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Amazon, Online Markets Face Reckoning in California Product Case

April 29, 2021, 10:30 AM

An injured hoverboard owner’s victory this week in an appeals court in California has powerful implications for Amazon.com Inc.‘s liability in the state, for its internal practices, and potentially for other online marketplaces like eBay Inc. and Etsy Inc., attorneys and others say.

Amazon can be held liable under California law for Kisha Loomis’ burn injuries, allegedly caused by a defective hoverboard that the company offered on its web marketplace but didn’t store, handle, or ship, the California Court of Appeal, Second Appellate District, said.

The case expands Amazon’s potential liability under California law as found in August in Bolger v. Amazon.com, Inc. There, a third-party seller engaged the company’s “Fullfilment by Amazon” service to store and ship a product.

The new decision “sweeps in non-Fulfilled by Amazon products, which the Bolger court didn’t necessarily address,” Jeremy Robinson, who helped represent Loomis in her appeal, told Bloomberg Law April 27.

It’s “also a warning sign to other online marketplaces that don’t take possession of the product but otherwise operate in a similar way to Amazon’s marketplace,” said Robinson, who’s with Casey Gerry Schenk Francavilla Blatt & Penfield LLP in San Diego.

Professor Agnieszka McPeak of Gonzaga University School of Law in Spokane, Wash., said that “courts are rejecting the internet exceptionalism idea when it comes to a company like Amazon,” aligning internet marketplaces with brick and mortar retailers in the product liability context.

“The trend is moving this way because of the specific level of control and interaction” that Amazon has with vendors and customers, she said.

But McPeak would distinguish among e-commerce sites. Under the Loomis opinion, eBay is more like a mere auctioneer, she said.

Chris Dolan, who practices in San Francisco and represented Loomis in the lower court and on appeal, said “disruptors” like Amazon “think they’re above the law because they’re new, shiny, and special. But they aren’t.”

“As technology shifts, the law needs to keep up with it,” he said.

Absolute Liability?

Fred Hiestand of the Civil Justice Association of California, who submitted a friend of the court brief supporting Amazon, said he’s concerned that the plaintiffs sought “a legal decision imposing absolute liability on Amazon.”

He foresees a “flood of lawsuits” against Amazon and higher prices for Amazon shoppers.

Whatever Amazon does to promote the safety of items sold on its site, “it’s never going to be enough” to stem lawsuits, he said. EBay and Etsy don’t have such deep pockets, “but it’s going to affect them,” he said. “They’re all susceptible.”

The California Supreme Court should take the case if Amazon appeals, he said.

The state high court declined to take up Bolger. Meanwhile, a bill that would govern online marketplace liability has been reintroduced in the California Legislature.

Liability Effects

McPeak says the Loomis decision, if it stands, could have an effect on Amazon’s internal practices, extending beyond the populous state, “because of the amount of liability they will face in California.” As with emissions and privacy laws, this decision “will set a higher bar across the board,” with Amazon unable to segment its market geographically, she said.

Amazon declined to comment on the Loomis case or say whether it would appeal.

But it said in an emailed statement that it “invests heavily in the safety and authenticity of all products offered in our store including proactively vetting sellers and products before being listed, and continuously monitoring our store for signals of a concern.”

“Amazon is a supporter of legislation that provides protections for consumers wherever they shop online to ensure all stores are held to the same standards,” it said, referring to the previous version of the California bill.

Next up in weighing the online marketplace’s liability for defective products under state law is Texas, where a state top court is considering a case involving a remote control that allegedly lacked features to safely contain a button battery that injured a toddler.

To contact the reporter on this story: Martina Barash in Washington at mbarash@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com