A Link in the Chain? Developments Regarding E-Commerce Website Liability for Defective Products Sold by Third-Party Vendors

More than 100 years ago, the New York Court of Appeals issued its now-infamous opinion in MacPherson v. Buick Motor Co.,[1] which ushered American courts into a new age of personal injury jurisprudence. Writing for the majority, renowned jurist Benjamin Cardozo eliminated the requirement of privity of contract for product-related personal injury actions, effectively allowing a downstream consumer to sue a manufacturer even though the parties had no contractual relationship.[2] Over the ensuing century, courts and legislatures expanded, modified, and otherwise molded this concept into what practitioners now refer to as the doctrine of products liability.

Today, when a consumer alleges that she was injured by a defective product, it is possible for her to sue multiple parties in the distribution chain, although the nature and extent of liability will depend heavily on the applicable provisions of state law. Section 402A of the Restatement (Second) of Torts, for example, imposes liability on any defendant who is “engaged in the business of selling” the subject product, regardless of whether the “seller” exercised “all possible care,” and regardless of whether the end user purchased the product directly from the “seller.”[3] In other words, depending on the state, a plaintiff can potentially recover not only from the manufacturer, but also from wholesalers, retailers, and other downstream non-manufacturing suppliers.[4]

Although many facets of products liability have been settled in the century following MacPherson, both courts and practitioners still face uncharted waters, including those presented in cases involving products sold online. E-commerce is an increasingly prevalent feature of daily life in the United States, especially after the meteoric rise in delivery culture prompted by the COVID-19 pandemic.[5] Product liability practitioners should be aware of the developing law concerning an “e-tailer’s” role in the chain of distribution, and its resulting exposure to potential products liability suits, when a consumer purchases a product from a third-party vendor.

Take Amazon, for example. The company’s website offers products for sale through three distinct platforms: (1) Amazon sells and ships goods directly to the consumer; (2) a third-party vendor sells the merchandise through Amazon’s “fulfilled by Amazon” program, under which Amazon stores, packages, and ships the sold product on the vendor’s behalf; or (3) a third-party vendor sells the product on Amazon.com, but stores, packages, and ships the product itself.[6] Under platforms (2) and (3), Amazon handles all communication with the customer and initially obtains the customer’s payment, which it later remits to the third-party vendor.

Like other online retailers who simply sell their products directly to consumers, when acting under platform (1), Amazon fits within the meaning of “seller” under most states’ laws. Its exposure therefore depends on how the state handles claims against downstream suppliers who played no role in the product’s design or manufacture.

In Amazon’s case, however, approximately 60% of its sales arise from orders placed with third-party vendors using platforms (2) and (3).[7] The role of such sellers in a product liability case has been the subject of extensive litigation over the past few years.

Less than a month ago, the California Court of Appeals held in Bolger v. Amazon.com, LLC that Amazon was subject to product liability claims arising from a defective battery the plaintiff purchased from a third-party vendor through the “fulfilled by Amazon” program.[8] Amazon stored the battery at one of its fulfillment centers, packaged it using Amazon-branded shipping supplies, and sent it directly to the plaintiff, who had no contact with the third-party vendor.[9]

In reversing the trial court’s grant of summary judgment in favor of Amazon, the appeals court reasoned that Amazon was a “link in the chain of product distribution even if it was not the seller as commonly understood,” as it “created the environment (its website) that allowed [the third-party vender] to offer the replacement battery for sale.”[10] It further explained that Amazon had “placed itself between [the vendor] and plaintiff’ in the chain of distribution” by accepting possession of the product, storing it in an Amazon warehouse, marketing it online, receiving payment, and shipping the product directly to plaintiff.[11]

Because Amazon was an “integral part of the overall producing and marketing enterprise” and “responsible for passing the product down to the consumer,” California law dictated that it should bear the cost of the injury.[12] As such, the record did not “demonstrate as a matter of law that Amazon [could not] be held strictly liable for defects in third-party products sold through its website, at least under the circumstances here.”[13]

While the Bolger decision will undoubtedly have sweeping implications for Amazon and other e‑tailers, the court’s discussion suggests a few potential limitations. Its use of the “at least under the circumstances here” language, coupled with its focus on Amazon’s conduct in possessing, storing, and shipping the product, at least arguably suggests that the result may have been different if the third-party defendant had not used the “fulfilled by Amazon” program.

Indeed, other courts have focused on the level of control the e-tailer exercises over the transaction. In Fox v. Amazon.com, Inc., the Sixth Circuit addressed Amazon’s role in the distribution chain — and its resulting liability — under the Tennessee Product Liability Act (“TPLA”), ultimately treating the issue as a function of control.[14]

There, the plaintiffs’ home was destroyed in a fire that was undisputedly caused by a hoverboard they purchased from a third-party vendor on Amazon’s website. That third-party vendor was judgment-proof, and the manufacturer of the product was unknown.[15] Because the plaintiffs could not recover from either party, Amazon faced liability under the TPLA if it qualified as a “seller.”[16]

In addressing the TPLA’s definition of “seller,” which “hinged on the . . . entity’s engagement in the business of selling,” the Sixth Circuit explained that both the legislature and the Tennessee Supreme Court had indicated that “control is an important consideration underlying products liability law.”[17] It held that the TPLA’s definition of “seller” meant “any individual regularly engaged in exercising sufficient control over a product in connection with its sale, lease, or bailment, for livelihood or gain.”[18]

The Fox court ultimately concluded, however, that Amazon was not liable under the TLPA because it did not exercise sufficient control over the hoverboard. Although the parties disagreed over whether Amazon stored and shipped the hoverboard under its fulfillment program, the summary judgment record indicated that the hoverboard was “[f]ulfilled by [the third-party vendor].”[19] The court, therefore, relied on the lack of evidence that Amazon shipped the hoverboard from one of its warehouses, and the fact that Amazon did not choose to offer the hoverboard for sale, did not set the price of the hoverboard, and did not make any representations about the hoverboard’s safety.[20]

Faced with facts similar to those in Bolger and Fox, some courts have imposed additional restrictions on the term “seller” and required the defendant to take and transfer title to the product.[21] In Erie Insurance Company v. Amazon.com, Inc., for example, the consumer purchased the subject product from a third-party vendor using the “fulfilled by Amazon” program.[22] The Fourth Circuit noted that Amazon received, stored, and shipped the product, but it rejected the plaintiff’s “control over the transaction” argument, holding that Maryland law defined “seller” as someone who passes title to the buyer for a price.[23] Because the third-party vendor transferred title directly to the buyer, Amazon could not face liability as a member of the distribution chain.[24]

Other courts have expressly declined to impose a “passage of title” requirement. In Fox, for example, the court rejected Amazon’s argument that it was not a “seller” because...