California Style Doesn't Lend Itself to Easy Definition

Outlook 2013

New Source for Information about the California Industry

"California Fashion Manufacturing (CFM)" is a new program and website developed and managed by the California Fashion Association. The goal is to develop opportunities for strategic alliances with Suuthern California apparel industry brand managers and local industry specialists.
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HOT BUTTON ISSUES: What is Proposition 65?...an Update

HOT BUTTON ISSUES - California’s Proposition 65
More than 40 retailers, including Macy’s, J.C. Penney, Saks, Kohls, Sears, Dress Barn, Limited, H&M, New York & Co., etc. paid $1.7 Million in settlements in 2010 by entering into a consent judgment issued by the Superior Court of the California, Alameda County, and brought by the Center for Environmental Health (CEH). Payments from each defendant averaged $48K, with legal fees in the $30K range. In other cases, wholesale brand holders and distributors settled suits when they were found to be in violation.

What is Proposition 65?...an Update
Proposition 65 (Safe Drinking Water and Toxic Enforcement Act of 1986) is a law that imposes requirements for goods made, distributed or sold in the State of California. It applies to all businesses with 10 or more employees doing business in California, and is seen as the most stringent chemical control and consumer protection statute in the nation. The Proposition 65 list contains prominent industrial chemicals, additives and/or ingredients in common household and office products, toys, jewelry, foods, drugs, dyes, pesticides, solvents, as well as some trimmings attached to apparel. The listed chemicals may also be used in manufacturing and construction, or they may be by-products of production or combustion processes. Proposition 65 requires that any person exposed to one or more of the chemicals on the list first receive a warning that the state has determined the chemical in question may cause cancer, birth defects and/or reproductive harm.

WHAT IS ‘CLEAR AND REASONABLE WARNING’
Reasonable warning under Proposition 65 is defined to be “reasonably calculated, considering the alternative methods available under the circumstances, to make the warning message available to the individual prior to exposure. The message must clearly communicate that the chemical in question is known to the state to cause cancer, or birth defects or other reproductive harm…”
The warning message must include the following language:
“WARNING: This product contains a chemical known to the State of California to cause cancer.”
and/or
“WARNING: This product contains a chemical known to the State of California to cause birth defects or other reproductive harm.”

The warning may be by one or more of the following methods:
*Label or other labeling on product;
*Shelf labeling, hang tags, signs, menus, or a combination thereof; and/or
*A system of signs, public advertising identifying the system, and toll-free information services

Note: By label or sign, the warnings shall be prominently placed upon a product’s label or other labeling or displayed at the retail outlet with such conspicuousness as to render it likely to be read and understood by an ordinary individual under customary conditions of purchase or use.

ENFORCEMENT Proposition 65 allows private persons or organizations to bring actions against alleged violators of the Act on behalf of the “general public,” after providing notice to the California Attorney General and local prosecutors. If the Attorney General or local prosecutor does not take action within 60 days after the notice issues, the private party may then file a lawsuit. A business targeted by a bounty hunter for Proposition 65 enforcement will first receive a 60-Day Notice of Violation and Intent to Sue, which is intended to give the Attorney General and local prosecutor the opportunity to intervene in the action.

LIABILITY Failure to comply with Proposition 65’s strict warning requirements can lead to fines of up to $2,500 per day, per violation, with bounty hunters keeping 25% of the penalty amounts. Plaintiffs also are entitled to reimbursement of their costs of bringing a Proposition 65 suit, including their attorney fees, which is often the real reason private parties bring these actions. The majority of Proposition 65 claims are resolved through settlements (e.g., a consent judgment).

AVOIDING LITIGATION Effective compliance strategies begin with a thorough audit of a business’ operations and products to determine what, if anything, may be implicated by Proposition 65’s requirements. A business should assess whether it releases (environmental exposure), or its products contain (products exposure) Proposition 65-listed chemicals - even in trace concentrations. Although implementation of a compliance strategy will not necessarily immunize a business for past Proposition 65 violations of future enforcement actions, it will minimize the accrual of any additional potential liability from non-compliance.

Why so many settlements?
*Warning labels may be required for trace chemicals whose presence is unknown to the business at the time of sale. Thus, liability mounts before the business is aware of the violation;
*Plaintiffs’ lawyers are experienced at forcing settlement; and
*Trials are expensive and unpredictable

RECENT TRENDS
Cadmium
Benzene
Acrylamide
De (2-ethylhexyl)phthalate (DEHP)
Lead (Approximately 80% of all notices of violation in the past 12 months involved lead)
Polyvinyl chloride (PVC)

LIMITING LIABILITY
Upstream Indemnification
Testing
Monitoring trends in Proposition 65 litigations
Insurance

Source: Presentation by Michael Fisher and Russell Allyn of Buchalter Nemer, July 2010

Fashion Action - Apparel Lawsuits Caught up in Legal Loophole - April, 2011

Voices on the issue of "Vexatious Litigation"

"These lawsuits succeed because they exploit a loophole found in Section 410 of the Copyright Act. The loophole creates an effectively 'unrebuttable' presumption that the plaintiff's copyright is valid."

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Stolen Style: Learning Series: The Piracy Paradox

Stolen Style: Learning Series: The Piracy Paradox: "So, if you’ve kept up with the Monday Learning Series, we’ve mentioned The Piracy Paradox a lot in passing, but never gone into much dept..."

The Reality of the IMBALANCE of Trade

President Obama has asked the U.S. industry to "win the future" and to do so with “innovation and by doubling exports within the next five years”. The current data makes it seem that things look good. U.S. exports are up about twenty percent so far in 2011. The problem is that the exports are being drowned out by a renewed flood of imports. As a result, the U.S. trade deficit is rising back toward the four percent of GDP level that is considered unsustainable, and portends even lower economic growth potential.

With the goal of ‘doubling’ exports, and spurred on by additional funding for development of high-speed trains, wind turbines, batteries, and solar panels, American factories are supposed to be looking toward increased production of vast high-tech products in the near future to “spur a U.S. economic renaissance that would produce good middle class jobs”.

Hi-Tech manufacturing requires an educated, trained workforce, at every level. …so why is ‘manufacturing’ relegated to the ‘hi-tech’ industries as defined by the larger companies in the industrial complex? Manufacturing is ANY kind of work that requires mastery of real things. The demands of eye-hand coordination can be intellectually demanding - with maintenance and repair work also fostering individual responsibility.

Many inventions are the result of a reflective moment when an individual worker made an assumption based on the skills acquired while on the job. Experience in production leads to innovation!

In a recent interview about companies who move their production to China, Applied Materials Executive Vice President Mark Pinto emphasized that “the critical factor in the trend is not R&D or innovation per se, but the availability of production facilities. Manufacturing also requires innovation.”

As stated by Clyde Prestowitz, President of the Economic Strategy Institute, “Innovation isn't the mana from heaven - It doesn't arise from some unique American gene. Rather than innovation leading to production, it is production that leads to innovation.”

The reason for this imbalance of exports vs. imports is not that America lacks innovation. No country has been more innovative in the past one hundred years than the United States. The reason America is increasingly losing out and lagging behind is that it lacks production - and that lack of production capability is now also leading to a decline in innovative capability.

Consider this: There is NO industrial training in most of the major US city’s schools with an alarming 38% (average) drop-out rate. These young people are willing and able to learn how to ‘make something’!

The truth is that an export-doubling target is meaningless unless all manufacturing is considered worthwhile and supported by the academic community within their curriculums, and by the removal federal, state, and local government restrictions and barriers for those entrepreneurs willing to invest in small manufacturing facilities, and train entry level employees. Investments in modern production facilities require the availability of an experienced workforce.

An experienced workforce would result in a renewed effort for modern production facilities. We do need to focus more on domestic production that can competitively substitute for imports by using our competitive advantage of ‘innovation’……that is the ONLY thing that will lead to more exports.