Lawyers Face State Scrutiny In Toxic Torts

With a change in law set for Jan. 1, year-end filings skyrocket.

Staff Reporter

Kamran Ghalchi in late December was preparing to let 3,000 businesses know he planned to sue them because they had failed to notify employees and customers that they were in the presence of harmful chemicals.

Most of the single-page notices that the Encino lawyer was about to file would be delivered to auto dealerships targeted for the chemicals emitted into the air by vehicle exhaust. The paper landed Dec. 21.

Over the hill, another attorney, Reuben Yeroushalmi, was doing research on the chemicals in asphalt, interviewing roofers and visiting construction sites. Though he didn't have any ailing workers at his office, or even know anyone who was hurt by those emissions, he said he could just tell by the smell that the sites could be harmful.

In December, he filed notices with 800 construction contractors and the state Attorney General's office.

These two attorneys, partners in the same firm until a few months ago, claim they are only protecting consumers as required under Proposition 65, the Safe Drinking Water and Toxic Enforcement Act of 1986. Attorney General Bill Lockyer isn't so sure.

In a January letter to Ghalchi, Deputy Attorney General Ed Weil questioned 1,200 air emission notices sent to auto dealerships. He asked that Ghalchi provide information on what evidence he had to demonstrate the exposures were occurring and that warnings were not being given.

He also questioned the settlement offers Ghalchi gave to several hundred auto dealerships. If each company hit with a notice on noncompliance paid the $7,500 settlement offer, Ghalchi's client, an Encino-based non-profit called Citizens for Responsible Business Inc., would take home $5.8 million, Weil said in the letter more than could be warranted under Prop. 65.

Ghalchi defends his notices, which are on hold until he answers the Attorney General's letters.

"Any skepticism and questions that are raised are raised because the number of notices was so large," Ghalchi said. "All these issues and any questions will be put to rest when the facts come out."

The Attorney General's office also sent letters to Yeroushalmi, questioning the timing of the notices filed against construction contractors.

Best intentions

Prop. 65 was enacted to inform consumers of the potential health risks caused by the 500-some carcinogens or toxins named in the statute by forcing businesses where those chemicals are emitted to post notices of their presence.

But the nearly 4,000 claims filed by Ghalchi and Yeroushalmi represent the vast majority of notices filed with the Attorney General's office in December and are about 3,600 more than the average number of notices filed each month with the Attorney General's office.

What's more, the notices came just in time to avoid changes to Prop. 65 that became effective Jan. 1 and would have made it more difficult to file a notice.

Prop. 65 notices are filed with the Attorney General and with the business in question, which has 60 days to respond. The business has the option to post a warning notice or dispute the charge.

For gas stations, where warnings about the hazards of MBTE are commonplace, the regulation isn't onerous. But for restaurants, auto dealerships, hardware stores and other retailers, the notice could have a chilling effect on business. If a business does not post the notice as required under Prop. 65, a lawsuit ensues. The cases often settle quickly.

According to statistics from the Attorney General, $16 million in settlement payments were reported in 332 settlements between January 2000 and August 2001 nearly $50,000 each on average. The cases are generally handled on a contingency basis, and attorneys fees made up 63 percent of those settlements, according to the Attorney General's office.

Only 18 plaintiffs' attorneys were involved in the 332 settlements tracked by the Attorney General's office, and Yeroushalmi's main client, Consumer Advocacy Group Inc., represented 17 percent of the settlements in that period.

Elusive non-profits

Yeroushalmi says he receives no monetary payment from the notices themselves, other than through Consumer Advocacy Group, a three-year-old Inglewood organization run by Max Trachsler, who Yeroushalmi said was a former International Red Cross scientist. Trachsler could not be reached for comment.

Yeroushalmi declined to identify the non-profit's other four board members, claiming they have received death threats at their homes and work places from the businesses they have targeted.

Ghalchi, too, declined to elaborate on the specifics of Citizens for Responsible Business Inc. But defense attorney Chuck Pomeroy of McKenna & Cuneo LLP, said the group's formation in December 2001 with the express purpose of filing Prop. 65 claims, along with Ghalchi's representation, creates the appearance that Ghalchi encouraged its establishment in order to have a plaintiff.

Ghalchi and Yeroushalmi, who worked together for three or four years in L.A., don't only handle Prop. 65 notices. Together, they are representing the plaintiffs in a pending class action against Wells Fargo, Citibank and other banks claiming violation of privacy. They are working together despite recently parting ways for reasons Yeroushalmi declined to explain.

Ghalchi did not return later calls on his relationship with Yeroushalmi.

The consumer advocate attorneys are two of fewer than 50 attorneys regularly involved in Prop. 65 filings.

When the legislation passed 16 years ago, the leading plaintiffs were big-gun non-profits like the Sierra Club and the AFL-CIO. By the mid-1990s, however, a number of attorneys with securities, consumer protection and other plaintiffs' work joined the fray.

The new attorneys tend to be out on their own and are often young and inexperienced, said Roger Carrick, of Carrick Law Group in L.A. "It allows lawyers to become specialized in an area who want to make a name for themselves," Carrick said. "If they're wanting to break into a practice, that is an opportunity."

Pomeroy added that "once you understand the concepts and principles, it becomes very easy to do. You walk into a market, a hardware or retail store, and you walk up and down the aisles and look at things. If you have some ideas, you can find potential consumer products to bring under Prop. 65."

Sen. Byron Sher, D-Stanford, wrote a 2001 amendment to Prop. 65 that brought stricter regulations. Among the changes was a requirement that plaintiffs attorneys provide a "certificate of merit" to the Attorney General's office before filing a claim.

The Attorney General is still devising specific regulations that enforce the requirements, and a "clean-up" bill will be proposed this year that strengthens the Attorney Generals' ability to intervene in settlements.

Giving the state more authority in these claims, which are largely enforced by private individuals, could eliminate the frivolous lawsuits, Sher said. "There's been a history where a number of claims made were never actually pursued to fix penalties, but collect payments in settlements," he said.

The requirements also make life more difficult for what many plaintiffs' attorneys said is a hard enough job already.

"Most people don't have the stomach to deal with Prop. 65 because they're under constant attack," Yeroushalmi said. "It's not fun to be a plaintiffs' attorney. They (defense firms) go out of their way to make your life miserable."

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