Amazon Subject to Strict Products Liability in California

Haight Brown & Bonesteel LLP

In Bolger v. LLC (No. D075738, filed 8/13/2020), Plaintiff Angela Bolger (“Plaintiff”) sued LLC (“Amazon”) for strict liability arising out of injuries she sustained from a replacement laptop battery purchased on Amazon’s website that subsequently exploded. A San Diego Superior Court granted Amazon’s Motion for Summary Judgment on the grounds that Amazon was not subject to strict products liability for products sold on its website. The Court of Appeals reversed.

Strict products liability “was created judicially because of the economic and social need for the protection of consumers in an increasingly complex and mechanized society, and because of the limitations in the negligence and warranty remedies.” (Daly v. General Motors Corp. (1978) 20 Cal.3d 725, 733.) The scope of strict liability has been expanded, where necessary, to account for “market realities” and to cover new transactions in “widespread use . . . in today’s business world.” (Price v. Shell Oil Co. (1970) 2 Cal.3d 245, 252.) To determine whether the doctrine of strict products liability should be applied in a situation that has not been considered by previous precedents, California courts primarily look to the purposes of the doctrine. “The strict liability doctrine derives from judicially perceived public policy considerations, i.e., enhancing product safety, maximizing protection to the injured plaintiff, and apportioning costs among the defendants. Where these policy justifications are not applicable, the courts have refused to hold the defendant strictly liable even if that defendant could technically be viewed as a “link in the chain” in getting the product to the consumer market. In other words, the facts must establish a sufficient causative relationship or connection between the defendant and the product so as to satisfy the policies underlying the strict liability doctrine.” (Arriaga v. CitiCapital Commercial Corp., 167 Cal.App.4th 1527, 1535.)

At this time, as the Court of Appeals points out, almost everyone knows about and has probably used Amazon to buy something. About 40% of the products on the site are sold by Amazon directly, meaning the product is bought from the manufacturer by Amazon and is then sold at a price Amazon selects. The remaining 60% are products sold by third-parties who pay Amazon a fee to use the website. This second category of products, the category at issue here, are selected by the various third parties that also set the price. The only difference to the consumer is that the website will show a “Sold by” label followed by the third parties’ chosen name. The consumer can find products from either category on the website through the same means, and pays the purchase price to Amazon either way.

Some of these third parties participate in the “Fulfilled By Amazon” (“FBA”) program. This program allows third parties to ship large quantities of their products to Amazon’s warehouse and when a purchase is made, Amazon will ship the product to the consumer. When Amazon fulfills the product, it can ship the third parties’ product with its own product or the products of other third parties, and uses its own packaging, which may include Amazon branding.

Here, Plaintiff purchased a replacement laptop battery through Amazon’s website which was being sold by a third party, Lenoge. Lenoge was participating in the FBA program so Amazon shipped the battery from its fulfillment center in Oakland, CA. Bolger received the battery in Amazon packaging, including an Amazon branded box with Amazon branded shipping tape. Less than a month later, Amazon suspended Lenoge’s selling privileges because it became aware of a group of safety reports regarding the batteries and Lenoge did not respond to Amazon’s requests for documentation. A few weeks later, Amazon permanently banned Lenoge. A few weeks later still, the Lenoge battery Plaintiff bought exploded, causing Plaintiff to suffer personal injuries.

Plaintiff sued Amazon, Lenoge and several other companies involved in the design, manufacture, distribution, and sale of the battery. Plaintiff’s Complaint asserted causes of action for strict products liability, negligent products liability, breach of implied warranty, breach of express warranty, and negligence/negligent undertaking. Lenoge was served, but failed to appear and a default was taken. Another defendant was defaulted and a different defendant could only be served in China which would take 2-3 years. After two years of litigation, Amazon filed and prevailed on a Motion for Summary Judgment, primarily arguing that it could not be liable under strict products liability because it did not manufacture, distribute or sell the battery to Plaintiff. Amazon argued that it was merely a provider of services, namely an online marketplace and logistics operation. The Court of Appeals disagreed with the trial court and held that Amazon was subject to strict products liability because doing so would further the policy considerations underlying strict product liability doctrine: 1) maximizing protection to the injured plaintiff, 2) enhancing product safety, and 3) apportioning costs among the defendants.

First, the Court of Appeals reasoned that Amazon, like conventional retailers, may be the only member of the distribution chain reasonably available to an injured plaintiff who purchases a product on its website. (Vandermark v. Ford Motor Co., 61 Cal.2d 256, 262.) The unavailability of other defendants is illustrated by this case where Plaintiff took two defaults, and a third defendant could only be sued in China. By allowing Plaintiff and those in similar positions to sue Amazon ensures that there is a means by which Plaintiff can be compensated for her injuries. “By extending liability to entities farther down the commercial stream than the manufacturer, the policy of compensating the injured plaintiff is preserved, and retailers and distributors remain free to seek indemnity against the manufacturer of the defective product.” (Kaminski v. Western MacArthur Co. (1985) 175 Cal.App.3d 445, 456.)

Second, Amazon “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.” Amazon has the freedom to choose which products are offered on its site, what certifications, testing and requirements must be met before products are offered and the power to pull products it deems unsafe. Amazon did just this with respect to Lenoge, when it pulled Lenoge’s batteries from the Amazon site and required new certifications for all of those trying to sell replacement batteries on the site. By holding Amazon liable for products liability, the Court reasoned, Amazon would have more incentive to care about the safety of the products that are offered on its site than it otherwise might.

Third, Amazon has the capacity to shift the cost of compensating injured plaintiffs between itself and the third-party sellers in the course of their ongoing relationship. Amazon is not powerless to shift its liability to the ultimately liable entity. For example, Amazon can and does require third party sellers to sign contractual indemnity agreements and chooses which sellers it will require to furnish proof of insurance coverage with Amazon listed as an additional insured. But more importantly, Amazon has ongoing relationships with third parties such that there are always assets that Amazon can seize to ensure itself that the third parties have sufficient assets to meet their indemnification obligations.

While a narrow reading of this case’s holding will result in Amazon being successfully sued for products liability in California more often, the broader implications of the decision mean that online retailers as a whole will face an uphill battle when claiming that they are so different from brick and mortar retailers that they ought to be able to avoid strict products liability in the State of California.

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Haight Brown & Bonesteel LLP

Haight Brown & Bonesteel LLP on:

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