AB 3262 Would Create Strict Liability for Electronic Marketplaces

California case law provides for strict liability for defective products that injure persons that are placed into market by manufacturers and retailers. The main exemption from liability is for products 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.

Assembly Bill 3262 by Assembly Judiciary Committee Chair Mark Stone (D–Santa Cruz) would require an electronic retail marketplace to be held strictly liable, with certain exceptions, for all damages caused by defective products placed into the stream of commerce to the same extent as a retailer. In Section One of the bill, there are seven findings and declarations by the Legislature.

The legislative findings include:

• Online sales of consumer goods have increased to more than 15% of all retail sales in the U.S. Electronic retail marketplaces play a substantial role in the distribution of goods to consumers in the State.
• Manufacturers in foreign countries could be outside of the jurisdiction of state courts, and consumers could be left without any recourse for damages caused by defective products.
• There is uncertainty how to apply strict product liability law to electronic retail marketplaces.
• More and more companies will forego selling products through physical stores where strict product liability principles would require compensation.
• The electronic retail marketplace may be the only member of the enterprise reasonably available to the injured consumer.
• 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.

Section Two of the bill would add Section 1714.46 to the Civil Code. Subdivision (a) imposes upon an electronic retail marketplace strict liability for all damages caused by defective products placed into the stream of commerce. The imposition of strict liability is intended to be to the same extent that a retailer of that defective product would be liable, and the bill would deem an electronic retail marketplace to be a retailer for purposes of California strict liability law.

In addition, the liability of an electronic retail marketplace is equal to, but not greater than, the liability of a retailer and all defenses to strict liability that are available under California law are preserved for an electronic retailer marketplace.

Nonetheless, subdivision (b) states that an ERM is not liable if any of the following conditions are me:

• The product that caused the damage was one of the following:
  • 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.
  • Handmade.
• The electronic retail marketplace did not receive a direct or indirect financial benefit from the sale of the defective product that caused the injury.
• 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.

Subdivision (c) provides that an electronic retail marketplace is 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.

Subdivision (d) provides a series of definitions, including “electronic retail marketplace,” “handmade,” “product,” and “vendor.” Subdivision (e) specifies that this new code 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.

AB 3262 is currently pending on the Senate Floor.