A California court of appeals recently held that Amazon may be held liable for a defective product sold by a third party on its site. The plaintiff in the case purchased a hoverboard on Amazon from a third-party seller on the site named TurnUpUp. After she received the hoverboard, it allegedly started a fire when it was charging, causing the plaintiff to suffer burns to her hand and foot. She filed a claim against Amazon claiming that it was responsible for the defective hoverboard she purchased on the site. Amazon argued that it is an “online mall” or “online storefront” for third-party sellers and could not be held liable under California products liability law. A judge initially agreed and dismissed the case against Amazon. However, a California appeals court disagreed, holding that Amazon may be liable under California strict liability law.
First, the court held that Amazon’s business practices make the company a direct link in the chain of distribution under California strict liability law. Under California law, a manufacturer, retailer, or “any business entity in the chain of production and marketing” is strictly liable if the article the manufacturer places on the market is defective and causes injury to a person. The approach is meant to hold liable all those engaged in producing and marketing a product and who should shoulder the cost of a defective product. The court held that Amazon’s business practices make it a direct link in the vertical chain of distribution under California’s strict liability law. The consumer found the item through Amazon’s website, Amazon took the order, processed the payment, and transmitted the order to the third party. The consumer sent a message to the seller through Amazon’s website and could not communicate with the seller directly. A return also would have been processed through Amazon. Amazon also transferred payment to the third party after deducting its fees. Thus, Amazon was unlike an “online mall” as malls normally do not serve as a conduit for payment and communication in every transaction between a buyer and a seller and do not charge a per-item fee.
In addition, the court found Amazon might be liable under a stream-of-commerce approach to strict liability. In California, if a defendant is not within the vertical chain of distribution, a defendant may still be held liable if the defendant received a direct financial benefit from the sale of the product and its activities, the defendant’s role was integral in bringing the product to the market, and the defendant controlled or had a substantial ability to influence the manufacturing or distribution process. The court held that there was a triable issue of material fact concerning whether Amazon received a direct financial benefit from its activities and sales of the product and whether its role was integral to the business enterprise. Thus, the appeals court reversed the decision to dismiss the case and sent the case back to the trial court.