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Priming Amazon’s Liability Pump

Courts are divided over the company’s legal liability for defective third-party products

September 28, 2021 Photo

As Amazon’s product offerings have expanded from over 1 million books in the mid-1990s to, by some estimates, over 350 million products today, so too have the risks that consumers can be injured by the products they purchase from the company. This raises the question: When consumers are injured by products they purchased from Amazon, can the company be held legally liable for those injuries if it had no role in the products’ creation or production?

The Texas Supreme Court recently answered “no” to that question. But other courts, notably a California court of appeal, have ruled Amazon can be held legally liable for these injuries. These two decisions reveal different approaches to whether, as a matter of law, Amazon “sells” the products sold by third parties that take part in Amazon’s “Fulfillment by Amazon” (FBA) program, in which Amazon sells a company’s products on its website, collects payments for the products, stores them in its warehouses, and ships them to the third parties’ purchasers. 

No Title Equals No Liability

In June 2021, the Texas Supreme Court ruled in Amazon.com v. McMillan that Amazon is not the seller of third-party products that are sold through the company’s FBA program because it does not hold title to them.

In McMillan, a 19-month-old opened a remote control’s battery compartment and swallowed the included button battery. Fluid from the battery caused permanent damage to the child’s esophagus. The remote was sold by a third party through Amazon’s FBA program. The child’s mother sued Amazon in federal court in Texas for strict products liability, among other causes of action. Amazon moved for summary judgment on the ground that it could not be held strictly liable because it was not a seller of the remote.

The district court denied Amazon’s motion, ruling that Amazon was a seller. The 5th Circuit then certified to the Texas Supreme Court the question of whether, under Texas law, Amazon is a seller of third-party products when it does not hold title to them, but it controls the transactions and delivery processes.

The Texas Supreme Court first looked to the Texas Products Liability Act (TPLA). Under the TPLA, non-manufacturing sellers are generally not liable for harm caused by defective products. Under the TPLA, a “seller” is an entity that “distribut[es] or otherwise plac[es]” a product in the stream of commerce for any commercial purpose. Despite the common conclusion ascribed to by the general public that Amazon is a seller of millions of products in its FBA program, the court limited the definition of “sellers” to only those who hold title to products and transfer ownership of them. The court considered Amazon’s possession of the remote to be an entrustment, which did not qualify Amazon as a seller.

The court then ruled Amazon was not a seller of the remote, and, thus, could not be held strictly liable for the plaintiff’s daughter’s injuries because it never held title to the remote. The court held that Amazon’s ability to transfer title from the manufacturer to the plaintiff did not confer title to Amazon at any point in the stream of commerce before the sale to the plaintiff.

Transaction and Public Policy Trump Title

In August 2020, however, California’s 4th District Court of Appeal ruled differently in a similar case.

In Bolger v. Amazon.com, Angela Bolger bought a replacement laptop computer battery from a third-party seller on Amazon. She alleged that, several months later, the battery exploded, causing her severe burns. She sued Amazon in California state court for, among other things, strict products liability. Amazon moved for summary judgment, arguing that it could not be liable for Bolger’s injuries because it did not distribute, manufacture, or sell the battery. The trial court agreed, granting Amazon’s motion and entering judgment in its favor.

The 4th District Court of Appeal reversed, holding that Amazon could be strictly liable for defective products sold through its FBA program. First, the court noted Amazon’s “pivotal” role in bringing the battery to Bolger by serving as a direct link in the chain of distribution and controlling the conditions of the sale. The court noted that Amazon’s heavy involvement in, and control of, the transaction surpassed the involvement and control exerted by defendants in earlier cases, where the court ruled that they could be held liable for defective products because they served as intermediaries between suppliers and consumers.

The court also noted that public policies underlying the doctrine of strict products liability confirm that Amazon could be liable. First, Amazon may be the only link in the distribution chain from which an injured plaintiff can seek damages. Second, Amazon can play a “substantial part” in ensuring products are safe or can pressure manufacturers to produce safe products. Finally, Amazon can “adjust the cost of compensating injured plaintiffs” between itself and sellers taking part in the FBA program.

Interestingly, the court makes clear that, unlike in Texas, California’s strict products liability law is not defined by dictionary definitions of “seller” and “distributor,” nor by California’s Commercial Code.

Navigating the Inconsistent Patchwork

These two decisions are emblematic of how courts across the U.S. are divided over Amazon’s liability for selling defective third-party products.

Some courts, like the 4th Circuit (applying Maryland law), the 9th Circuit (applying Arizona law), and appellate courts in Arizona and New Jersey have ruled in favor of Amazon in similar cases, focusing, as the Texas Supreme Court did, on the fact that Amazon did not have title to the defective products in question. Other courts, like the 3rd Circuit (applying Pennsylvania law, though it later vacated this decision and has not issued another), the Western District of Wisconsin, and Louisiana have ruled against Amazon, taking positions like California’s.

Because products liability law is inherently state specific, which results in an inconsistent mix of state statutes and case law, strategic plaintiffs and their counsel may seek to file cases in jurisdictions that have ruled, or are likely to rule, on this issue in a similar fashion to the California 4th District Court of Appeal.

As more third-party sellers with unsafe products sign on with Amazon to sell those products—and more online retailers enter the marketplace with programs like Amazon’s FBA program—more cases involving defective third-party products will spring up. With a national legislative solution almost certainly out of the picture, litigants, insurers, and their counsel face the luck of the draw when it comes to jurisdictions and their take on an area of law that, for the foreseeable future, differs from state to state.

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About The Authors
Peter Dye

Peter Dye is a partner in Koeller, Nebeker, Carlson & Haluck, LLP’s Sacramento office.  peter.dye@knchlaw.com

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