Products Liability Law Daily Amazon can be held strictly liable for defective products sold on its website by third-party sellers
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Friday, August 14, 2020

Amazon can be held strictly liable for defective products sold on its website by third-party sellers

By Nicholas Kaster, J.D.

Amazon’s integral position in the chain of distribution put it in the best position to ensure product safety.

A California state appellate court ruled that Amazon.com was liable for a defective replacement laptop battery sold on its website by Lenoge Technology (HK) Ltd. In reversing the state trial court, the appellate court held that Amazon placed itself between third-party seller Lenoge and the consumer who purchased the battery in the chain of distribution. Amazon accepted possession of the product from the third-party seller, stored it in its warehouse, received the consumer’s payment for the product, and shipped the product to the consumer in Amazon packaging. Amazon also set the terms of its relationship with the third-party seller, controlling conditions of the seller’s offer for sale on Amazon’s website. Thus, because Amazon was "an integral part of the overall producing and marketing enterprise," the court held that it should be held strictly liable. Further, the court held that Amazon was not shielded from liability by Section 230 of the Communications Decency of Act of 1996 because the consumer’s strict liability claims depended on Amazon’s own activities, not on its status as a speaker or publisher of content provided by the third-party seller (Bolger v. Amazon.com, LLC, August 13, 2020, Guerrero, P.).

A consumer purchased a replacement laptop computer battery on Amazon.com, the online shopping website operated by Amazon.com, LLC. The Amazon listing for the battery identified the seller as "E-Life," a fictitious name used by Lenoge Technology (HK) Ltd. The consumer alleged that the battery exploded several months later, and she suffered severe burns and was hospitalized as a result. She subsequently sued Amazon and several other companies, including Lenoge, asserting 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, resulting in the trial court entering a default judgment against it.

Arguments on summary judgment. Amazon moved for summary judgment, arguing that the doctrine of strict products liability, as well as any similar tort theory, did not apply to it because it did not distribute, manufacture, or sell the product in question. It claimed its website was an "online marketplace" and E-Life (Lenoge) was the product seller, not Amazon. Amazon also argued that Section 230 of the Communications Decency Act of 1996 (CDA) shielded it from liability because the causes of action were based on Amazon’s publication of Lenoge’s sales listing. The consumer opposed the motion, arguing that regardless of whether Amazon was technically the seller of the replacement battery, it was part of the chain of production and distribution of the product, and, therefore, it was strictly liable for any defects in the product. She further asserted that even if Amazon was not part of the chain of production and distribution, it was liable under California’s marketing enterprise doctrine. Also, she disagreed that the CDA applied to shield Amazon from liability.

The trial court granted Amazon’s motion for summary judgment. It found that Amazon was not strictly liable for defective products offered by third-party sellers on its website. Amazon was not a seller or distributor of the replacement laptop battery, the lower court found. Instead, it was a "provider of services by maintaining an online marketplace, warehousing and shipping goods and processing payments." The consumer appealed.

Appellate ruling. On appeal, the consumer argued that Amazon was strictly liable for defective products offered on its website by third-party sellers like Lenoge. Under the circumstances of this case, the appellate court agreed. As a factual and legal matter, Amazon placed itself between Lenoge and the consumer in the chain of distribution of the product at issue in the case at bar. The appellate court further observed that Amazon accepted possession of the product from Lenoge, stored it in an Amazon warehouse, attracted the consumer to the Amazon website, provided the consumer with a product listing for Lenoge’s product, received her payment for the product, and shipped the product in Amazon packaging to her. Amazon set the terms of its relationship with Lenoge, controlled the conditions of Lenoge’s offer for sale on Amazon’s site, limited Lenoge’s access to Amazon’s customer information, forced Lenoge to communicate with customers through Amazon, and demanded indemnification, as well as substantial fees, for each purchase. Whatever term is used to describe Amazon’s role—"retailer," "distributor," or "facilitator"—that role was pivotal in bringing the product to the consumer in this case, the court said.

According to the appellate court, Amazon was "a direct link in the chain of distribution, acting as a powerful intermediary between the third-party seller and the consumer." The court noted that Amazon is the only member of the enterprise that is reasonably available to an injured consumer in some cases. In addition, it plays a substantial part in ensuring that the products listed on its website are safe, it can and does exert pressure on upstream distributors (like Lenoge) to enhance safety, and it has the ability to adjust the cost of liability between itself and its third-party sellers. Under established principles of strict liability, said the court, Amazon should be held liable if a product sold through its website turns out to be defective. Strict liability here "affords maximum protection to the injured plaintiff and works no injustice to the defendants, [because] they can adjust the costs of such protection between them in the course of their continuing business relationship."

The court of appeal further noted that Amazon had control over both the product at issue and the transaction that resulted in its sale to the consumer. Amazon also constructed the website, accepted Lenoge as a third-party seller, marketed Lenoge’s offer for sale, took possession of the replacement battery, accepted the consumer’s order for the battery, billed her for the purchase price, and shipped her the battery in Amazon-branded packaging. But for Amazon’s own acts, the consumer would not have been injured. Amazon’s own acts, and its control over the product in question, formed the basis for its liability, the court determined.

The appellate court additionally stated that the precise transaction at issue in the current case is a matter of first impression in California. The issue in this appeal, the court said, is not whether "websites for products sold by others" should generally be held strictly liable. Rather, the issue is whether Amazon may be held strictly liable for the defective Lenoge replacement battery purchased by the consumer. Other factual situations involving "websites for products sold by others," including other sales through Amazon, may be distinguishable. The court expressed no opinion regarding whether strict liability should or should not apply in such situations. The record did not demonstrate as a matter of law that Amazon could not be held strictly liable for defects in third-party products sold through its website, at least under the circumstances in the current case, said the appellate court. Consequently, the trial court erred by summarily adjudicating the consumer’s causes of action for strict products liability on this basis, the appellate court held.

Communications Decency Act of 1996. The appellate court also concluded that Amazon was not shielded from liability by Section 230 of the CDA. This provision generally prevents internet service providers from being held liable as a speaker or publisher of third-party content. Courts have declined to apply Section 230 to strict products liability claims, the court of appeal said.

The court reasoned that the CDA does not apply in the case at bar because the strict liability claims depend upon Amazon’s own activities, not on its status as a speaker or publisher of content provided by Lenoge for its product listing. The content of the product listing was not determinative, and it need not be attributed to Amazon to support strict liability. Instead, Amazon’s own involvement in the distribution of an allegedly defective product supported strict liability, the court stated. Accordingly, the appellate court reversed the trial court’s judgment in favor of Amazon.

This case is No. D075738.

Attorneys: Thomas D. Luneau (Casey Gerry Schenk Francavilla Blatt & Penfield, LLP) for Angela Bolger. Julie L. Hussey (Perkins Coie LLP) for Amazon.Com, LLC.

Companies: Amazon.Com, LLC

MainStory: TopStory SCLIssuesNews ElectronicProductsNews CaliforniaNews

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