California AG Appeals To Dismiss Settlement In P&G Prop 65 Suit

California is advocating reversal of a Prop 65 settlement reached last August on the grounds that an environmental group should not be financially "rewarded" for filing suit in the name of public interest.

The American Environmental Safety Institute "may not simply trade its claims 'in the public interest' for money for itself and illusory injunctive relief and a reward for itself," California State Attorney General Bill Lockyer states in the appeal filed March 21.

In June 2005, AESI sued Procter & Gamble over trace amounts of lead in the manufacturer's brand of Crest toothpaste products.

The suit was filed under California's Safe Drinking Water & Toxic Enforcement Act (Prop 65), which requires that products that expose consumers to levels of certain known carcinogens or reproductive toxins in excess of established limits must bear a "clear and reasonable" warning label on their products.

The measure, implemented in 1997, allows citizen law enforcement groups to file actions if public prosecutors do not.

However, the ability to sue "in the public interest" under Prop 65 is not "an opportunity for plaintiffs to raise funds for their favorite activities, even where those activities are themselves lawful activities of charitable corporations," Lockyer asserts.

In August 2005, Los Angeles County Superior Court approved a settlement that required P&G to "specify" that material orders for hydrated silica, a cleaning component of toothpaste, contain less than 7.5 parts per million lead.

The firm had previously been ordering the material at 10 ppm lead, according to the filing.

The order also required P&G to "explore" ways of reducing lead for a period of 12 months, and to actually reduce those levels if the firm found it feasible.

In addition, P&G was ordered to pay $387,500 to AESI "for its ongoing compliance monitoring costs of this consent judgment, and to reimburse AESI for its enforcement efforts on behalf of the public interest and the general public."

Of that amount, approximately $325,000 went directly to AESI, Lockyer notes.

The Attorney General submitted a letter to the court objecting to the proposed settlement in early October, stating that the "illusory relief" provided in the settlement provided "no substantial public benefit," and therefore could not support an award of attorney fees.

The letter also calls on the court to impose "greater restrictions" on the use of the funds given to AESI, charging that the group had a "spotty history" of collecting Prop 65 funds without accounting for their use.

AESI filed a cross-appeal on October 31, 2005, claiming that the Attorney General's involvement in the case was "unconstitutional."

In his formal appeal, Lockyer cites a number of reasons why AESI "cannot be considered a prevailing party entitled to attorney fees."

First, the settlement provides no genuine public benefit, therefore negating a "public interest" attorney fee reward.

According to Prop 65, the plaintiff must prove significant public benefit to prevail and obtain fees.

"If a plaintiff may collect fees even where it fails to accomplish the objective of the suit, regardless of whether any legal rights are vindicated, then plaintiffs would have an incentive to bring even meritless cases," he explains.

"Careful review of the proposed settlement shows that, in fact, there is no real change either in the products in question or in the information given to the public," as the "specification" and "exploration" requirements cannot be considered actual changes in P&G's behavior.

Second, "the judgment fails to assure that payments to the plaintiff will be used in a manner that furthers the purposes of the statute."

Lockyer cites Prop 65, which authorizes financial relief in the form of civil penalty, of which the plaintiff may keep 25%; the remaining 75% must be turned over to the state for further implementation of the measure.

However, Lockyer charges that AESI is collecting $325,000 in a "manner not expressly authorized by Prop 65 or any other statute."

The settlement also fails to "adequately identify" what AESI proposes to do with the money, Lockyer maintains. The group's proposed actions are "vague generalities [that] fall short of the necessary binding assurances" that use of the funds will be consistent with existing law, he says.

"They give the court no real idea how the money will be spent," he notes.

The appeal also alludes to AESI's "spotty record of complying with its existing obligations to report its income and expenditures," and recommends that "court supervision of its expenditures would be appropriate."

Furthermore, the AG says the L.A. court made the decision to approve the settlement in part due to a misunderstanding that the settlement would not affect any other parties.

The court "clearly misunderstood the effect of the settlement, erroneously determining that the settlement had no effect on anyone other than the settling parties, an error that affected the decision to approve the settlement," according to Lockyer.

In fact, the court later used a provision for correcting clerical errors to amend a paragraph in the settlement agreement defining what parties would be affected, according to Lockyer's appeal.

The mistake was a legal error rather than a clerical one and should have been addressed by a modified judgment, including an opportunity for the AG to be heard, he maintains.

"The trial courts have a duty to assure that it does not become a 'pot of gold to fund projects ranked high on the group's own agenda,'" Lockyer concludes. "The court below failed to discharge this duty."

- Melina Vissat