Robert Ghazarian had always tried to be diligent about posting the requisite health warnings in the four Hot Wings Cafe restaurants he co-owns around Los Angeles.
So when a notice arrived telling him he had failed to adequately warn customers about the hazards of alcohol, and that he could be liable for up to $2,500 a day for as many days as he had been in violation, he was bewildered.
Because the location cited has fewer than 10 employees, Ghazarian was able to avoid a fine. But he still had to pay a lawyer, and is frustrated by what he sees as an unscrupulous attempt to extract money from his business.
"It's strong-arming us," Ghazarian said. "We're in the business of providing food and service to our customers, but we're learning every new trick people come up with."
The letter informed Ghazarian that he was in violation of Proposition 65, a 27-year-old law that requires businesses to disclose the presence of dangerous chemicals in anything they sell. It came on the letterhead of the same law firm that, over the last two years, has sent out every notice advising businesses of insufficient alcoholic beverage warnings, according to the attorney general's website.
Ghazarian's ordeal was not an isolated incident. It was part of a broader pattern in which businesses are told they aren't complying with their Proposition 65 obligations and are given the option of paying a fine to settle the matter quickly - "please go away money," in the words of Assemblyman Mike Gatto, a Los Angeles Democrat.
The firm that sent Ghazarian a notice, the law office of Miguel A. Custodio Jr., did not return messages seeking comment. Since 2011, Custodio's firm has sent out more than 60 notices faulting restaurants for failing to warn customers about alcohol.
J.T. Fox also saw one of those notices. Fox is the attorney for Kitchen 24, a Los Angeles area restaurant that received a warning in January and absolved itself by paying $5,000 - a bargain, Fox said, considering the cost of a court fight or cumulative daily fines. But Fox said he harbors no ill will toward the lawyers who served him.
"You're more angry at the statute than you are at them," Fox said. "They found a little nuance in the law where they can have an opportunity to make money."
That nuance is the target of Gatto's bill. Assembly Bill 227 attempts to shield businesses from what Gatto called "unintended consequences to an otherwise righteous law."
The purpose of Proposition 65, passed by voters in 1986, was twofold: to prohibit businesses from dumping chemicals into water supplies, and to ensure that no one could knowingly sell a product containing hazardous chemicals without notifying consumers. The list of 782 chemicals mandating a warning includes alcohol and substances that can be byproducts of roasting coffee (acrylamide) or grilling hamburgers (polycyclic aromatic hydrocarbons).
Protecting consumers is a laudable goal, Gatto said, and he insisted that his bill would be tailored to inoculate retailers against lawsuits brought on by opportunistic attorneys. As currently written, the bill gives businesses a 14-day window to post the necessary warnings and avoid penalties.
"This bill is about protecting the little guy," Gatto said at a committee hearing last week.
There are parallels in Gatto's effort to last year's push to curb Americans with Disabilities Act-related lawsuits. Proponents of the ADA reform bill, which Gov. Jerry Brown signed in September, said predatory attorneys were exploiting the law to demand settlements from businesses whose facilities weren't fully handicapped-accessible.
But Gatto's task is trickier: because Proposition 65 is a voter-passed ballot initiative, any changes to the law must further its original intent.
A wide array of interest groups have backed Gatto's measure, from groups representing dentists and craft brewers to the California Bus Association. Kara Bush, a lobbyist for the California Restaurant Association, decried "bounty hunting" by people looking for an easy payday.
"These lawsuits are typically instigated by parties who repeatedly target businesses, not because someone was wrong," Bush said. "Rather, these lawsuits are an industry unto themselves."
But organizations that use Proposition 65 to prod manufacturers into reformulating their products say Gatto's bill would weaken a crucial tool for getting chemicals out of consumer products.
"The bill as currently written would do far more than address those kind of gotcha lawsuits for a failure to notice a common substance in a restaurant or a bar," David Rosen, an attorney and board member of the Consumer Attorneys of California, testified. "It would create a 'get out of jail free' card for any Prop. 65 violation."
At the hearing, Kathryn Alcantar, California policy director for the Center for Environmental Health, displayed a blue plastic children's sleeping mat and recounted how her organization had used Proposition 65 to get the mat's manufacturer, Peerless Plastics, to agree to remove flame retardants from its products. The Center for Environmental Health has used the same process for products like baby powder, lunch boxes and jewelry, Alcantar said.
But the organization would have less leverage to strike such deals if companies had a way to exonerate themselves and avoid paying a potentially heavy backlog of fines, Alcantar said. She said monetary settlements cover the cost of testing consumer products and taking legal action.
"One of the reasons we've been able to do the investigative research and find these chemicals is because we've been able to collect these fees," Alcantar said.
Proposition 65 functions best as a deterrent, according to David Roe, an attorney who was a principal author of the initiative. Businesses have an incentive to offer products that are chemical-free if they face a Proposition 65 lawsuit that would carry a fine and compel them to either reformulate their products, a costly proposition, or affix warning labels that could scare off customers.
"The risk of companies having to go through that process is what causes them to act in advance," Roe said. "If the possibility of enforcement goes away, all that benefit goes away."
Gatto denied that his bill would offer a "safe harbor" to big manufacturers. He argued that it applies only to posting signs in retail establishments and would not affect the imperative to label products, and stressed that he is still working to craft the bill's language to ensure it is narrowly focused and leaves Proposition 65's core intact. Lawmakers who voted the bill out of committee did so with the caveat that they wanted to see the language tightened.
The 14-day grace period is also too slim to allow manufacturers to take corrective action and avoid penalties, Gatto said, arguing that it would not be feasible for a large company to label or change its products in such a short amount of time.
"It is completely manifest that we aren't trying to go after a toy manufacturer who puts lead in a product," Gatto said in an interview, adding that "a restaurant is unique because you can put that sign up."
Roe, the original author of Proposition 65, said he is still in touch with Gatto's office and hopes to see a stronger bill he can get behind. For now, though, he remains opposed.
"I think it's good for the statute to give small businesses a clear pathway to comply without getting tangled up in expensive lawyering," Roe said. "The danger, of course, is it carves out loopholes that bigger, more sophisticated parties can use, and as written it certainly does."
Call Jeremy B. White, Bee Capitol Bureau, (916) 326-5543. Follow him on Twitter @jeremybwhite.