Stores to Pay Fines Over Tobacco Warning : Lawsuit: Failure to post signs alerting consumers will cost eight chains and a manufacturers coalition $750,000. Case was a test of liability under Prop. 65.

Eight chain stores and a coalition of manufacturers have agreed to pay a record $750,000 in fines for not warning consumers that cigars and pipe tobacco can cause cancer and birth defects, Atty. Gen. John K. Van de Kamp announced Monday.

In a test case of Proposition 65, the toxic chemicals initiative approved by voters in 1986, Van de Kamp won the settlement establishing that retailers--not just manufacturers--must warn consumers about hazardous products.

“The $750,000 in penalties and costs makes it clear to retailers that Proposition 65 applies to them, too,” the lame-duck attorney general said. “Once retailers know that a product they sell requires a warning, they cannot keep selling it unless that warning is clearly provided.”

The chain stores Safeway, Lucky, Vons, Ralphs, Alpha Beta, Albertson’s, Thrifty and Raley’s--along with a group created by food makers called the Ingredient Communication Council--will join in paying the largest fine yet under Proposition 65.

The case dates back to October, 1988, when Van de Kamp sued 25 tobacco companies, the eight retail chains and the Ingredient Communication Council for failing to provide proper warnings for cigars, pipe tobacco and loose-leaf tobacco products.

The tobacco companies quickly gave in, paid fines of $150,000 and began providing the warnings on store shelves where the products were displayed. But the retailers continued to deny their legal responsibility, hoping to prove that the warning requirements of Proposition 65 did not apply to them.

“They wanted to try to set a precedent for this product that they didn’t have to do anything,” said Deputy Atty. Gen. Ed Weil, who handled the case. “We decided to set a precedent that they did have to do something.”

Under Proposition 65, businesses must provide a “clear and reasonable” warning if they expose the public to chemicals known to cause cancer or birth defects. Companies that violate the law can be fined $2,500 a day for each individual exposure.

In theory, the supermarkets could have faced fines of more than $1 billion for the seven-month period in 1988 before the tobacco companies placed the warnings on the store shelves. Unlike cigarettes, cigars, pipe tobacco and loose-leaf tobacco products require no federal warning.

To comply with the warning requirement of Proposition 65, the stores had relied on a toll-free hot line set up by the Ingredient Communication Council. But the hot line, branded “800-BALONEY” by its critics, reached only a few consumers. The telephone warning system was found by a judge to be legally inadequate.

Four environmental groups that initiated the tobacco action--the Environmental Defense Fund, the Natural Resources Defense Council, the Sierra Club and Campaign California--will receive a $75,000 share of the fine for their legal expenses, Weil said.

“It is very important to establish that retailers must cooperate,” Weil said. “They can’t just continue to sell a product knowing the warning is not being given.”