District of New Jersey Finds Amazon to be “Seller” of Hoverboard under NJ Product Liability Act

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The District of New Jersey has held that Amazon may be sued under New Jersey law for defective products sold by third-party sellers through its online marketplace.

The dispute in New Jersey Manufacturers Insurance Group v. Amazon.com Inc., Civil Action No. 16-cv-9014, involved an allegedly defective hoverboard purchased from a third-party seller by an insured of plaintiff New Jersey Manufacturers Insurance Group (“NJM”) via Amazon.com.  NJM filed suit as subrogee of the insured, asserting a strict lability claim under the New Jersey Product Liability Act (NJPLA), in addition to claims for breach of implied warranty and negligence.

Amazon moved for summary judgment regarding NJM’s product liability claim on the theory that it was not a “manufacturer” or “product seller” of the hoverboard under the NJPLA.  Amazon also moved for summary judgment on NJM’s warranty and negligence claims on the basis that the NJPLA subsumed such claims.

Regarding the NJPLA claim, Judge Julien Xavier Neals held that the “critical issue” before the court was “whether Amazon qualifie[d] as a ‘product seller’ as that term is defined under the NJPLA.”  Looking to “how the New Jersey Supreme Court would resolve the issue,” the court began by analyzing “the plain language of the NJPLA,” which “limits liability to manufacturers and sellers.”  The NJPLA defines a product seller as:

any person who, in the course of a business conducted for that purpose: sells; distributes; leases; installs; prepares or assembles a manufacturer’s product according to the manufacturer’s plan, intention, design, specifications or formulations; blends; packages; labels; markets; maintains or otherwise is involved in placing a product in the line of commerce . . . .

N.J.S.A. 2A:58C-2 (emphasis added).

The court held that Amazon qualified as a product seller under the NJPLA for two reasons.  First, Amazon “was in the business of selling hoverboards,” as it was undisputed that Amazon had sold thousands of the products.  Second, Amazon was “involved in putting hoverboards in the line of commerce,” as evidenced by the fact that Amazon processed the insured’s payment for the product and acted as the “only conduit” between the insured and the third-party seller.  The fact that Amazon suspended sales of the hoverboards after receiving customer complaints about the hoverboards also supported the Court’s decision that Amazon was involved in putting the products “in the line of commerce.”  As a result, the court denied Amazon’s motion for summary judgment concerning the NJPLA claim.

Regarding NJM’s warranty and negligence claims, on the other hand, the court held in favor of Amazon, finding both claims subsumed by the NJPLA.  The court held that NJM’s negligence claim was based on the “distribution and sale of the” hoverboard and failure “to adequately notifying and/or warn” of the “dangerous condition posed by” it, thereby putting “NJM’s negligence claim . . . squarely within [the] NJPLA.”  NJM did not oppose the premise that the NJPLA subsumed its implied warranty claim, and the court held that this claim was also subsumed by the NJPLA.

As we have previously explored on this blog, authority is split nationwide as to whether an online retailer that permits third-party sellers to sell through its online marketplace may be sued pursuant to state product liability law.  An appeals court in California has held that Amazon may be held liable for products sold through its marketplace by a third-party seller (Bolger v. Amazon.com, Inc., No. 37-2017-00003009-CU-PL-CTL (Cal. App.); Loomis v. Amazon.com, Inc., No. BC632830 (Los Angeles Cnty.)).  Similarly, the Third Circuit Court of Appeals has held that online retailers such as Amazon could be held liable for allegedly defective third-party products sold through its website under Pennsylvania law (Oberdorf v. Amazon.com, Inc., No. 18-1041 (3d Cir.)).  However, unlike in the District of New Jersey’s decision, such claims have been dismissed in other cases in Maryland (Erie Ins. Co. v. Amazon.com, Inc., No. 18-1198 (4th Cir.)), Ohio (Stiner v. Amazon.com, Inc., No. 17CA011215 (Ohio Ct. App.)), Tennessee (Fox v. Amazon.com, Inc., No. 18-5661 (6th Cir.)), Texas (Amazon.com, Inc. v. McMillan, No. 20-0979 (Texas)), and New York (Wallace v. Tri-State Assembly LLC, No. 2020-04820 (N.Y. 1st Dept.)).