May 14, 2022

Why interoffice emails that discuss potential product issues are a long term land mine for businesses

While not strictly a product liability action but a Song Beverly Warranty action available to vehicle buyers in CA, Bowser v Ford Motor Co. (May 2022) exemplifies the problems with “bad” internal company emails being created as well as long threads which loop different people in and out of the thread and even loop in parties outside the corporate entity. Needless to say email is very dangerous when not used properly and our office counsels clients all the time on best practices for ensuring that internal emails do not end up becoming an damning exhibit in a case against them or even another company. These days very often employees want to text, chat or email a free flowing “discussion” which really should be conducted on the phone or conference call. Failing to heed that one simple rule creates lots of headaches down the road that cannot be “undone”. Keeping outside legal counsel active in the thread discussion of the “issue” goes a long way to defeating claims of admissibility. But there are also limits to that practice as well which is the subject of another posting. Using social media of course is even worse than email and this article only address internal company emails (not communications outside the company). We are also not delving into the courts discussion of the depositions used against Ford that were taken in another action as that is another long analysis for another post (and most entities do not run into that situation as often as the email problem). The decision (Bowser v Ford Motor Co.; decision issued May 2022) is a great read however it is 83 pages long. It is available here.

I quote liberally from the decision below but of course I have only taken out the essential parts of the ruling at issue here and tried to ensure clarity and continuity in the relevant portions of the decision.

The purchase price of the 2006 Ford truck in question was $43,084.68. Mr. Bowser (the plaintiff) reviewed literature at the dealership that said “the Ford Super Duty [was] the best in class, having the best performance, highest quality.”

Over Ford’s objections, the Bowsers introduced a number of internal Ford emails and presentations. These showed that Ford was aware that certain parts of the 6.0L engine, including fuel injectors, turbochargers, and EGR valves, were failing at excessive rates, and that Ford was struggling to find the root cause of some of these failures. Some of the emails said that this information should be kept secret.

The Bowsers sued Ford, asserting causes of action under the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq. [Song-Beverly or Song-Beverly Act]) and for common-law fraud. Ford conceded liability under the Song-Beverly Act. A jury found for the Bowsers on all causes of action. It awarded compensatory damages ($42,310.17 under the Song-Beverly Act; $43,084.68 for fraud), $84,620.34 as a statutory penalty under the Song-Beverly Act, and $253,861.02 in punitive damages. The Bowsers elected to recover compensatory damages under the Song-Beverly Act rather than for fraud. The trial court awarded them $836,528.12 in attorney fees plus $94,264.99 in costs.

Ford appealed. It contended that the trial court erred by admitting the internal Ford documents, because they were inadmissible hearsay.

The Bowsers introduced a number of internal Ford emails and presentations (I am only highlighting a few for the purposes of showing the efforts to keep them secret):

In one email in the chain, dated May 29, 2002 (note how hold this email is), Freese noted that the turbocharger of a test vehicle had failed. There were “[n]ew concerns” about “loose injectors.” He requested a “[r]oot [c]ause [d]efinition,” a “[c]ontainment [p]lan,” and a “[c]orrective action plan.”

Exhibit 42 was an email chain dated November 2002 sent by Steven Henderson. Henderson’s title was Power Train Purchasing Manager. He said, “[W]e’re in the middle of 6.0L launch, and . . . things are not going well. J1 was delayed a full week for [Navistar] to work on the issues, but they are not fully resolved yet.”

Exhibit 47 was an email chain including a September 2004 email sent by Frank Ligon. Ligon’s title was Director of the Customer Service Division. He said Ford was “putting together a comprehensive strategy to bring all 6.0 up to standard.” “We are seeing a new group of concerns that range from chaffing [sic] of various wire harnesses causing drivability concerns, sensors that are failing at a high rate and turbo concerns.” “At this point we do not have a definitive repair action . . . to properly address the concern universe.” “Bottom line is we are not ‘out of the woods’ on this 6.0 and in fact may experience repeat symptoms once certain repairs are performed . . . .” The email was marked “privileged and confidential.” It added, “This is very confidential!!!” “I strongly urge that this information NOT be shared at this time until the ‘official’ action is announced.”

Exhibit 198 was a PowerPoint-style presentation dated February 2006. No author was indicated. It was entitled, “ITEC and Large Diesel Strategy Review.” It was labeled, “Ford secret draft.”

Exhibit 64 was an email chain dated February 2006 sent by Koszewnik. It said, “FYI only. Don’t forward or reference.”

The court addressed the hearsay objections to the emails (those above and many others) as follows:

There is a hearsay exception for a statement by the opposing party: “Evidence of a statement is not made inadmissible by the hearsay rule when offered against the declarant in an action to which he is a party . . . .” (Evid. Code, § 1220.) A corporation, however, can speak only through its officers and agents (employees included in “agent”). Accordingly, statements assertedly made by a corporation are not usually analyzed as party admissions under Evidence Code section 1220, but rather as authorized admissions under Evidence Code section 1222.

The court held “an assertion made by an agent in the course and scope of the agent’s employment, when offered against the principal by a party-opponent, no matter to whom the assertion was addressed.” California cases also hold that a statement by one employee to another was an authorized admission of the employer. It need only be shown that the agent’s statement “concerned a matter within the scope of the declarant’s employment and was made before that relationship was terminated.”

“Whatever is said by an agent . . . , either in the making of a contract for his principal, or at the time, and accompanying the performance of any act, within the scope of his authority, . . . of the particular contract or transaction in which he is then engaged, is, in legal effect, said by his principal, and admissible as evidence . .” Also when based on evidence of the declarant’s duties and responsibilities, it can apply to lower-ranking agents.

“In general, the determination requires an examination of the nature of the employee’s usual and customary authority, the nature of the statement in relation to that authority, and the particular relevance or purpose of the statement. A statement is “admissible as an authorized admission only where a proper foundation has been laid as to the declarant’s authorization to speak on behalf of the party against whom the statement is offered.”

The once concession made to Ford, (which did not really help them) was “The declarations of an [alleged] agent (employee) are not admissible to prove the fact of his agency or the extent of his power as such agent. [Citations.]”. “Hearsay statements in the documents themselves cannot be used to prove that they were authorized admissions.” For example, the fact that Koszewnik’s email signature described him as “Director, North American Diesel” cannot be used to prove that he actually was Ford’s Director of North American Diesel.

So clearly 20 year old emails in this case were a problem for Ford. The other problem is that email tends to exist on servers outside of your control and has backup and retention policies that don’t align with your company’s own policy. So think twice before sending that email to someone else in the company. Should you pick up the phone first rather then later on write a “better” less inflammatory open ended no resolution email?


Law Offices of Steven W. Hansen | www.swhlaw.com | 562 866 6228 © Copyright 1996-2022 Conditions of Use

February 12, 2022

Problem Solved ! AB-1946 Electric bicycles: safety and training program. (Calif 2022)

The California legislature likes to do three things (1) spend money on government initiatives/programs (spend on yourself I call it) (2) create as many rules and laws as possible to make it look like the legislature is "fixing" a "problem" or solving a "need" (3) do these things in a way that makes nothing mandatory but yet allows the state to spend lots of money doing "something" usually at 10x the cost of what the private sector would spend. In the end it accomplished nothing but at least you can campaign on it (even if it does not pass you can say you voted for it). The bill below meets all three characteristics. Putting up a website that no one even knows about is not going to make e-bike riders safer or better riders. Properly posting the signs and rules on trails and paths and the ENFORCING those rules would go a long way but alas that requires way too much work. Better to just put up a website. Does the state not recall (or know of) People for Bikes website? They have pretty much done all the work. Will the bike industry agree with what the CA "Office of Traffic Safety" is going to write as far as "guidelines"? Does it even matter?

We will try to keep posting on this as it evolves. Watch this space.

Assembly Bill
No. 1946



Introduced by Assembly Member Boerner Horvath

February 10, 2022


An act to add Article 4 (commencing with Section 893) to Chapter 8 of Division 1 of the Streets and Highways Code, relating to electric bicycles.

LEGISLATIVE COUNSEL'S DIGEST

AB 1946, as introduced, Boerner Horvath. Electric bicycles: safety and training program.
Existing law, the Protected Bikeways Act of 2014, provides that the state’s bicycle programs have not been fully developed or funded. Existing law requires the Department of Transportation to develop safety standards in connection with the use of bicycles, including the establishment of minimum safety design criteria for the planning and construction of specified types of bikeways and roadways where bicycle travel is permitted.
This bill would require the department, in coordination with the Office of Traffic Safety, to develop, on or before September 1, 2023, statewide safety standards and training programs based on evidence-based practices for users of electric bicycles, as defined, including, but not limited to, general electric bicycle riding safety, emergency maneuver skills, rules of the road, and laws pertaining to electronic bicycles. The bill would require the safety standards and training programs to be developed in collaboration with relevant stakeholders and to be posted on the internet websites of both the department and the Office of Traffic Safety.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Article 4 (commencing with Section 893) is added to Chapter 8 of Division 1 of the Streets and Highways Code, to read:
Article  4. Electric Bicycle Safety and Training
893.
 As used in this article, “electric bicycle” has the meaning provided in Section 312.5 of the Vehicle Code.
894.
 (a) The department, in coordination with the Office of Traffic Safety, shall develop, on or before September 1, 2023, statewide safety standards and training programs based on evidence-based practices for users of electric bicycles, including, but not limited to, general electric bicycle riding safety, emergency maneuver skills, rules of the road, and laws pertaining to electronic bicycles.
(b) The safety standards and training programs shall be developed in collaboration with relevant stakeholders.
(c) The safety standards and training programs shall be posted on the internet websites of both the department and the Office of Traffic Safety on or before September 1, 2023.




Law Offices of Steven W. Hansen | www.swhlaw.com | 562 866 6228 © Copyright 1996-2020 Conditions of Use

December 1, 2021

full text of the California e bike law (AB 1096) that was signed into law in October 2015 that governs the use of e bike on California roadways

Our readers have requested that we post the full text of the California e bike law that was signed into law in October 2015 that governs the use of e bike on California roadways and some bike paths. Again please check individual vehicle code sections to insure that changes have not been made since this bill was issued in October 2015.

Assembly Bill No. 1096

An act to amend Sections 406, 12804.9, 21113, 21207.5, and 24016 of, and to add Sections 312.5 and 21213 to, the Vehicle Code, relating to vehicles.

[ Approved by Governor  October 07, 2015. Filed with Secretary of State  October 07, 2015. ]

LEGISLATIVE COUNSEL'S DIGEST

AB 1096, Chiu. Vehicles: electric bicycles.

Existing law defines a “motorized bicycle” or a “moped” as a 2-wheeled or 3-wheeled device having fully operative pedals for propulsion by human power, or having no pedals if powered solely by electrical energy, and an automatic transmission and motor, as specified.

Existing law also defines a “motorized bicycle” as a device that has fully operative pedals for propulsion by human power and has an electric motor that meets specified requirements. Existing law requires a motorized bicycle, as described by this definition, to comply with specified equipment and manufacturing requirements. Existing law also imposes specified requirements relating to the operation of bicycles. A violation of the Vehicle Code is a crime.

This bill would delete the latter definition of a “motorized bicycle.” The bill would define an “electric bicycle” as a bicycle with fully operable pedals and an electric motor of less than 750 watts, and would create 3 classes of electric bicycles, as specified. The bill would require manufacturers or distributors of electric bicycles to affix a label to each electric bicycle that describes its classification number, top assisted speed, and motor wattage. The bill would require every electric bicycle manufacturer to certify that it complies with specified equipment and manufacturing requirements. The bill would also require an electric bicycle to operate in a manner so that the electric motor disengages or stops functioning when brakes are applied, or in a manner so that the release or activation of a switch or other mechanism disengages or stops the electric motor from functioning.

The bill would require a person riding an electric bicycle to comply with the above-described requirements relating to the operation of bicycles. The bill would prohibit persons under 16 years of age from operating a class 3 electric bicycle. The bill would also require persons operating, or riding upon, a class 3 electric bicycle to wear a helmet, as specified. The bill would prohibit the operation of a class 3 electric bicycle on specified paths, lanes, or trail, unless that operation is authorized by a local ordinance. The bill would also authorize a local authority or governing body to prohibit, by ordinance, the operation of class 1 or class 2 electric bicycles on specified paths or trail. The bill would prohibit a person from tampering with or modifying an electric bicycle to change its speed capability, unless he or she appropriately replaces the classification label. The bill would specify that a person operating an electric bicycle is not subject to financial responsibility, driver’s license, registration, or license plate requirements. The bill would also make conforming changes.

This bill would incorporate additional changes to Section 21113 of the Vehicle Code proposed by AB 604 that would become operative only if this bill and AB 604 are both chaptered, and this bill is chaptered last.

Because the bill would create new requirements regarding electric bicycles, the violation of which would be a crime, the bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES 

Bill Text

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

 

SECTION 1. Section 312.5 is added to the Vehicle Code, to read:

 

312.5. (a) An “electric bicycle” is a bicycle equipped with fully operable pedals and an electric motor of less than 750 watts.

(1) A “class 1 electric bicycle,” or “low-speed pedal-assisted electric bicycle,” is a bicycle equipped with a motor that provides assistance only when the rider is pedaling, and that ceases to provide assistance when the bicycle reaches the speed of 20 miles per hour.

(2) A “class 2 electric bicycle,” or “low-speed throttle-assisted electric bicycle,” is a bicycle equipped with a motor that may be used exclusively to propel the bicycle, and that is not capable of providing assistance when the bicycle reaches the speed of 20 miles per hour.

(3) A “class 3 electric bicycle,” or “speed pedal-assisted electric bicycle,” is a bicycle equipped with a motor that provides assistance only when the rider is pedaling, and that ceases to provide assistance when the bicycle reaches the speed of 28 miles per hour, and equipped with a speedometer.

(b) A person riding an electric bicycle, as defined in this section, is subject to Article 4 (commencing with Section 21200) of Chapter 1 of Division 11.

(c) On and after January 1, 2017, manufacturers and distributors of electric bicycles shall apply a label that is permanently affixed, in a prominent location, to each electric bicycle. The label shall contain the classification number, top assisted speed, and motor wattage of the electric bicycle, and shall be printed in Arial font in at least 9-point type.

SEC. 2. Section 406 of the Vehicle Code is amended to read:

406. (a) A “motorized bicycle” or “moped” is a two-wheeled or three-wheeled device having fully operative pedals for propulsion by human power, or having no pedals if powered solely by electrical energy, and an automatic transmission and a motor that produces less than 4 gross brake horsepower and is capable of propelling the device at a maximum speed of not more than 30 miles per hour on level ground.

(b) Every manufacturer of a motorized bicycle or moped, as defined in this section, shall provide a disclosure to buyers that advises buyers that their existing insurance policies may not provide coverage for these bicycles and that they should contact their insurance company or insurance agent to determine if coverage is provided. The disclosure shall meet both of the following requirements:

(1) The disclosure shall be printed in not less than 14-point boldface type on a single sheet of paper that contains no information other than the disclosure.

(2) The disclosure shall include the following language in capital letters:

“YOUR INSURANCE POLICIES MAY NOT PROVIDE COVERAGE FOR ACCIDENTS INVOLVING THE USE OF THIS BICYCLE. TO DETERMINE IF COVERAGE IS PROVIDED YOU SHOULD CONTACT YOUR INSURANCE COMPANY OR AGENT.”

 SEC. 3. Section 12804.9 of the Vehicle Code is amended to read:

12804.9. (a) (1) The examination shall include all of the following:

(A) A test of the applicant’s knowledge and understanding of the provisions of this code governing the operation of vehicles upon the highways.

(B) A test of the applicant’s ability to read and understand simple English used in highway traffic and directional signs.

(C) A test of the applicant’s understanding of traffic signs and signals, including the bikeway signs, markers, and traffic control devices established by the Department of Transportation.

(D) An actual demonstration of the applicant’s ability to exercise ordinary and reasonable control in operating a motor vehicle by driving it under the supervision of an examining officer. The applicant shall submit to an examination appropriate to the type of motor vehicle or combination of vehicles he or she desires a license to drive, except that the department may waive the driving test part of the examination for any applicant who submits a license issued by another state, territory, or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico if the department verifies through any acknowledged national driver record data source that there are no stops, holds, or other impediments to its issuance. The examining officer may request to see evidence of financial responsibility for the vehicle prior to supervising the demonstration of the applicant’s ability to operate the vehicle. The examining officer may refuse to examine an applicant who is unable to provide proof of financial responsibility for the vehicle, unless proof of financial responsibility is not required by this code.

(E) A test of the hearing and eyesight of the applicant, and of other matters that may be necessary to determine the applicant’s mental and physical fitness to operate a motor vehicle upon the highways, and whether any grounds exist for refusal of a license under this code.

(2) (A) Before a class A or class B driver’s license, or class C driver’s license with a commercial endorsement, may be issued or renewed, the applicant shall have in his or her driver record a valid report of a medical examination of the applicant given not more than two years prior to the date of the application by a health care professional. As used in this paragraph, “health care professional” means a person who is licensed, certified, or registered in accordance with applicable state laws and regulations to practice medicine and perform physical examinations in the United States. Health care professionals are doctors of medicine, doctors of osteopathy, physician assistants, and registered advanced practice nurses, or doctors of chiropractic who are clinically competent to perform the medical examination presently required of motor carrier drivers by the United States Department of Transportation. The report shall be on a form approved by the department. In establishing the requirements, consideration may be given to the standards presently required of motor carrier drivers by the Federal Motor Carrier Safety Administration.

(B) The department may accept a federal waiver of one or more physical qualification standards if the waiver is accompanied by a report of a nonqualifying medical examination for a class A or class B driver’s license, or class C driver’s license with a commercial endorsement, pursuant to Section 391.41(a)(3)(ii) of Subpart E of Part 391 of Title 49 of the Code of Federal Regulations.

(3) A physical defect of the applicant that, in the opinion of the department, is compensated for to ensure safe driving ability, shall not prevent the issuance of a license to the applicant.

(b) In accordance with the following classifications, an applicant for a driver’s license shall be required to submit to an examination appropriate to the type of motor vehicle or combination of vehicles the applicant desires a license to drive:

(1) Class A includes the following:

(A) Except as provided in subparagraph (H) of paragraph (3), a combination of vehicles, if a vehicle being towed has a gross vehicle weight rating or gross vehicle weight of more than 10,000 pounds.

(B) A vehicle towing more than one vehicle.

(C) A trailer bus.

(D) The operation of all vehicles under class B and class C.

(2) Class B includes the following:

(A) Except as provided in subparagraph (H) of paragraph (3), a single vehicle with a gross vehicle weight rating or gross vehicle weight of more than 26,000 pounds.

(B) A single vehicle with three or more axles, except any three-axle vehicle weighing less than 6,000 pounds.

(C) A bus with a gross vehicle weight rating or gross vehicle weight of more than 26,000 pounds, except a trailer bus.

(D) A farm labor vehicle.

(E) A single vehicle with three or more axles or a gross vehicle weight rating or gross vehicle weight of more than 26,000 pounds towing another vehicle with a gross vehicle weight rating or gross vehicle weight of 10,000 pounds or less.

(F) A house car over 40 feet in length, excluding safety devices and safety bumpers.

(G) The operation of all vehicles covered under class C.

(3) Class C includes the following:

(A) A two-axle vehicle with a gross vehicle weight rating or gross vehicle weight of 26,000 pounds or less, including when the vehicle is towing a trailer or semitrailer with a gross vehicle weight rating or gross vehicle weight of 10,000 pounds or less.

(B) Notwithstanding subparagraph (A), a two-axle vehicle weighing 4,000 pounds or more unladen when towing a trailer coach not exceeding 9,000 pounds gross.

(C) A house car of 40 feet in length or less.

(D) A three-axle vehicle weighing 6,000 pounds gross or less.

(E) A house car of 40 feet in length or less or a vehicle towing another vehicle with a gross vehicle weight rating of 10,000 pounds or less, including when a tow dolly is used. A person driving a vehicle may not tow another vehicle in violation of Section 21715.

(F) (i) A two-axle vehicle weighing 4,000 pounds or more unladen when towing either a trailer coach or a fifth-wheel travel trailer not exceeding 10,000 pounds gross vehicle weight rating, when the towing of the trailer is not for compensation.

(ii) A two-axle vehicle weighing 4,000 pounds or more unladen when towing a fifth-wheel travel trailer exceeding 10,000 pounds, but not exceeding 15,000 pounds, gross vehicle weight rating, when the towing of the trailer is not for compensation, and if the person has passed a specialized written examination provided by the department relating to the knowledge of this code and other safety aspects governing the towing of recreational vehicles upon the highway.

The authority to operate combinations of vehicles under this subparagraph may be granted by endorsement on a class C license upon completion of that written examination.

(G) A vehicle or combination of vehicles with a gross combination weight rating or a gross vehicle weight rating, as those terms are defined in subdivisions (j) and (k), respectively, of Section 15210, of 26,000 pounds or less, if all of the following conditions are met:

(i) Is operated by a farmer, an employee of a farmer, or an instructor credentialed in agriculture as part of an instructional program in agriculture at the high school, community college, or university level.

(ii) Is used exclusively in the conduct of agricultural operations.

(iii) Is not used in the capacity of a for-hire carrier or for compensation.

(H) Firefighting equipment, provided that the equipment is operated by a person who holds a firefighter endorsement pursuant to Section 12804.11.

(I) A motorized scooter.

(J) A bus with a gross vehicle weight rating or gross vehicle weight of 26,000 pounds or less, except a trailer bus.

(K)  Class C does not include a two-wheel motorcycle or a two-wheel motor-driven cycle.

(4) Class M1. A two-wheel motorcycle or a motor-driven cycle. Authority to operate a vehicle included in a class M1 license may be granted by endorsement on a class A, B, or C license upon completion of an appropriate examination.

(5) (A) Class M2 includes the following:

(i) A motorized bicycle or moped, or a bicycle with an attached motor, except an electric bicycle as described in subdivision (a) of Section 312.5.

(ii) A motorized scooter.

(B) Authority to operate vehicles included in class M2 may be granted by endorsement on a class A, B, or C license upon completion of an appropriate examination, except that no endorsement is required for a motorized scooter. Persons holding a class M1 license or endorsement may operate vehicles included in class M2 without further examination.

(c) A driver’s license or driver certificate is not valid for operating a commercial motor vehicle, as defined in subdivision (b) of Section 15210, any other motor vehicle defined in paragraph (1) or (2) of subdivision (b), or any other vehicle requiring a driver to hold any driver certificate or any driver’s license endorsement under Section 15275, unless a medical certificate approved by the department that has been issued within two years of the date of the operation of that vehicle and a copy of the medical examination report from which the certificate was issued is on file with the department. Otherwise, the license is valid only for operating class C vehicles that are not commercial vehicles, as defined in subdivision (b) of Section 15210, and for operating class M1 or M2 vehicles, if so endorsed, that are not commercial vehicles, as defined in subdivision (b) of Section 15210.

(d) A license or driver certificate issued prior to the enactment of Chapter 7 (commencing with Section 15200) is valid to operate the class or type of vehicles specified under the law in existence prior to that enactment until the license or certificate expires or is otherwise suspended, revoked, or canceled. Upon application for renewal or replacement of a driver’s license, endorsement, or certificate required to operate a commercial motor vehicle, a valid medical certificate on a form approved by the department shall be submitted to the department.

(e) The department may accept a certificate of driving skill that is issued by an employer, authorized by the department to issue a certificate under Section 15250, of the applicant, in lieu of a driving test, on class A or B applications, if the applicant has first qualified for a class C license and has met the other examination requirements for the license for which he or she is applying. The certificate may be submitted as evidence of the applicant’s skill in the operation of the types of equipment covered by the license for which he or she is applying.

(f) The department may accept a certificate of competence in lieu of a driving test on class M1 or M2 applications, when the certificate is issued by a law enforcement agency for its officers who operate class M1 or M2 vehicles in their duties, if the applicant has met the other examination requirements for the license for which he or she is applying.

(g) The department may accept a certificate of satisfactory completion of a novice motorcyclist training program approved by the commissioner pursuant to Section 2932 in lieu of a driving test on class M1 or M2 applications, if the applicant has met the other examination requirements for the license for which he or she is applying. The department shall review and approve the written and driving test used by a program to determine whether the program may issue a certificate of completion.

(h) Notwithstanding subdivision (b), a person holding a valid California driver’s license of any class may operate a short-term rental motorized bicycle without taking any special examination for the operation of a motorized bicycle, and without having a class M2 endorsement on that license. As used in this subdivision, “short-term” means 48 hours or less.

(i) A person under the age of 21 years shall not be issued a class M1 or M2 license or endorsement unless he or she provides evidence satisfactory to the department of completion of a motorcycle safety training program that is operated pursuant to Article 2 (commencing with Section 2930) of Chapter 5 of Division 2.

(j) A driver of a vanpool vehicle may operate with a class C license but shall possess evidence of a medical examination required for a class B license when operating vanpool vehicles. In order to be eligible to drive the vanpool vehicle, the driver shall keep in the vanpool vehicle a statement, signed under penalty of perjury, that he or she has not been convicted of reckless driving, drunk driving, or a hit-and-run offense in the last five years.

SEC. 4. Section 21113 of the Vehicle Code is amended to read:

21113. (a) A person shall not drive a vehicle or animal, or stop, park, or leave standing a vehicle or animal, whether attended or unattended, upon the driveways, paths, parking facilities, or the grounds of any public school, state university, state college, unit of the state park system, county park, municipal airport, rapid transit district, transit development board, transit district, public transportation agency, county transportation commission created pursuant to Section 130050 of the Public Utilities Code, joint powers agency operating or managing a commuter rail system, or any property under the direct control of the legislative body of a municipality, or a state, county, or hospital district institution or building, or an educational institution exempted, in whole or in part, from taxation, or any harbor improvement district or harbor district formed pursuant to Part 2 (commencing with Section 5800) or Part 3 (commencing with Section 6000) of Division 8 of the Harbors and Navigation Code, a district organized pursuant to Part 3 (commencing with Section 27000) of Division 16 of the Streets and Highways Code, or state grounds served by the Department of the California Highway Patrol, or any property under the possession or control of a housing authority formed pursuant to Article 2 (commencing with Section 34240) of Chapter 1 of Part 2 of Division 24 of the Health and Safety Code, except with the permission of, and upon and subject to any condition or regulation that may be imposed by, the legislative body of the municipality, or the governing board or officer of the public school, state university, state college, county park, municipal airport, rapid transit district, transit development board, transit district, public transportation agency, county transportation commission, joint powers agency operating or managing a commuter rail system, or state, county, or hospital district institution or building, or educational institution, or harbor district, or a district organized pursuant to Part 3 (commencing with Section 27000) of Division 16 of the Streets and Highways Code, or housing authority, or the Director of Parks and Recreation regarding units of the state park system or the state agency with jurisdiction over the grounds served by the Department of the California Highway Patrol.

(b) A governing board, legislative body, or officer shall erect or place appropriate signs giving notice of any special conditions or regulations that are imposed under this section and the governing board, legislative body, or officer shall also prepare and keep available at the principal administrative office of the governing board, legislative body, or officer, for examination by all interested persons, a written statement of all those special conditions and regulations adopted pursuant to this section.

(c) When a governing board, legislative body, or officer permits public traffic upon the driveways, paths, parking facilities, or grounds under their control then, except for those conditions imposed or regulations enacted by the governing board, legislative body, or officer applicable to the traffic, all the provisions of this code relating to traffic upon the highways shall be applicable to the traffic upon the driveways, paths, parking facilities, or grounds.

(d) A public transportation agency that imposes any condition or regulation upon a person who parks or leaves standing a vehicle, pursuant to subdivision (a), is authorized to do either of the following:

(1) Enforce that condition or regulation in the manner provided in Article 3 (commencing with Section 40200) of Chapter 1 of Division 17 of this code. The public transportation agency shall be considered the issuing agency for that purpose.

(2) Designate regularly employed and salaried employees, who are engaged in directing traffic or enforcing parking laws and regulations, for the purpose of removing any vehicle in the same manner as a city, county, or jurisdiction of a state agency pursuant to Chapter 10 (commencing with Section 22650) of Division 11 of this code.

(e) With respect to the permitted use of vehicles or animals on property under the direct control of the legislative body of a municipality, no change in the use of vehicles or animals on the property, that had been permitted on January 1, 1976, shall be effective unless and until the legislative body, at a meeting open to the general public, determines that the use of vehicles or animals on the property should be prohibited or regulated.

(f) A transit development board may adopt ordinances, rules, or regulations to restrict, or specify the conditions for, the use of bicycles, motorized bicycles, electric bicycles, skateboards, and roller skates on property under the control of, or any portion of property used by, the board.

(g) A public agency, including, but not limited to, the Regents of the University of California and the Trustees of the California State University, may adopt rules or regulations to restrict, or specify the conditions for, the use of bicycles, motorized bicycles, electric bicycles, skateboards, and roller skates on public property under the jurisdiction of that agency.

(h) “Housing authority,” for the purposes of this section, means a housing authority located within a county with a population of over 6,000,000 people, and any other housing authority that complies with the requirements of this section.

(i) “Public transportation agency,” for purposes of this section, means a public agency that provides public transportation as defined in paragraph (1) of subdivision (f) of Section 1 of Article XIX A of the California Constitution.

SEC. 4.5. Section 21113 of the Vehicle Code is amended to read:

21113. (a) A person shall not drive a vehicle or animal, or stop, park, or leave standing a vehicle or animal, whether attended or unattended, upon the driveways, paths, parking facilities, or the grounds of any public school, state university, state college, unit of the state park system, county park, municipal airport, rapid transit district, transit development board, transit district, public transportation agency, county transportation commission created pursuant to Section 130050 of the Public Utilities Code, joint powers agency operating or managing a commuter rail system, or any property under the direct control of the legislative body of a municipality, or a state, county, or hospital district institution or building, or an educational institution exempted, in whole or in part, from taxation, or any harbor improvement district or harbor district formed pursuant to Part 2 (commencing with Section 5800) or Part 3 (commencing with Section 6000) of Division 8 of the Harbors and Navigation Code, a district organized pursuant to Part 3 (commencing with Section 27000) of Division 16 of the Streets and Highways Code, or state grounds served by the Department of the California Highway Patrol, or any property under the possession or control of a housing authority formed pursuant to Article 2 (commencing with Section 34240) of Chapter 1 of Part 2 of Division 24 of the Health and Safety Code, except with the permission of, and upon and subject to any condition or regulation that may be imposed by, the legislative body of the municipality, or the governing board or officer of the public school, state university, state college, county park, municipal airport, rapid transit district, transit development board, transit district, public transportation agency, county transportation commission, joint powers agency operating or managing a commuter rail system, or state, county, or hospital district institution or building, or educational institution, or harbor district, or a district organized pursuant to Part 3 (commencing with Section 27000) of Division 16 of the Streets and Highways Code, or housing authority, or the Director of Parks and Recreation regarding units of the state park system or the state agency with jurisdiction over the grounds served by the Department of the California Highway Patrol.

(b) A governing board, legislative body, or officer shall erect or place appropriate signs giving notice of any special conditions or regulations that are imposed under this section and the governing board, legislative body, or officer shall also prepare and keep available at the principal administrative office of the governing board, legislative body, or officer, for examination by all interested persons, a written statement of all those special conditions and regulations adopted pursuant to this section.

(c) When a governing board, legislative body, or officer permits public traffic upon the driveways, paths, parking facilities, or grounds under their control then, except for those conditions imposed or regulations enacted by the governing board, legislative body, or officer applicable to the traffic, all the provisions of this code relating to traffic upon the highways shall be applicable to the traffic upon the driveways, paths, parking facilities, or grounds.

(d) A public transportation agency that imposes any condition or regulation upon a person who parks or leaves standing a vehicle, pursuant to subdivision (a), is authorized to do either of the following:

(1) Enforce that condition or regulation in the manner provided in Article 3 (commencing with Section 40200) of Chapter 1 of Division 17 of this code. The public transportation agency shall be considered the issuing agency for that purpose.

(2) Designate regularly employed and salaried employees, who are engaged in directing traffic or enforcing parking laws and regulations, for the purpose of removing any vehicle in the same manner as a city, county, or jurisdiction of a state agency pursuant to Chapter 10 (commencing with Section 22650) of Division 11 of this code.

(e) With respect to the permitted use of vehicles or animals on property under the direct control of the legislative body of a municipality, no change in the use of vehicles or animals on the property, that had been permitted on January 1, 1976, shall be effective unless and until the legislative body, at a meeting open to the general public, determines that the use of vehicles or animals on the property should be prohibited or regulated.

(f) A transit development board may adopt ordinances, rules, or regulations to restrict, or specify the conditions for, the use of bicycles, motorized bicycles, electric bicycles, skateboards, electrically motorized boards, and roller skates on property under the control of, or any portion of property used by, the board.

(g) A public agency, including, but not limited to, the Regents of the University of California and the Trustees of the California State University, may adopt rules or regulations to restrict, or specify the conditions for, the use of bicycles, motorized bicycles, electric bicycles, skateboards, electrically motorized boards, and roller skates on public property under the jurisdiction of that agency.

(h) “Housing authority,” for the purposes of this section, means a housing authority located within a county with a population of over 6,000,000 people, and any other housing authority that complies with the requirements of this section.

(i) “Public transportation agency,” for purposes of this section, means a public agency that provides public transportation as defined in paragraph (1) of subdivision (f) of Section 1 of Article XIX A of the California Constitution.

 

SEC. 5. Section 21207.5 of the Vehicle Code is amended to read:

 

21207.5. (a) Notwithstanding Sections 21207 and 23127 of this code, or any other law, a motorized bicycle or class 3 electric bicycle shall not be operated on a bicycle path or trail, bikeway, bicycle lane established pursuant to Section 21207, equestrian trail, or hiking or recreational trail, unless it is within or adjacent to a roadway or unless the local authority or the governing body of a public agency having jurisdiction over the path or trail permits, by ordinance, that operation.

(b) The local authority or governing body of a public agency having jurisdiction over a bicycle path or trail, equestrian trail, or hiking or recreational trail, may prohibit, by ordinance, the operation of a class 1 or class 2 electric bicycle on that path or trail.

 

SEC. 6. Section 21213 is added to the Vehicle Code, to read:

 

21213. (a) A person under 16 years of age shall not operate a class 3 electric bicycle.

(b) A person shall not operate a class 3 electric bicycle, or ride upon a class 3 electric bicycle as a passenger, upon a street, bikeway, as defined in Section 890.4 of the Streets and Highways Code, or any other public bicycle path or trail, unless that person is wearing a properly fitted and fastened bicycle helmet that meets the standards of either the American Society for Testing and Materials (ASTM) or the United States Consumer Product Safety Commission (CPSC), or standards subsequently established by those entities. This helmet requirement also applies to a person who rides upon a class 3 electric bicycle while in a restraining seat that is attached to the bicycle or in a trailer towed by the bicycle.

 

SEC. 7. Section 24016 of the Vehicle Code is amended to read:

 

24016. (a) An electric bicycle described in subdivision (a) of Section 312.5 shall meet the following criteria:

(1) Comply with the equipment and manufacturing requirements for bicycles adopted by the United States Consumer Product Safety Commission (16 C.F.R. 1512.1, et seq.).

(2) Operate in a manner so that the electric motor is disengaged or ceases to function when the brakes are applied, or operate in a manner such that the motor is engaged through a switch or mechanism that, when released or activated, will cause the electric motor to disengage or cease to function.

(b) A person operating an electric bicycle is not subject to the provisions of this code relating to financial responsibility, driver’s licenses, registration, and license plate requirements, and an electric bicycle is not a motor vehicle.

(c) Every manufacturer of an electric bicycle shall certify that it complies with the equipment and manufacturing requirements for bicycles adopted by the United States Consumer Product Safety Commission (16 C.F.R. 1512.1, et seq.).

(d) A person shall not tamper with or modify an electric bicycle described in subdivision (a) of Section 312.5 so as to change the speed capability of the bicycle, unless he or she appropriately replaces the label indicating the classification required in subdivision (c) of Section 312.5.

 

SEC. 8. Section 4.5 of this bill incorporates amendments to Section 21113 of the Vehicle Code proposed by both this bill and Assembly Bill 604. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2016, (2) each bill amends Section 21113 of the Vehicle Code, and (3) this bill is enacted after Assembly Bill 604, in which case Section 4 of this bill shall not become operative.

SEC. 9. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

Law Offices of Steven W. Hansen | www.swhlaw.com | 562 866 6228 © Copyright 1996-2020 Conditions of Use

September 18, 2021

Amazon's new 'guarantee' policy seeks to mollify consumers, streamline claims process

Originally Published in Bicycle Retailer and Industry News 
Reprinted with permission 

August 17, 2021

Amazon just announced a new type of "guarantee" or "support" that it is calling the A-to-Z Guarantee (AZG). Actually, this is not new; it was introduced more than 20 years ago, but is now "improved." In Amazon's own words, from its full official press release:

"Now, in the unlikely event a defective product sold through Amazon.com causes property damage or personal injury, Amazon will directly pay customers for claims under $1,000 — which account for more than 80% of cases — at no cost to sellers, and may step in to pay claims for higher amounts if the seller is unresponsive or rejects a claim we believe to be valid."

Interestingly, in the fine print (A-to-z Claims Process Terms and Conditions), Amazon also states, "The Process is not insurance or a warranty, and it does not replace any applicable insurance or warranty that may be available to you."

As you can see there are a lot of loaded words in this AZG press release, what my contracts professor liked to call "weasel words." It's hard to imagine any personal injury or property damage claims being "resolved" for under $1,000. The other issue that is left somewhat in the dark is what would be in the release that Amazon surely would require a consumer to sign. I suspect it would be a global release barring any suit against anyone or any company from future claims. And of course, the issue of what to do with minors under 18 is not addressed. Those settlements require court approval. Further reading of the details notes that you would also have to assign all your claims rights to Amazon ... "so that we can pursue recovery from other sources in our discretion."

What is more interesting is how Amazon will fund this. One has to assume the money is not coming out of Jeff Bezos' yacht fund, given how many claims this would likely encompass. On the one hand, this is AZG is only for products sold through Amazon.com (presumably Fulfillment by Amazon) and apparently does not cover those items sold through any "third-party sites" (Fulfillment by Merchant). This will add confusion to the process, especially with consumers as most do not know if they are getting an FBA product or FBM product. Some aspects of the AZG cover FBM, but the new part regarding injury claims apparently does not. One has to assume this funding is being arranged through Amazon's insurance coverage, the suppliers' coverage (naming Amazon as "additional insured"), or perhaps through Amazon withholding payment to sellers for claims that it has deemed "bonafide" (or a combination of all three sources). Amazon insists this payment is at "no cost to sellers." However, upon further reading, Amazon only commits to "Pay valid claims less than $1,000 and not seek reimbursement from sellers who have valid insurance." We assume "valid" insurance would mean insurance that actually pays Amazon for the claim; if it does not pay the claim, then Amazon could go after the seller directly.

After further reading the Terms And Conditions, it states "Any offers of compensation made through the A-to-z Claims Process will be limited to (a) the purchase price of the product; and (b) compensation of up to $1 million for medical expenses, lost wages, and property damage approximately caused by a defective product. Amazon will not offer to compensate you for non-economic damages, business losses, consequential and incidental damages, attorney fees, punitive damages, or other losses." So it seems the payment limit is much higher than the $1,000 limit. But Amazon will only step in above that limit if the seller's insurance kicks in. It also appears that no "pain and suffering" amounts will be paid, which makes up the vast majority of most settlements and verdicts, and so the reality is for any sizable personal injury claims this process is not realistically going to resolve anything.

As a further restriction, you only have 90 days to make an AZG claim, whereas under most state laws, you would have 2-5 years to bring suit and typically for minors until they are 18. Also, all other terms and conditions apply to the AZG Claims process, including but not limited to choice of law and dispute resolution provisions. One would have to assume that it would be a binding arbitration proceeding and that the company providing the arbitrators would find itself out of business quickly if it were deciding against Amazon too often.

Again the more interesting part of this deal is the funding, administration and the entire claims process, which brings us to part two of the equation: liability insurance. Amazon partnered with Marsh McLennan, the largest insurance broker in the world, and a number of U.S. insurers to offer insurance to its sellers. Per the Amazon seller central site: "Effective September 1, 2021, once you reach $10,000 in gross proceeds in any month, you are required under your selling agreement with Amazon to carry commercial liability insurance with limits of at least $1 million in the aggregate and name Amazon as an additional insured" and of course the "stick" part: "If you do not obtain the required insurance, we will seek reimbursement for costs we incur in resolving claims, regardless of sales thresholds, unless we agree to waive our right to reimbursement. We may also restrict you from selling in a particular category or even suspend your account until you provide proof of insurance." Of course, Amazon sellers remain free to use their own insurance brokers and insurer to obtain the required insurance, and it remains to be seen if the Amazon consortium of brokers and insurers ends up being cheaper.

In addition to leaving out the FBM side of Amazon, the insurance program appears to be open only to U.S.-based sellers. This of course is a huge loophole in the entire process as most of what Amazon sells is from sellers outside the U.S. That of course is a much thornier problem that Amazon's AZG process does not seem to deal with at all. It's not clear what percentage of non-U.S. manufactured goods are actually sold to Amazon by third-party sellers within the U.S. on the FBA side.

Surely, the state court's assault — or rather plaintiff attorneys' assault on Amazon — in the last two years (with most of the anti-Amazon appellate rulings coming out in the last 12 months) has had some role in this new process being rolled out. As I and the courts predicted after the Bolger v Amazon case this would accelerate Amazon's process of passing the "product liability" cost along to its sellers and forcing them to get coverage. This is exactly what the courts in their rulings have stated; that a large player in the consumer products marketplace, like Amazon, has the financial clout and bargaining strength to require its millions of sellers to get the required insurance. The courts were right. Amazon is doing just what they predicted. Holding Amazon liable as a seller has forced it to push that liability back upstream.

Finally, there is Amazon's fight with the CPSC, which may also be somewhat related to this. Amazon may be using this new AZG accelerated claims process to burnish its image with the CPSC, portraying itself as a responsible company that cares about consumers and their safety. But again the recall responsibility is separate from the product liability responsibility (although the two are linked) and it remains to be seen who will win in the CPSC fight.

There are many unanswered questions on this process, and surely changes will be implemented as Amazon goes along or it might totally change the program. We also do not know to what extent the plaintiff's bar will create ancillary litigation just out of this process alone. I am sure that Walmart.com and other large platforms trying to compete with Amazon are watching closely. Infusing this much insurance coverage and related administration costs into the consumer goods market that was previously uninsured is not only going to cause consumer goods price inflation, as if we don't have enough already, but there will be a huge shift of money into insurance coffers. With increased prices we know who benefits. Amazon. We also do not know what percentage of FBA (or FBM) sellers are uninsured currently.

Another thing we know about Amazon is that it likes to take over many aspects related to consumer product sales (after watching third parties work in a market segment for years like FedEx). Look at Amazon Web Services and Amazon shipping for example. So the next question is when will Amazon get into the lucrative insurance brokerage market or claims administration business? Amazon has certainly upped its game in the consumer goods business. It will be very interesting to watch this play out over the next two years.

Steven W. Hansen is an attorney who represents product manufacturers, distributors and retailers in product liability and other lawsuits and provides consultation on all matters related to the manufacture and distribution of e-bikes and other consumer products. For further questions visit www.swhlaw.com or email legal.inquiry@swhlaw.com

The information in this column is subject to change and may not be applicable in your state or country. It is intended as a thought-provoking discussion of general legal principles and does not constitute legal advice. Any opinions expressed herein are solely those of the author.


Law Offices of Steven W. Hansen | www.swhlaw.com | 562 866 6228 © Copyright 1996-2020 Conditions of Use

July 16, 2021

U.S. Consumer Product Safety Commission (CPSC) filed an administrative complaint against Amazon.com, on July 14 2021 to force it to recall certain consumer products

The CPSC does not actually have the ability to "force" a US company to undertake a "voluntary recall". The vast majority of CPSC recalls are basically undertaken voluntarily. The degree of how voluntary or involuntary they are often depends on the nature of the safety problem, how widespread it is and also on the size of the company. Again in the vast majority of cases, such as recently with Peloton, the company relents and agrees to conduct a "voluntary" recall under the control of CPSC. In some cases however the CPSC either has to back down and accept what remediation and notification that has been done, or like in this case with Amazon, it literally has to sue Amazon to "force" it to recall the products under CPSC guidelines with the CPSC calling the shots (as usual) on the specifics of how the notifications will be sent out, what they say, the remedies etc.  The suit itself is quite a good read (and educational) and details the position the CPSC is asserting on Amazon's role in the sales and returns process and why it should be forced to undertake the recall (not the overseas manufacturers which the CPSC has no control over). Its quite an eyeopener. This is nothing short of extraordinary for the CPSC to do and again it only does so in egregious situations where it is quite certain a judge will agree with its findings. 

Obviously we would never counsel any of our clients to take such a step unless there were good reasons not to conduct a recall, but of course if that was the case the CPSC would not likely be suing the company. We always recommend cooperating with the CPSC (but only through counsel) if you plan on conducting a recall for a host of related legal reasons. It will be interesting to watch this suit play out. No doubt the CPSC felt emboldened by a number of recent court decisions like this one in California holding Amazon legally responsible for the distribution of allegedly defective products.

Law Offices of Steven W. Hansen | www.swhlaw.com | 562 866 6228 © Copyright 1996-2020 Conditions of Use

August 23, 2020

California Court rules that Amazon does have liability for a defective product (Bolger v Amazon.com LLC)

This article was reprinted with permission from Bicycle Retailer and Industry News  

By Steven W. Hansen, Esq. 

Update 11/19/20: The California Supreme Court on 11/18/20 denied Amazon.com LLC’s bid for judicial review of this case decided earlier this fall. So that mean this case is now a legally cite-able precedent and is "the law" in Calif.

An appeals court in California ruled Thursday that Amazon is not shielded from liability for defective products sold by third-party sellers through its online marketplace.

Nationally this California Appellate case is one of the first decided against Amazon holding them directly liable for a defective product sold on its marketplace. It remains to be seen what happens on somewhat similar cases pending in state and federal courts throughout the country. On a related issue, the California Legislature is considering a bill (AB-3262 Product liability: electronic retail marketplaces) that would treat “electronic retail marketplaces” like retailers for purposes of California strict liability law. The future of this bill is uncertain and most if not all of California law regarding product liability is case law not statutory law.

The plaintiff in the California case, Angela Bolger, bought a replacement laptop computer battery on Amazon.com in 2016.

The listing for the battery on Amazon identified the “seller” (“sold by”) as “E-Life,” a fictitious name used on Amazon by Lenoge Technology (HK) Ltd. (Lenoge). Amazon charged Bolger for the purchase, retrieved the laptop battery from its location in an Amazon warehouse, (as this was an “FBA” sale or “fulfillment by Amazon”) prepared the battery for shipment in Amazon-branded packaging, and sent it to Bolger. Bolger alleged the battery exploded several months later, and she suffered severe burns as a result.

Interestingly a month after the purchase Amazon suspended Lenoge’s selling privileges because it became aware of a “grouping” of safety reports on Lenoge’s laptop batteries and Lenoge did not respond to Amazon’s requests for documentation. Three weeks later, Amazon permanently blocked Lenoge’s account.  Bolger sued Amazon in January 2017 and several other defendants, including Lenoge, alleging causes of action for strict products liability, negligent products liability, breach of implied warranty, breach of express warranty, and “negligence/negligent undertaking.” Lenoge was served but did not appear, so the trial court entered its default. Other entities were sued as well but foreign service of process was going to take 2-3 years. Three months after suit was filed, Amazon sent Bolger an email warning her that Amazon had learned that the Lenoge replacement battery “may present a fire hazard or not perform as expected…If you still have this product, we strongly recommend that you stop using the item immediately.”

What is most interesting to us is that there is no record of any CPSC recall regarding this battery or related companies which would be required before any notification were sent to a consumer regarding a safety issue; unless of course Amazon did not consider itself a seller or in the retail chain. Ironically there is still an Amazon seller named “Lenoge” selling laptop batteries on the site as of this writing.

After almost two years of litigation, Amazon moved for summary judgment, arguing primarily that the doctrine of strict products liability, as well as any similar tort theory, did not apply to it because Amazon did not design or manufacture the product, sell or distribute the battery, set the price, provide a warranty, or control the terms of the product offer. Similarly, Amazon argued it was not involved in sourcing the subject battery from the manufacturer or upstream distributor.” Amazon also submitted a declaration from an Amazon senior manager responsible for product safety, investigations, and recalls who asserted that “E-life retained title to the battery at all times,” and “E-life was also responsible for ensuring the battery that it sold to [Bolger] was properly packaged and complied with all applicable laws.” The Amazon manager acknowledged Amazon’s A-to-z Guarantee, but she denied it was a warranty. She stated, “The only warranty provided for a product comes from the third-party seller.”

The trial court judge agreed with all of Amazon’s factual and legal arguments (even though there were likely disputed facts that could have prevented the motion from being granted), and granted Amazon’s motion, and entered judgment accordingly. 

The three-judge panel at the Court of Appeal, strongly disagreed in a very well reasoned decision. We strongly urge readers to take a look at the opinion starting at page 18 as it pretty much lays out the entire basis of product liability in California and how Amazon’s attempt to shield itself from liability was really a smokescreen for its true role in the chain of distribution.

Initially the court pointed out that “Essentially the paramount policy to be promoted by the [product liability doctrine] is the protection of otherwise defenseless victims of manufacturing defects and the spreading throughout society of the cost of compensating them.” But “the facts must establish a sufficient causative relationship or connection between the defendant and the product so as to satisfy the policies underlying the strict liability doctrine.” The court looked at older decisions where product “facilitators” had benefited from service charges in providing the product and finding liability as the “overall producing and marketing enterprise is in a better position to insure against the liability and to distribute it to the public by adding the cost thereof to the price of the product.” 

One of the key factors (although perhaps not the deciding factor) in this case was that the Lenoge supplier was participating in the FBA program with Amazon. The court painstakingly went thru the process of how the battery got from Lenoge to Amazon and from Amazon to the consumer and that Amazon was an “integral part of the overall producing and marketing enterprise that should bear the cost of injuries resulting from defective products.”. The court painstakingly went thru all of the policies underlying the doctrine of strict products liability to confirm that the doctrine should apply.

First, Amazon, like conventional retailers, may be the only member of the distribution chain reasonably available to an injured plaintiff who purchases a product on its website. 

Second, Amazon, again like conventional retailers, “may play a substantial part in insuring that the product is safe or may be in a position to exert pressure on the manufacturer to that end; the retailer’s strict liability thus serves as an added incentive to safety.”

Third, Amazon, like conventional retailers, has the capacity to adjust the cost of compensating injured plaintiffs between itself and the third-party sellers in the course of their ongoing relationship.

Amazon focused on dictionary definitions of “seller” and “distributor” and claimed it could not be held strictly liable because those definitions do not apply to it. It characterized its business as a service, i.e., a forum for others to sell their products, and therefore outside the rule of strict liability. The court felt Amazon’s arguments were unpersuasive.

First, regardless of whether Amazon selected this particular battery for sale, it chose to host Lenoge’s product listing, accept Lenoge into the FBA program, take possession of the battery, accept Bolger’s order, take her payment, and ship the battery to her. Amazon was therefore part of the chain of distribution even if it did not consciously select the Lenoge replacement battery for sale. Second, and more fundamentally, Amazon did choose to offer the Lenoge replacement battery for sale. Amazon was no mere bystander to the vast digital and physical apparatus it designed and controlled. The court reasoned Amazon made these choices for its own commercial purposes and so it should share in the consequences.

Many of the arguments Amazon asserted were contradictory. For example, Amazon argued that it did not set the price for third-party products and therefore cannot “spread the cost of defects across units sold.” But as Amazon noted, it does control its fees. If it desires, it can increase fees on high-risk products, or all products, and thereby spread the cost of compensating consumers injured by such products.  Of course, this is the problem in general with low-cost products. Costs must be cut somewhere and one of the ways to do that is by avoiding product liability and insurance costs. This is typically the case with overseas companies beyond the reach of US courts. But of course, the argument here is that Amazon does in fact have control over these overseas companies and can force them to insure Amazon.

Amazon also contended (as all internet companies do) that, regardless of its liability under California law, it is shielded by the federal Communications Decency Act (1996). The court ruled against Amazon on this issue as well as under existing case law, “while the [CDA] protects interactive computer service providers from liability as a publisher of speech, it does not protect them from liability as the seller of a defective product.” Here the liability was based on Amazon’s own conduct, as described above, not the content of Lenoge’s product listing. The court also distinguished eBay cases where eBay was not found responsible for users' false product listings.

It is important to point out that this appellate decision will almost surely be appealed by Amazon to the California Supreme court and that it could take well over a year for a final decision from that court. Once that decision comes down from the CA Supreme court (Its unclear if the US Supreme court would agree to hear this case) the case may still be sent back to the trial court for trial and appealed again from a verdict. Or the case may settle and this opinion and/or any Supreme Court opinion would stand as the law. Amazon may seek to “de-publish” the opinion so it could not be relied on as precedent. That outcome is unlikely in this case. 

The issue of Amazon’s strict liability for third-party sales has been, and continues to be, litigated in state and federal courts across the country. Some hold Amazon strictly liable while others do not.  Many of the other cases are factually distinguishable, including because the product at issue was NOT sold through Amazon’s FBA program (as in the Bolger case). Also other state statutes or case law have limited strict liability in a manner inconsistent with California law.   

So now what are the implications of the Bolger case? Well knowing Amazon and how it likes to assert its leverage over sellers, it will likely immediately start requiring very large insurance policies naming it as additional insured for all third party sellers (but especially those who use FBA) As California is such a huge market for Amazon and Amazon cannot be sure where a third party seller product may be shipped, any decision in any state holding Amazon responsible will make it such that Amazon will have to enforce the insurance requirements system-wide. Also as most plaintiffs do not pursue entities in other countries that require complex foreign service and jurisdictional issues to be overcome, it will be interesting to see how this decision forces Amazon to force the small sellers to pony up when it comes to the defense and indemnification of Amazon. The overall effect will likely be increased prices on the Amazon third party platform (even more so that post-COVIID-19) which may hurt it in its fight with Walmart.

This decision was a long time in coming but I had to say the writing was on the wall. The decision is a great read for those that want to learn about how Amazon deals with sellers. Amazon wants a big piece of the sales pie. It wanted to have total control over sellers and buyers while keeping the two isolated from each other. But when it came to liability its position was “oh we don’t sell anything and have nothing to do with the marketing of the product”. Well that facade has now been severely eroded. The emperor's lack of clothes has now been pointed out in a court decision that will be heard around the world.

Law Offices of Steven W. Hansen | www.swhlaw.com | 562 866 6228 © Copyright 1996-2020 Conditions of Use

August 12, 2020

California Bill alert; AB-1286 Shared mobility devices: agreements (2019-2020) (AB 371 2022)

UPDATE 6/21/22. This bill was renumbered to AB 371 and CAL Bike does not like the insurance requirements. Quite a few provisions have been added since 2020 version below. Here is the calbike campaign and the link to the current version of the bill. Act now in contacting your CA legislator as votes can happen very quickly without warning.

UPDATE 9/2/20. So the legislative year is over in CA as of 8/31/20...whew...The final bill language is set forth below as of 9/2/20. They still did not clean up the issue below in my 8/27/20 update. If the bill is signed by Gov. Newsom it looks like it would take effect January 1, 2021.

UPDATE 8/27/20:

It appears that the mobility industry and or others in the industry were able to remove all the provisions in the bill relating to releases. However in my opinion the definition of a  “Shared mobility device” and a  “Shared mobility device provider” is still too vague which then leads to a problem with this remaining provision "(b) Before distribution of a shared mobility device, a shared mobility service provider shall enter into an agreement with, or obtain a permit from, the city or county with jurisdiction over the area of use. "Distribution" is way too vague and again this could apply to very small rental operations that cannot afford such high insurance limits.

ORIGINAL 8/12/20 POST:

Once again someone in the California legislature got whiff of a bad idea and decided to run with it. Just like the AB 5 bill last year regarding independent contractors and the resulting unwinding of Uber in CA., now we have a "shared mobility bill" that attempts to "fix" a few issues in that sector but does it in a very heavy handed way. 

The first problem is the definition of a "shared mobility device". (ellipses eliminates unneeded verbiage) "Shared mobility device” means an electrically motorized board.... motorized scooter ... electric bicycle... [human powered] bicycle..., or other similar personal transportation device, .... that is made available to the public..". It gets worse.

“Shared mobility service provider”... means a person or entity that offers, makes available, or provides a shared mobility device in exchange for financial compensation..."

So if one person wanted to rent a bike to someone, this law applies to that person renting a bike. Rather overbroad and too all inclusive. Poorly drafted in my opinion. There should be some revenue size threshold added to this definition.

Now for the good part, if you rent one of these devices (regardless of the size of your business or the amount of revenue to you earn) you have to purchase a policy from a California admitted insurer (might be tough from what I know of this insurance market) and the limits have to be 1 million per claim and 5 million dollars in the aggregate. In some respects that is more than Walmart suppliers have to procure to sell to Walmart.

But there is more. The "agreement between the provider and a user shall not contain a provision by which the user waives, releases, or in any way limits their legal rights or remedies under the agreement.". So even though California statutory law and case law allows for such waivers and releases in the recreational sports context, this legislator knows better and is going to go against established law. Such releases are not allowed in a product liability case to begin with. All this does is expose the companies renting (not product manufacturers or distributors) to MORE liability and make it harder for them to extricate themselves from litigation. Also the insurance market has "priced in" those waivers and without them insurance costs will likely rise in this sector. Legislators should think very long and hard before tinkering with existing liability laws and precedent. The law of unintended consequences makes things hard to fix once a new law is unleashed.

It goes on to provide that "A city or county that authorized a provider to operate within its jurisdiction before January 1, 2020, and continues to provide that authorization shall adopt rules for the operation, parking, maintenance, and safety rules regarding the use and maintenance of shared mobility devices..."

Quite frankly I trust the mobility companies to come up with better rules for operation than any government entity. Trust me I have seen this play out before. Government entities are not very adept at this especially considering the hundreds of different devices out there.

It is worth noting that this bill is co-sponsored by the Consumer Attorneys of California (CAOC) (which is a large association of attorneys that represents plaintiff's) and the League of California Cities (which is a group that generally advocates for cities) It is supported by the Environmental Defense Fund and a number of consumer protection groups. It is opposed by a number of shared mobility service providers, TechNet, and the Civil Justice Association of California.

The senate Judiciary Committee Analysis is as follows (in part)

Required prohibition on waiver of rights and remedies

Pursuant to the bill, the agreement and permit must also prohibit provisions in shared mobility provider agreements between providers and users by which the user waives, releases, or in any way limits their legal rights or remedies under the agreement. Writing in opposition, were a coalition of groups, including a number of providers such as Bird and Lime.

What is interesting is that the committee responded to their opposition with:

"It is true that such waivers are generally permitted and widely used, but are subject to certain limitations and requirements laid out in statute and case law. Civil Code Section 1668 provides:All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.Relevant judicial precedent further requires that waivers must be clear, unambiguous, and explicit in expressing the intent of the subscribing parties, as well as comprehensible in each of its essential details. (Benedek v. PLC Santa Monica(2002) 104 Cal.App.4th 1351, 1356; Westlye v. Look Sports, Inc.(1993) 17 Cal.App.4th 1715, 1731."

So even after acknowledging years of case law out there to protect consumer from onerous releases or waivers the Legislature still felt it was appropriate and ban outright the use of waivers and in a very broad fashion (not just for electric devices) or limiting the ban to large providers.

The plaintiff attorneys association responded (some what inaccurately) that:

"The opposition argues that such agreements are common. However, (1) [releases] being common does not make them right and (2) they are different from other rental agreements/operators. The companies manufacture (Editor: that is not true in all circumstances) and place e-scooters into the stream of commerce and are more akin to a product manufacturer and/or retailer and less like an innocent rental agency with no control over the product. Also, the manufacturers have the exclusive control to fix/maintain the scooters. (Editor: this is is also not always accurate) When a driver rents a vehicle, he or she is not required to waive the liability of car defects; neither should a scooter rider."

The Civil Justice Association of California (CJAC) responded that "The scooter manufacturer has no way of exerting control over the scooter rider and does not deserve full legal responsibility for accidents that may occur as a result of a rider’s behavior." The Legislative analyst responded that "assumption of risk" can still be asserted but I would point out if the defendant is in fact a product manufacturer or in the stream of distribution "assumption of risk" is not available as a defense in a pure product liability case.

If you want to see the full bill analysis click here. It is worth a read.

The entire bill as it exists today is set forth below. This bill was last amended in June of 2019 and it is just now coming up for a hearing with the CA Senate Judiciary Committee on August 18, 2020. Don't ask why. It passed out of committee on 8/19/20 and is now set for a 'third reading". This is part of the problem with the CA legislature. Surprise hearings on dormant bills months down the road. Maybe that's planned. August 31 is the last day to pass the bill.

The committee can be reached at:
State Capitol
Room 2187
Sacramento, CA 95814
Phone: (916) 651-4113
Fax: (916) 403-7394
Email: sjud.fax@sen.ca.gov

The bill author can be reached here.

FINAL LANGUAGE OF BILL AWAITING SIGNATURE BY GOV. NEWSOM LIKELY WITHIN 30 DAYS:

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


SECTION 1.

 Title 10.1 (commencing with Section 2505) is added to Part 4 of Division 3 of the Civil Code, to read:

TITLE 10.1. Shared Mobility Devices

2505.
 (a) For purposes of this title:
(1) “Shared mobility device” means an electrically motorized board as defined in Section 313.5 of the Vehicle Code, motorized scooter as defined in Section 407.5 of the Vehicle Code, electric bicycle as defined in Section 312.5 of the Vehicle Code, bicycle as defined in Section 231 of the Vehicle Code, or other similar personal transportation device, except as provided in subdivision (b) of Section 415 of the Vehicle Code, that is made available to the public by a shared mobility service provider for shared use and transportation in exchange for financial compensation via a digital application or other electronic or digital platform.
(2) “Shared mobility service provider” or “provider” means a person or entity that offers, makes available, or provides a shared mobility device in exchange for financial compensation or membership via a digital application or other electronic or digital platform.
(b) Before distribution of a shared mobility device, a shared mobility service provider shall enter into an agreement with, or obtain a permit from, the city or county with jurisdiction over the area of use. The agreement or permit shall, at a minimum, require that the shared mobility service provider maintain commercial general liability insurance coverage with a carrier doing business in California, with limits not less than one million dollars ($1,000,000) for each occurrence for bodily injury or property damage, including contractual liability, personal injury, and product liability and completed operations, and not less than five million dollars ($5,000,000) aggregate for all occurrences during the policy period. The insurance shall not exclude coverage for injuries or damages caused by the shared mobility service provider to the shared mobility device user.
(c) (1) A city or county that authorizes a provider to operate within its jurisdiction on or after January 1, 2021, shall adopt rules for the operation, parking, and maintenance of shared mobility devices before a provider may offer any shared mobility device for rent or use in the city or county by any of the following:
(A) Ordinance.
(B) Agreement.
(C) Permit terms.
(2) A city or county that authorized a provider to operate within its jurisdiction before January 1, 2021, and continues to provide that authorization shall adopt rules for the operation, parking, and maintenance of shared mobility devices by January 1, 2022, by any of the following:
(A) Ordinance.
(B) Agreement.
(C) Permit terms.
(3) A provider shall comply with all applicable rules, agreements, and permit terms established pursuant to this subdivision.
(d) Nothing in this section shall prohibit a city or county from adopting any ordinance or regulation that is not inconsistent with this title.

SEC. 2.

 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

 

OLDER VERSION OF THE BILL BELOW:

Introduced by Assembly Member Muratsuchi

February 21, 2019


An act to add Title 10.1 (commencing with Section 2505) to Part 4 of Division 3 of the Civil Code, relating to mobility devices.


LEGISLATIVE COUNSEL'S DIGEST


AB 1286, as amended, Muratsuchi. Shared mobility devices: agreements.
Existing law regulates contracts for particular transactions, including those in which one person agrees to give to another person the temporary possession and use of personal property, other than money for reward, and the latter agrees to return the property to the former at a future time.
This bill would require a shared mobility service provider, as defined, to enter into an agreement with, or obtain a permit from, the city or county with jurisdiction over the area of use. The bill would require that the provider maintain a specified amount of commercial general liability insurance and would prohibit the provider from including specified provisions in a user agreement before distributing a shared mobility device within that jurisdiction. The bill would define shared mobility device to mean an electrically motorized board, motorized scooter, electric bicycle, bicycle, or other similar personal transportation device, except as provided.
This bill would require a city or county that authorizes a shared mobility device provider to operate within its jurisdiction on or after January 1, 2020, to adopt operation, parking, maintenance, and safety rules and maintenance rules, as provided, regarding the use of the shared mobility devices in its jurisdiction before the provider may offer shared mobility devices for rent or use. The bill would require a city or county that authorized a provider to operate within its jurisdiction before January 1, 2020, and continues to provide that authorization to adopt those operation, parking, maintenance, and safety rules and maintenance rules, as provided, by January 1, 2021.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

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


SECTION 1.

 Title 10.1 (commencing with Section 2505) is added to Part 4 of Division 3 of the Civil Code, to read:

TITLE 10.1. Shared Mobility Devices

2505.
 (a) For purposes of this title:
(1) “Shared mobility device” means an electrically motorized board as defined in Section 313.5 of the Vehicle Code, motorized scooter as defined in Section 407.5 of the Vehicle Code, electric bicycle as defined in Section 312.5 of the Vehicle Code, bicycle as defined in Section 231 of the Vehicle Code, or other similar personal transportation device, except as provided in subdivision (b) of Section 415 of the Vehicle Code, that is made available to the public by a shared mobility service provider for shared use and transportation in exchange for financial compensation via a digital application or other electronic or digital platform.
(2) “Shared mobility service provider” or “provider” means a person or entity that offers, makes available, or provides a shared mobility device in exchange for financial compensation or membership via a digital application or other electronic or digital platform.
(b) Before distribution of a shared mobility device, a shared mobility service provider shall enter into an agreement with, or obtain a permit from, the city or county with jurisdiction over the area of use. The agreement or permit shall, at a minimum, require that the provider comply with both of the following requirements:
(1) Requires Require that the shared mobility service provider to maintain commercial general liability insurance coverage with a carrier doing business in California, with limits not less than one million dollars ($1,000,000) for each occurrence for bodily injury or property damage, including contractual liability, personal injury, and product liability and completed operations, and not less than five million dollars ($5,000,000) aggregate for all occurrences during the policy period. The insurance shall not exclude coverage for injuries or damages caused by the shared mobility service provider to the shared mobility device user.
(2) The shared mobility provider agreement between the provider and a user shall not contain a provision by which the user waives, releases, or in any way limits their legal rights or remedies under the agreement.
(c) (1) A city or county that authorizes a provider to operate within its jurisdiction on or after January 1, 2020, shall adopt rules for the operation, parking, maintenance, and safety rules regarding the use and maintenance of shared mobility devices before a provider may offer any shared mobility device for rent or use in the city or county. county by any of the following:
(A) Ordinance.
(B) Agreement.
(C) Permit terms.
(2) A city or county that authorized a provider to operate within its jurisdiction before January 1, 2020, and continues to provide that authorization shall adopt rules for the operation, parking, maintenance, and safety rules regarding the use and maintenance of shared mobility devices by January 1, 2021. 2021, by any of the following:
(A) Ordinance.
(B) Agreement.
(C) Permit terms.
(3) A provider shall comply with all operation, parking, maintenance, and safety rules applicable rules, agreements, and permit terms established pursuant to this subdivision.
(d) Nothing in this section shall prohibit a city or county from adopting any ordinance or regulation that is not inconsistent with this title.

SEC. 2.

 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.
 

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