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E-Commerce Marketplace Liablity

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Former Counsel
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Can an e-commerce marketplace be liable in a chain of distribution for injury caused by a defective product sold by a third party? This week, the California Court of Appeal, Second District, in Loomis v. LLC, 2021 WL 1608878, held that yes, LLC (“Amazon”), the online marketplace, may be strictly liable for injuries caused by a defective hoverboard sold by one of Amazon’s third-party sellers, reversing the trial court’s grant of summary judgment in favor of Amazon. The Court of Appeal held that Amazon may be liable under California’s strict product liability and negligent product liability theories for injuries caused by a fire in a hoverboard purchased online from Amazon and sold by a third-party seller. The court concluded that Amazon is a direct link in the vertical chain of distribution, making it subject to liability under California’s strict liability doctrine. Id. at *7-8.

The Loomis court considered and rejected Amazon’s arguments that it could not be strictly liable under a stream of commerce theory. The Court found that there were triable issues of fact under the three elements of a stream of commerce theory, citing evidence that Amazon received a financial benefit from the sales transaction as Amazon had a role in creating a market for the hoverboards; amazon’s role was integral to the hoverboard business enterprise; and Amazon had the substantial ability to influence the manufacturing or distribution process. Id. at *8-9.

Notably, the Loomis court found the California Court of Appeal Fourth Division’s recent Bolger v. LLC (2020) 53 Cal.App.5th 431 decision was correctly decided, wherein the Court held that Amazon could be strictly liable for a fire in a laptop battery purchased on and sold by a third-party retailer. Id. at *5-7.

As products are increasingly sold by third parties through e-commerce marketplaces, and while “e-commerce may not neatly fit into a traditional sales structure” (Id. at *8), e-commerce retailers must be mindful of their obligations to consumers and potential risks in light of the recent Loomis and Bolger decisions.