Component Parts Supplier Case to Watch

The California Supreme Court has agreed to review a lower appeals court's ruling on the application of the component parts doctrine in a metal worker's suit claiming lung  injury. See Ramos, et al. v. Brenntag Specialties Inc., et al., No. B248038 (Cal. review granted 7/9/14).

In Ramos v. Brenntag Specialties, Inc. , 224 Cal.App.4th 123, the court had disagreed with the well-reasoned opinion in Maxton v. Western States Metals, 203 Cal.App.4th 81 (2012). 

Generally, suppliers of raw materials to manufacturers cannot be liable for negligence, or under a strict products liability theory, to the manufacturers‘ employees who sustain personal injuries as a result of using the raw materials in the manufacturing process. Only in extraordinary circumstances —such as when the raw materials are contaminated, the supplier exercises substantial control of the manufacturing process, or the supplier provides inherently dangerous raw materials— can suppliers be held liable. Product components include raw materials, bulk products, and other constituent products sold for integration into other products. The products at issue in these cases clearly are mere raw materials because they could be used in innumerable ways, and they were not sold directly to consumers in the market place. Rather, they were sold to plaintiff‘s employer for the purpose of using them to manufacture other products. 

Under California law, component and raw material suppliers are not liable to ultimate consumers when the goods or material they supply are not inherently dangerous, they sell goods or material in bulk to a sophisticated buyer, the material is substantially changed during the manufacturing process, and the supplier has a limited role in developing and designing the end product. When these factors exist, the social cost of imposing a duty to the ultimate consumers or users far exceeds any additional protection provided. The rationale for not imposing liability on a supplier of product components is a matter of equity and public policy. Such suppliers ordinarily do not participate in developing the product components into finished products for consumers. Imposing liability on suppliers of product components would force them to scrutinize the buyer-manufacturer‘s manufacturing process and end-products in order reduce their exposure to lawsuits. This would require many suppliers to retain experts in a huge variety of areas, especially if the product components are versatile raw materials. Courts generally do not impose this onerous burden on suppliers of product components because the buyer- manufacturer is in a better position to ensure safety.

In Ramos, a different lower appellate court rejected the argument that raw material suppliers are not liable for injuries caused by finished products that use those raw materials. Hopefully, the California Supreme Court will clarify.

Prop 65 Reforms Proposed

Our readers know how Prop 65 has created numerous issues for product sellers and created much litigation mischief in the hands of overzealous plaintiffs. Interesting that earlier this week, California Gov. Jerry Brown (D) said he now advocates reforms to California's law to frivolous lawsuits that do nothing to protect consumers.

The administration, through the California Environmental Protection Agency, wants to work closely with the state Legislature to revamp Proposition 65 by ending frivolous “shake-down” lawsuits. 

Voters approved Proposition 65 in 1986. The measure requires the Governor to annually publish a list of chemicals allegedly "known to the state to cause cancer or reproductive toxicity." If a business in California sells a product containing such chemicals listed by the state in excess of certain levels, the business must provide warnings to users or in the workplace.

The Governor wants reforms to:
• Cap or limit attorney’s fees in Proposition 65 cases.
• Require stronger demonstration by plaintiffs that they have information to support claims before litigation begins.
• Require greater disclosure of plaintiff’s information.
• Set limits on the amount of money in an enforcement case that can go into settlement funds in lieu of penalties.

The administration is worried about "lawyers who bring nuisance lawsuits to extract settlements from businesses with little or no benefit to the public or the environment." Since 2008, nearly 2,000 complaints have been filed by so-called “citizen enforcers.” Goofy suits include litigation against banks for failing to prevent second-hand smoke near their ATM machines.

The devil is always in the details, so it will be important to keep an eye on this.


California Publishes New Draft of Informal Green Chemistry Regulations

Yesterday the California Department of Toxic Substances Control (DTSC) convened a Green Ribbon Science Panel (GRSP) to continue work on the state's Green Chemistry initiative.

Readers may recall from previous posts that the GRSP was established with the passage of two "green chemistry laws" in 2008, and is charged with providing advice and serving as a resource to DTSC and the public regarding the California Green Chemistry Initiative. On the agenda for the meeting this week was input from the GRSP on the recently-posted “Safer Consumer Products Informal Draft Regulations”, which were published late last month.  An earlier draft of those regulations, released by the DTSC last November, drew strong commentary from both industry and environmental groups. According to DTSC, a wide range of stakeholders, including those from industry, environmental groups, scientists, and legislative leaders, raised "substantive and valid concerns" about the prior draft of the regulations. DTSC  eventually withdrew the draft regulations.

The latest draft regulations provide for a four-step process to identify safer consumer product alternatives: 1) create an immediate list of Chemicals of Concern (~3,000) based on the work already done by other organizations, and specify a process for DTSC to identify additional  chemicals as Chemicals of Concern (COCs); 2) require DTSC to evaluate and prioritize product/COC combinations to develop a list of “Priority Products” for which an alternatives assessment must be conducted; 3) require responsible entities (manufacturers, importers, and retailers) to notify DTSC when their product is listed as a Priority Product.  Manufacturers (or other responsible entities) must perform an "alternatives assessment" for the product and the Chemicals of Concern in the product to determine how best to limit potential exposures to, or the level of potential adverse public health and environmental impacts posed by, the Chemicals of Concern in the product; 4) require DTSC to identify and impose regulatory responses to effectively limit potential adverse public health and/or environmental impacts, if any, posed by the Priority Product/Chemical of Concern.

The draft regulations note that they would not apply to prescription drugs and devices; dental restorative materials; medical devices, and some other categories. But it is clear that they will impose significant new burdens on many product manufacturers, importers and sellers. The new regulations require risk assessments and life cycle analyses for prioritized products, which may lead to use limits for chemicals, reformulation requirements to eliminate targeted chemicals, or even a ban on sales of certain products in California.

And, of course, varying state regulations (in approach and content) frustrate the ability of those companies to design and market products in a global supply chain.

DTSC labels the new draft "informal," perhaps because they make substantial changes to the withdrawn set, which drew such intense scrutiny.   The initial list of “Chemicals of Concern” would be far broader than previously expected; the product prioritization criteria is revised, although it still appears likely to impact children's products, personal health, and other consumer products. But worker exposure has been added to the priority criteria as well. The regulations would also expand the list of hazards to include a wider range of hazard traits and environmental and toxicological testing endpoints. The previous exemption for unintentionally added chemicals would be eliminated, and, significantly, the “no exposure pathway” exemption would also be dropped.  

The regulations would require an alternatives assessment, conducted in two stages, with a report to DTSC regarding each stage. The first stage focuses on product criteria (function, performance, technical, and legal requirements), identification of alternatives to the COC, and screening of the alternatives.  The second stage would involve a detailed assessment of alternatives, focusing on exposure pathways and life cycle segments.

After evaluating the reports of the alternatives assessment, DTSC would then consider the appropriate regulatory response, which could involve a requirement of information disclosure, or more assessment, or limitation of certain uses, up to a ban.

The draft regulations would also require responsible entities to establish and pay for an end-of-life product stewardship program for any product that is to treated as a hazardous waste in California.

Materials for the meeting are here and here. On December 5, 2011, DTSC will hold a workshop on the informal draft regulations. The informal public comment period ends December 30, 2011.  DTSC apparently will then develop a formal new set of proposed regulations.   

California Postpones Green Chemistry Regulations

California has postponed final adoption of its green chemistry rules pending further review to address a variety of stakeholder concerns. As readers know from previous posts, "green chemistry" is the state's effort to require that chemical products be designed in such a way as to reduce the use or generation of hazardous substances and reduce health and environmental risks, with a clear emphasis on finding alternatives to "chemicals of concern."

Two bills passed in 2008 by the legislature mandated that DTSC develop regulations for identifying and prioritizing chemicals of concern, to create methods for analyzing alternatives to existing chemicals, and to create a mechanism for regulatory response, including possible restrictions or bans on certain chemicals. The laws also created a Green Ribbon Science Panel to advise DTSC, and provided for a Chemical Information Clearinghouse that will make chemical risk information more accessible to the public.

Now, the state environmental head, Secretary Linda Adams, has announced that the California Department of Toxic Substances Control will reconvene the Green Ribbon Science Panel to take another look at the proposed regulations. Those regulations, released by the DTSC last November, drew strong commentary  from both industry and environmental groups.  According to Adams, a wide range of stakeholders, including those from industry, environmental groups, scientists, and legislative leaders, have raised "substantive and valid concerns" about the most recent draft of the regulations. 



Inside Counsel Explores California Green Chemistry Regs

Your humble blogger is quoted in the latest edition of the fine publication INSIDE COUNSEL.  See “Proposed Regulation Requires Companies To Go Green,” Inside Counsel, November 1, 2010.

Readers know we have posted on California's Green Chemistry program.  This new article explores its potential impact, which will likely reverberate far beyond that state’s borders.  for example, I spoke to the publication about the impracticality of making two versions of many products, one for California and one for the rest of the nation. 

The article also suggests that plaintiffs attorneys will likely find plenty of litigation opportunities in the initiative, including the argument that changes made to comply with the regulation could and should have been made earlier, as I discussed with the author.

I also pointed out that there doesn’t appear to be an easy mechanism for getting a chemical or product off the state's target list once it’s finalized, highlighting the importance of the initial comment period.


California's Proposed "Green Chemistry" Regulations Move Forward

California's proposed "green chemistry" regulation took another step closer to completion last week, as the state Department of Toxic Substance Control (DTSC) submitted the draft regulations to begin the final official rulemaking process.  The public has until Nov. 1, 2010 to make comments.  Under state law passed in 2008, the regulations must be finalized before 2011.

As readers know from previous posts, "green chemistry" is the state's effort to require that chemical products be designed in such a way as to reduce the use or generation of hazardous substances and reduce health and environmental risks, with a clear emphasis on finding alternatives to "chemicals of concern."  Two bills passed in 2008 by the legislature mandated that DTSC develop regulations for identifying and prioritizing chemicals of concern, to create methods for analyzing alternatives to existing chemicals, and to create a mechanism for regulatory response, including possible restrictions or bans on certain chemicals.  The laws also created a Green Ribbon Science Panel to advise DTSC, and provided for a Chemical Information Clearinghouse that will make chemical risk information more accessible to the public.

Earlier in 2010, the agency released a draft Safer Consumer Product Alternatives regulation, then held public meetings and workshops and took written comments.  Last week, the final, slightly revised draft, was issued. DTSC’s regulations call for identifying and prioritizing chemicals in consumer products, for conducting an alternatives assessment, and then an appropriate  regulatory response.

The proposed regulations call for creation of a proposed initial list of Chemicals under Consideration by June 1, 2012, and, from that an eventual list of Priority Chemicals by July 1, 2012. Similarly, the agency is to create a proposed initial list of Products under Consideration (because they contain the relevant chemicals) by March 1, 2013, and eventually a final list of Priority Products by December 1, 2013. In making this determination, the regulations offer a long list of relevant factors, including usage, distribution, disposal and life cycle issues, use by sensitive sub-populations, and a host of toxicity parameters.  One thing for manufacturers to watch: it is unclear how the DTSC will weigh and balance these and other factors. Especially important will be the relative emphasis on realistic, feasible exposure scenarios and dose, as opposed to theoretical risks in the lab.  A second area of potential concern here is that while the proposed regulations include a fairly detailed (and likely lengthy) petition process to challenge regulatory response decisions, they apparently do not include a similar ready process to seek removal of a chemical or product from the priority lists.  Thus, manufacturers and relevant trade associations will have to closely monitor the draft/proposed lists and jump into the comment period before the lists are finalized. Food, drugs, and a few other products are exempt, but the potential list of "consumer products" is quite large.

In the second phase involving Alternative Assessments, product makers will have to provide what may become a quite complex and expensive assessment of potential alternatives to the chemical/product, including a look at hazards, potential exposures, and life cycle.  For example, if the lead of the assessment team works for the manufacturer, the Assessment must be reviewed and verified by an independent third-party consultant.  It is unclear what data DTSC will want to see here, including whether the agency will require additional, new toxicity testing of a product or an alternative.  This may be especially onerous for smaller companies, and for newer technologies (think nano?) in which the existing body of data may not be as robust. One area for companies to watch here is the protection, or lack thereof, of trade secret information.  Ingredients in a product, and possible alternatives that make the product safer, are often a key part of intellectual property, a competitive advantage.  The regulations purport to offer some trade secret protection, but it s not crystal clear how the DTSC will apply this principle.

After receiving the Alternative Assessment, the DTSC is to decide on the best method, if any, to mitigate paternal risks with the product, ranging from no further action to recalls and bans.

The regulations offer a good reminder to double-check company knowledge and comfort with the supply chain, components and agreements, risk sharing provisions, insurance coverage, etc.

California Takes Next Steps On "Green Chemistry"

Readers know how California's often extreme statutory and regulatory initiatives can influence toxic tort litigation.  Now comes word that California regulators last week released a proposed framework for forthcoming regulations to reduce certain chemicals in consumer products, as part of its “green chemistry” initiative.

The California Department of Toxic Substances Control’s release of an outline of the Draft Regulations for Safer Products is a second step in identifying "chemicals of concern" in California. The outline proposes guidelines for scientific and systematic prioritization of chemicals and products of concern, certification of alternatives assessment and development of DTSC’s regulatory response. Those responses may include banning substances or products, and end-of-life management issues. It also described a process manufacturers could use to evaluate the chemicals and safer have to perform an "Alternatives Assessment" for the product. Note that any public or private entity or individual may petition the Department to evaluate a chemical or a chemical and product combination during the prioritization process.

DTSC called for feedback on the outline.  The next step will be creating actual draft regulations based on the outline. The agency said that draft regulations will be released in the very near future, and that it will begin a formal rule-making process. State law requires the regulations be adopted by January 1, 2011.

California's green chemistry initiative, a statutory mandate since 2008, is an effort to identify and to reduce the use of chemicals that regulators conclude pose the greatest risk to public health and the environment.