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AB-3262 Product liability: electronic retail marketplaces.(2019-2020)

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Date Published: 08/24/2020 12:48 PM
AB3262:v92#DOCUMENT

Amended  IN  Senate  August 24, 2020
Amended  IN  Senate  August 20, 2020
Amended  IN  Senate  August 13, 2020
Amended  IN  Senate  August 05, 2020
Amended  IN  Senate  July 16, 2020
Amended  IN  Assembly  June 08, 2020
Amended  IN  Assembly  May 04, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 3262


Introduced by Assembly Member Mark Stone
(Principal coauthor: Senator Jackson)
(Coauthors: Assembly Members Gonzalez and Wicks)

February 21, 2020


An act to add Section 1714.46 to the Civil Code, relating to civil liability.


LEGISLATIVE COUNSEL'S DIGEST


AB 3262, as amended, Mark Stone. Product liability: electronic retail marketplaces.
Existing law imposes strict liability upon persons who place a defective product on the market, including retailers engaged in the business of distributing goods to the public, for injuries caused by the product. Existing law exempts a manufacturer or seller from liability, except as provided, in any action for injury or death caused by a product, other than an action based on a manufacturing defect or breach of an express warranty, if the product is inherently unsafe and the product is known to be unsafe by the ordinary consumer who consumes the product with the ordinary knowledge common to the community and the product is a common consumer product intended for personal consumption, as specified.
This bill would require an electronic retail marketplace, as defined, to be held strictly liable, subject to certain exceptions, for all damages caused by defective products placed into the stream of commerce to the same extent as a retailer.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) Over the past 10 years, online sales of consumer goods have increased from less than 5 percent of retail sales to more than 15 percent of all retail sales in the United States. In recognition that the percentage of retail sales that are online is expected to continue to increase and that over $600 billion in online sales occurred in 2019 in the United States, increasing dramatically during the COVID-19 pandemic, it is clear that electronic retail marketplaces play a substantial role in the distribution of goods to consumers in the State of California, whether or not they ever take physical possession of those goods. Furthermore, when manufacturers of products sold online are located in foreign countries, those manufacturers could be outside of the jurisdiction of the courts of the State of California. Under these circumstances, the consumer could be left with no recourse for damages caused by defective products made by foreign manufacturers unless the electronic retail marketplace that distributed the product is subject to liability for the defective product.
(b) Under existing law a manufacturer, seller of goods, or other entity that is engaged in the business of distributing goods to the public is strictly liable in tort if a product they manufacture, sell, or distribute proves to have a defect that causes injury to a human being.
(c) The purpose of that liability is to ensure that the costs of injuries resulting from defective products are borne by the manufacturers, sellers, and other entities that are engaged in the business of distributing goods to the public, rather than by the injured consumers.
(d) Under existing law, the elements of a strict liability action are all of the following:
(1) The product was used in an intended or reasonably foreseeable manner.
(2) The product was in a defective condition when it left the defendant’s possession.
(3) The defective product was the legal cause of the plaintiff’s injuries or damages.
(e) There is uncertainty how to apply strict product liability law to electronic retail marketplaces. As a result, some injured consumers who purchase products through electronic retail marketplaces are unable to obtain compensation for their injuries from the entities that manufactured, distributed, or sold the products, thereby defeating the compensatory purpose of strict liability law.
(f) Unless this uncertainty is addressed in favor of compensating injured consumers, more and more companies will forego selling products through physical stores where strict product liability principles would require compensation. Instead, manufacturers, distributors, and sellers will emphasize electronic retail marketplace sales of possibly defective and injurious products thereby increasing the financial burdens on consumers, public health systems, and private and public insurers who, alone or in combination, will unjustly have to pay for the cost of treating and healing injuries without contribution from those that actually caused the harm or profited from the manufacture, sale, or distribution of the defective product. Furthermore, the electronic retail marketplace may be the only member of the enterprise reasonably available to the injured consumer. In other cases the electronic retail marketplace may be in a position to exert pressure on manufacturers to ensure that their products are safe. In this way, strict liability of the electronic retail marketplace serves as an incentive to safety and the lack of such liability creates an increased risk of defective products being sold to consumers. Strict liability on the manufacturer and the electronic retail marketplace alike affords maximum protection to the injured plaintiff and works no injustice to the electronic retail marketplace or manufacturer as they can adjust the costs of such protection between them in the course of their business relationship.
(g) Under existing law, magazines, newspapers, and broadcasters are not subject to strict products liability when they accept revenue for advertisements for products that are defective and cause harm. Therefore, it is the intent of the Legislature that revenue accepted for online advertisements that are the equivalent of advertisements accepted by magazines, newspapers, or broadcasters, without further facilitation of the placement of products into the stream of commerce, are not considered a financial benefit for purposes of this act.

SEC. 2.

 Section 1714.46 is added to the Civil Code, to read:

1714.46.
 (a) Consistent with the policy considerations underlying the doctrine of strict products liability of enhancing product safety, maximizing protection to the injured plaintiff, and apportioning costs among defendants, an electronic retail marketplace shall be strictly liable for all damages caused by defective products placed into the stream of commerce to the same extent that a retailer of that defective product would be liable and shall be deemed to be a retailer for purposes of California strict liability law. The liability of an electronic retail marketplace shall be equal to, but not greater than, the liability of a retailer as provided in Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256, and all defenses to strict liability that are available to a retailer under California law shall be preserved for an electronic retail marketplace.
(b) An electronic retail marketplace shall not be liable as described in subdivision (a) if any of the following conditions are met:
(1) The product that caused the damage was one of the following:
(A) Preowned or used and prominently described or prominently advertised on the electronic retail marketplace as preowned or used at the time it was purchased by the consumer.
(B) Handmade.
(2) The electronic retail marketplace did not receive a direct or indirect financial benefit from the sale of the defective product that caused the injury. A fee that is exclusively for an advertisement is not a “financial benefit from the sale of the defective product.”
(3) The sale or transaction of the product occurred by auction and is exempt from strict liability, as described in Tauber-Arons Auctioneers Co. v. Superior Court (1980) 101 Cal.App.3d 268.
(c) Notwithstanding subdivision (b), an electronic retail marketplace shall be strictly liable for the sale of preowned, used, handmade, or auctioned defective products if the application of strict liability to the electronic retail marketplace is consistent with the policy considerations underlying strict liability.
(d) As used in this section, the following definitions apply:
(1) “Electronic retail marketplace” means an electronic place or internet website that is engaged in the business of placing or facilitating the placement of products into the stream of commerce in this state, regardless of whether the vendor, product, or the marketplace has a physical presence in the state or whether, as described in Canifax v. Hercules Powder Co. (1965) 237 Cal.App.2d 44, 52, the electronic retail marketplace ever takes physical possession of the product. “Electronic retail marketplace” includes any subsidiaries or related party companies, including, but not limited to, any company that would constitute an “affiliated group” under Section 1504 of the Internal Revenue Code.
(2) “Handmade” means a product that conforms to all applicable state and federal consumer health and safety laws and is made by the vendor in the primary residence of the vendor, so long as the vendor’s sales of handmade products generate less than fifty thousand dollars ($50,000) per year in revenues.
(3) “Product” means a tangible good that is subject to strict product liability law.
(4) “Vendor” means the manufacturer, distributor, seller, or supplier of the product. “Vendor” does not include the electronic retail marketplace.
(e) This section does not limit the provisions of existing law that make manufacturers, distributors, sellers, retailers, and suppliers of products strictly liable for the safety of those products and prohibit the sale of products that violate state or federal health or safety laws.