[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




 
               PROPOSITION 65'S EFFECT ON SMALL BUSINESS

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS


                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                    WASHINGTON, DC, OCTOBER 28, 1999

                               __________

                           Serial No. 106-38

                               __________

        Printed for the use of the Committee on Small Business


                                 ______



                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Island
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
JOHN E. SWEENEY, New York            DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana                DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota             GRACE F. NAPOLITANO, California
MARY BONO, California                BRIAN BAIRD, Washington
                                     MARK UDALL, Colorado
                                     SHELLEY BERKLEY, Nevada

                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director



                            C O N T E N T S

                              ----------                              
                               Witnesses
                                                                   Page

        LaMura, Marianne, Chemcoat Labs, Inc.....................     6
        Strauss, Frank, Activa Products, Inc.....................    10
        Klein, Robert, Lenmar, Inc...............................    12
        Golden, Mar, Golden Artists Colors.......................    15
        Skommesa, Sandra, Ellis Paint Company....................    17
        Brown, Ann, Chairwoman, Consumer Product Safety 
          Commission.............................................    30
        Weil, Ed, Esq., Deputy Attorney General, California......    32
        Khorrami, Shawn, Esq., Van Nuys, Attorney, Law Offices of 
          Shawn Khorrami.........................................    37
        Margulies, Jeffrey, Esq., Attorney, Haight, Brown & 
          Bonesteel, LL.P........................................    41
                                Appendix
        Opening statements:......................................
    Talent, Hon. James M.........................................    63
    Velazquez, Hon. Nydia........................................    65
        Prepared statements:.....................................
    LaMura, Marianne.............................................    69
    Strauss, Frank...............................................    76
    Klein, Robert................................................    85
    Golden, Mark.................................................    95
    Skommesa, Sandra.............................................   157
    Brown, Ann...................................................   160
    Weil, Ed.....................................................   168
    Khorrami, Shawn..............................................   177
    Margulies, Jeffrey...........................................   187
        Additional material:.....................................
    Supplemental statement of Frank Strauss......................   199
    Supplemental statement of Mark Golden........................   202
    Letter from James Whittinghill, Vice President, American 
      Trucking Association, to Chairman Talent...................   207
    Letter from Winston Hickox, Secretary for Environmental 
      Protection, California Environmental Protection Agency, to 
      Chairman Talent............................................   213
    Letter from S. Lee Selisky, President, Sea Pearls, to 
      Chairman Talent............................................   220
    Settlement agreement between As You Sow, Unlimited Holdings, 
      Inc., Walgreen Co., and Magic Nails, Inc...................   222
    Letter and additional material from Ann Brown, United States 
      Consumer Product Safety Commission.........................   229
    Additional information from Michael R. Lemov, Winston & 
      Strawn.....................................................   240
    Letter from Richard Carrabine, President, Air Serco 
      Manufacturing Company, to Counsel Roger Keller.............   435
    Letter from William Keller, owner, Gardex, to Chairman Talent   444
    Letter from Clifford Chanler, Chanler Law Group, to Counsel 
      Roger Keller...............................................   448

Statements of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming...........................................     1
        Prepared statement of....................................     2
    Underwood, Hon. Robert A., a Delegate in Congress from the 
      U.S. Territory of Guam.....................................    13
        Prepared statement of....................................    13
    Goss, Hon. Porter J., a Representative in Congress from the 
      State of Florida...........................................    14
        Prepared statement of....................................    15

Statements of witnesses:
    Bedell, Charles A., Murphy Exploration and Production 
      Company, National Ocean Industries Association; American 
      Petroleum Institute; U.S. Oil and Gas Association; 
      Independent Petroleum Association of America; Domestic 
      Petroleum Council; NAD International Association of 
      Drilling Contractors.......................................    52
        Prepared statement of....................................    00
    Hakes, Jay, Administrator, Energy Information Administration, 
      U.S. Department of Energy..................................    38
        Prepared statement of....................................    00
    Joyner, Mike, Director, Legislative and Governmental Affairs, 
      the Florida Department of Environmental Protection.........    17
        Prepared statement of....................................    19
    Rosenbusch, Walt, Director of Minerals Management Service, 
      U.S. Department of the Interior;...........................    28
        Prepared statement of....................................    29

Additional material supplied:
    Text of H.R. 33..............................................     4
    Coalition for Sustainable Resources, Inc, prepared statement 
      of.........................................................    57





               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 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. Velazquez. 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 seeking 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. Velazquez statement may be found in the appendix.]
    Mrs. Napolitano. Thank you, Ms. Velazquez.
    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.
    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.
    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.
    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.
    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.
    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 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.
    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 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 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 manufacturers 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.
    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 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.
    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.
    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 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.
    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.
    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 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?
    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. Velazquez. 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. Velazquez. 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. Velazquez. Mr. Strauss?
    Mr. Strauss. Ms. Velazquez, 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. Velazquez. 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 government 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. Velazquez. 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. Velazquez. 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. Velazquez. 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. Velazquez. 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.
    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. Velazquez. 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. Velazquez. 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.
    Ms. Velazquez. 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. Velazquez. 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. Velazquez. 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.
    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----
    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.
    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 economic 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.
    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.
    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.

 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 
mini-blinds 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.
    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?
    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.
    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. Velazquez. 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. Velazquez. Ms. Brown, there has been some discussion 
about changing FHSA to include in its labeling definition----
    Ms. Brown. Changing what?
    Ms. Velazquez. FHSA.
    Ms. Brown. Oh, FHSA. FHSA, yes. We are full of initials in 
Washington. You know how it is.
    Ms. Velazquez. 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. Velazquez. 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.
    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. Velazquez. Thank you, Ms. Brown.
    Mr. Weil.
    Mr. Weil. Yes.
    Ms. Velazquez. 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. Velazquez. 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.
    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. Velazquez. 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----
    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.
    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 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 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 distributors 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 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 
commentators 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 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 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 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.
    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.
    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.
    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, 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 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.
    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 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.
    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.
    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.
    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.
    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 vigorous 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 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?
    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 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.
    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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