Prop 65 and asphalt roofing work: winning against a stacked deck

NRCA often has been called upon to wage fierce struggles against excessive environmental, health and safety legislation and regulations, such as those related to asbestos, fall protection and asphalt fumes. NRCA has been largely successful in its efforts for a number of reasons, including effective leadership; its ability to forge strong alliances with other interested groups; and the credibility that comes from its long-term commitment to not only improve the quality of roofing work but also protect the health and safety of roofing workers, building occupants and others in the vicinity of roofing projects.

The controversy regarding the cancer-causing effects of asphalt fume exposure represents the most recent example of the effectiveness of NRCA's fight to curb overregulation. Unfortunately, the controversy also illustrates how cancer fears—even if they are entirely without persuasive scientific foundation—can create significant legal jeopardy for roofing contractors and other small businesses. Although there is no persuasive evidence that asphalt fumes are carcinogenic, hundreds of California roofing contractors have been threatened with lawsuits because they use asphalt, and thousands more might receive similar threats in the near future.

Asphalt, a subject of serious regulatory scrutiny for many years, is made from crude oil. Both crude oil and asphalt have trace amounts of a number of compounds—polynuclear aromatic hydrocarbons (PAHs)—that have produced tumors when applied in high concentrations in "skin-painting" studies involving laboratory animals. No convincing evidence has been developed indicating these compounds routinely are present at significant levels in the fumes that are created when asphalt is heated during roofing work or that exposure levels pose a cancer risk to roofing workers. Nevertheless, if history in the environmental, health and safety arenas teaches anything, the mere possibility of a cancer risk is sufficient to draw intense interest by regulators.

Since 1990, a number of agencies and influential scientific groups have reviewed the available scientific evidence to decide whether to regulate or classify asphalt fumes as a cancer-causing substance. The list includes the California Environmental Protection Agency (Cal/EPA) and federal Occupational Safety and Health Administration (OSHA) in the early 1990s, National Institute of Occupational Safety and Health (NIOSH) and International Agency for Research on Cancer (IARC) in the mid-1990s, and American Conference of Governmental Industrial Hygienists (ACGIH) in the late 1990s.

None of these groups found adequate evidence justifying the classification of asphalt fumes as a cancer-causing substance. Just this past February, the latest comprehensive scientific review was completed by a science advisory committee evaluating the adequacy of the current occupational standard for asphalt fumes in California. After examining the latest data about the possible cancer risk and other health effects, the committee decided without dissent no new regulatory action is needed.

These results have been achieved in large measure because of the efforts of a partnership among NRCA; asphalt producers; roofing asphalt product manufacturers; and the United Union of Roofers, Waterproofers and Allied Workers. NRCA and its partners have insisted that regulatory decisions be based on sound scientific evidence and delivered on their commitments to develop such evidence and identify reasonable ways to control exposures while preserving their ability to install quality roof systems. A centerpiece of NRCA's proactive approach is a national education and training program for controlling emissions of asphalt fumes. (For more information about the program, see "Training about asphalt fumes," page 30.)

Proposition 65

With this background, it would seem almost beyond comprehension that California roofing contractors currently could be ensnared in a protracted, high-stakes controversy involving the possible cancer risks of exposure to asphalt fumes.

The culprit is a California statute titled the Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65. Proposition 65's core requirement is neither uncommon nor clearly objectionable—it prohibits exposing individuals to unsafe levels of substances listed in California as carcinogens or reproductive hazards without providing a "clear and reasonable" warning. But Proposition 65 contains a unique combination of provisions that render it a ready vehicle for abusive litigation.

The legal risks to California businesses arise from the law's private-enforcement provisions, often referred to as its "bounty hunter" provisions. Proposition 65 permits private citizens to bring civil lawsuits against alleged violators of the act and seek injunctive relief and civil penalties up to $2,500 per day for each violation. Private enforcement often is found in environmental statutes, but Proposition 65 works in favor of bounty hunters in several ways not seen anywhere else in the United States.

Private plaintiffs in Proposition 65 enforcement cases may be awarded not only reasonable attorneys' fees but also 25 percent of the civil penalties assessed against defendants. Even better for plaintiffs is the fact that they need not even allege exposure levels are unsafe. A Proposition 65 bounty hunter can file a lawsuit against a California business on the basis of nothing more than an allegation that a chemical listed in California as a carcinogen or reproductive hazard is present, even if only in trace amounts, in a product or workplace.

The burden to demonstrate safety, a task that often is impossible and always expensive, is placed on the defendant. Because of the large potential liabilities, the high costs and uncertainties of litigation, and other factors, Proposition 65 bounty hunter lawsuits virtually always are settled without any determination whether persuasive bases for the lawsuits ever existed. Of nearly 20,000 bounty hunter lawsuits filed since the law was enacted, only a handful has gone to trial on the merits.

If it isn't already obvious that Proposition 65 creates a "stacked deck" against businesses and open invitation to what amounts to extortion by private bounty hunters, consider how California Judge Miriam A. Vogel described the statutory scheme in Consumer Cause Inc. v Smilecare et al., a 1996 case in which a dental office was sued for failing to post a Proposition 65 warning about the presence of trace levels of mercury (a listed reproductive hazard) in silver amalgam used for filling cavities. Despite recent findings by the U.S. Food and Drug Administration and other widely respected scientific bodies that mercury exposures from dental fillings are well within safe levels, the court held that under Proposition 65, the bounty hunter plaintiff was not even required to allege mercury exposures are unsafe to maintain its lawsuit. The burden, instead, rested on the dental office to prove the safety of its fillings.

In her dissent, Vogel elegantly captures the essence of the enforcement scheme by saying: "Here is how it works ... . Pick a dentist or doctor, any dentist or doctor ... . Visit the dentist's or doctor's office. If you don't see Proposition 65 warning signs on the walls or counters, go to the nearest courthouse, file a complaint, allege a failure to warn, and ask for $2,500 for each day the dentist or doctor has failed to give the required warnings. ... Go ahead and admit that you have no evidence about the level of the chemical he uses (and thus no reason to believe that he is in violation of the law) and admit that you do not contend that exposure at the level used by the dentist or doctor will result in any [health] effect. ... What's a dentist or doctor to do? Settle with the plaintiff, of course. Save the cost of the assessment. Save the legal fees. Get rid of the case."

To be sure, some private-enforcement actions under Proposition 65 are based on legitimate factual investigations and genuinely seek to ensure exposed individuals are warned about real health hazards. Vogel's point, however, is the law also permits—even encourages—frivolous litigation.

In fact, Proposition 65 has spawned a thriving cottage industry in California consisting of a small cadre of "public-interest" groups, many of which were created specifically for the purpose of exploiting the law's private enforcement scheme. An equally small group of lawyers files lawsuits on behalf of these groups and extracts settlements from defendants who have few other practical choices. Despite its small size, this industry is quite healthy financially; revenues run well into tens of millions of dollars in bounties every year. Nearly two-thirds of these recoveries wind up in the pockets of the plaintiffs' lawyers, and the actual fate of the remaining payments often is difficult to determine. California lawyers with expertise in these cases report that settlements in cases against individual businesses typically fall in the $10,000 to $50,000 range—$30,000 is an oft-mentioned benchmark figure.

Roofing contractors' plight

The waning days of 2001 saw a dramatic rise in private enforcement notices under Proposition 65 as bounty hunter groups and their lawyers raced to file before the Jan. 1, 2002, effective date of recent reforms intended to discourage frivolous litigation under Proposition 65. More than 4,000 notices of intent to sue under Proposition 65 were served on California businesses, including several hundred roofing contractors, during the last few weeks of 2001.

Virtually all the notices naming roofing contractors were filed by one attorney on behalf of a recently incorporated "public-interest" organization called Consumer Advocacy Group (CAG). The notices announced CAG's intent to sue each of the several hundred contractors in individual lawsuits alleging violations of Proposition 65. Based on the track record of the bounty hunters in general and the particular attorney filing the roofing notices, it only was a matter of time before additional notices naming thousands of other California roofing contractors would be prepared.

California Attorney General Bill Lockyer, commenting about the avalanche of bounty hunter notices as a whole, expressed concern publicly that "there is an odor of extortion around many of these notices," and his office reportedly began an investigation into whether the bounty hunters were "building a money-making machine."

The notices naming roofing contractors principally are based on asphalt exposures. In a controversy nearly bursting with cruel ironies, perhaps the biggest irony is neither asphalt nor asphalt fumes are listed as carcinogens by California. In fact, California proposed to add asphalt fumes to its Proposition 65 lists in 1991 but declined to take action after NRCA and its asphalt industry partners made all the relevant scientific data available for consideration.

Nevertheless, the notices remain actionable because they mention exposures to various constituents of asphalt, including a number of PAHs, that are on the California Proposition 65 lists of carcinogens and reproductive hazards. The notices do not claim exposures to these compounds are at unsafe levels or significant health risks are posed to workers and others who allegedly are exposed. Such a claim would, of course, be difficult to scientifically support considering the reviews during the past decade or so by OSHA, NIOSH, ACGIH, IARC, Cal/EPA and Cal/OSHA. But according to Proposition 65, a claim that a real health hazard exists is unnecessary for a bounty hunter to file suit.

Understandably, the first instinct upon receipt of such a notice is to fight. But consider the plight of a roofing contractor who realistically assesses his options under Proposition 65. The litigation costs of contesting a bounty hunter lawsuit easily might run into the hundreds of thousands of dollars if the case goes through discovery, preliminary procedural and substantive motions, a trial with expert witnesses and appeals.

It is difficult, to say the least, to win a Proposition 65 case on the merits because the statute places the burden on the defendant to prove the safety of his products and operations. Because asphalt contains, according to the bounty hunters, nearly three dozen Proposition 65 listed chemicals, a contractor would have to spend tens—perhaps hundreds—of thousands of dollars for experts to prepare complex risk assessments to prove the exposures for which he is responsible are safe. And as Vogel noted, these assessments might not be enough to prevail. The plaintiff might respond with assessments of his own, and with the burden of proof resting on the defendant, a "battle of the experts" usually favors the plaintiff.

The outcome of protracted litigation being uncertain, the magnitude of a defendant's potential liability becomes a matter of great interest. Assume a contractor's crews work with asphalt 50 days per year on average. Applying the maximum penalty of $2,500 per day during a four-year period (four years being the applicable statute of limitations according to the bounty hunters), the maximum penalty per exposed employee would be $500,000. Multiply that figure not only by the number of employees exposed but also by the number of building occupants and bystanders also allegedly exposed during these projects. Add to that amount the plaintiff's litigation costs, including attorneys' fees and fees paid for the plaintiff's investigators, consultants and expert witnesses.

You get the point. Any small business served with a notice from a Proposition 65 bounty hunter faces enormous—in nearly all cases, irresistible—pressure to quickly settle even before a lawsuit is filed. The fact that the threatened lawsuit may be completely meritless is, from a business standpoint, essentially irrelevant. The fact that no genuine health hazard exists is legally irrelevant by the statute's terms. The way out is simple, if painful—agree to post warnings about hazards that have not been demonstrated, pay a five-figure bounty to the plaintiff and his lawyer, and move on.

As Vogel puts it: "Save the cost of the assessment. Save the legal fees. Get rid of the case."

NRCA's role

Shortly after the 11th-hour mass notices were served in late 2001, NRCA assumed the lead role in an effort to devise an acceptable resolution to the problem. In that effort, a number of factors were considered critical for the roofing industry.

First, any solution had to be structured on an industrywide basis to include not only the several hundred roofing contractors who had received notices threatening lawsuits but the thousands of other California roofing contractors who had not yet been noticed.

The track record of Proposition 65 bounty hunters is clear and consistent: Once an industry has been identified and targeted, relatively expensive settlements initially are forced on a few particularly vulnerable defendants and those settlements then become the negotiating floor for settling with other businesses. The process continues until all readily identified businesses within the targeted industry have been forced to pay the bounty. Developing an industrywide settlement mechanism was necessary to protect the thousands of contractors who inevitably would receive notices, as well as the several hundred who already have been named.

Second, the per-case settlement figure had to be reduced significantly from the five-figure norm under Proposition 65. A $30,000 bounty typically is unaffordable for individual roofing contractors. And if extended to all California roofing contractors who use asphalt, the aggregate loss easily could run well into the tens of millions of dollars. This could not only deliver a staggering economic blow to the roofing industry but also affect a grossly unjust enrichment of the plaintiff and its attorney, particularly in light of the plaintiff's inability to demonstrate any real health hazard to roofing workers and others.

Third, it was important to recognize that unless and until real reforms are enacted leveling the playing field under Proposition 65, the roofing industry now is on the bounty hunters' radar screens, and roofing contractors, therefore, will remain vulnerable to future harassment. The problem is not limited to the fact that contractors who have not yet been noticed eventually will be identified and targeted. The pending notices are based on specific constituents of asphalt. There is nothing to stop bounty hunters from issuing future notices alleging entirely separate Proposition 65 violations on a variety of grounds.

For example, because the Proposition 65 list of carcinogens and reproductive hazards is so big (about 750 substances) and asphalt is a highly complex mixture of tens of thousands of chemicals, future notices could be based on constituents not named in the existing notices, including chemicals that might be added to the Proposition 65 list in the future.

In addition, the current notices focus on asphalt, but asphalt certainly is not the only material used in roofing work that might be found to contain or release listed substances. In short, roofing work presents many opportunities for future bounty hunter notices, and there is significant potential for multiple repetitions of the present controversy now that the roofing industry has been targeted. Consequently, any resolution of the pending notices has to anticipate and minimize this potential to the greatest extent possible both in the terms of the settlement itself and by adopting the widespread use of state- and court-approved Proposition 65 warning signs in the roofing industry.

Fourth, it was important to find a solution that does not disrupt—and, if possible, reinforces—existing roofing industry practices regarding worker health and safety protection, hazard communication and product quality control. NRCA strongly believed from the beginning the price of any settlement is too high if it undermines these and other critical aspects of professional roofing work.

A chance

Because negotiations are under way on a possible settlement with California's Office of the Attorney General and the attorney for the private plaintiff, it is inappropriate to describe the specific settlement terms currently being discussed or predict the eventual outcome. What can be said is NRCA hopes the objectives discussed can be substantially achieved and specific terms of a settlement likely will be communicated to California roofing contractors soon.

Assuming the objectives are achieved, California roofing contractors certainly would be well-advised to carefully consider joining the settlement even if they have not yet received a notice threatening an enforcement lawsuit based on asphalt-related exposures.

To be sure, joining likely will mean paying a relatively modest sum and agreeing to post specified warnings, modifying existing hazard-communication programs, and adhering to work practices currently recommended by the industry for asphalt temperature and exposure control. If NRCA substantially achieves its objectives, however, the financial obligation may be a small fraction of the norm for bounty hunter lawsuits under Proposition 65. And a significant portion of the recovery might be allocated to educational uses supported by the industry.

Perhaps most important, contractors who join will be insulated from further liability for the Proposition 65 violations alleged in the notices if NRCA's settlement goals are realized. And contractors who opt in also might enjoy a substantial reduction or elimination of the risk that they will be targeted by future notices alleging different violations of Proposition 65. On the other hand, California roofing contractors who do not join the settlement will be left to their own devices in responding to the bounty hunter notices most of them eventually will receive. Contractors might be unable to settle such cases on terms differing substantially from highly unfavorable historical norms.

For roofing contractors and other small businesses in California, Proposition 65 establishes an enforcement scheme that, despite the statute's noble purpose, often creates a malevolent "twilight zone" in which the facts are largely irrelevant; existence of a real health hazard is completely irrelevant; and the only critical issue is how much money it will take to buy off a bounty hunter and attorney.

Escalating outrage about frivolous private lawsuits under Proposition 65 and other laws finally is drawing serious attention from the California legislature and California's Office of the Attorney General. But until meaningful reforms are enacted, California roofing contractors have little choice other than to make the best of a bad situation.

The current negotiations regarding the pending asphalt-related bounty hunter notices are expected to be completed soon. When the negotiations are announced, they may offer a resolution more favorable than the norm under Proposition 65, and, in any case, they certainly will deserve careful consideration by every roofing contractor in California.

Art Sampson is special counsel to NRCA for environmental, health and safety regulatory matters. Sampson is licensed to practice law in Washington, D.C., and maintains his office in Fairfax, Va.

Training about asphalt fumes

by Tom Shanahan

A centerpiece of NRCA's proactive approach to addressing asphalt fumes issues is a new training program, "Asphalt Fumes: Keep it Down!", being developed by NRCA; the United Union of Roofers, Waterproofers and Allied Workers (UURWAW); National Institute of Occupational Safety and Health (NIOSH); Asphalt Institute; and Asphalt Roofing Manufacturers Association. The program is remarkable because it is the result of a joint labor, management and government effort.

The program consists of a 15-minute worker training video that provides tips for best work practices. The video is accompanied by a comprehensive trainers guide. In addition, NIOSH developed a companion pamphlet for workers that compliments the NRCA program. The pamphlet is intended to be part of contractors' safety training efforts aimed at minimizing worker exposures to asphalt fumes. The program will be available this fall.

There have been ongoing discussions by the organizations about the best way to promote and, if feasible, use the training program as the basis for developing an educational program that could be delivered nationally through NRCA's and UURWAW's educational offerings. The program will improve the quality of work environments, strengthen existing workplace safety and hazard communication programs, and reduce building occupants' complaints and health-related fears. Regulators, of course, like the program because it will reduce exposures. The program benefits all involved.

For more information about the program, contact me at (800) 323-9545, Ext. 7538, or tshanahan@nrca.net or click here.

Tom Shanahan is NRCA's associate executive director of risk management and education.

A settlement

To establish a basis for a judicially enforceable consent decree incorporating a settlement that could benefit all California roofing contractors, two lawsuits were filed in February in the Alameda County Superior Court against five roofing contractors who volunteered to be sued on behalf of the entire industry, as well as 1,800 unnamed "John Doe" defendants. On April 28, the two lawsuits were consolidated into a single action captioned as People v. Blue's Roofing Co. et al., Case No. 03-082954.

At press time, discussions concerning a possible settlement were nearing completion. California roofing contractors and others interested in the litigation should contact Tom Shanahan, NRCA's associate executive director of risk management and education, to obtain current information about the status of the case, including any settlement that may have been reached by the time this article was published. Shanahan can be reached at (800) 323-9545, Ext. 7538, or tshanahan@nrca.net.