As e-commerce has continued to expand and evolve, courts have grappled with determining who is liable when a product is defective. Jurisdictions remain divided over whether online retailers are immune from suits when a third party sells a product on its marketplace. However, California courts have not only affirmed this possibility, but recently broadened that liability.

In August 2020, California’s Fourth Appellate District published the first state appellate court decision to find that LLC (Amazon) could be strictly liable for third-party products sold on its marketplace where the product was “Fulfilled by Amazon” (FBA). (Bolger v. (2020) 53 Cal.App.5th 431.) In Bolger, a consumer suffered burns when a laptop battery exploded after it had been purchased from from a third-party seller in the FBA program. Under that program, the third-party seller would ship the products to Amazon’s warehouses. These products would be presented for sale within the website — and, if and when sold, would be shipped by Amazon to the buyer. Third-party sellers in the FBA program pay storage and fulfillment fees to Amazon, in addition to general seller and referral fees paid by all third-party sellers. Bolger’s expert asserted that “Amazon ‘owns’ the customer. This means that Amazon owns and controls the relationship with the buyer; the individual or company supplying products to the FBA program does not. The supplier has no direct relationship with the buyer, and indeed in most cases does not even have an indirect relationship with the buyer.” (Id. at 441.)

In Bolger, the court of appeal reversed the trial court’s grant of summary adjudication, holding that under these facts, Amazon was involved in the vertical distribution of consumer goods and responsible for passing the product down the line to the consumer. As such, Amazon was an integral part of the overall producing and marketing enterprise that should bear the cost of injuries resulting from defective products and could be strictly liable.

Recently, California’s Second Appellate District expanded Bolger, holding that Amazon could be liable for third party purchases even if the product was not in the FBA program, in Loomis v. LLC (2021) 63 Cal.App.5th 466. Kisha Loomis purchased a hoverboard from Amazon’s website that was sold by a third party seller based in China. The hoverboard was plugged into an outlet and was later discovered to be on fire, causing burns to Loomis’ hands and feet. Loomis sued Amazon for strict and negligent product liability, and the trial court granted summary judgment in favor of Amazon.

While the third-party seller in Loomis was not part of the FBA program, the court of appeal reversed and remanded. The court rejected Amazon’s argument that it doesn’t play a role in the vertical distribution chain or stream of commerce because it is not a manufacturer, seller, or supplier, but merely a service provider. The court noted that Amazon listed the hoverboard on its website, processed Loomis’ payment, and transmitted the order and payment to the third party, after deducting its fees. Moreover, when Loomis had a question about the delivery of the product, her communication was with Amazon, not the third-party seller. Accordingly, the court found that there were triable issues of material fact, and summary adjudication was not appropriate.

Loomis also held that allowing such suits to move forward served the public policy reasons for extending strict liability to retailers. The California Supreme Court has held that “[i]n some cases the retailer may be the only member of that enterprise reasonably available to the injured plaintiff. In other cases the retailer himself may play a substantial part in insuring that the product is safe or may be in a position to exert pressure on the manufacturer to that end; the retailer’s strict liability thus serves as an added incentive to safety.” (Vandermark v. Ford Motor Co. (1964) 61 Cal.2d 256, 262-263.)

In Loomis, the court found that Amazon may be the only member in the distribution chain that a consumer could recover damages from because other defendants failed to appear or were overseas. Moreover, the court found that Amazon could exert its power as a gatekeeper between the supplier and consumer to enhance safety. In particular, all third-party sellers must abide by Amazon’s Services Business Solutions Agreement, which may require proof that a product complies with safety standards before it’s listed on the website.

The holdings in Loomis have broader implications for online marketplaces. Arguably, Bolger could be narrowly read to be limited to circumstances where there are programs similar to Amazon’s FBA and the product was in the defendant’s possession. Loomis opens the door to broader lawsuits, regardless of how the product was delivered.

The California Supreme Court rejected Amazon’s request for review in Bolger, and it is unclear if Amazon will seek review of the Loomis decision.

For more on product liability, see CEB’s California Tort Guide, chapter 11.

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