As Amazon continues to grow, more questions have been raised about whether it can be liable for the acts of its 3P sellers, such as selling defective products. The latest court to weigh in is the California Court of Appeal in the case of Loomis v. Amazon.com, LLC, No. B297995 (Cal. App. 2d Dist. Apr. 26, 2011). In Loomis, a customer ordered a hoverboard from a 3P Amazon seller based in China. The seller did not use the Fulfillment By Amazon service. The hoverboard exploded, injuring the customer, who brought suit against Amazon. The Trial Court granted summary judgment in favor of Amazon, finding that Amazon is merely an “online advertiser.”
The California Court of Appeal reversed and held that Amazon could be strictly liable for the product defect under California law. The Court reasoned that Amazon interacted with the customer, took the customer’s order, processed the order to the 3P seller, collected the money, and was paid a fee for each sale. Amazon’s extensive involvement meant that it was effectively a retailer, not just a shopping mall owner leasing space to independent vendors. In addition, Amazon could play a substantial part in keeping products safe because Amazon could require 3P sellers to follow safety requirements, and did have safety requirements for 3P sellers in certain categories. Amazon was in the best position to compensate the plaintiff, because it would be difficult or impossible to get compensation from a low-profile 3P seller in China. And Amazon could adjust the costs of compensation through fees and insurance.
This Loomis case follows last year's case Bolger v. Amazon.com, LLC, 53 Cal. App. 5th 431 (Cal. App. 4th Dist. 2020), which reached the same conclusion, although the seller in Bolger did use FBA. Thus, two California state appellate courts have now held that Amazon can be strictly liable under California law for defects in products sold by 3P sellers, whether they use FBA or not. On the other hand, and as the Loomis court noted, courts in several other states (including Ohio, Tennessee, Illinois, and Wisconsin) have held that Amazon is not strictly liable for products sold by 3P sellers. Accordingly, California is likely to impose strict liability on Amazon for 3P products going forward, but some other states may not. Amazon’s liability for the acts of 3P sellers thus remains an open question, as states each come to their own conclusions on the topic.
The Loomis case also makes clear that courts are increasingly focused on the details of Amazon’s operations as they grapple with how to apply old legal principles to new eCommerce ways of business. The outcomes of Amazon-related litigations have been different and often hinge on these details. Therefore, litigants dealing with Amazon should ensure that they understand the nuances of Amazon, including how its platform and fulfillment works, its economic relationship with 3P sellers, and obtaining jurisdiction over 3P sellers who may be located in different states or foreign countries.