You and a friend form a corporation (Company) together selling refurbished handbags. Your responsibilities are to decide sales and your friend's, Patty, is to manage operations and compliance.
It was manage to base the Company in Philadelphia, Pennsylvania (PA) due to its favorable tax laws, though, your second store in Brooklyn has strong sales due to your clientele's interest in eco-friendly fashion. For this same reason, online sales of the handbags do very well in the California (CA) market, and in fact, accounted for 18% of sales in 2011.
Your company has received a complaint letter from a CA purchaser (Purchaser) that claims the refurbished bag it bought from you is in violation of a CA state consumer product safety law, called as Proposition 65 (Prop 65). The claim stems from a protective coating on the exterior of the bag that Purchaser claims has caused a painful and unsightly skin rash on her hand and shoulder.