Court to decide scope of Amazon’s liability for defective products

Following oral argument on Feb. 23, Division 8 of the 2nd District Court of Appeal in Loomis v. Amazon.com (B297995) appears poised to expand the reach of last year's Bolger v. Amazon.com, 53 Cal. App. 5th 431 (2020) to products that are not "Fulfilled by Amazon." This would be consistent with the tentative ruling issued by the court a few days before argument, in which the court indicated it was inclined to reverse summary judgment for Amazon as to the product liability and negligence theories.

Loomis, which involves burn injuries and a house fire started by a defective hoverboard purchased on Amazon, is the natural successor to last year's Bolger case from Division 1 of the 4th District Court of Appeal. In Bolger, the court ruled that Amazon could be held strictly liable for certain defective products sold on its "marketplace" -- a part of its website where third-party suppliers and manufacturers list products for sale -- because Amazon was instrumental in the sale and essentially did everything a regular retailer would do except take title to the product. This holding was a big blow to Amazon, which had previously prevailed in that type of case in many other jurisdictions.

Loomis raises many of the same issues as Bolger, with the main difference being the hoverboard in Loomis was not Fulfilled by Amazon. In practical terms, this means Amazon never had possession of the hoverboard. Instead, unlike in Bolger, the product was shipped directly from the third-party supplier who listed it on Amazon's website.

Chris Dolan of the Dolan Law Firm, who represents Loomis, argued Amazon's failure to take possession does not matter under California law and Amazon is still strictly liable for the damages caused by the defective hoverboard. Amazon, represented by Brendan Murphy of Perkins Coie, argued it was not the seller of the hoverboard and also that Bolger was wrongly decided. However, the court appeared skeptical of those arguments, reserving most of its tough questions for Murphy.

Assuming the court in Loomis sticks with its tentative, it will be only the second time Amazon has ever lost a Fulfilled by Amazon case at the appellate level. And the first one, from a panel of the 3rd Circuit in Oberdorf v. Amazon.com, Inc., 930 F.3d 136 (3d Cir. 2019), was vacated by a grant of rehearing en banc, see Oberdorf v. Amazon.com Inc., 936 F.3d 182 (3d Cir. 2019). Following that, the en banc court certified the question to the Pennsylvania Supreme Court. See Oberdorf v. Amazon.com Inc., 818 F. App'x 138 (3d Cir. 2020). The parties then resolved the case before a ruling from the Pennsylvania high court, so the original Oberdorf panel opinion remains vacated and has no precedential value. Meaning, a decision in Loomis that goes against Amazon will have ripples all across the country.

Indeed, this battle continues to be fought in other jurisdictions as well. In four recent decisions, courts have reached differing conclusions on the scope marketplace liability for defective products sold on the marketplace. Most recently, in an opinion written by former Texas Supreme Court Justice Don. R. Willett, a panel of the 5th U.S. Circuit Court of Appeals certified the question of Amazon's liability for a defective product to the Texas Supreme Court. See McMillan v. Amazon.com, 983 F.3d 194 (5th Cir. 2020). Although the judges seemed disinclined to buy Amazon's argument that its role in the sale of the defective product -- in that case a remote control -- the panel nevertheless decided the Texas high court was best suited to resolve the dispute given the "potentially sweeping implications" of the ruling and because "[n]o Texas court has yet decided whether an online retailer like Amazon is a 'seller' under Texas products-liability law." A decision from the Texas Supreme Court is expected in June.

Shortly before the McMillan opinion was issued, a trial court in New York denied a motion for summary judgment by Amazon in which Amazon claimed it was merely a service provider for a defective thermostat that caught fire and caused significant property damage. See State Farm Fire & Cas. Co. v. Amazon.com Servs., Inc., 008550/2019, 2020 WL 7234265, at *1 (N.Y. Sup. Ct. Dec. 8, 2020). The court ruled that under New York law, "Amazon exercises sufficient control over the product to be considered among 'retailers and distributors.'" Id. at *4. This holding is particularly noteworthy because it runs counter to two earlier federal district court decisions construing New York law to exclude Amazon from liability, Eberhart v. Amazon.com, Inc., 325 F.Supp.3d 393, 397 (S.D.N.Y. 2018) and Philadelphia Indemnity Ins. Co. v. Amazon.com, Inc., 425 F.Supp.3d 158, 162-164 (E.D.N.Y. 2019). This sets up a conflict that likely will have to be resolved by the New York appellate courts.

Still, Amazon managed to dodge liability in two other cases, Stiner v. Amazon.com, Inc., 2020-Ohio-4632 (2020) and State Farm Fire & Cas. Co. v. Amazon.com, Inc., 835 Fed.Appx. 213 (9th Cir. Nov. 17, 2020). In Stiner, the Ohio Supreme Court ruled that Amazon was not a "supplier" under the Ohio Products Liability Act of caffeine powder that killed a teenager, and in State Farm, a divided panel of the 9th Circuit held Amazon was not strictly liable under Arizona law for defective hoverboard batteries that burned a home. However, a dissenting judge argued the matter should be decided by the Arizona Supreme Court and State Farm has requested that relief in a petition for rehearing en banc.

The ruling in Loomis will also come at a time when the California Legislature has revived an effort to address this issue legislatively. That measure, Assembly Bill 1182, was introduced on Feb. 18 by Assemblymember Mark Stone (D-Monterey Bay). Last year's bill stalled out before a final vote, but given the increasing societal importance of these questions, the bill should generate a lot of interest this year. 