PROPOSITION
65 FACT SHEET
By David P. Waite, Esq.
The purpose of this Fact Sheet is to provide general, background information about Proposition 65 to businesses operating in California. This Fact Sheet is not intended nor is it useful as a substitute for legal advice.
FACT SHEET: PROPOSITION 65 --COMPLIANCE AND DEFENSE
In light of the recent increase in the number of lawsuits brought under California=s Proposition 65 (AProp. 65" or the "Act"), we prepared this summary of the law.
Prop. 65 is among the most comprehensive toxic chemical control statutes in the nation. It prohibits the release by businesses with more than 10 employees of any listed carcinogen or reproductive toxicant into any drinking water source. It also requires that any person exposed to one of the chemicals on the list first receive a warning that the state has determined that the chemical may cause cancer and/or reproductive toxicity.
Enforcement
Prop. 65 provides for aggressive enforcement due largely to the Act=s Abounty hunter@ provision. That provision allows private persons and organizations to bring actions against alleged violators of the Act on behalf of the Ageneral public,@ after providing the California Attorney General or local prosecutors with an opportunity to intervene and take control of the enforcement action. If the Attorney General does not take action within 60 days after the notice, the private party may file suit.
Violations of Prop. 65
Failure to comply with Prop. 65's tough mandates can lead to fines of up to $2,500 per day per violation, with Abounty hunters@ keeping 25 percent of the amounts received. Plaintiff=s are usually entitled to reimbursement of their costs of bringing a Prop. 65 suit, including their attorney fees, which is often the real reason private parties bring these actions. Furthermore, along with a Prop. 65 cause of action, many plaintiffs bring a claim under the California Unfair Practices Act, which prohibits unfair competition. If the Attorney General brings the unfair practices claim, a Prop. 65 defendant can be required to pay additional penalties of up to $2,500 per day. Private Prop. 65 plaintiffs are not entitled to these additional penalties. However, courts may grant injunctive relief and restitutionary damages, directing the defendant, among other things, to disgorge all profits from its sales or activities conducted in violation of Prop. 65. In sum, the financial liability facing a business not complying with the mandates of Prop. 65 can be onerous.
Exemptions
* Businesses with fewer than 10 employees (including part-time workers) are exempt from the Act.
* Releases and exposures below certain statutorily defined levels are also exempt, however, these thresholds are exceptionally difficult to meet.
Compliance with Proposition 65
Any effective compliance strategy must begin with a thorough audit of a business= operations to determine what, if anything, it is doing in violation of Prop. 65.
To avoid exposure to liability, a business should determine if it is releasing any listed chemicals which might find their way into a drinking water source. If it is, the business should desist causing such releases. For those products that the State has provided "safe harbor" language, the use of these warnings should be sufficient. If no safe harbor language is available for a particular exposure, it is extremely important that a business receive expert assistance drafting and implementing an adequate warning.
Although the implementation of this compliance strategy will not necessarily immunize a business for past violations of Prop. 65 it will minimize the accrual of any additional potential liability for non-compliance and may even serve as a useful means of discouraging a court from granting restitutionary damages pursuant to an Unfair Business Practices claim.
Defending Against a Proposition 65 Lawsuit
A business targeted by a Abounty hunter@ for a Prop. 65 enforcement action will first receive a 60-Day Notice of Intent to Sue Under Prop. 65, which is intended to give the Attorney General or local prosecutor the opportunity to intervene in the enforcement action. The Act delineates specific requirements for a 60-Day Notice. Notices must be scrutinized carefully for defects because a plaintiff will be required to begin the entire notification process anew if a court holds that the Notice was defective. This could dramatically affect a business= potential liability, especially if the business implemented an effective compliance strategy immediately upon receipt of the first Notice.
After the Notice has been analyzed, the validity of the plaintiff=s claims must be examined to determine viable defenses. Where there are no viable defenses, it is critical to negotiate proper settlement terms including gaining protection against suits from others. If there are viable defenses, litigation strategies must be analyzed and litigation goals must be established.
Businesses must be careful as they walk the minefield of California environmental compliance; with effective assistance, businesses can avoid Prop. 65 headaches.
Environmental Practice Group Experience
The Jeffer, Mangels, Butler & Marmaro LLP Environmental Group has substantial expertise handling Prop. 65 matters, whether it be in developing compliance strategies, negotiating settlement agreements or defending suits brought. Although each Prop. 65 situation presents unique challenges, the Environmental Practice Group is able to call upon its substantial experience in this area to meet the unique needs of each of its clients.
New
Changes to Proposition 65: Welcome Relief or Added Burden?
By David P. Waite, Esq.
I. INTRODUCTION By now, many commercial enterprises that permit the legal sale or use of tobacco on their premises have been confronted with 60-day notice letters and civil complaints for allegedly failing to post the required warnings in violation of Health and Safety ("H&S") Code § 25249.5 ("Proposition 65"). Over 4000 notice letters have been issued prior to year's end by private enforcers seeking to avoid the application of new changes to Proposition 65.
Procedures contained in present law and rule were thought to prevent Proposition 65 enforcement abuses. However, concerns remained that plaintiffs' counsel were bringing frivolous suits. In addition, defense counsel, along with certain plaintiffs, were achieving settlements perceived as not protective of the public interest.
Senate Bill 471, effective January 1, 2002, provides additional requirements to fend off frivolous private enforcement actions. The new law imposes additional pre-filing requirements on private enforcers, establishes criteria for the assessment of civil penalties, and increases the roles of both the Attorney General and the Courts in the settlement process. While these new measures may stem abuses, they may actually increase the burdens imposed on those unfortunate enough to be caught in the cross hairs of the Proposition 65 enforcer.
II. DISCUSSION
A. The Certificate of Merit
In providing the Attorney General 60 days within which to review allegations of violations of the Proposition 65 warning requirements, a person seeking to enforce Proposition 65 will be required to include a "certificate of merit". This certificate must indicate that: (1) the person executing the certificate (either the attorney for the noticing party, or the noticing party) has consulted with one or more persons with "relevant and appropriate" experience; (2) this person has "reviewed facts, studies, or other data regarding the exposure to the listed chemical that is the subject of the action"; and (3) this person believes that there is a "reasonable and meritorious case" for the private action. Factual information in support of the certificate must be attached to the certificate that is forwarded to the Attorney General.
If the defense is ultimately successful and the court, based on its review of the certificate, concludes that "there was no credible factual basis for the certifier's belief that an exposure to a listed chemical had occurred or was threatened", then the court may deem the case frivolous and order the private enforcer, his or her attorney, or both to pay reasonable expenses including attorneys fees to the successful party.
The legislature decided to make the certificate of merit off limits to discovery pursuant to H&S Code §25249.7 (h) (1). Only by engaging in the traditional, time-consuming and perhaps costly discovery, which the certificate of merit provision does not affect, may a defendant be in the position to demonstrate the case is frivolous.
B. New Penalty Criteria
Presently, Proposition 65 states that a violator of the provisions of Proposition 65 shall be liable for a civil penalty not to exceed $2500 per day for each violation. If the complainant and alleged violator come to a settlement, one of the parties simply files the stipulation for entry of consent judgment, order approving the stipulation, and proposed judgment with the court which typically approves of the judgment.
New provisions insert penalty-assessment criteria patterned after several environmental statutes and regulations. In assessment of the penalty, the court is to consider the nature and extent of the violation, the number of, and severity of, the violations, the economic effect of the penalty on the violator, whether the violator took good faith measures to comply with the chapter and the time these measures were taken, the willfulness of the violator's misconduct, the deterrent effect that the imposition of the penalty would have on both the violator and the regulated community as a whole, and any other factor that justice may require. H&S Code §25249.7 (b) (2) (A) through (G). It is unknown whether the new criteria will significantly affect the settlement process.
C. New Role of the Court
Where the parties agree to settle the case, unlike present practice where either plaintiff's or defendant's counsel submits the stipulation to the court for approval, H&S Code § 25249.7 (f) (4) requires that plaintiff submit the settlement to the court for approval upon noticed motion. In addition, unlike present practice where the court by simple order may approve the stipulation for entry of judgment, H&S Code § 25249.7 (f) (4) requires that the court make specific findings. The findings are to include: (1) warnings required by the settlement comply with Proposition 65; (2) any award of attorney's fees is reasonable under California law; and (3) the penalty amount is reasonable based on the statute's criteria for penalty assessment. H&S Code § 25249.7 (f) (5) places the burden on plaintiff to produce evidence sufficient to sustain the above required findings.
Where the private enforcer and defendant seek to settle the case without hearing, of necessity, the parties will need to provide the court proposed stipulated findings demonstrating that the statutory criteria have been properly structured into the settlement. Otherwise, the court will need to conduct a hearing in order to make the required statutory findings.
These new procedures will place additional burdens on defendants seeking to reach settlement with private enforcers. It is unclear how involved courts will be in reviewing a proposed Proposition 65 settlement.
D. New Role of Attorney General
In addition to providing courts with new responsibilities in reviewing Proposition 65 settlements, pursuant to H&S Code §25249.7 (f) (4), the Attorney General is provided the opportunity to appear and participate in any proceeding on the merits of the settlement without intervening in the case. Again, it is unknown what criteria the Attorney General will employ in evaluating the adequacy of proposed settlements and what level of participation his office will choose in a particular case.
III. CONCLUSIONS
One may hope that the changes to Proposition 65, with the best of intentions on the part of the Legislature and the Attorney General, will have the desired effect of reducing frivolous Proposition 65 lawsuits. However, the non-disclosure provisions of the certificate of merit, the civil penalty assessment criteria, and the requirement for court findings create additional hurdles for defendants attempting to enter into a straightforward settlement under Proposition 65.
Waiting
Too Long For Tenants to Pay?
By Lawrence Rubenstein
There is a delicate balance between overly aggressive rent collection and being too passive. Some owners "manage by the book," serving a three-day notice to pay the day after rent is due, and do not accept money after the fourth day. Some owners wait patiently no matter what, hoping to avoid legal costs, turnover and the hassle of the eviction process.
Waiting too long for tenants to pay can be very expensive. In addition to the legal expense, you lose rental income every day you wait to initiate the unlawful detainer action (eviction). Moreover, word gets out to other tenants that you are a passive collector, and next thing you know, many of your building's tenants are paying late. Late payers not only create the risk of losing rental income, but also add administrative and accounting burden for the owner. And perpetually late payers often dispute what they actually owe due to erratic payments and postings.
From this you might conclude that it is appropriate to aggressively start evictions. Perhaps, but in many cases this is not the case. Careful consideration is in order for each individual late payment situation. One should consider the circumstances as to why the tenant needs to pay late (job layoff, medical emergency), how long the tenant has resided there, timeliness of past rent payments, tenant quality and whether you wish to retain the tenant. If a tenant has a good likelihood of paying, or catching up by making payments, you come out well ahead by avoiding the expense of a turnover, legal fees, and the time you spend pursuing an unlawful detainer action.
In any event, certain rules should be applied in nearly all late payment circumstances. One, give tenants a reminder by the third day rent is due. Two, serve a three-day notice to pay by the fifth day (unless it's a long-term reliable tenant). Three, get a specific commitment date for paying and enforce it. Four, accept only certified funds once a three-day notice was served. Five, charge a late fee and enforce it. Otherwise where is the incentive for a tenant to pay you first, ahead of other bills? Six, charge the tenant all attorney's fees you have incurred before accepting any rent. Seven, do not allow the tenant to continue paying late. Once you allow the establishment of a late payment pattern, you have inadvertently permitted the tenant to legally pay in this manner. You then must serve the tenant legal notice to pay at the on-time date to reestablish your rights.
I always ask our property supervisors to remind tenants to pay their rent ahead of other bills. Making payments on a TV or stereo, or even utility bills doesn't do them much good if they are living on the street. And having an unlawful detainer on one's record makes it difficult to rent for the next ten years!
Lawrence Rubenstein is President of Los Angeles-based LRA Property Management Incorporated.
What
is it About Security Deposits and Pets?
By Lawrence Rubenstein
Every day an apartment sits vacant, money is lost. Getting apartment units rented as quickly as possible, to "good" tenants, at market rents is everyone's goal. Why then do many owners and property managers insist on large security deposits from tenants? And why do many owners not rent to tenants with pets?
I recall from my introductory Economics classes that the greater the demand for a product, the higher the price you can achieve. It also follows that the less you restrict your applicants, the easier it will be to fill a vacancy. Since most renters are short of cash, and so many have pets, what is it that leads owners and property managers to exclude these potential renters?
First, let's discuss the motive for getting high security deposits. Certainly all property owners experienced occasions where a full, two month's rental security deposit came in handy. In my last article, I discussed the horror of a tenant living in a unit for more than six months rent-free. How nice it would have been to recover at least two months rent through a security deposit forfeit. We've all heard dreadful stories of tenants destroying a unit, or painting their apartment black, or taking the carpet with them on move out. Again, it's a comfort knowing you have two month's security deposit to offset any expenses. From this, it may seem obvious that property owners should demand the lawful maximum allowable security deposit in order to protect themselves financially. But looking at these specific examples may lead you to the wrong conclusion.
Let's assume that you have 100 rental units and that 99 of them are leased to good, responsible tenants who take care of their units. In each of these instances, you are able to get an additional $10 per month rent because you've increased your available demand by reducing your security deposit requirement. Remember most tenants don't have much cash, and reducing their move in cash requirement opens the door for many more potential rentals.
Now you're collecting $1,000 additional revenue per month, or $12,000 more per year. Just how much damage or rent loss might the one in a hundred tenant cost? Most likely, the amount is much less than $12,000. Moreover, you have an opportunity to carefully screen your potential tenants, check their credit and employment, and make an educated guess on how they will pay and act. In the long run you benefit most by asking a modest deposit. And it's the long run bottom line we should be after, and not worry about those nasty occasional losses.
The same is true of pets. Why limit renting to tenants without pets? Of course there are some good reasons. As recent tragic events have shown, attack dogs are not pets and vicious animals of any kind are not acceptable pets. Additionally, if a tenant has a pet elephant and the available unit is on the second floor, this could be a problem for the tenant below. A howling wolf could also be a problem. I don't think the neighbors would appreciate a rooster crowing at 4 a.m., either. So there are some pet owners that should definitely be avoided. But how about a cat, or a quiet dog?
In the vast majority of cases, a cat or small dog will do little damage to your property. Perhaps you will have to replace the carpeting after several years of tenant revenues from a pet owner, who will have gladly increased the security deposit by a few hundred dollars to include a treasured companion. Most pet owners are responsible tenants who will take good care of their apartments. Although some dogs will destroy the carpet, in the long run, you will come out ahead by renting to pet owners.
One caveat to allowing pets is your responsibility to have a tenant remove a pet that may be dangerous. If an owner has knowledge of a pet injuring someone, they must have the tenant remove the pet from the property, or face significant liability should an incident occur. Given the murder conviction of the owner of dogs known to be dangerous, this caveat is all the more germane.
As with lower security deposits, you will increase your rental demand, thus increasing your market rent and be able to fill your vacancies much sooner from this larger rental pool. Despite the occasional damage losses you might suffer, you will make more money in the end by allowing reliable pet owners to rent.
So why do owners and property managers ask for the maximum security deposits and restrict tenants with pets? It's all the better for us that they do. It increases the demand for the buildings we manage. We get the benefit of this larger pool of potential tenants and our clients make even more money!
Lawrence Rubenstein is President of Los Angeles-based LRA Property Management Incorporated.
Property
Management and the Government
By Lawrence Rubenstein
I've recently had numerous discussions with staff and fellow property managers about how to handle certain "notices." This used to be a simple issue. But the government seems intent on re-regulating landlord-tenant law, leading to much confusion on the part of both tenants and landlords about what is now legal and what is not.
NOTICE TO VACATE
Until recently, if a tenant was not under a lease term -- that is under a
month-to-month tenancy -- a tenant could give a landlord a 30-day notice to
vacate, and the owner could likewise give a tenant the same 30-day notice. This
simple symmetry is no longer so simple.
If you live in the cities of Los Angeles, West Hollywood or Santa Monica, and the tenant has resided in the unit over a year, you must give the tenant a 60-day notice to vacate. However, if the building is covered by rent control (generally if built before 1979), then you cannot give a tenant notice to vacate at all, unless you have "cause" as defined by that city's Rent Control Ordinance. (Soon, it won't be just Los Angeles, West Hollywood and Santa Monica that will fall under this requirement; a new State of California law that goes into effect January 1, 2003 will make the 60-day notice requirement statewide for non-rent-controlled buildings.) And, by the way, if your building is located in the City of Glendale, there is no Rent Control Ordinance, but there is a restriction on serving a notice to vacate without cause.
If a tenant is on a Section 8 subsidy, you must give the tenant (and Section 8 office) a 90-day notice to vacate. However, if the tenant lives in a rent-controlled building in the City of Los Angeles, you must accept the tenant rent portion as total rent paid, and cannot evict the tenant (unless one of the other 12 reasons to evict occurs)!
NOTICE TO INCREASE RENT
In non-rent-controlled buildings, you were allowed to increase rent any
amount, at any time, with a 30-day notice to Change Terms of Tenancy (except
during the time of a lease commitment). Effective January 1, 2001, things are no
longer this straightforward.
You may still increase rent any amount you please, but if you raise a tenant's rent 10% or more during a 12-month period, you must give the tenant a 60-day notice. For example, if you increased a tenant's rent 5% two months ago and wish to raise it again another 6% within the next ten months, you must give a 60-day notice for that second increase.
In most rent-controlled buildings, you can increase rent no more than once a year, and that amount is capped by an inflation number provided to you by the city in which the property is located. For example, the City of Los Angeles currently allows a maximum 3% increase (unless the landlord pays utilities, and then it's 4%).
AND THERE'S MORE
The government also has changed how notices can be served - in person, by mail
or by posting. The rules are extremely complex - so my advice is to do your due
diligence first. Another new State law requires disclosure of where the tenant
can go to personally pay rent, and the hours someone will be there to collect
it. It is silent on whether you may use drop boxes for collection. And try
calculating interest owed on security deposits for rent-controlled units in Los
Angeles. The rate was 5%, and then varies by year over the past several
years.
If you are confused about how to comply with landlord-tenant law in the State of California, feel comforted that you are among the many. Unfortunately, there doesn't seem to be any relief in sight. So, for now, don't take anything for granted, do your research and then double-check once again.
Lawrence Rubenstein is President of Los Angeles-based LRA Property Management Incorporated.