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Amazon Found Strictly Liable for Defective Products Sold by Third-party Sellers in a Ground Breaking Appellate Court Decision

Author: Dan Cortright

Guest Editor: Jeremy Freedman

October 5, 2020 2:01pm

The Fourth Appellate District Court of Appeal recently published its decision in the Bolger v. Amazon.com, LLC case (2020 DJDAR 8836 (Aug. 13, 2020)) holding that Amazon is liable under a theory of strict product liability for a defective product sold on its online marketplace by a third-party seller.

Plaintiff Angela Bolger purchased a replacement laptop battery through Amazon.com that was sold by third-party seller Lenoge Technology (HK) Ltd.  Several months after receiving the battery from Amazon, the battery exploded causing Bolger to suffer severe burns.  She sued Amazon.com and Lenoge, among others, including a defendant in China (on whom she was told it would take 2-3 years to effect service of process).  Lenoge was served but did not appear and was defaulted by the court, as was one other defendant not located in the United States.  After two years of litigation Amazon filed a motion for summary judgment claiming 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 merely an “online marketplace” and Lenoge was the product seller, not Amazon.  The trial court agreed and entered summary judgment for Amazon.

Upon appeal, Bolger argued that Amazon is strictly liable for defective products sold on its website by third-party sellers.  In agreement, the appellate court weighed several factors in its 47-page opinion. The facts that persuaded the appellate Court to hold Amazon strictly liable included:

  1. Amazon placed itself between Lenoge and Bolger in the chain of distribution of the product;
  2. Amazon accepted possession of the product from Lenoge;
  3. stored it in an Amazon warehouse;
  4. attracted Bolger to the Amazon website;
  5. provided Bolger with a product listing for Lenoge’s product;
  6. received her payment for the product; and
  7. shipped the product in Amazon packaging to her.

After a lengthy review of the case law and evolution of the tort of strict products liability, the holding focused on the following factors regarding the relationship between Amazon and Lenoge:

  1. Amazon set the terms of its relationship with Lenoge;
  2. controlled the conditions of Lenoge’s offer for sale on Amazon;
  3. limited Lenoge’s access to Amazon’s customer information;
  4. forced Lenoge to communicate with customers through Amazon; and
  5. demanded indemnification from Lenoge as well as substantial fees from them on each purchase.

Also relevant to its evaluation was the fact that “[t]hroughout the process, Bolger had no contact with Lenoge or anyone other than Amazon. She believed Amazon sold her the battery.” The Court found these factors sufficient to hold Amazon liable under the tort of strict products liability, explaining: “Whatever term we use to describe Amazon’s role, be it “retailer,” “distributor,” or merely “facilitator,” it was pivotal in bringing the product here to the consumer.”

The court specifically found the case law supports its holding because Amazon was a “direct link in the chain of distribution, acting as a powerful intermediary between the third-party seller and the consumer.”  Further,  because “Amazon is the only member of the enterprise reasonably available to an injured consumer in some cases, it plays a substantial part in ensuring the products listed on its website are safe[1], 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.”  (See Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256, 262.)  Strict liability here “affords maximum protection to the injured plaintiff and works no injustice to the defendants, for they can adjust the costs of such protection between them in the course of their continuing business relationship.” (Id. at pp. 262-263.)

In response to Amazon’s argument that it was protected by a federal law preventing liability of internet service providers for third-party content, the court then further concluded that “Amazon is not shielded from liability by title 47 United States Code section 230. That section generally prevents internet service providers from being held liable as a speaker or publisher of third-party content. It does not apply here because Bolger’s strict liability claims depend on Amazon’s own activities, not its status as a speaker or publisher of content provided by Lenoge for its product listing.”

Although the appellate court reversed the trial court’s grant of summary judgment and remanded the matter, it did instruct the trial court to enter an order granting Amazon’s motion in part.

Takeaway

It is not clear whether the Supreme Court of California will take this matter up on appeal. The decision is based on the basic principle that a company in the distribution chain that places a product in the stream of commerce should be held liable for defective products. This, however, fails to account for Amazon’s inability to modify, manufacture or make alterations to the products placed for sale through its market place. Nonetheless, the Appellate Court and likely a Supreme Court may find that Amazon, given its size and marketplace power, has the ability to hold the companies selling products on its website to the highest standard and accountable for defective products. In either event, this case opens the door for potential liability for companies who provide a market place for products and those that re-sell products  under their own name and who may not be an economic behemoth like Amazon.

 

[1] “Amazon states that customer safety is a top priority. As Amazon’s person-most-knowledgeable explained at his deposition, “[W]e’ve got a long and well-developed product-safety process, and that starts from the very beginning. When a third-party seller signs up to sell on the platform, they have to agree to … sell products that meet all the compliance requirements for the jurisdictions that they’re going to be selling the product in. [¶] Once products are being sold, we have a robust and active process to monitor for any customer complaints that come in. Regardless of the format that those come in, we track those, we log those, we report those things to [the Consumer Products Safety Commission]. [¶] And … we will decide whether or not we’re going to continue to sell a particular product or not. And that’s an ongoing process. That happens every single day for every single product on the website . . . .” Later, he stated, “You know, Amazon does everything in its power and goes above and beyond to make sure that we’re providing the best customer experience, including safe products.”

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