Amazon Packages Bursting into Open Fires, Jack Frost Nipping at Your Nose…

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On December 26, Marty and Dave McFly were playing video games when, downstairs in the living room, the hoverboard that Marty had received for Christmas ignited. The fire quickly engulfed the Christmas tree and spread throughout the house. Marty and Dave escaped with minor injuries, but their house was destroyed. Since the McFlys had bought the hoverboard from Amazon.com, they sued the company, alleging that it sold them a defective product and failed to warn them that it was unsafe. Amazon, however, argues that it is not responsible because it did not manufacture or even sell the hoverboard. Instead, it merely set up a marketplace by which a third-party Chinese manufacturer sold the hoverboard. Is the McFlys’ lawsuit up in smoke?

Unfortunately, that scenario is not a hypothetical. From late 2015 to early 2016, there were 57 reported hoverboard fires, explosions and similar issues, which caused at least $2.3 million in property damages and some minor injuries. Almost half of the hoverboards were purchased on Amazon. Predictably, lawsuits were filed, and Amazon has defended by arguing that it is not a seller and, even if it were, it is immune from liability under a federal statute called the Communications Decency Act (CDA). Those arguments have had mixed success in courts outside of Texas. This post examines how they would likely fare here.

Is Amazon a “Seller” Under Texas Law?

Probably. We begin with background on how Amazon operates. On its website, Amazon retails its own products and those of over a million third-party vendors. The vendors decide which products to sell, set their prices and supply Amazon with the products’ information. For its part, Amazon publishes the products’ information on its website, collects orders and shipping information from customers, and process their payments (after deducting its service fee). The vendors are generally responsible for shipping, but they can pay to participate in the “Fulfillment by Amazon” program, under which Amazon takes possession of the products, stores in them in its warehouse and ships them to the customers when they are ordered.

The definition of “seller” under Texas law is broad enough to include Amazon, whether it is retailing its own products or merely facilitating sales by third-party vendors. One of the purposes of products-liability law is equitable loss distribution and risk minimization. To that end, Texas courts have held that any person who “is engaged in the business of introducing products into the channels of commerce” can be held liable for harms caused by those products if they are unreasonably dangerous. It will be difficult for Amazon to argue that it did not “introduce products into the channels of commerce” by advertising them on its website, shipping them and collecting payments for them.

If Amazon is a “Seller”, When Can It Be Held Liable for Defective Products Sold on its Website?

Rarely. In 1993, the Texas Legislature enacted the Texas Products Liability Act to restrict liability for defective products to those than manufacture them. The Act provides that a seller who did not manufacture the product is generally not liable for any harm caused by that product, regardless of whether the seller is sued for strict products liability, negligence, misrepresentation or breach of an express or implied warranty. Because Amazon does not manufacture the products that it sells, it will generally not be liable for harms that they cause.

But the Texas Products Liability Act has eight exceptions. The seller can be held liable if it designed, altered or installed the product, provided inadequate warnings about the product, misrepresented an aspect of the product, or actually knew of the defect to the product. Sellers can also be held liable when the manufacturer is insolvent or not subject to the jurisdiction of the court. The plaintiffs have the burden of proving that one of those exceptions apply.

The last two exceptions are the most pertinent to lawsuits against Amazon, as many cases have involved manufacturers based overseas (and potentially beyond the jurisdiction of Texas courts) and those that simply cannot be located.

Does the CDA Immunize Amazon from Liability for Defective Products?

No. The CDA provides broad immunity to web-based service providers for any claims stemming from their publication of information created by third parties. Courts have held that the CDA prevents them “from entertaining claims that would place a computer service provider in a publisher’s role, and therefore bars lawsuits seeking to hold a service provider liable for its exercise of a publisher’s traditional editorial functions—such as deciding whether to publish, withdraw, postpone, or alter content.”

Product-liability claims, however, are typically not based on Amazon’s publication of the third-party vendors’ speech. Rather, they are based on Amazon’s conduct in facilitating the sales of dangerous products. Accordingly, courts have unanimously concluded that the CDA does not shield Amazon from product-liability claims.

While the CDA does not provide complete immunity, it does narrow the circumstances under which Amazon could be liable. Two of the exceptions under the Texas Products Liability Act apply when (1) the seller exercised substantial control over the product’s warning or instructions, which were inadequate; and (2) the seller made incorrect factual representations about the product on which the customer relied. Proving that those exceptions apply would require the customer to argue that Amazon failed to add necessary information about the product or correct the information that was provided by the third-party vendors. That would implicate traditional editorial functions, triggering immunity under the CDA.

Tilting the Scales in Your Favor

The old adage caveat emptor is still good advice. When purchasing products on Amazon (or any other online retailer), you should attempt to find a reputable manufacturer who will stand behind their product. Otherwise, you may be left empty-handed if it malfunctions.

On the other hand, if you are a retailer, the Texas Products Liability Act provides significant protections for you. Not only are you generally not liable for any harms caused by the products you sell, you are also entitled to indemnification of the costs of defending those claims from the products’ manufacturers.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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