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Friday
Jun162017

Old Grounds: A Lack of Prop 65 Warnings Brew Trouble for Coffee Franchisors

 

by Stephen T. Holzer and Barry Kurtz

 

California Prop 65 warnings – many residents barely notice these anymore, as we’ve lived with Safe Drinking Water and Toxic Enforcement Act notices for over 30 years now. They appear at gas pumps; in apartment and office buildings; on packaging for food, toys and other products; and in retail establishments all over the state.

The ubiquitous but largely ignored warnings are clear, generally stating that a consumer may be exposed to certain chemicals that may cause cancer or reproductive harm.

But if the average citizen of California no longer notices the signs, who does? Bounty hunters. More specifically, an opportunistic group of consumers and lawyers who notice the lack of Prop 65 signs and labels. They then file lawsuits on behalf of the public good. Most businesses settle the claims rather than engage in expensive litigation.

This leads to a whole new trend in tort litigation aimed at restaurants, though Starbucks and Dunkin’ Donuts were named (along with approximately 80 other coffee co-defendants) in a suit brought by the Council for Education and Research on Toxics (CERT) back in 2010. CERT's complaint is that these businesses failed to warn customers of potentially harmful, carcinogenic chemicals in coffee, specifically acrylamide.

In the latest news on this particular CERT suit, Dunkin’ lost its argument for summary judgment. The franchisor claimed it needn’t put warning labels on its coffee because technically, the franchisor doesn’t sell coffee in California. Dunkin’ Brands Inc. oversees a corporation – it doesn’t buy, sell, roast, distribute or even possess coffee.

A Los Angeles Superior Court Judge found that argument weak, and so to court will Dunkin’ go, along with its codefendants. 

More Acrylamide and Other Chemically-Based Acrimony

The chemical acrylamide isn't just found in coffee. It forms on starchy foods as they cook, so toast, French fries and a host of other popular menu items carry trace amounts. Really, just about any one operating a restaurant in California can become a target for this type of tort.

But environmental plaintiffs worry about other chemicals and ingredients too.

Prop 65 and Restaurant Businesses

According to the Mercury News, plaintiffs filed lawsuits last year because of Bisphenol A (BPA) found in receipt paper and bottled water.

Sugar is also on the chemical hit list, though not considered a Prop 65 chemical. California lawmakers introduced Senate Bill 300, the Sugar-Sweetened Beverage Health Warning Act, which could require anyone selling closed container beverages to add warnings to their containers, and any business with vending or beverage dispensing machines to add signage to those machines.

The warning as written now, would read:  STATE OF CALIFORNIA SAFETY WARNING: Drinking beverages with added sugar(s) contributes to obesity, type 2 diabetes, and tooth decay.

Some franchisors have already stated an intention to remove food dyes from the ingredients of their menu items, Dunkin' Donuts and Baskin Robins among them. But California has a bill targeting products with these chemicals too.

Senate Bill 504 would amend the state's Health and Safety Code to direct the Office of Environmental Health Hazard Assessment (OEHHA) to review literature regarding the potential risks to children who may be consuming these chemicals.

A report from the OEHHA would be due in 2019. Chances are good the chemicals in food dyes will make their way to the hundreds of chemicals already flagged on California's Prop 65 list of potentially toxic agents.

Prop 65 Compliance

So what should restaurant owners know about Prop 65, and more importantly, what should they do?

1. Size Matters: Understand that the law affects businesses employing 10 or more people. Small café and food truck owners are probably safe if they employ a skeleton staff. In fact, that was another argument Dunkin' Brands Inc. attempted when it tried to get out of the coffee labeling suit.

2. The List is Long: There are about 900 chemicals cited as dangerous on the OEHHA list as of January (there are 1,000 rows on the Excel sheet – some of the data contains delisted chemicals, some are header information rows, etc.). Chances are good every business in California with 10 or more employees should be posting a warning of some sort.

3. Prop 65 Has Evolved: The rules regarding this law changed recently. Warning labels and signs gave general warnings in the past, now businesses must name the specific chemical present on the premises or in the product. That could get rather daunting, e.g. "This establishment sells products for consumption that may contain acrylamide, BPA, benzidene (found in food dyes), ethanol (found in alcoholic beverages), etc. The new rules will be enforced as of August 30, 2018.

4. Violation Penalties: Up to $2,500 per day, per violation.

5. Some Good News: Businesses could argue that the levels of the chemicals present in food or other products are so low, there is little risk of harm. This type of defense requires expert, scientific testimony however, and may be financially out of reach for many businesses.

Franchisors and franchisees should beware and be diligent. 

History tells us that when a contingency fee attorney finds one unit in a franchise system in potential violation of these types of consumer-protection laws, litigation on the claims spreads through the franchise system and company-owned units like wildfire. Since the franchisor generally establishes operating standards, specifications and procedures with which the franchisees must follow, both are at risk if they fail to comply with these measures once they become law.

 

Steve Holzer is the Chair of our Environmental Practice Group. Barry Kurtz is the Chair of our Franchise and Distribution Practice Group.

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