New Draft Prop. 65 Warning Regulations: What Manufacturers and Suppliers Need to Know

On November 24, 2015, the Office of Environmental Health Hazard Assessment (“OEHHA”) issued proposed revisions to its January 15, 2015 draft Prop. 65 warning regulations. 27 CCR §§25600 et seq. The full text of the new draft regulations was published by the Office of Administrative Law on November 27.

OEHHA’s November draft proposes several changes to the January version, two of which stand out as significant.
 
1. Out With The “Dirty Dozen”

Existing regulations provide some guidance as to warning content, prescribing “safe-harbor” language designed to protect against Prop. 65 claims if used properly. They do not, however, require warnings to name any of the chemicals giving rise to the duty to warn (the “subject chemicals”). The January draft [§25602] changed that, specifying a list of 12 such chemicals that must be named if the warning is to achieve safe-harbor status. The November draft eliminated the list, but retained a truncated version of the chemical-naming requirement.

Under the new version [§25601(c)], safe harbor status is achieved if “one or more” of any of the subject chemicals is named in the warning. This is good news for those who sell products in California, as the November draft would eliminate the need to test for all 12 of the formerly listed chemicals to craft a warning that meets the chemical-naming requirement (which, by the way, does not apply to on-product warnings).

2. More Protection For Existing Inventory

The January draft [§25600(b)] provided a phase-in period of two years from the adoption of the new regulations. This was problematic because any products manufactured prior to adoption would have to be re-labeled if they were still on the shelves two years after adoption. The November draft [§25600(b)] fixed this problem, providing that products manufactured prior to adoption are protected indefinitely so long as their warnings comply with the prior (September 2008) regulations. Given that many products have shelf lives longer than two years, this change, if adopted, would avoid substantial – and wasteful – relabeling costs.

-- Brian Haughton and Julia Graeser

For more information, contact Brian Haughton at bsh@bcltlaw.com, (415) 228-5423, or Julia Graeser at jrg@bcltlaw.com, (415) 228-5481

New California Laws Will Ease Groundwater Right Battles, Yet Encourage More Litigation

On October 9, 2015 Governor Jerry Brown signed into law two bills aimed at making groundwater disputes easier and faster to resolve in court.

The new laws—companion bills AB 1390 (Alejo) and SB 226 (Pavley)—streamline California’s onerous groundwater adjudication process, which can drag on for decades. Such adjudications comprehensively establish groundwater right allocations for all users in a covered groundwater basin and, up to now, have been governed by common law principles. The new statutes focus primarily on procedures to speed up the groundwater adjudication process, but also ensure that courtroom adjudications do not interfere with California’s 2014 legislation promoting sustainable management of groundwater basins, known as the Sustainable Groundwater Management Act (“SGMA”).

There are at least 20 adjudicated basins in California, but the daunting, multi-year adjudication process  tends to discourage attempts to comprehensively establish groundwater rights. For example, the initial complaint in the Upper Los Angeles River Area adjudication was filed in 1955, but adjudication was not completed until 1979. Further, every affected groundwater right holder in a subject basin must receive notice, which results in huge numbers of named parties. The recently concluded Antelope Valley adjudication had over 70,000 parties.

With the potential for multi-decade litigation affecting thousands of parties, the adjudication process has not been used to its full potential. But with vastly increased groundwater pumping prompted by California’s historic drought, and a “wild west” chaos predominating in many of California’s groundwater aquifers, the new laws come at a key juncture. Building on SGMA, the new laws promise to provide further tools for effectively determining and managing groundwater resources throughout California. Once wielded, however, these powerful legal tools will have vast consequences in determining the scope of water rights across the State.

Key Changes to Lawsuits Determining Groundwater Rights

AB 1390 aims to streamline and speed up the judicial procedures for conducting comprehensive groundwater adjudications, targeting challenges related to providing notice, authorizing new agency intervention, phasing the litigation, setting disclosure deadlines, and providing injunctive power to the court to prevent a pumpers’ race to the bottom after the complaint is filed.

Specifically, AB 1390:

• Requires the plaintiff filing the complaint to also provide a draft notice and draft form answer at that time. The plaintiff then would need to send the notice to all tax assessor parcel numbers in the basin, so as to ensure all affected parties are provided with notice. The law deems such actions as sufficient to provide notice and establish jurisdiction over all affected parties.
  
• Authorizes groundwater sustainability agencies—the local agencies designated by SGMA as responsible for devising groundwater sustainability plans—to intervene in a comprehensive adjudication. This would ensure that even where such sustainability agencies do not hold water rights in the basin, they can still intervene in the litigation.
  
• Requires the court to convene an early case management conference aimed at speeding up the litigation, to address:  (1) identifying whether the basin boundaries should be adjusted, (2) appointing a special master, (3) scheduling a hearing on a preliminary injunction, (4) dividing the case into phases to resolve legal and factual issues, (5) limiting discovery to correspond to the phasing, (6) scheduling an early resolution of claims to prescriptive rights, and (7) forming classes of overlying groundwater rights holders to further speed adjudication.

• Mandates that all parties submit initial disclosures within six months of appearing in the action. In these disclosures—submitted under penalty of perjury—each party must identify the quantity of groundwater extracted from the basin for each of the previous 10 years, the location of each groundwater extraction well, and the use for which groundwater extracted has been applied.
  
• Authorizes the court to issue a preliminary injunction that could include a moratorium on new or increased groundwater extraction. This provision would help reduce the race to the pumps created by the filing of adjudication action.

Advancing SGMA Goals 

SB 226 adds provisions specific to groundwater basins that are undergoing a comprehensive adjudication and which are also subject to the SGMA. SGMA requires all groundwater basins designated as high- or medium-priority basins by the Department of Water Resources to have a groundwater sustainability plan in place by January 2022 (or 2020, if in a state of critical overdraft). Cal. Water Code § 10720.7(a).

SB 226 requires courts overseeing comprehensive groundwater adjudications to:

manage the proceedings in a manner that minimizes interference with the timely completion and implementation of a groundwater sustainability plan, avoid[ ] redundancy and unnecessary costs in the development of technical information and a physical solution, and [be] consistent with the attainment of sustainable groundwater management within the timeframes established by this part.

Cal. Water Code § 10737.2. In the context of adjudications, the legislation would also clarify how groundwater basin boundary adjustments should occur as well as how basins deemed “probationary” under SGMA would be covered by an adjudication.

This bill would also enable the California Attorney General to intervene in any adjudication action.

California Confronts the Drought Head-On

The new laws further demonstrate the California Legislature’s “all hands on deck” efforts to addressing the current water crisis. On the heels of authorizing $7.5 billion in Prop. 1 funding, the groundbreaking SGMA, the State Water Resources Control Board’s unprecedented curtailment notices to surface water rights holders, and recent developments in the courts, California continues the process of redefining the legal framework applicable to California’s vitally important groundwater resources.

-- Dave Metres

For more information, contact Dave Metres at dmm@bcltlaw.com or (415) 228-5488.

New California Groundwater Laws Portend More Litigation, But Faster Resolution

Last week, the California Legislature sent two important bills on groundwater to Governor Jerry Brown for signature. The bills promise to revamp California’s complicated, lengthy, and arduous judicial process for adjudicating rights to groundwater, and to make the adjudication process comport with 2014’s pathbreaking law governing California groundwater. But as the new laws would speed the judicial process to comprehensively establish all groundwater rights in particular basins, the streamlining also could prompt litigants to head to the courthouse more quickly.

The bills—AB 1390 (Alejo) and SB 226 (Pavley)—represent another concerted effort by California lawmakers to address groundwater issues. After ignoring California’s ever-diminishing groundwater resources for decades, the Legislature passed the Sustainable Groundwater Management Act (“SGMA”) in 2014, which endeavors to nurse California’s most severely impacted groundwater basins back to health. The new legislation promises to build on that effort, and to ease the multi-year—and often multi-decade—process of comprehensively adjudicating groundwater rights in court.

To confront the significant challenges in determining the groundwater rights for the thousands of users in each groundwater basin, AB 1390:

• streamlines the processes for providing notice to all affected parties,
• speeds up the timeline for these parties to identify their groundwater extractions,
• provides the courts ample new tools to streamline the adjudication process, and
• creates new judicial powers to enable prompt resolution without increasing the potential for overpumping generated by the filing of the lawsuit.

SB 226 adds new provisions to the SGMA that are aimed at ensuring that neither the adjudication process nor the efforts to develop and implement groundwater sustainability plans required by SGMA interfere with each other.

 

Together, the bills represent another important step in reducing the conflicts and easing the resolution of contentious battles over water rights. The California legislature—unlike in past droughts—has taken seriously the call to action this drought has presented, and has produced another law that promises to bring faster resolution to contentious courtroom fights over groundwater allocations.

 

If Governor Brown signs the bills, and all indications suggest he will, new courtroom battles over groundwater rights should be expected.

-- Dave Metres

For more information, contact Dave Metres at dmm@bcltlaw.com or (415) 228-5488.

“Not the Stuff of Science”: “Differential Etiology” Causation Opinions Fail Daubert in 7th Circuit Toxic Tort Case

The Seventh Circuit Court of Appeals has affirmed a district court’s grant of summary judgment in an environmental toxic tort case, holding that the testimony of all three of plaintiffs’ causation experts – James Dahlgren, M.D., Vera Byers, M.D., Ph.D, and Jill Ryer-Powder, Ph.D – was properly excluded as unreliable under the Daubert standard governing the admissibility of expert testimony.

In C.W. et al. v. Textron, Inc. (August 26, 2015; Court of Appeals Case No. 14-3448 (N.D. Ind.)), the plaintiffs were two minors whose parents filed tort claims on their behalf against Textron. While living near a Textron fastener manufacturing plant in Rochester, Indiana, the infant children experienced gastrointestinal, immunological, and neurological issues. The parents eventually learned that the groundwater well at their home was contaminated by vinyl chloride released from the Textron facility, at levels of five to nine parts per billion. The family moved out of the home and sued Textron, alleging that the company had exposed the children to vinyl chloride, which caused their illnesses and substantially increased their risk of cancer and other adverse health effects.

After four years of litigation, the district court granted in its entirety a motion in limine to exclude plaintiffs’ three expert witnesses and then granted summary judgment, finding that plaintiffs could not prove general or specific causation without the experts. The Court of Appeals affirmed, holding that the district court “properly adhered to the Daubert framework” and conducted an “exhaustive” review.

Dr. James Dahlgren testified that exposure to vinyl chloride can cause and did cause the children’s illnesses, and that it was highly likely that both children will develop cancer at some point in the future. The district court found that Dahlgren’s reliance on “differential etiology” (often mistakenly called “differential diagnosis”) failed to meet the Daubert standard, in part because Dahlgren “failed to connect the dots between the scientific studies that he analyzed and the opinions that he offered”: the studies that he relied upon failed to establish that vinyl chloride, at the dose and duration relevant to the case, could cause the problems that plaintiffs experienced or claimed they were likely to experience. The Court of Appeals agreed that Dahlgren’s methodology was unreliable, stating: “This approach is not the stuff of science.”

Dr. Vera Byers also testified that exposure to vinyl chloride – via contaminated drinking water, inhalation of vapors from bathing, and dermal contact – can cause and did cause the children’s gastrointestinal and immune-system problems. The district court similarly excluded her differential etiology testimony, finding the studies she relied on were not relevant, and there was no basis for “ruling in” vinyl chloride exposure as a possible cause of the medical issues. The Court of Appeals concurred, commenting: “Without the benefit of analogous studies and an acceptable method of extrapolation, Dr. Byers . . . is forced to take a leap of faith in pointing to vinyl chloride as having the capacity to cause the injuries (and risk of injury) to [plaintiffs]. The district court ably performed its gatekeeper role in shielding the jury from this leap.”

Dr. Jill Ryer-Powder testified similarly, relying on studies at much higher exposure levels than were present in the case. In forming her opinion on causation, Ryer-Powder also relied on the fact that the plaintiffs’ drinking water exceeded regulatory standards. As with Dr. Dahlgren and Dr. Byers, the district court found that she did not offer a reliable basis to support her opinion. The Court of Appeals held that the district court did not abuse its discretion in rejecting Ryer-Powder’s methodology, noting in part that exceedances of regulatory standards do not prove causation.

The Court of Appeals also:

• ruled that the district court properly rejected the experts’ methodology, to the extent they based their opinions on the timing of the plaintiffs’ injuries coinciding with their exposure to vinyl chloride (citing a prior Seventh Circuit opinion holding that the “mere existence of a temporal relationship” does not “show a sufficient causal relationship”); and 
• rejected plaintiffs’ claim that, because there are no studies available regarding the impact of vinyl chloride on children at the dose and duration in question, the experts’ testimony should have been admitted. The Court noted that computer-based models can extrapolate from animal data to human subjects, and from high doses to low doses, but plaintiffs’ experts did not mention or refer to this method of bridging the data gap.

Finally, the Court of Appeals affirmed the district court’s grant of summary judgment in the absence of any admissible expert causation evidence, but disagreed with that court’s categorical exclusion of  differential etiology as a method to establish general causation. The Court adopted the approach taken by the Second Circuit Court of Appeals in Ruggiero v. Warner-Lambert Co., 424 F.3d 249 (2005), recognizing that there may be instances where a rigorous use of differential etiology is sufficient to support an expert’s opinion on both general and specific causation.

-- Don Sobelman

For more information, contact Don Sobelman at (415) 228-5456 or des@bcltlaw.com 

Federal Judge Puts Freeze on EPA’s Clean Water Act Rulemaking: Preliminary Injunction Halts Implementation of 'Waters of U.S.' Rule

In May of this year the U.S. Environmental Protection Agency (“EPA”) and the U.S. Army Corps of Engineers (“Corps”) issued the much-anticipated Waters of the United States rule (the “Rule”). The Rule redefines and expands federal jurisdiction over waters of the United States under the federal Clean Water Act.

The intent of the Rule, according to the United States, is to provide greater clarity over the jurisdictional reach of the Clean Water Act following a string of Supreme Court decisions limiting the reach of federal jurisdiction. See, e.g., Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers, 531 U.S. 159 (2001) and Rapanos v. United States, 547 U.S. 715 (2006). According to agriculture and industry groups, the Rule is an unprecedented expansion of federal authority that vastly increases the jurisdictional reach of the Clean Water Act, will have a widespread negative economic impact, and profoundly infringes on private property rights.

The Rule has been opposed in Congress and, via a July 28 letter, by officials in 31 states that have asked EPA and the Corps to delay implementation of the Rule. A number of states and business groups have already filed challenges to the rulemaking in federal district courts. For example, on July 10, 2015, the U.S. Chamber of Commerce, along with the National Federation of Independent Business, Portland Cement Association, State Chamber of Oklahoma and Tulsa Regional Chamber, filed a lawsuit challenging the rule in Oklahoma federal court. See Chamber of Commerce et al. v. EPA, Case No. 4:15-cv-00386 (D.Okla. July 10, 2015).

On August 10, 2015, North Dakota and 12 other states -- Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, South Dakota, and Wyoming -- sought a preliminary injunction from the District of North Dakota to prevent implementation of the Rule. North Dakota, et al. v. United States Environmental Protection Agency, et al., Case No. 3:15-cv-00059 (D. N.D. June 29, 2015). The plaintiffs argued that a preliminary injunction was needed to maintain the status quo while the Rule’s legal failings were addressed by the federal courts.

On Thursday, August 27, Judge Ralph Erickson issued the requested preliminary injunction in an 18-page order that can be read here. In issuing the preliminary injunction, Judge Erickson found it more likely than not that the EPA and the Corps had overstepped their authority in promulgating the Rule and had failed to comply with aspects of the Administrative Procedure Act. In balancing the potential harm of issuing a preliminary injunction, the Court concluded:

On balance, the harms favor the [plaintiff] States. The risk of irreparable harm to the States is both imminent and likely. More importantly delaying the Rule will cause the Agencies no appreciable harm. Delaying implementation to allow a full and final resolution on the merits is in the best interests of the public.

Order at 15.

This preliminary injunction is sure to be appealed by the United States and signals the first of many legal salvos over the legitimacy of the Rule.

-- Tom Boer

For more information, contact Tom Boer at (415) 228-5413 or jtb@bcltlaw.com.

CEQA Alert: Extensive Proposed Revisions to CEQA Guidelines Released for Public Comment

On August 11, 2015, the Governor’s Office of Planning and Research (“OPR”) released a preliminary discussion draft of comprehensive revisions to the CEQA Guidelines (“Discussion Draft”).   

Revisions to the CEQA Guidelines are usually piecemeal, and made in response to either specific legislation amending the CEQA statute or court decisions interpreting CEQA. However, in 2013, OPR broadly solicited suggestions from stakeholders as to what changes to the CEQA Guidelines should be made. The Discussion Draft resulted from this process.

The Discussion Draft proposes revisions to 25 aspects of CEQA, broken down into three categories:  “Efficiency Improvements” (seven revisions), “Substance Improvements” (two revisions), and “Technical Improvements” (16 revisions). However, the fact that only two of the proposed revisions fall under the heading of “Substance Improvements” is somewhat misleading, as virtually all of the “Efficiency Improvements” would also substantively alter the Guidelines, with ramifications for both the environmental review process and post-review CEQA litigation. These substantive changes address a number of areas, including:

• adoption and application of thresholds of significance;
• determinations as to whether an activity is within the scope of a program EIR;
• the contents of Guidelines Appendix G (Initial Study Environmental Checklist);
• the consequences of a court decision finding a violation of CEQA;
• analysis of energy impacts;
• analysis of water supply impacts;
• selection of the baseline conditions for impacts analysis;
• deferral of mitigation; and
• response to comments on a draft EIR.

While some of the proposed revisions merely attempt to harmonize the Guidelines with recent case law and legislative acts, other revisions go well beyond such considerations and will likely be controversial. Moreover, OPR has posed a number of questions for stakeholders in the Discussion Draft, which could lead to additional proposed revisions.

The Preliminary Draft is available here. Comments on the Draft Guidelines must be submitted to OPR by October 12, 2015.

- Don Sobelman and Kathryn Oehlschlager

For more information, contact Don Sobelman at (415) 228-5456 or des@bcltlaw.com, or Kathryn Oehlschlager at (415) 228-5458 or klo@bcltlaw.com.

CEQA Alert: CA Supreme Court Clarifies Duties of State Agencies in Funding Off-Site Mitigation

On August 3, the California Supreme Court released its second CEQA decision of 2015, addressing a key issue for state agencies undertaking projects that require off-site environmental mitigation. In City of San Diego v. Board of Trustees of the California State University (SC Case No. S199557) (“City of San Diego”), the Court clarified that a state agency may not reject as infeasible off-site mitigation via fair-share payment solely due to the lack of appropriations earmarked for that purpose by the State Legislature. In doing so, it affirmed the Court of Appeal’s decision directing the Board of Trustees of the California State University (“CSU Board”) to vacate its certification of an EIR for a major expansion of the San Diego State University (“SDSU”).

In 2007, the CSU Board prepared an environmental impact report and campus master plan revision (“EIR”) proposing several major construction projects on the SDSU campus (“the project”). The EIR identified significant cumulative traffic impacts at several off-campus locations in San Diego, and it estimated the project’s average “fair share” contribution to mitigate the increased congestion at 12 percent. However, the CSU Board stated that it could not commit to paying that fair share, because it was not certain whether the California Legislature would appropriate funding specifically for that purpose. For this reason, the CSU Board found that mitigation of the traffic impacts via fair-share payment was infeasible, and that the traffic impacts were therefore significant and unavoidable. The CSU Board certified the EIR based on a statement of overriding considerations.

In a unanimous opinion penned by Justice Werdegar, the Supreme Court revisited the Court’s decision in another case involving the CSU Board’s approval of a campus expansion project, City of Marina v. Board of Trustees of California State University (2006) 39 Cal.4th 341 (“Marina”). In Marina, which was also authored by Justice Werdegar, the Court held that the CSU Board’s duty to mitigate impacts extended beyond the boundaries of the campus, and that if it could not adequately mitigate those impacts by performing acts on the campus, “then to pay a third party . . . to perform the necessary acts off campus may well represent a feasible alternative.” However, the Court also noted that “[ ] a state agency’s power to mitigate its project’s effects through voluntary mitigation payments is ultimately subject to legislative control; if the Legislature does not appropriate the money, the power does not exist.” 

In the instant case, the CSU Board relied on the italicized language above in determining that the uncertainty of earmarked appropriations by the Legislature rendered mitigation by fair-share payment infeasible. The Supreme Court held that, in doing so, the CSU Board had erroneously interpreted Marina, for a number of reasons:

1. The italicized language is “dictum” that appeared in a paragraph in the decision that “imagines possible limitations on our holding that the Board shared with other agencies the responsibility to mitigate the off-site environmental effects of its project.”
2. The Marina dictum “is simply an overstatement,” as a public agency “has access to all of its discretionary powers and not just the power to spend appropriations.” Moreover, in the case of CSU, the agency has some discretion over use of general support appropriations for capital projects and has access to non-state funds.
3. Neither CEQA nor any other decision interpreting the statute suggests that mitigation costs for a project funded by the Legislature cannot be included in the project’s budget and paid for with funds appropriated for the project.
4. No provision of CEQA “conditions the duty of a state agency to mitigate its projects’ environmental effects on the Legislature’s grant of an earmarked appropriation.” Moreover, the Legislature has expressly subjected the CSU Board’s decisions on campus master plans to CEQA, including the requirement for mitigation of environmental impacts.
5. CEQA draws no distinction between on-site and off-site environmental impacts. Public agencies are required to mitigate or avoid significant effects of a project on the “environment,” which is defined as “the physical conditions which exist within the area which will be affected by a proposed project.” If on-site mitigation measures can be funded through the project budget without an earmarked appropriation (as the CSU Board had determined in the EIR), “then so too can off-site mitigation measures.”

In addition, the Court noted that “unreasonable consequences” would follow from the CSU Board’s interpretation of Marina, and CEQA’s “fundamental statutory directive” would be impaired. Finally, the Court rejected three new arguments presented by the CSU Board, finding that Education Code sections 67504 and 66202.5 and Government Code section 13332.15 did not support the Board’s determination.

Overall, the City of San Diego decision provides welcome clarity on an important and recurring issue of CEQA interpretation that the Court itself had created with the Marina decision.

-- Don Sobelman

For more information, contact Don Sobelman at (415) 228-5456 or des@bcltlaw.com.