule that has been proposed or suggested would require us to define cautionary labeling differently for state law than

the statute defines it for federal law, and there is just no basis in

the legislative history or in the language of the statute to suggest

that is what Congress intended.

Chairman TALENT. Well, I am going to let you have the last

word.

Thank you all for coming. I do appreciate your patience. I hope

something good comes out of this.

And the hearing will be adjourned.

[Whereupon, at 3:02 p.m., the Committee was adjourned, subject

to the call of the chair.]

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