Two eBay members have filed a class action lawsuit against SquareTrade Inc, eBay's chosen provider of dispute resolution and seller verification services.

Anthony Burton and Chris Tao sued SquareTrade on June 30 in the Superior Court of California in the County of San Francisco under Section 17200 of the California Business and Professions Code, the state's Unfair Competition Law (UCL), according to the law firm of Climaco Lefkowitz, et al. The suit was filed on behalf of Burton and Tao and "all others similarly situated and on behalf of the General Public."

The case stems from a seller who participated in SquareTrade's Seal Program and who allegedly perpetrated one of the largest cases of online auction fraud on eBay.

On May 16th, eBay suspended the account of "Liquidationuniverse," a reseller of Toshiba Laptops. Liquidation Universe was a participant in Square Trade's Seal Program. Every buyer that purchased from Liquidation Universe saw the Square Trade logo on the auction, promising them up to $800 in fraud protection, in addition to eBay's fraud protection of $200.

However, unlike eBay's fraud protection, the amount of Square Trade protection was the company's total liability. Liquidation Universe customers going through the process of filing for Square Trade's fraud protection would have to share the $800 in coverage. There are an estimated 1,000 - 6,000 victims in this case.

Keith Vernon, a lawyer for Climaco Lefkowitz, said consumers who bought items on eBay from Liquidation Universe believed they were protected when they saw the Square Trade seal.

Earlier this month, SquareTrade said additional funds would be available to victims, but did not give specifics. The company has made some modifications to its Buyer Protection Program as a result of the Liquidation Universe case, which it calls "unprecedented on eBay."

SquareTrade's CEO was out of the office when AuctionBytes tried to contact him for comment on Wednesday afternoon.

A copy of the complaint can be found online in PDF format (you must have Adobe Acrobat Reader to view this file):

http://www.climacolaw.com/burton%20complt%20.pdf

Related Story: "Are eBay Users Getting a Square Deal from Square Trade?" by David Steiner
AuctionBytes Newsflash, 5/25/03 http://www.auctionbytes.com/cab/abn/y03/m05/i25/s03