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A Monthly Case Reporting From Shook’s Orange County Attorneys.
You're listening to In That Case, a Shook podcast series exploring timely court decisions that impact the business community. Presenters are Orange County attorneys. Let's listen in as Shook lawyers summarize the decision.
Tom:And then the final one we have here is a, California Court of Appeal decision. This is involving a Prop 65 claim. In this case, leavers Amazon. It was a interesting case in matter of first impression that went before the court of appeal. And this case dealt with, whether or not there's a couple of different issues.
Tom:Some dealt with what's the standard for determining, testing for products, And the other was whether or not a online retailer, in this case, Amazon, was required to have personal knowledge or constructive knowledge that the products they're selling contained a listed chemical. In this case, it was mercury.
Tom:So here, Amazon was selling skin lightening creams on their website, and they received a Prop 625 notice, claiming that these skin lightening creams contain mercury. In fact, they'll they claimed that the levels were significantly above federal limits for, skin lightening creams. At trial, the court ruled in favor of Amazon, finding products that were selling all contained mercury, and 2, that plaintiff failed to show that Amazon had actual knowledge that these products contained mercury that they were selling.
Tom:On appeal, the the plaintiff had challenged the court's ruling, claiming that it was it was error for the court to require plaintiff to to demonstrate Amazon had actual knowledge, plaintiff claimed that the actual standard is constructive knowledge. That's all they have to prove, and the trial courts preventing plaintiff from admitting evidence of constructive knowledge was error.
Tom:In addition, the the plaintiff had argued that the trial courts requiring plaintiff prove each product at issue was individually tested and contained mercury was error as well. So on on appeal with the, issue of whether or not these products contained or had to have testing for mercury, the court of appeal reviewed that for substantial evidence and determined that there was, the trial had commuted error. And in fact, because, expert testimony in this case wasn't based on any proper or the expert testimony was not consistent with the evidence that was in the record.
Tom:In particular, what Amazon had done is in their European markets, they they had different notices that were they received from European agencies, notifying them that these face creams had mercury. So Amazon would take those off the market in Europe but not here in the United States. So Plaintiff argued, they're actually had they were on notice that these face creams had mercury in them and that they should either have a props to keep live warning or be pulled from their stores here in the US. Plantiff had also argued on appeal that the levels of mercury were so high in these skin creams that they're consistent with being an active ingredient in the face creams.
Group:So if there was actual notice, then the court didn't have to address didn't address the constructive notice issue?
Tom:If there was well, there are 2 different, standards. What plaintiff or what the plaintiff had alleged on appeal was that they should have been allowed to present evidence of constructive knowledge, that the actual standard, the threshold of what they had approved wasn't that Amazon had actual knowledge that these products contain mercury, but they're on, yeah, constructive notice through these other, notifications that these products contain mercury, and they should have complied with Prop 65 as a result of that.
Group:I thought you just said they had actual notice because they pulled it off the market in Europe?
Tom:They they did. That's what plaintiff argued on appeal. But they also said that if the court disagrees, that's actual knowledge because it's what's being done in Europe, not here in the States, that they should be able to prove that at the very least, they had knowledge because of the fact that these other European agencies are demanding they pull it off the shelf, which should put them on notice that these creams are selling here in the US.
Group:Also Did the court then reach the issue of whether constructive notice is sufficient?
Tom:The court said they should have, on appeal. The the court of appeal said they should've been allowed to present evidence of knowledge after reviewing the, the prop 65 regulations, looking at definitions of knowing and intent in the statute, and I'm looking at, the statement of reasons that the OEHHA, which is the California Office of Environmental Health Hazard Assessment, that's the agency that, oversees and implements the Prop 65 regulation.
Group:How did they define constructive notice as opposed to actual notice? Because sounds like Amazon had actual notice from their experience in Europe.
Tom:So the court side
Group:is that What does it take under the decision to have constructive knowers?
Tom:Well, what the statute says is that no person, in the course of no person in the course of doing business shall knowingly and intentionally expose consumers to, chemicals that are on the state of California's list. And what the court said is that the term knowing and intentional aren't defined in the prop 65 statute. The term knowing in the regulations is defined as having knowledge that you're, either knowledge of release or knowledge of the exposure. And what the court did is said, okay. Well, there's no there's no definition of whether or not this is requiring actual notice or or or actual knowledge or constructive knowledge.
Tom:So then they went and looked at the legislative history and looking at these statement of reasons. And in there, the, OEHHA had discussed that you don't need to have actual knowledge that you're either discharging some sort of fluid into the water or exposing consumers to a chemical. As long as you have constructive knowledge that you're doing it, that satisfies the intent of the statute, which is to be a remedial statute. It's meant to be essentially a right to know statute.
Group:What is constructive knowledge? Did the court define it, explain what it is? Apparently, it's different from actual knowledge.
Tom:Well, the court didn't go through and and define it per se. What the court said is that they should have been allowed to present evidence of constructive knowledge, meaning they had some sort of
Group:Whatever their duty to actually investigate and test?
Tom:That you hear yeah. So for the constructive knowledge, what they refer to is that you're you're essentially have a duty to investigate, essentially, and based upon reasonable facts presented to you. And in this case, because Amazon was at least on notice that some of these skin lightening creams, at least in Europe, contain mercury.
Tom:And in fact, the levels are so high that it's that it's consistent with being an active ingredient because they're essentially 0.2% or up to 2% of the the actual final product, that they're on notice that these these creams either do or likely have, mercury in them. And, again, that's based on the the what's been happening in these other markets.
Tom:One of the arguments that they have also argued at constructive knowledge is that after they served Amazon with a 60 day notice, they were then on notice as well that there there's a claim that these skin lining creams contain mercury. And at least at that point, they should have reacted and either pulled them from the market or placed a warning online, which Amazon eventually did. But, in the time between placing a warning on the website and receiving notice, there were 5 units of this product that were sold to consumers.
Tom:And so at the very least, there were violations for those 5 products that were sold.
Group:You said that this was they renewed this on substantial evidence? Yes. But do I think they're gonna what was the question of the offer? I think you said de novo.
Tom:That was a different case. Oh, oh, yeah. Yeah. Yeah. That was, too.
Tom:Oh, yeah. That was good to get So, yeah, you review for substantial evidence.
Group:So they presented the evidence, and then they were reviewing whether that evidence was, like, was evidence of constructive knowledge?
Tom:Or what they do is is the on appeal, they gave great deference to the or trial court's ruling on evidence that was admitted and how the evidence is applied. But they said that even though they gave great deference to the trial court, it's not, it's not toothless .
Tom:So the Court of Appeal isn't required to uphold any finding that's based on improbable evidence or evidence that's irrelevant to the issues before it. Which district was it in Quorum Gio? This was for, first district.
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