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Selling Products In California: Navigating Product Regulations

10/31/2017 Articles

Big Picture: Product Liability in California

California applies its strict product liability laws to all products put into the stream of commerce and sold to the public, and those laws govern a wide array of products.  In California, unlike some states, a plaintiff need not prove the product was unreasonably dangerous or that the defect was hidden or concealed.  Simply put, a manufacturer, distributor or retailer is liable in tort if a defect in the manufacture or design of the product causes injury while the product is being used in a reasonably foreseeable way.  Liability for injuries resulting from those products extends to all parties in the “stream of commerce,” which includes companies involved in the design, manufacture, production, distribution, and sales of those products.  

Most plaintiffs tend to allege, at a minimum, theories of strict product liability, negligence, and/or breach of warranty as a basis for liability.  All three theories may be pled in the alternative. This article focuses more narrowly on the theory of strict product liability under California law, for which there are three avenues of pleading and recovery.  Namely, that the plaintiff was harmed by a product distributed/manufactured/sold by the defendant that: (1) contained a manufacturing defect, (2) was defectively designed; and/or (3) did not include sufficient warnings of potential safety hazards.   Although the plaintiff must establish that the product was defective at the time it was sold, liability can be imposed when the defendant should have foreseen the post-sale alteration and could have designed the product to prevent – or diminish the risk of – that alteration.  Strict product liability may be invoked by consumers and users of the product, but also by anyone to whom an injury from the defect is “reasonably foreseeable.”   Strict product liability actions may encompass both latent and patent defects.

a.         Manufacturing Defect

A plaintiff proves the existence of a manufacturing defect by establishing all of the following: 

  • that the defendant manufactured, distributed, or sold the product;
  • the product contained a manufacturing defect when it left the defendant’s possession;
  • the plaintiff was injured; and
  • the product was a substantial factor in causing the plaintiff’s injury.

 In broad strokes, a product contains a manufacturing defect when it differs from the manufacturer’s intended result, or from other ostensibly identical units of the same product line.

b.         Design Defect

A product is defectively designed when it is built to its intended specifications, but the design itself is inherently defective, which renders the product unsafe and causes some harm or injury.  A plaintiff may prove his or her injury was the result of a design defect through evidence that a different design would have prevented the injury.  In California, two tests govern: the consumer expectations test and the risk-benefits test, either of which may be used.  Under the consumer expectations test, the plaintiff must prove that the design was defective because the product did not perform as safely as an ordinary consumer would have expected it to when used, or misused, in an intended or reasonably foreseeable way, and that resulted in plaintiff’s injury.  A consumer expectations instruction may be given even if the mechanism by which the injury resulted requires expert testimony.   Unlike the risk-benefit test, “state of the art” medical and scientific knowledge at the time the product was manufactured is not factored into determining whether a product failed to meet this test.

The risk-benefit test requires the plaintiff to prove that the design of a product was a substantial factor in causing the harm/injury; the defendant then has the opportunity to prove that the intended benefits of the designed product outweigh its risks.  A number of factors are considered in making this determination, including: the likelihood the harm would occur; the feasibility of an alternative safer design; the cost of an alternative safer design; and the disadvantages of that alternative design.

It is worth noting that a product may be defective even if its design does not deviate from the industry norm, and compliance with a government safety standard does not automatically preclude liability.

c.         Failure to Warn

The final potential avenue for recovery under California strict product liability laws is the  failure to warn doctrine. Under this theory, the plaintiff must prove that the product had potential risks or side effects that were known or knowable in light of general industry knowledge at the time of manufacture, distribution, and/or sale; that ordinary consumers would not have recognized those potential risks or side effects; that the defendant failed to adequately warn or instruct of those potential risks; and that the failure to properly warn was a substantial factor in causing the harm or injury.

Failure to warn claims can be based on allegations of inadequacy of the warning, or on the absence of a warning.   Adequacy of the warning is evaluated in light of the existing knowledge at the time the product was manufactured, and is ordinarily a question of fact.   When the sole claim is failure to warn, the defendant is entitled to present evidence of the “state of the art,” that is, the particular risk was neither known nor capable of being known by the application of scientific knowledge at the time of manufacture or distribution.    

d.         Some California Nuances

There are many defenses that are more uniquely alleged in California.  Some interesting defenses include the  component parts doctrine, which provides that the manufacturer of a component part is not liable for injuries caused by the finished product into which the component has been incorporated, unless the component itself was defective and substantially contributed to or caused the harm.  Second, depending on the type of product at issue, there may be a number of exceptions and/or defenses that apply, such as the learned intermediary doctrine for  pharmaceutical and medical devices.  For failure to warn claims, a “sophisticated user” defense may also be available.

Now, What is California’s Proposition 65 About?

In 1986, California voters approved an initiative known as the Safe Drinking Water and Toxic Enforcement Act of 1986, better known by its original name of Proposition 65.  Proposition 65 requires the State to publish a list of chemicals known to cause cancer or birth defects or other reproductive harm.  This list, which must be updated at least once a year, has grown to include approximately 900 chemicals since it was first published in 1987.

Proposition 65 requires businesses to notify Californians about certain chemicals in the products they purchase, in their homes or workplaces, or that are released into the environment. Proposition 65 also prohibits California businesses from knowingly discharging significant amounts of listed chemicals into sources of drinking water.  Proposition 65 regulates three exposure pathways to a Proposition 65-listed substance: (1) consumer product exposure, (2) occupational exposure, and (3) environmental exposure.  Each exposure pathway varies from the others, and each triggers different warning obligations.  It is therefore critical that a company subject to Proposition 65 identify which of these exposure pathways could apply.

Proposition 65, codified at California Health and Safety Code (“HSC”) § 25249.6, states the following:

No person in the course of doing business shall knowingly and intentionally expose any individual to a substance known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual. 

The Office of Environmental Health Hazard Assessment (OEHHA) administers the Proposition 65 program.  OEHHA, which is part of the California Environmental Protection Agency (Cal/EPA), also evaluates all currently available scientific information on substances considered for placement on the Proposition 65 list.

Enforcement of Proposition 65 is by the California Attorney General’s Office, by a local district attorney or city attorney (for cities with a population in excess of 750,000) or, most commonly, by private citizens or organizations bringing citizen suit claims for alleged violations.  HSC § 25249.7.  If found to be in violation, the statute provides for a civil penalty of up to $2,500 per day for each violation.   Id. at § 25249.7(b).  In determining the penalty amount, the court is required to consider the nature and extent of the violation, the number and severity of the violations, the economic effect of the penalty to the violator, whether the violator took good faith corrective measures, the willfulness of the misconduct, the deterrent effect of the penalty, and any other factor justice may require.  Id.  In practice, this can significantly vary the assessed penalty.

a.         What types of chemicals are on the Proposition 65 list?

The list contains a wide range of naturally occurring and synthetic chemicals that are alleged to cause cancer or birth defects or other reproductive harm.  These chemicals include additives or ingredients in pesticides, common household products, food, drugs, dyes, or solvents.  We often see private enforcer actions around lead, cadmium, DEHP and other phthalates, and BPA.

b.         What requirements does Proposition 65 place on companies doing business in California?

Businesses are required to provide a "clear and reasonable" warning before knowingly and intentionally exposing anyone to a Listed chemical.  This warning can be given by a variety of specified means, such as by labeling a consumer product, posting signs at the workplace, distributing notices at a rental housing complex, or publishing notices in a newspaper.  Once a chemical is listed by OEHHA, businesses have 12 months to comply with warning requirements.

Proposition 65 also prohibits companies that do business within California from knowingly discharging listed chemicals into sources of drinking water. Once a chemical is listed, businesses have 20 months to comply with the discharge prohibition.

Businesses with fewer than 10 employees and government agencies are exempt from Proposition 65’s warning requirements and prohibition on discharges into drinking water sources.  Businesses are also exempt from the warning requirement and discharge prohibition if the exposures they cause are so low as to create no significant risk of cancer or birth defects or other reproductive harm.

c.         What does a warning mean?

If a warning is placed on a product label or posted or distributed at the workplace, a business, or in rental housing, the business issuing the warning is aware or believes that one or more listed chemicals is present.  By law, a warning must be given for listed chemicals unless exposure is low enough to pose no significant risk of cancer or is significantly below levels observed to cause birth defects or other reproductive harm.

For chemicals that are listed as a carcinogen, the "no significant risk level” is defined as the level of exposure that would result in not more than one excess case of cancer in 100,000 individuals exposed to the chemical over a 70-year lifetime.  In other words, a person exposed to the chemical at the “no significant risk level” for 70 years would not have more than a “one in 100,000” chance of developing cancer as a result of that exposure.

For chemicals that are listed as causing birth defects or reproductive harm, the “no observable effect level” is determined by identifying the level of exposure that has been shown not to pose any harm to humans or laboratory animals.  Proposition 65 then requires this “no observable effect level” to be divided by 1,000 in order to provide an ample margin of safety.  Businesses subject to Proposition 65 are required to provide a warning if they cause exposures to chemicals listed as causing birth defects or reproductive harm that exceed 1/1000th of the “no observable effect level.”

OEHHA develops “safe harbor numbers” for determining whether a warning is necessary or whether discharges of a chemical into drinking water sources are prohibited.  According to OEHHA’s website, a business may choose to provide a warning simply based on its knowledge, or assumption, about the presence of a listed chemical without attempting to evaluate the levels of exposure.

d.         What are safe harbor numbers?

A business has "safe harbor" from Proposition 65 warning requirements or discharge prohibitions if exposure to a chemical occurs at or below these levels. These safe harbor levels consist of No Significant Risk Levels for chemicals listed as causing cancer and Maximum Allowable Dose Levels for chemicals listed as causing birth defects or other reproductive harm. OEHHA has established over 300 safe harbor levels to date and continues to develop more levels for listed chemicals.

e.         What if there is no safe harbor level?

If there is no safe harbor level for a chemical, businesses that expose individuals to that chemical would be required to provide a Proposition 65 warning, unless the business can show that the anticipated exposure level will not pose a significant risk of cancer or reproductive harm. OEHHA has adopted regulations that provide guidance for calculating a level in the absence of a safe harbor level.  Regulations are available at Article 7 and Article 8 of Title 27, California Code of Regulations (“CCR”).  Determining anticipated levels of exposure to listed chemicals can be very complex, and usually requires the assistance of a toxicologist or other consultant.

What’s Different About the New Regulations?

The new warning regulations go into effect into effect on August 30, 2018.  However, the new regulations expressly provide that businesses can begin complying with them prior to the effective date.  So while compliance with the old regulations will continue to constitute “clear and reasonable” warning under Proposition 65 until August 30, 2018, compliance with the new regulations will constitute “clear and reasonable” warning under Proposition 65 both before and after August 30, 2018.

Proposition 65 regulations broadly define a “consumer product exposure” as an exposure to a Proposition 65-listed substance that results from a person’s acquisition, purchase, storage, consumption, or any reasonably foreseeable use of a consumer product, including the consumption of food.  27 CCR § 25600.1(d).  “Consumer product” is in turn defined in the new regulations as any “article, or component thereof, including food, that is produced, distributed, or sold for personal use, consumption, or enjoyment of a consumer.”  Id. at § 25600.1(e). 

The term “consumer” is not defined.  However, the definitions of other specified terms make clear that this exposure pathway is concerned with retail products that are sold for personal use.  As stated above, any exposure resulting from a “reasonably foreseeable use” of a consumer product will be deemed to be a consumer product exposure.

Of particular relevance to this article, the new regulations establish significant new standards for Proposition 65 warnings for consumer products in California.  For example, the warning itself is revised to generally require identification of the listed chemical that poses exposure from the product; where more than one listed chemical is contained in the product and poses exposure, the new regulation allows either the identification of the multiple chemicals or the use of the term “including and identification of one of the chemicals (“This product can expose you to chemicals including [name of one or more chemicals] which is [are] known to the state of California to cause .  .  .  “).  The new warning language also includes a URL to the OEHHA website for further information.  See 27 CCR §25603.

The new regulations also specify responsibilities for communication of Proposition 65 warnings.  Proposition 65 has consistently been construed as requiring a warning that is clear and reasonable to a consumer at the time they are deciding to purchase or, in some situations, use the product (exposure prohibited “without first giving a clear and reasonable warning.”  See HSC §§25249.6, 25249.11(f).  The express terms of the statute also seek to minimize burden on retailers by placing primary responsibility on the “producer” or “packager” of the product.  The new warning regulations provide much greater detail in defining the responsibilities of manufacturers, producers, packagers, importers, suppliers, distributors and retailers of consumer products.  See 27 CCR §25600.2.

The new regulations also provide much greater detail regarding the methods for communication of Proposition 65 warnings for consumer products, including for online and catalog sales.  Specifically, in addition to specifying labels, shelf signs, shelf tags at each point of display of the product at brick and mortar stores, for online sales the new regulations require the warning be provided either in full text or a “clearly marked hyperlink” on the product display page “or otherwise prominently displaying the warning to the consumer prior to completing the purchase.”  See 27 CCR §25602(b).  The new regulations contain similar requirements for catalog sales.  See 27 CCR §25602(c). 

Finally, the new regulations recognize that a party to an existing, court-ordered consent judgment specifying Proposition 65 warning requirements will continue to be deemed to be in compliance with Proposition 65 if they continue to comply with the warning requirements of the consent judgment.

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