Products Liability Law Daily Amazon not a ‘product seller’ under New Jersey’s products liability law
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Wednesday, July 25, 2018

Amazon not a ‘product seller’ under New Jersey’s products liability law

By Miriam A. Friedman, J.D.

The actions of Amazon.com, Inc. (Amazon), where its role included fulfilling a transaction by holding a product provided by a third-party seller in its inventory and shipping it to a consumer, did not qualify it as a "product seller" under the New Jersey Products Liability Act (PLA), the federal district court for New Jersey ruled in an action arising out of a house fire allegedly caused by a battery from a laptop computer. As such, the court had no need to reach the question of possible immunity under the Communications Decency Act (CDA). In a decision designated as not for publication, the court granted Amazon’s motion for summary judgment and, therefore, denied the insurance company subrogee’s motion for partial summary judgment (Allstate New Jersey Insurance Co. v Amazon.com, Inc. , July 24, 2018, Wolfson, F.).

The insured homeowner resided in New Jersey with her daughters, one of whom, using her mother’s Amazon Prime account, purchased a replacement battery for her laptop after having conducted a search for the battery on Amazon’s website. The "sold by" line on the Amazon order page identified "E-life," later identified as the seller Lenoge Technology (HK) Limited (Lenoge). The daughter was under the impression that Amazon was the battery seller, and the Amazon name appeared on the credit card statement. Amazon shipped the battery to the daughter from its Virginia fulfillment center in an Amazon box sealed with Amazon tape. A little over a month later, the laptop, with the new battery, had been left on a bed with the battery charging for a couple of hours. One of the house residents returned home to find the smoke detector sounding and the bed on fire. Ultimately, the house burned. At some point after the fire, Amazon sent an email advising the purchaser of a potential fire hazard with the laptop battery.

All state New Jersey Insurance Company, as subrogee of the homeowner, filed a products liability suit in the New Jersey Superior Court, alleging that Amazon "marketed sold, shipped, assembled, packaged, distributed and/or was otherwise involved in placing the defective battery in the stream of commerce"; shipped a battery that "was not reasonably fit, suitable, or safe for its intended purpose"; and "had a duty to warn the insured that the battery was in an unreasonably dangerous condition." Amazon removed the case to federal court on the basis of diversity. The insurance company moved for partial summary judgment, and Amazon filed a cross-motion for summary judgment.

"Product seller" under the PLA. Noting that it must "predict how the New Jersey Supreme Court would decide an issue that had not been resolved by the Supreme Court," the federal trial court concluded that nothing in the circumstances of the transaction in the case at bar gave the Internet entity the "requisite level of control" over the item provided that would make it a product seller under the PLA. Despite the PLA’s broad language providing that "any party involved in placing a product in the line of commerce" can meet the definition of a "product seller" and the state courts’ expansive interpretation of strict products liability law, the court pointed out that the PLA was "not boundless." That is, control over the product was the "touchstone" that New Jersey courts have evaluated when considering whether an intermediary’s role was that of a facilitator as opposed to an "active participant" in the transaction at issue, the court explained. In particular, the court indicated that the focus must be on whether the intermediary "[ever] had physical control of the product [or] had merely arranged the sale." In the case at bar, the court emphasized that a lack of control was evident from the agreements governing the relationship between the parties—including the Amazon Services Business Solutions Agreement (ABSA) between Amazon and Lenoge—and found that even the "Fulfillment by Amazon" (FBA) storage and shipping services did not impart any such control.

On this topic, the court made a few final comments. First, even if the Internet entity had exerted more control over the product than brokers in some of relevant body of case law, the insurance company had not presented any authority holding that the level of control exerted by Amazon in the current case brought it within the bounds of strict liability. Furthermore, the cases cited by the insurance company were "not directly applicable to the current dispute." Finally, although "not controlling," courts in other jurisdictions had recently found that Amazon was not in the "class of actors" subject to strict liability under state product liability statutes, "some of which [were] similar to the PLA."

Interactions with the buyer. Addressing another issue raised by the insurance company, the court found that although Amazon had been the purchaser’s "only link to the product," on the facts before the court, the relationship between Amazon and the purchaser did not make the online entity a "product seller." Rather, the crucial fact was that Amazon never exerted control over the transaction, and, thus, was not a product seller.

Public policy. Finally, both parties offered arguments about "the apparently profound public policy consequences" that this decision would have. Here, too, the court found that because the Internet entity lacked control over the product at issue, it ultimately would be unable to manage the risks posed by the allegedly defective product. Also, it was far from clear that, without the Internet entity as a defendant, the insurance company would lack an appropriate party to sue. The court expressed concern that "stretching the case law" to capture the activities in this case would "conflict with the spirit of the law" and with the New Jersey Supreme Court’s mandate to courts to be cautious in expanding the law when doing so "would impose a substantial economic burden" on businesses and individuals, without achieving the goal of enhancing product safety. The court concluded that against the backdrop of this legislative intent and the weight of New Jersey authority, public policy arguments could not "transform" Amazon into a "product seller" under the state’s law.

The case is No. 17-2738 (FLW) (LHG).

Attorneys: Christopher Konzelmann (White and Williams LLP) for Allstate New Jersey Insurance Co. Beth S. Rose (Sills Cummis & Gross PC) for Amazon.Com, Inc.

Companies: Allstate New Jersey Insurance Co.; Amazon.Com, Inc.

MainStory: TopStory SCLIssuesNews DefensesLiabilityNews ElectronicProductsNews HouseholdProductsNews NewJerseyNews

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