Appellate Court Finds Amazon Can Be Held Liable for Defective Products

The giant commercial marketplace can be sued over defective products from third-party sellers.

(AP Photo/Michel Spingler, File)

(CN) — As the world’s largest commercial “river,” Amazon.com can be sued when customers sustain injuries from defective products sold by third parties on its website, a state appellate panel has ruled.

“The Amazon is the world’s largest river. Amazon.com supposedly chose its trademark because it aimed to create the world’s largest river of commerce. Amazon.com can control what it created,” Justice John Shepard Wiley Jr. wrote in a concurring opinion from the Second Appellate District panel Monday.

“Once Amazon is convinced it will be holding the bag on these accidents, this motivation will prompt it to engineer effective ways to minimize these accident costs.”

He concluded: “This case is easy. Amazon is well situated to take cost-effective measures to minimize the social costs of accidents.”

The dispute centers on a lawsuit filed by Kisha Loomis, who purchased a $370 hoverboard on Amazon in 2015 as a Christmas gift for her son. She sustained burns to her hands and feet trying to extinguish a fire started after her son plugged the device in to charge it.

Amazon collected a $39.99 subscription fee from manufacturer TurnUpUp, and a 15% referral fee totaling $55.50 from Loomis’ purchase. Amazon collected around $110,000 in fees from roughly $736,000 worth of hoverboards TurnUpUp sold on Amazon from September through December 2015, before Amazon’s own investigation of fire or smoke incidents triggered by defective hoverboards caused it to pull the product from its marketplace.

The e-retail giant also handled all product advertising, payment processing, and communication between Loomis and the manufacturer, which was not allowed to speak with her directly.

The panel cited these facts in rejecting Amazon’s argument that it functions merely as an “an online mall” that carries no responsibility for product defects.

“Owners of malls typically do not serve as conduits for payment and communication in each transaction between a buyer and a seller,” Judge Sam Ohta, a Los Angeles County Superior Court judge who sat on the appellate panel in the case, wrote in the majority opinion.

Ohta also noted that when it comes to consumers looking for compensation for their injuries, “Amazon may be the only member of the distribution chain reasonably available for an injured consumer to recover damages.”

Acting Presiding Justice Maria Stratton rounded out the panel.

In overturning a judgment by a lower court judge in favor of Amazon, the panel looked to the Fourth Appellate District’s ruling in Bolger v. Amazon, where a woman was burned when a battery she bought on the site for her laptop suddenly exploded.

The panel in that case found Amazon could be held strictly liable under California law for the woman’s injuries since the company acts as a “direct link” between buyers and third-party sellers.

While Bolger involved an order warehoused and fulfilled by Amazon, Loomis’ hoverboard came directly from China. Her attorney, Christopher Dolan of the Dolan Firm, said the panel’s ruling widens the scope of strict liability law.

“This broadens the application to any product sold on Amazon regardless of how it gets sold to the customer,” he said by phone on Wednesday. “Amazon was trying to say, ‘If you go online and buy it, you’re not buying it from us.’ My goal was for the ruling to come down in such a way so that it is applicable to anyone on the internet who is a point of contact.”

If megaretailers like Amazon can command hefty fees from third-party sellers they should be responsible for ensuring the safety of those products, Dolan said. He noted that while Amazon required third-party sellers like TurnUpUp to sign a “business solutions agreement” to ensure that its hoverboards complied with safety standards, it never checked to make sure those products were actually safe.

“So they would say something but do nothing, even though they were in that position of power to confirm that product was safe,” Dolan said. “What came out of this ruling is that Amazon is going to up its game to make sure products coming in meet safety standards.”

Amazon declined comment, citing pending litigation. But a spokesperson noted in an email that “Amazon invests heavily in the safety and authenticity of all products offered in our store including proactively vetting sellers and products before being listed, and continuously monitoring our store for signals of a concern.”

The company also said it backed Assembly Bill 3262, a proposed law that would have imposed strict liability for defective products on all online marketplaces. It died in the state Senate last year, but its lead sponsor, Assembly member Mark Stone, D-Santa Cruz, introduced similar legislation this year.

Dolan helped write the legislation and was heavily involved in the negotiations along with the Consumer Attorneys of California. He said the law needed to be clarified to ensure that electronic marketplace sellers can be held liable for unsafe products. Amazon came on board because it didn’t want to be singled out from the competition. 

“Several years ago I said we needed to do this legislatively because it was unclear how it would work through the courts,” he said, calling the Loomis case part of a “two-pronged approach” aimed at bringing retail Goliaths to heel. 

Stone said Friday he would be pulling this year’s bill since the court’s ruling will likely apply to any online marketplace that sells a defective product, regardless of its origin. 

“I am very pleased with the court’s ruling and the depth of understanding shown when it comes to protecting consumers even as new ways of distributing products are developed through technological innovation,” Stone said in a statement. “The breath of the Loomis decision removes the need for this bill to move and we congratulate the Dolan Law Firm for their broad victory protecting consumers.”

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