Not Even Amazon Can Avoid Being In the Chain of Distribution Under California Strict Products Liability Law

In August of 2020, a California Court of Appeal held that Amazon was subject to strict products liability for each and every product sold on its website. (See Bolger v. LLC (2020), 53 Cal.App.5th 431. You can read our full analysis of that opinion here. In short, the Court of Appeal held that, notwithstanding Amazon’s protestations, the company was within the vertical supply chain for the product, despite not falling within the classical definitions of designer, manufacturer, or distributor of the product in question. The Court of Appeal also relied on the public policy rationale underlying the doctrine of strict products liability and found that to hold Amazon liable under strict products liability would further those interests. Amazon appealed the Bolger ruling to the California Supreme Court, but review was denied.

Some eight months later, Amazon’s position has not improved. In Loomis v. LLC (No. B297995, filed April 26, 2021), a different district of the Court of Appeal held that Bolger was correctly decided and relied on it to overturn a motion for summary judgment on which Amazon had previously prevailed. The Loomis matter centers around a “hoverboard” product bought as a Christmas present from The board was listed by a seller identified as TurnUpUp, which is a name used by SMILETO, allegedly a Chinese company. The board was shipped to Plaintiff by Forrinx Technology (USA), Inc. It arrived in time for Christmas and, a few days later, was plugged in to charge. The board was allegedly then discovered in flames, and Plaintiff suffered burns trying to extinguish the fire.

At the trial level, Amazon moved for summary judgment on Plaintiff’s strict liability and negligence claims, arguing that it was not in the “chain of distribution,” and that it was not liable under the “marketing enterprise theory.” The Trial Court granted Amazon’s Motion and Plaintiff appealed.

On appeal, Amazon argued that Bolger was erroneously decided because it failed to abide by long-standing limitations in strict liability law, namely that there was a threshold requirement limiting liability to those entities that “manufactured, sold, or supplied” the product at issue. Amazon argued that it was merely a facilitator in connecting the consumer and seller through its website. Finally, Amazon argued that the Bolger Court ill-advisedly relied on “vague and ill-defined policy notions” that were “cited six decades ago.” Despite Amazon’s arguments, the Court of Appeal agreed with the Bolger Court and found that Summary Adjudication as to Plaintiff’s strict products liability and negligence claims were erroneously granted.

The Court of Appeal held that Amazon was in the direct vertical chain of distribution of the product in question because Amazon placed itself between the consumer and the supplier. Plaintiff went to to look for hoverboards, found one, ordered it through Amazon, paid Amazon, and Amazon informed the seller who then packaged and shipped the product. When the consumer wanted to know if the product would arrive in time for Christmas, she asked Amazon, the only entity with whom she had dealt, and had she wanted to return the product, she would have returned it to Amazon.

Recognizing that e-commerce may not fit perfectly into the traditional sales structure, the Court also found that Amazon was liable under the stream of commerce/market enterprise approach. Under this alternate theory, strict products liability will attach against those entities that meet a three prong test: 1) the entity received a direct financial benefit from sale of the product, 2) the entity’s role was integral to the business enterprise, such that the defendant’s conduct was a necessary factor in bringing the product to the initial consumer market; and (3) the defendant had control over, or a substantial ability to influence, the manufacturing or distribution process. The Court of Appeal found that there were triable issues of material fact as to each of these prongs.

As to financial benefit, Amazon admits that it received a financial benefit from this discrete sale, but argued that such fees are not connected to the activities involved in bringing the product to the initial consumer market. The Court agreed that there must be ties to this particular product, but that there were no facts showing what Amazon’s role had been in bringing the TurnUpUp hoverboard to market, which is why the Court found a triable issue on the first and second prongs. As to the third prong, Amazon argued that it avoids liability because it did not manufacture or sell the hoverboard and never had physical possession of it. Nonetheless, the Court held that Amazon cannot escape liability because of a prior Court of Appeals decision, Canifax v. Hercules Powder Co. (1965) 237 Cal.App.2d 44, 52 which held that a wholesaler who placed an order with the defendant who then passed the order to the manufacturer was within the chain of distribution. The Canifax Court found that the defendant was liable because “the fact that it chooses to delegate the manufacture of [the product] to another and that it causes the manufacturer to ship the product directly to the consumer cannot be an escape hatch to avoid liability.” On that basis, the Court found that there was a triable issue here regarding the amount of control Amazon possessed over the manufacturing and distribution process.

The Court of Appeal similarly dismissed Amazon’s arguments regarding foreign law and policy considerations. The Court of Appeal found no reason to look to other states’ laws when California had decided the issues. As to the policy considerations, the Loomis Court agreed with the Bolger Court in applying the policy rationale underlying the doctrine of strict product liability, namely that Amazon plays a substantial part in insuring that the product is safe, that Amazon may be the only member in the distribution chain reasonably available to Plaintiff, and that Amazon is in a position to shift the costs of liability amongst other members in the chain of distribution.

Amazon likely brought this appeal in an attempt to create a split of the Courts of Appeal which would make review of the matter by the California Supreme Court more likely. Their attempt was unsuccessful, however, and now two Districts of California’s Courts of Appeal have held that Amazon, and those entities in similar (though probably less dominating) market positions, cannot successfully avoid strict products liability by means of summary judgment or adjudication in California.

This document is intended to provide you with information about product liability law related developments. The contents of this document are not intended to provide specific legal advice. If you have questions about the contents of this alert, please contact the authors. This communication may be considered advertising in some jurisdictions.

April 29, 2021