By Joshua Frumkin, Esq.
Under Arizona’s products liability law, Amazon was not considered the "seller" of products sold by a third-party vendor on its website.
In an action brought against Amazon.com by the insurer of a home that was damaged when two hover boards that were purchased through the online retailer caught fire, the U.S. Court of Appeals for the Ninth Circuit affirmed an Arizona federal court’s grant of summary judgment to Amazon. The appellate panel reviewed the issues de novo and determined, in a nonprecedential decision, that the totality of the circumstances indicated that Amazon was not a "seller" under Arizona law and, thus, owed no duty to the consumer for products sold on Amazon.com by third-party vendors (State Farm Fire and Casualty Co. v. Amazon.com, Inc., November 17, 2020, per curiam).
An individual purchased two hover boards from a third-party vendor on Amazon.com and subsequently sold them to a consumer. The hover boards' batteries spontaneously combusted while charging and caused significant damage to the consumer's home. The consumer's homeowner’s insurer, State Farm Fire and Casualty Co. (State Farm), filed suit against Amazon.com, Inc. and Amazon.com, LLC (collectively, Amazon) and alleged strict products liability and negligence under Arizona law. The federal district court in Arizona ruled that Amazon was not a "seller" under Arizona law, and granted summary judgment to Amazon on both claims [see Products Liability Law Daily’s September 30, 2019 analysis]. State Farm duly appealed. The insurer argued that the district court erred in articulating a seven-factor balancing test, which State Farm claimed was incompatible with Arizona law's more holistic "totality of the circumstances" approach to strict liability claims. State Farm also argued that the district court erred by weighing all factors for Amazon, even though the Federal Rules of Civil Procedure require courts to weigh all facts and inferences in favor of the non moving party.
District court did not err by articulating seven factors to be weighed. The appellate panel disregarded State Farm's argument that the district court erred by articulating a seven-factor balancing test. Arizona imposes strict liability on manufacturers and sellers of defective products that were unreasonably dangerous and caused physical harm. Arizona law applies strict liability when an entity which was an "integral part of an enterprise" caused the defective product to be placed in the stream of commerce. Arizona courts therefore utilize a contextual approach that balances multiple factors to determine whether a company participated significantly in the stream of commerce. Here, the Ninth Circuit determined that the district court accurately summarized the law by stating that Arizona weighs "a number of factors including" seven that the court listed explicitly.
Strict liability analysis exonerated Amazon. The panel also disagreed with State Farm's argument that the district court erred by concluding that the majority of the strict liability factors weighed in favor of Amazon. The panel considered all of the seven factors considered by the district court de novo and found that each supported Amazon's position.
First, the appellate court determined that Amazon's express refusal to warranty the allegedly defective hover boards indicated that Amazon did not take responsibility for the quality of those items. Second, the court distinguished between selling a product and merely shipping a product, which would not accrue strict liability for product defect, and likened Amazon to the U.S. Postal Service in this instance. Third, the court recognized that Amazon did not inspect the third-party products and, instead, relied wholly on the representations of those third-party sellers before shipment. Fourth, the court considered that Amazon only stored and shipped the products without taking title to them. The court understood those factors as indicating that Amazon was not the seller of the hover boards in question. Fifth, the court ascertained that Amazon's interest in the transaction was limited, because Amazon does not significantly profit from each third-party transaction it facilitates. Sixth, the court pointed out that State Farm failed to show that Amazon uses its market power to influence third-party sellers' design and manufacturing decisions. Finally, the court reasoned that because the third party was listed as the hover boards' seller on the website and receipt, Amazon was not fostering consumer reliance on its brand; the court likewise noted that State Farm cited no cases indicating that the buyer's subjective belief of the seller's identity justifies finding that entity strictly liable.
As such, the court concluded that summary judgment for Amazon was appropriate because it was not the seller of the hover boards under Arizona's strict liability law. Because Amazon merely facilitated the sale for the third-party seller, it could not be held liable for the consumer's injury.
Negligence claim also failed. The court explained that because Amazon was not the "seller" under Arizona’s strict liability law, Amazon did not owe a duty to the consumer that could have been breached by the product's defects. As such, the court stated that State Farm's negligence claim also failed.
Dissent. One of the three circuit judges dissented from the decision on the grounds that a contrary ruling also was plausible. He opined that the Arizona case law explored by the circuit court did not adequately consider the role Amazon played in the transaction and the responsibility that Amazon had to the marketplace. The dissenting judge thus recommended that the questions before the circuit court be certified for review by the Supreme Court of Arizona.
The case is No. 19-17149.
Attorneys: Daniel Wallace Berglund (Grotefeld Hoffmann Gordon Ochoa & Evinger LLP) for State Farm Fire and Casualty Co. William Brendan Murphy (Perkins Coie LLP) for Amazon.Com, Inc.
Companies: State Farm Fire and Casualty Co.; Amazon.Com, Inc.; Amazon.Com LLC; Amazon Inc.
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