Amazon Can Be Liable for Third-party Sellers’ Defective Products in California-Will Other States Follow? (NY)
Amazon has traditionally been exempt from various states’ product liability laws by successfully arguing that Amazon is not a “seller” when it comes to products sold by third-parties through Amazon’s website. A California Appellate Court has overturned a lower court and ruled that Amazon.com played a pivotal role in every step of a plaintiff’s purchase of a replacement laptop computer battery on the online shopping website, making it potentially liable for the personal injuries caused when the battery malfunctioned. Angela Bolger sued Amazon and the Chinese-based company, Lenoge Technology, that listed itself on the website as the seller, alleging strict/negligent products liability, breach of warranty and negligent undertaking. Although Lenoge was served, it did not appear and the court entered default judgment.
Bolger alleged the battery exploded several months later, and she suffered severe burns as a result. Amazon then moved for summary judgment, arguing primarily 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 that Lenoge was the product seller, not Amazon. The trial court agreed, granted Amazon’s motion, and entered judgment accordingly. Bolger appealed, resulting in the higher court’s determination that Amazon’s role was more than that of just marketplace. The facts relied upon by the court may apply to other products sold on Amazon by third-party sellers because the Court found it was important that Amazon charged Bolger for the purchase, retrieved the laptop battery from its location in an Amazon warehouse, prepared the battery for shipment in Amazon-branded packaging, and sent it to Bolger.
In a very fact-specific inquiry, the Court of Appeal for the Fourth Appellate District in Bolger v. Amazon.com LLC determined that Amazon could be found strictly liable for defective products offered on its website by third-party sellers like Lenoge. In the circumstances of this case, the Court of Appeal agreed with Bolger and reversed a San Diego trial court stating that: “Amazon placed itself between Lenoge and Bolger in the chain of distribution of the product at issue here. … Under established principles of strict liability, 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, for they can adjust the costs of such protection between them in the course of their continuing business relationship.'” The Court declined to extend the protections of the Communications Decency Act to Amazon under these facts because Amazon’s actions were at issue.
The Court, in analyzing the fundamental goals of strict products liability legislation found that Amazon is a direct link in the chain of distribution, acting as a powerful intermediary between the third-party seller and the consumer. 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, 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, Amazon should be held liable if a product sold through its website turns out to be defective.
Online marketplaces such as Amazon may become much stricter in terms of who they allow to sell on their site, and greater product liability risks could drive up prices as they assume a greater role in the due diligence of investigating those sellers that increase risk of litigation and ultimately exposure in U.S. Courts. California’s reasoning could be adopted by legislators and other state courts, such as New York, New Jersey and Pennsylvania. We will watch for future developments in strict products liability jurisprudence in our areas and keep you updated on any impact this case may have.
If you have any questions, please contact Vincent Terrasi.