Products Liability Law Daily Despite clarification of state statute to qualify Amazon as a ‘seller,’ products liability claim failed
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Wednesday, June 12, 2019

Despite clarification of state statute to qualify Amazon as a ‘seller,’ products liability claim failed

By Leah S. Poniatowski, J.D.

A family’s claims under Tennessee products liability and consumer protection statutes were not adequately supported to survive Amazon’s motion to dismiss, but a fact issue regarding hoverboard safety email kept their Restatement-based tort claim alive.

A family who had lost their home in a fire caused by a hoverboard battery were largely unsuccessful in challenging a lower court’s ruling in favor of Amazon, the U.S. Court of Appeals for the Sixth Circuit ruled, affirming a Tennessee federal court’s grant of summary judgment in the e-commerce giant on claims arising under that state’s products liability and consumer protection acts. However, the appellate court corrected the lower court’s construction of the term "seller" in the products liability statute to allow inclusion of the online retailer if the remaining facts had met the terms of the definition. Further, dismissal of the family’s tort claim was reversed upon correcting the lower court’s misapplication of similar Restatement of Torts provisions concerning duties to others and the existence of material facts in dispute (Fox v. Amazon.com, Inc., June 10, 2019, Clay, E.).

A mother purchased a FITURBO F1 self-balancing scooter, also known as a hoverboard, for her son in November 2015, from W2M Trading Corporation through the Amazon Marketplace, after having done research on the website for similar products. W2M sold the hoverboard under the "friendly name" (a name used by sellers for identification on the website) of "-DEAL-," which was indicated on the purchase receipt. The receipt was sent by "amazon.com" and the package was delivered from China in a shipping box marked with the "Amazon" trademark.

Around the same time, Amazon learned of several instances in which hoverboards had been involved in fires and explosions, and the company initiated an internal investigation. The company’s product safety team produced a report on December 10, 2015. The leaders of the product safety, product quality, and legal teams met and agreed to suspend the sale of all hoverboards, to implement a contingency plan to monitor for news reports or complaints of fires or explosions, and to issue a "non-alarmist" communication to purchasers of the hoverboards.

The mother apparently had received the email, but she did not recall reading it. She gave her son the hoverboard for Christmas and, on January 9, 2016, it caused a fire that consumed their entire home and personal belongings. Two children were trapped upstairs when the fire broke out and had to escape by breaking windows and jumping down.The family filed a lawsuit against Amazon, W2M, and other Amazon entities for violations of the Tennessee Products Liability Act and the Tennessee Consumer Protection Act, as well as negligent failure to warn and intentional and/or negligent misrepresentation.

Trial court. The lower court ruled in favor of Amazon on all claims, holding that the online retailer was not a "seller" under Tennessee’s products liability laws [see Products Liability Law Daily’s May 31, 2018 analysis]. In addition, the court found that the retailer did not have a duty to warn post-sale of any dangers, and that it had not made any misrepresentations or violated the state consumer protection act. The family appealed the trial court’s decision.

Tennessee Products Liability Act. The Sixth Circuit held that the Tennessee Products Liability Act’s (TPLA) definition of "seller" is not as narrow as the lower court had construed and could include Amazon, but the facts still did not support the application of that definition to the company.

Under the TPLA, a "seller" is defined as "any individual or entity engaged in the business of selling a product," including a "retailer," "wholesaler," or "distributor," as well as a "lessor" engaged in the business of leasing a product and a "bailor" engaged in the business of bailment of a product. Amazon argued that the ordinary meaning of the term "seller," and as the term is defined in the Uniform Commercial Code, should be adopted when construing the TPLA. The appellate court disagreed, pointing to the inclusion of "lessor" and "bailor" in the TPLA definition and suggesting that the state legislature did not intend the term to be as limited as Amazon suggested. Additionally, applying such a limited construction to exclude a specifically included term would conflict with basic statutory construction, the appellate panel reasoned.

Governing case law supported the family’s construction of the term, and it comported with the remedial purpose of the TPLA. Amazon clearly was the entity "most likely to compensate" the family in light of the company’s significant income and market share, and by the likely unreachability of the third-party seller and manufacturer. The panel pointed out that Amazon is capable of motivating the manufacture and sale of safer products "which is a primary purpose behind the doctrine of products liability in general." Accordingly, the panel held that under the TPLA, a "seller" is "any individual regularly engaged in exercising sufficient control over a product in connection with its sale, lease, or bailment, for livelihood or gain."

However, the panel concluded that the family’s assertions that Amazon exercised sufficient control based on its: (1) storing and shipping the hoverboard; (2) obtaining the initial payment in exchange for the hoverboard; (3) retention of payment; and (4) handling of all communication with the family vis-a-vis the hoverboard were not supported by the facts. Amazon’s records showed that the hoverboard’s purchase had been fulfilled by the third-party seller and that Amazon had remitted the customer’s payments to the third-party seller during the applicable time period. Further, Amazon’s receipt of the initial payment and communications were not sufficient exercises of control to rise to the level of "seller." Because the evidence did not support finding that Amazon was a "seller," there were no material facts in dispute to support a TPLA claim and, thus, the lower court’s judgment on the TPLA claim was correct.

Tennessee tort law. The appellate panel also found that there were fact issues in dispute on the family’s tort law claim against Amazon with respect to its notice concerning the safety of hoverboards. Under Tennessee law, courts consider Restatement (Second) of Torts Sections 323 and 324A in order to determine if an individual has assumed a duty and has become subject to the duty of acting reasonably. The difference between the two Restatement sections is that Section 323 concerns liability between the defendant and the person to whom the defendant undertook to render services, and Section 324A concerns liability to someone other than the person to whom the defendant undertook to render services, the panel explained.

The lower court held that Section 324A did not apply and that the Section 323 claim had been forfeited. The appellate court stated that the conclusion on Section 324A was erroneous and declined to address the latter determination. Pursuant to governing case law, Amazon’s liability to the family members other than the mother was within Section 324A. Specifically, the email sent to the mother clearly warned of the hoverboard’s dangers and requested that the warning be "pass[ed] along" to the proper person if the hoverboard had been purchased for someone else. Thus, Amazon assumed the duty to act. Further, there were facts in dispute as to whether Amazon had breached that duty, namely, that the email had not disclosed the results of Amazon’s internal investigation, the dangers posed by the product included risk of fire or explosion, or the decision to stop selling hoverboards worldwide. Additionally, it was disputable whether the mother had read the email message and would have acted upon it. Therefore, the trial court’s grant of summary judgment on the tort law claim was reversed.

Tennessee Consumer Protection Act. The appellate court agreed with the lower court that there were no genuine issues of material fact relating to the family’s Tennessee Consumer Protection Act (TCPA) claim to demonstrate a sufficient causal link. The mother’s statement that she did not recall noticing the third-party seller’s "friendly" name or that she would have recognized it as referring to a third-party seller—the only evidence proffered by the family—fell below what the TCPA requires to demonstrate causation. The family’s other argument, i.e., that causation had not been briefed by the parties, was not supported given Amazon’s assertion that the family had failed to link the company to actions deemed unlawful by the TCPA, which was sufficient to put the family on notice. Accordingly, the lower court’s ruling on the TCPA claim was affirmed.

The case is No. 18-5661.

Attorneys: Steven E. Anderson (Anderson & Reynolds, PLC) for Charles Brian Fox. Brendan Murphy (Perkins Coie, LLP) for Amazon.com, Inc.

Companies: Amazon.com, Inc.

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