Trial Magazine

Known as the “everything store,” Amazon has become the world’s largest online retailer, generating $386 billion in revenue in 2020.₁ Since the start of 2017, about 3.3 million third-party sellers have joined Amazon marketplaces, with a growing number of these sellers from China.² Currently, approximately 50% of all sales on Amazon come from third-party sellers.³

Amazon and other internet retailers have created new opportunities for small businesses and entrepreneurs around the world to sell products on an easily accessible platform, while also delivering a nearly endless supply of products directly to U.S. consumers’ homes. But this dramatic increase in third-party sellers from other countries has also created an unwelcome collateral problem: If consumers are injured by a defective product purchased via Amazon or another site, how do they recover damages when the third-party seller is a foreign company?

If a consumer is injured by a defective product purchased from Amazon, the company’s policy is to direct the consumer to the third party that “sold” the defective product. When the seller is headquartered in the United States, state products liability laws provide a means of recovery.
But when the seller company is headquartered outside of the United States (particularly when the company is based in China) or if the U.S. company is bankrupt, consumers often are unable to recover damages because of the difficulty of obtaining and enforcing judgments. Thus, consumers rightly focus on Amazon. Unfortunately, they soon discover that the online giant refuses to accept responsibility, claiming it is merely a “marketplace” and not a “seller” or “retailer” under products liability laws.

Until recently, Amazon escaped liability repeatedly by claiming it was only an advertising portal so it could not be held liable for defective products it did not manufacture or sell. But more courts are recognizing the integral role Amazon plays in these transactions, and plaintiff attorneys are finding ways to ensure injured consumers can bring viable claims. Such opinions and principles are, of course, applicable to other e-commerce companies as well.⁴

The ‘Online Advertiser’ Argument

In courts around the country, Amazon denies being a seller, instead arguing that it is merely an advertiser or online marketplace that connects buyers and sellers—a listing service for third-party vendors—and therefore cannot be held liable for defective third-party products purchased on its app or website.

Communications Decency Act. Amazon has frequently relied on the Communications Decency Act (CDA), arguing that a website cannot be held liable for simply publishing advertisements for a third-party vendor’s product, since that material originates from the vendor. Congress enacted the CDA as part of the Telecommunications Act of 1996 to prevent minors from viewing sexually explicit material on the internet.⁵ The CDA states that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”⁶

Amazon has argued that the CDA “provides immunity for claims against providers of interactive computer services, such as Amazon, ‘as the publisher or speaker of any information provided by another information content provider.’”⁷ But this does not apply when the plaintiff’s claims are not based on the publication of someone else’s speech and instead are based on the defendant’s role in selling or distributing a product that caused injury.⁸

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Find evidence—including storage, delivery, and receipt of payment—that the defendant was integrally involved in and exerted control over the sale of the third-party product.

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State products liability laws. Without CDA immunity, courts still need to consider whether a plaintiff has a viable products liability claim. In 2019, the Fourth Circuit sided with the defendant on a products liability claim in a case involving an allegedly defective headlamp.⁹ After the headlamp allegedly caused a house fire, the homeowners’ insurer sued Amazon.¹⁰ The third-party seller was a Chinese company.¹¹ The plaintiff argued that even though Amazon didn’t manufacture the headlamp, it was directly involved in its sale.¹²

The Fourth Circuit affirmed that “Amazon was not the ‘seller’ of the headlamp and therefore did not have liability under Maryland law.”¹³ The court reasoned that, under Maryland law, a product seller must have transferred title to product purchasers for a price.¹⁴ Therefore, entities that “do not take title to property during the course of a distribution but rather render services to facilitate that distribution or sale, are not sellers.”¹⁵ Since there was no evidence that Amazon ever had title to the headlamp, it was not a seller.¹⁶

In October 2020, the Ohio Supreme Court in Stiner v. Amazon.com, Inc., found that Amazon was not liable for a teenager’s death after he consumed caffeine powder sold on its website by a third party.¹⁷ Under the Ohio Products Liability Act, the court held, Amazon was not a supplier that could be held liable for a defective product.¹⁸ Rather, the third-party seller had sole responsibility.¹⁹

The court held that to be a supplier under Ohio law, the person or company placing a product in the stream of commerce must have had some control over the product.²⁰ Since Amazon had no relationship with the manufacturer or entities in the seller’s distribution channel and did not write the product description for the caffeine powder or ever have possession of the product, it was not a supplier.²¹

An Active Participant

Many courts’ view of Amazon’s role in these types of transactions started to change around 2015 when hoverboards were gaining popularity. In Fox v. Amazon.com, Inc., a couple sued the company after a hoverboard caught fire inside their home in Nashville, Tenn., trapping the couple’s two children on the second floor.²² The father arrived home in time to instruct them to break a window and jump out.²³ The children survived, but the fire destroyed their home. It was undisputed that the hoverboard’s battery pack was to blame.²⁴ The hoverboard originated in China but was purchased on Amazon.²⁵

Unable to file a claim against the Chinese manufacturer, the couple brought suit in Tennessee federal court against Amazon.²⁶ The online giant held to its usual line—that the third-party seller was solely responsible for the defective product, as Amazon was a mere marketplace and not a seller.²⁷ The case was dismissed, but the plaintiffs appealed to the Sixth Circuit.²⁸

Meanwhile, Amazon had received several complaints of hoverboards exploding and also catching fire.²⁹ It launched an internal investigation into the matter and soon discovered the boards’ lithium-ion battery packs were faulty.³⁰ In December 2015, it emailed customers warning them about the defective products.³¹ At about the same time, the company stopped selling all hoverboards on its site, and later—after the plaintiffs’ house fire—started issuing refunds on some of the defective hoverboards.³²

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Request any recall information or communications the defendant sent to consumers who purchased the product, including any drafts of those communications.

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These actions, the Sixth Circuit later held, made Amazon an active participant in the product’s distribution and not merely a marketplace.³³ Amazon’s warning to consumers made it clear that the company was aware of the product’s dangers, and since it “assumed a duty to act,” there remained genuine issues of material fact regarding whether the company breached that duty and whether that breach caused the plaintiffs’ harm.³⁴

Several other courts have also issued rulings that signal an overall shift in how courts are beginning to view Amazon when it comes to products liability.³⁵ In January 2020, for example, the Southern District of Texas found that Amazon could be a seller under Texas’s products liability statute, noting that the company was “integrally involved in and exerts control over the sales of third-party products.”³⁶ The court held that a “seller does not need to actually sell the product; introducing the product in the stream of commerce is enough.”³⁷ Because Amazon stored the product, packaged and prepared the product for delivery, delivered the product to the plaintiff, and set fees related to the product’s sale, it was a seller under Texas law.³⁸

Amazon appealed to the Fifth Circuit, which submitted a certified question to the Texas Supreme Court asking whether Amazon is a seller under Texas law if it does not hold title to the product but controls the process of the transaction and delivery.³⁹ The Texas Supreme Court accepted the certified question, but as of this writing, it has not yet issued an opinion.

In August 2020, a California state appellate court ruled in Bolger v. Amazon.com, LLC, that Amazon was liable for defective third-party products sold on its site based on it distributing the products into the U.S. market.⁴⁰ The court found that Amazon played a pivotal role in an allegedly defective laptop battery’s sale and purchase, thus placing the company in the chain of distribution.⁴¹ The court held that the CDA did not shield Amazon from liability because the plaintiff’s “strict liability claims depend on Amazon’s own activities, not its status as a speaker or publisher of content provided by [the third-party seller] for its product listing.”⁴²

Other recent court rulings include one from the Western District of Kentucky holding that Amazon may be liable for an assumed duty to warn buyers of a defective product’s dangers. In that case involving the hoverboards discussed earlier, Amazon’s failure to include certain information in its email to buyers may have amounted to negligence, said the court.⁴³

And in Loomis v. Amazon.com, LLC, a California state appellate court held that Amazon can be strictly liable as a seller of defective products.⁴⁴ The California court, citing to Bolger, reasoned that “just like a conventional retailer, Amazon can use its power as a gatekeeper between an upstream supplier and the consumer to exert pressure on those upstream suppliers (here, third-party sellers) to enhance safety.”⁴⁵

Building a Solid Claim

Use strategies from these cases and others to hold internet retailers liable for defective products purchased on their app or website. If Amazon is the actual product seller per its website, a plaintiff will have an easier time bringing products liability claims against the company, as there is little doubt that Amazon placed the product into the stream of commerce. But when a product is purchased via a third-party seller, you will need to investigate and find evidence—including storage, delivery, and receipt of payment—that Amazon was integrally involved in and exerted control over the sale of the third-party product.

Bring a strict liability claim. To begin, a consumer must bring strict liability claims related to the distribution and sale of the defective product. Under strict liability, a defective product seller, distributor, or manufacturer is generally liable if someone is injured by the defective product, regardless of the defendant’s conduct or actions. Also consider bringing other claims such as negligence and breach of warranty.

Failure-to-warn claims may not succeed. For example, in the Texas case mentioned earlier, the plaintiff purchased a TV remote control from Amazon.⁴⁶ The consumer’s 19-month-old daughter later ingested the button battery from the remote, which lodged in her esophagus, causing permanent damage.⁴⁷ The district court held that under the CDA Amazon could not be held liable for failing to warn about dangers associated with the product.⁴⁸

Focus on the defendant’s role in the selling process. The Texas court also ruled, however, that Amazon could be qualified as a seller under the state’s products liability statute.⁴⁹ The law states that whether an entity is considered a seller or a person engaged in distributing a product “depends on the specific facts at issue,” adding that to be engaged in distribution, a business does not need to actually sell the product: “introducing the product in the stream of commerce is enough.”⁵⁰

Introducing the product into the stream of commerce is a key element of many states’ products liability statutes.⁵¹ Look for evidence that the defendant was involved in and exerted some control over the sale of the third-party product—such as storing the product at its warehouse, packaging the product for delivery, delivering the product to the plaintiff, and setting fees related to the product’s sale.

Showing that the defendant plays a large role in the selling process is also key, particularly for overcoming a CDA immunity argument. Demonstrate that the company’s role extended beyond a mere editorial function to include several activities crucial to the selling process.⁵² For example, the Western District of Wisconsin ruled that Amazon was not immune from liability under the CDA because its liability was not based on posting content from a third party but on its “active participation” in the selling process.⁵³

Proving that the defendant was a key player in putting foreign-manufactured products into the U.S. market also is crucial.⁵⁴ Look for evidence such as arranging for the product’s transport to the United States and processing fees related to the product’s transport and sale.

Pursue discovery early and aggressively. Evidence showing the defendant’s knowledge of the product’s defects and its communications with consumers about those defects can also be crucial. Include requests for any product testing data and any customer complaints made to it about the product. Also request any recall information or communications sent to consumers who purchased the product, including any drafts of those communications. The defendant may make proportionality objections to your requests, so you must understand the proportionality objection elements in your jurisdiction.

Now is the time to be vigilant so strong precedents are set for online retailers. By continuing to press forward, plaintiff lawyers can hold internet retailers accountable for the safety of the products it sells to consumers.

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Eric Chaffin is the managing partner and Steven Cohn is of counsel at Chaffin Luhana in New York City. They can be reached at chaffin@chaffinluhana.com and cohn@chaffinluhana.com.

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Notes

1. Shelley E. Kohan, Amazon’s Net Profit Soars 84% With Sales Hitting $386 Billion, Forbes, Feb. 2, 2021, https://tinyurl.com/hchab5zj.
2. Chris Dunne, Amazon Has 1,029,528 New Sellers This Year (Plus Other Stats), Feedback Express, https://tinyurl.com/teyfhpmu.
3. Id.
4. See, e.g., Atari Interactive, Inc. v. Redbubble, Inc., 2021 WL 706790, at **5–7 (N.D. Cal. Jan. 28, 2021).
5. Sara L. Zeigler, Communications Decency Act of 1996, The First Amendment Encyclopedia, https://www.mtsu.edu/first-amendment/article/1070/communications-decency-act-of-1996.
6. 47 U.S.C. §230(c)(1) (2018). The CDA defines “interactive computer service” as “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server” and “information content provider” as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.” Id. at §230(f)(2)–(3).
7. Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135, 139 (4th Cir. 2019) (citing 47 U.S.C. §230(c)(1) (emphasis in original)).
8. Id. at 139.
9. Id. at 135.
10. Id. at 138–39.
11. Id.
12. Id.
13. Id. at 137–38.
14. Id. at 140–42.
15. Id. at 141.
16. Id. at 140–42.
17. 164 N.E.3d 394 (Ohio 2020).
18. Id. at 399–400.
19. Id. at 399.
20. Id.
21. Id.
22. See Fox v. Amazon.com, Inc., 930 F.3d 415 (6th Cir. 2019).
23. Id. at 421.
24. Id.
25. Id. at 419.
26. Id. at 421.
27. Id.
28. Id.
29. Id. at 419–420.
30. Id.
31. Id. at 420.
32. Pavithra Mohan, Amazon Is Offering Refunds to Customers Who Purchased Hoverboards, Fast Co., Jan. 21, 2016, https://www.fastcompany.com/3055776/amazon-is-offering-refunds-to-customers-who-purchased-hoverboards.
33. Fox, 930 F.3d at 426–28.
34. Id. at 427.
35. See State Farm Fire & Cas. Co. v. Amazon.com, Inc., 390 F. Supp. 3d 964 (W.D. Wis. 2019); Oberdorf v. Amazon.com, Inc., 930 F.3d 136 (3d Cir. 2019).
36. McMillan v. Amazon.com, Inc., 433 F. Supp. 3d 1034, 1042 (S.D. Tex. 2020).
37. Id. at 1041.
38. Id. at 1042.
39. McMillan v. Amazon.com, Inc., 983 F.3d 194 (5th Cir. 2020).
40. 267 Cal. Rptr. 3d 601 (Cal. Ct. App. 2020).
41. Id.
42. Id. at 605.
43. State Farm Fire & Cas. Co. v. Amazon, Inc., 2021 WL 1124787, at **8–9 (W.D. Ky. Mar. 24, 2021).
44. 2021 WL 1608878, at **11–12 (Cal. Ct. App. Apr. 26, 2021).
45. Id. at *11.
46. McMillan, 433 F. Supp. 3d at 1037.
47. Id.
48. Id. at 1044–45.
49. Id. at 1041–44.
50. Id. at 1041.
51. See, e.g., Tincher v. Omega Flex, Inc., 104 A.3d 328 (2014) (applying Pennsylvania law); O’Neil v. Crane Co., 266 P.3d 987 (2012) (applying California law).
52. See Oberdorf, 930 F.3d at 152–53; State Farm, 390 F. Supp. 3d at 973–74.
53. State Farm, 390 F. Supp. 3d at 973–74.
54. Id. at 974.