Strike Two for Amazon in the California Court of Appeal

A California Court of Appeal has held that Amazon may be strictly liable for injuries to customers who bought products from third-party sellers offered on Amazon’s website.  (See discussion of Bolger decision here).

In Kisha Loomis v. Amazon.com LLC, plaintiff sought damages from Amazon for burns allegedly caused by a defective hoverboard she purchased through Amazon’s website.  Amazon won summary judgment from the trial court, which held that Amazon did not fall within the chain of distribution and could not be liable under the “marketing enterprise theory.”

Following the earlier ruling in Bolger v. Amazon.com, LLC (2020) 53 Cal.App.5th 431, review denied (Nov. 18, 2020), the California Court of Appeal, Second Appellate District, reversed the summary judgment for Amazon in Loomis.  The Court held that Amazon could be held strictly liable as a direct link in the vertical chain of distribution, noting it was “undisputed [that] Amazon placed itself squarely between TurnUpUp, the seller, and Loomis, the buyer . . .”.  Rejecting Amazon’s characterization of its marketplace as an “online mall providing online storefronts for sellers,” the Court concluded that Amazon’s actions, including interacting with the customer, taking and processing the order, collecting the money, and receiving a percentage of the sale, were all consistent with the roles of a retailer or distributor of consumer goods.  The fact that “Amazon did not hold title to the product and did not have physical possession of the hoverboard d[id] not automatically render it solely a service provider and remove it from strict liability.”

The Loomis Court also set forth an alternative ground for imposing strict liability, recognizing that e-commerce does not fit precisely into a traditional sales structure but ruling that triable issues of material fact existed relevant to liability under the “stream of commerce approach or market enterprise theory.”  Under this approach, a defendant may be strictly liable if three factors are satisfied:  (1) the defendant received a direct financial benefit from its activities and sale of the product; (2) the defendant’s role was integral to the business enterprise such that the defendant’s conduct was a necessary factor in bringing the product to the initial consumer market; and (3) the defendant had control over, or a substantial ability to influence, the manufacturing or distribution process.

The Court found there was a triable issue of material fact because Amazon presented no evidence of its role in establishing a market for TurnUpUp hoverboards, and because Amazon received a financial benefit from its sale of the hoverboards, including a monthly subscription fee and a 15% referral fee.  As to the third factor, the Court found a triable issue of material fact because Amazon had “substantial ability to influence the manufacturing or distribution process through its ability to require safety certification, indemnification, and insurance before it agrees to list any product.”

The Court also concluded that public policy would be promoted by imposing strict liability because Amazon played a role in ensuring product safety; because it might be the only actor in the distribution chain reasonably available to pay damages to an injured consumer; and because Amazon could adjust the costs of consumer protection between it and third-party sellers through fees, indemnity requirements and insurance.  The Court suggested that imposing strict liability “may incentivize Amazon to expand its safety compliance requirements to more products and thus further the goal of product safety.”

Though two California decisions now have allowed liability against Amazon for third-party sales through its website, these decisions still reflect the minority position.  See, e.g., Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135, 140-44 (4th Cir. 2019) (Amazon was not strictly liable under Maryland law as the “seller” of a defective headlamp purchased though its website from a third party and fulfilled by Amazon); Stiner v. Amazon.com, Inc., 120 N.E.3d 885, 894-95 (Ohio Ct. App. 2019), aff’d 162 Ohio St.3d 128 (2020) (Amazon was not liable under Ohio law as a “supplier” for the death of an individual who consumed caffeine powder purchased on its website from a third party); Fox v. Amazon.com, Inc., 930 F.3d 415, 425 (6th Cir. 2019) (Amazon was not the “seller” under Tennessee’s Products Liability Act because it did not exercise “sufficient control” over the defective hoverboard purchased from a third party through Amazon); Garber v. Amazon.com, Inc., 380 F. Supp. 3d 766, 778-81 (N.D. Ill. 2019)  (Amazon was not a “seller” of a defective hoverboard and did not otherwise fall within the chain of distribution and thus was not strictly liable under Illinois law).

Given the frequency and nationwide scope of online purchases from third-party providers through Amazon’s site, more rulings on this issue can be expected in courts around the country; time will tell whether other courts follow California’s decision to impose liability for such purchases or join the growing number of jurisdictions that have rejected it.