California has tightened court review of private Proposition 65 settlements, requiring judges to find that settlements are in the public interest and provide a public benefit.
Signed into law on 27 September 2026, Assembly Bill 2577 (AB 2577) applies to settlements of private Proposition 65 enforcement actions and allows courts to resolve attorneys’ fee disputes separately from the rest of a settlement.
For manufacturers, importers, retailers, and other businesses facing Proposition 65 claims, the change puts greater emphasis on what a settlement actually accomplishes.
Settlements must provide a public benefit
California’s Safe Drinking Water and Toxic Enforcement Act of 1986, commonly known as Proposition 65, requires warnings for certain exposures to chemicals the state lists as causing cancer or reproductive toxicity.
Private parties can bring actions to enforce these requirements. Under AB 2577, a new finding is required before a court may approve a settlement: it must be in the public interest and provide a public benefit.
In failure-to-warn cases, a settlement is presumed to meet this standard if it requires the defendant to either reduce exposure to the listed chemical below the pre-settlement level or provide a Proposition 65 warning where one was not previously provided. The plaintiff bears the burden of producing sufficient evidence to support the required findings.
The change does not alter which chemicals are listed or independently require new warnings. It changes the standard courts use to evaluate settlements of private Proposition 65 actions.
“Status quo” settlements become harder
The new standard targets settlements that resolve litigation without changing the alleged chemical exposure or warning practices.
DLA Piper attorneys Greg Sperla and Megan Kinney said the changes mean that “status quo settlements” that effectively lack reformulation or new warnings are no longer viable. They expect future settlement terms to be more likely to include lower warning or reformulation thresholds as plaintiffs seek to avoid objections from the California Attorney General.
That could bring the underlying product more directly into settlement negotiations. Depending on the case, a company could consider reducing exposure to the listed chemical, reformulating the product, adding a warning, or agreeing to additional testing.
These measures are not automatically required in every settlement. For failure-to-warn cases, reduced exposure or a new warning establishes a statutory presumption that the public-interest and public-benefit requirements are satisfied.
Fee disputes can be handled separately
The law also changes how courts handle disputes over attorneys’ fees.
Courts must find that attorneys’ fees provided under a settlement are reasonable and appropriate under California law. If the California Attorney General objects to the fees and the court agrees with the objection, the fee issue can be considered separately rather than requiring rejection of an otherwise approvable settlement.
The parties and the attorney general can submit additional evidence concerning the proposed fees, and the court can determine the award, up to the amount originally proposed.
Sperla and Kinney describe the previous system as an “all-or-nothing” approach, under which a court could not simply modify the stipulated consent judgment. The new procedure allows the underlying settlement to proceed while the fee dispute is addressed separately.
Implication for businesses
For businesses targeted by private Proposition 65 enforcement actions, the new standard provides an additional safeguard during settlement, whereas the private party bringing the action bears the additional burden of producing sufficient evidence to show that the settlement is in the public interest and provides a public benefit.
According to AB 2577, in failure-to-warn cases, a settlement is presumed to meet this public-interest and public-benefit standard if it requires the defendant to reduce exposure to the listed chemical below the pre-settlement level or provide a Proposition 65 warning where one was not previously provided.
The new requirement gives defendants and the California Attorney General a clearer basis to challenge a proposed settlement when the private enforcer cannot provide sufficient evidence that it delivers the required public benefit.