Whose Product Is It Anyway? Examining Amazon’s Liability Under the LPLA for Products Sold by Third Parties on its Website

by Braxton Duhon

I. Introduction: An Explosive Case

Angela Bolger, like many Amazon Prime[1] customers, often used Amazon to order items that she needed.[2] On one such occasion, Bolger searched the internet for a replacement laptop battery and ultimately ordered one from Amazon.[3] Amazon then shipped Bolger a Lenoge[4] laptop battery, which she received a few days later.[5] After opening the Amazon-branded box, wrapped in Amazon-branded shipping tape, Bolger installed and began to use her new laptop battery.[6] The laptop battery exploded within the first few months of use, placing Bolger in the hospital for two weeks because of serious burns.[7] Bolger then filed suit against Amazon seeking compensation for her injuries under the theory of strict products liability.[8]

The Bolger case is not as straightforward as it initially appears because Lenoge––the original manufacturer––is a third-party seller that utilizes Amazon to sell its product and fulfill such sales.[9] Ultimately, the California Court of Appeal held that Amazon was potentially liable under strict products liability for the sale of a defective third-party laptop battery on its site when the original manufacturer was part of the “Fulfillment by Amazon” (FBA) program and Amazon played an integral role in the overall production and marketing process.[10] Because of Amazon’s unique distribution structure under the FBA program, other courts have struggled to apply traditional strict products liability laws.[11]

In contrast to the California Court of Appeal, courts around the country have refused to hold Amazon liable for defective third-party products sold on its website.[12] Despite the discussions of this issue in courts across the country, no such cases have yet arisen in Louisiana.[13] Therefore, it is important to analyze and compare the facts of the Bolger case to the Louisiana Products Liability Act (LPLA) to determine whether Louisiana courts will hold Amazon liable for defects in third-party products sold on its website when the original manufacturers or sellers participate in the FBA program.[14]

II. Bolger v. Amazon—the Key Facts

Before applying the LPLA to the Bolger fact pattern, it is necessary to identify the important details in the case and analyze the California court’s reasoning for its decision.[15] Perhaps the two most important factual elements in Bolger are Lenoge’s categorization as a third-party seller and its participation in Amazon’s FBA program.[16]

 A.Third-Party Sellers on Amazon

There are two general types of products sold on Amazon: (1) products that Amazon selects and purchases from manufacturers and distributors, which Amazon then sells to consumers at a price set by Amazon; and (2) products that third parties sell on Amazon’s website, with the third parties setting their own prices and using Amazon’s website as an intermediary to reach consumers.[17] Products sold by third parties are distinguished on Amazon’s website through the “sold by” notation on the product description page, directly above the “add to cart” button.[18] In the typical third-party sale on Amazon’s website, Amazon charges the customer’s credit card, deducts any fees, gathers proceeds from other purchases of that seller’s products, and remits periodic payments to the third-party seller.[19] In this situation, the third party typically handles the shipping and returns.[20] Lenoge, the manufacturer of the laptop battery in the Bolger case, was a third-party seller using Amazon’s website to reach consumers.[21]

 B. Fulfillment by Amazon Program

As a third-party seller, Lenoge also participated in the Fulfillment by Amazon program.[22] Amazon controls membership in the FBA program by requiring third-party sellers to apply for registration of any product such sellers want included in the program.[23] Once Amazon approves registration, the FBA program allows third-party sellers to ship their products to Amazon warehouses for storage; thereafter, Amazon puts the products up for sale on its website.[24] Upon sale, Amazon packages and ships the product.[25]

Additionally, Amazon benefits from the FBA agreement, as it allows Amazon to ship products from different third parties together, to control the packaging for the shipment, and to control any Amazon-specific messaging or branding associated with the packaging.[26] Since Amazon controls the shipping, customers must ship returns or exchanges back to Amazon, not the third-party seller.[27] The third-party seller has no control in the transaction, because Amazon must decide whether to approve each transaction and handle all communication with the buyer.[28] In essence, the FBA program results in “Amazon own[ing] and control[ling] the relationship with the buyer.”[29]

C. Products Liability Law: The Basics

Products liability is a special field of tort law governing the liability of sellers and manufacturers to consumers for injuries incurred because of a product defect.[30] The Restatement (Second) of Torts § 402A contains the primary rule governing products liability for sellers in common-law jurisdictions.[31] Section 402A provides that a seller is liable to a consumer for physical harm caused by a product defect that is “unreasonably dangerous to the user or consumer.”[32] If a product is found to have a defective condition that is unreasonably dangerous to the consumer, then the seller is held liable regardless of the existence of negligence or contractual privity[33] Stated otherwise, § 402A creates strict products liability.[34] Though there are subtle differences between states, the core of strict products liability is the protection of consumers.[35]

D. The Bolger Court’s Reasoning

Grappling with the determination of Amazon’s liability for a defective product sold on its website, the Bolger court focused on the general policy reasons supporting strict liability and on Amazon’s control over the transaction involving the Lenoge battery.[36] First, the court held that Amazon controlled both the product and the transaction at issue.[37] Amazon was responsible for creating its website, approving Lenoge’s laptop battery for the FBA program, marketing the laptop battery for sale, taking possession of the battery, storing it in an Amazon warehouse, accepting Bolger’s offer to purchase the battery, billing Bolger, and shipping the battery to Bolger in Amazon packaging.[38] The California Court of Appeal found that without Amazon’s own actions and control, Bolger would not have suffered injuries.[39]

In opposition, Amazon argued that it did not consciously choose to offer the specific Lenoge battery for sale.[40] However, the court held that while Amazon did not consciously choose to offer the specific laptop battery for sale, it did choose the following: to host the listing, to accept the product into the FBA program, to take possession of the battery, to accept Bolger’s order, and to ship the battery to Bolger.[41] Therefore, Amazon’s own choices resulted in its participation in the supply chain and its liability for the defective battery reaching Bolger.[42]

In addition to Amazon’s control over the product, the court found that policy reasons supported an application of strict products liability.[43] First, the court found that Amazon “may be the only member of the distribution chain reasonably available to an injured plaintiff who purchases a product on its website.”[44] Many third-party sellers on Amazon have little to no presence in the United States.[45] For example, in Bolger, two of the defendants were served and failed to appear, while the plaintiff was unable to serve the third defendant in the U.S.[46] Therefore, Amazon was the only member of the supply chain available for the plaintiff to sue.[47] If the court failed to impose strict liability on Amazon, then many plaintiffs like Bolger would go uncompensated.[48] Weighing Amazon’s availability and its ability to seek indemnification from the other entities, the court found that extending liability to Amazon in this situation supported the first policy consideration behind strict product liability.[49]

Second, the court examined Amazon’s ability to ensure product safety or exert pressure on manufacturers to achieve product safety.[50] Here, the court relied on Amazon’s “robust and active process” of tracking, monitoring, and logging customer complaints.[51] As part of its monitoring system for customer complaints, Amazon analyzes complaints to determine whether products should remain for sale on the site.[52] Additionally, Amazon requires third-party sellers to comply with all applicable laws and regulations and has the power to demand proof of compliance and any requisite certifications from such third-party sellers.[53] Amazon serves as a gatekeeper for the stream of commerce in this regard and has the ability to remove a product from its site to prevent it from reaching consumers.[54] It is this gatekeeping power that allows Amazon to exert pressure on manufacturers to ensure product safety.[55]

Finally, the court found that Amazon already had provisions in place to “adjust the cost of compensating injured plaintiffs between itself and the third-party sellers in the course of their ongoing relationship.”[56] In its contracts with third parties, Amazon requires third parties to broadly indemnify Amazon and provide bank information to ensure the enforcement of the indemnification duties.[57] Amazon also has the ability to withhold or delay payments to a third-party seller if it determines that the third party’s actions may lead to customer disputes or claims.[58]  The court then noted that if third-party sellers earn above a certain threshold of revenue, then Amazon requires such third-party sellers to secure commercial liability insurance and name Amazon as an additional insured.[59] Therefore, the court found it clear that Amazon should bear the burden of liability because it not only has current cost-balancing provisions in place, but also has the capacity to implement more provisions if necessary.[60]

III. Application of the LPLA

The primary difference between the California Court of Appeal’s analysis in Bolger and a Louisiana court’s analysis of the same facts would be the existence of the Louisiana Products Liability Act, as opposed to California’s common-law doctrine of strict liability.[61] In Louisiana, the LPLA sets forth a statutory framework providing the exclusive remedy for products liability actions in Louisiana.[62] Within this framework, courts only hold entities classified as “manufacturers” liable.[63]

Pursuant to Louisiana Revised Statutes § 9:2800.53, a manufacturer is “a person or entity who is in the business of manufacturing a product for placement into trade or commerce.”[64] This includes “producing, making, fabricating, constructing, designing, remanufacturing, reconditioning, or refurbishing a product.”[65] Based on the facts of the Bolger case, Amazon would not fall within this first definition of manufacturer under the LPLA because it played no role in the actual design or production of the product.[66] However, the LPLA provides that “manufacturer” also means “a seller of a product who exercises control over or influences a characteristic of the design, construction or quality of the product that causes damage.”[67] Therefore, the primary question for Louisiana courts would be whether, under facts similar to the Bolger case, Amazon exercised a sufficient amount of control over the Lenoge laptop battery to expose itself to liability under the LPLA.[68]

A. Exercising Control––Louisiana Case Law

One way to predict the analysis of a Louisiana court under the Bolger facts is to examine prior Louisiana case law analyzing an entity’s exercise of control over a product in determining whether that entity is a manufacturer under the LPLA.[69] In Slaid v. Evergreen Indemnity, Ltd., the Louisiana Second Circuit Court of Appeal held that a bank did not exercise the requisite amount of control over a mobile home to render it a manufacturer of the mobile home.[70] The court held that while the bank authorized the repair of a window on the mobile home, it did not exercise any control or supervision over the repair process or preparation of the mobile home for sale because various dealers handled these tasks.[71] Ultimately, the court found that the indirect control over the approval of the repair was not in line with the legislative intent or policy support behind the LPLA.[72]

Additionally, in Parks ex rel. Parks v. Baby Fair Imports, Inc., the Louisiana Fifth Circuit Court of Appeal found that K-Mart did not exercise the requisite level of control over a t-shirt to render it liable as a manufacturer of the t-shirt.[73] The appellant argued that K-Mart exercised control over and influenced the design and construction of the t-shirt because it custom ordered the shirt from Baby Fair, at which point the shirt was made according to K-Mart’s specifications.[74] Additionally, the appellants noted that K-Mart required that the shirt pass certain tests regarding construction and fabric quality pursuant to K-Mart’s quality assurance testing program.[75] In response, K-Mart argued that it only specified the fiber content and color of the fabric but had nothing else to do with the fabric selection or design.[76] The court ruled that K-Mart’s selection of the fiber content and color of the fabric did not rise to the level of control envisioned by the legislature, stating that the “legislature intended more direct and specific conduct on the part of the seller.”[77]

B. Comparing Bolger to Slaid and Parks

Drawing on the Louisiana Fifth Circuit’s reasoning in Parks, Amazon’s exercise of control in Bolger potentially demonstrates “more direct and specific conduct on the part of the seller.”[78] At a minimum, Amazon’s actions in Bolger are more specific and direct than the bank’s actions in Slaid.[79] For example, whereas the bank at issue in Slaid merely approved a repair, Amazon controlled the entirety of the transaction in Bolger.[80] Amazon accepted Lenoge into the FBA program, stored the laptop battery at Amazon warehouses, sold the battery, shipped the battery in Amazon packaging, and retained fees paid for the battery. Accordingly, Amazon’s actions are potentially similar to K-Mart’s actions in Parks.[81]

In Parks, K-Mart was simply the intermediary selling the t-shirt to the customers.[82] K-Mart stored the shirt on its premises and then sold the shirt to customers, much like Amazon did for Lenoge.[83] The difference is that Lenoge is a foreign manufacturer that likely had otherwise limited opportunities to enter the U.S. market, whereas Baby Fair is a U.S. company.[84] The original plaintiffs joined Baby Fair as a defendant in Parks, but the plaintiffs in Bolger were unable to join Lenoge.[85] Therefore, the common-law policy consideration regarding the availability of potential defendants did not weigh in favor of holding the retailer liable in Parks but would weigh in favor of holding Amazon liable under the Bolger facts.[86]

Despite the differences between the Parks and Bolger cases, it is important to remember that the statutory text and interpretation of the LPLA is likely to outweigh any policy considerations from other jurisdictions because of Louisiana’s prioritization of statutory law.[87] For example, the Parks court ended its analysis by providing that holding K-Mart liable “would turn all sellers who made specific selections of goods offered from manufacturers into manufacturers themselves.”[88] The court’s reasoning indicates a focus on control of the physical design and fabrication of the item, as opposed to control over the transaction.[89] Therefore, it appears that Louisiana courts are hesitant to stretch the definitions within the LPLA to extend liability to entities, like Amazon, falling within the gray area of the “manufacturer” definition.[90]

IV. Conclusion––A Legislative Predicament   

Although the Bolger case presents a “best chance” fact pattern for extending LPLA liability to Amazon for third party products sold on its website, it is unlikely that Louisiana courts will classify Amazon as a “manufacturer” in similar circumstances.[91] The policy considerations behind products liability in general point towards holding Amazon liable for defective third-party products sold on its website when such products are part of Amazon’s FBA program because of the amount of control Amazon exercises over such products.[92] However, in its current form, the LPLA does not provide for a definition of “manufacturer” that fits Amazon’s role in third-party FBA transactions.[93] Therefore, as Louisiana courts appear unwilling to stretch the current definition of “manufacturer” under the LPLA, it is up to the Louisiana Legislature to amend the statute and expand the definition of “manufacturer” to encompass marketplace vendors like Amazon.[94]

If the legislature does not amend the statute, then it is likely that the arguments that did not work for Amazon in Bolger will work for the company in a future Louisiana case.[95] Consumers would be left unprotected and without a remedy, since foreign manufacturers are often difficult or impossible to reach.[96] Therefore, as technology and accessibility advance in product manufacturing and sale, so must the law, in order to protect consumers. In this regard, it is up to Louisiana courts and the legislature to decide if such advancement in the law is warranted given Amazon’s size, power, and control over the retail industry. It is only a matter of time before a fact pattern similar to that in Bolger arises in Louisiana, and hopefully the courts are well equipped to handle the issue—one way or another—when it does.

 

[1] Amazon Prime is a premium subscription service in which users pay a nominal fee to gain access to certain Amazon benefits. Such benefits include free two-day shipping on select items, access to Amazon’s video and music streaming services, and additional shopping benefits. About Amazon Prime, Amazon, https://www.amazon.com/gp/help/customer/display.html?nodeId=201910360 [https://perma.cc/3F9C-NUBM] (last visited Sept. 19, 2020).

[2] Bolger v. Amazon.com, LLC, D075738, 2020 WL 4692387, at *5 (Cal. Ct. App. Aug. 13, 2020).

[3] Id.

[4] Lenoge was the brand of the laptop battery sold on Amazon and ordered by Bolger. Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id. at *3.

[10] Id. at *12.

[11] See generally Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135 (4th Cir. 2019) (holding Amazon was not liable for defective headlamp that a third party sold on its website because Amazon was not a “seller” under Maryland law); Fox v. Amazon.com, Inc., 930 F.3d 415 (6th Cir. 2019) (holding Amazon was not liable for defective headlamp that a  third party sold on its website because Amazon was not a “seller” under Tennessee law).

[12] See generally Erie Ins. Co., 925 F.3d 135 (holding that Amazon was not liable for defective headlamp that a third party sold on its website because Amazon was not a “seller” under Maryland law); Fox, 930 F.3d 415 (holding that Amazon was not liable for defective headlamp that a third party sold on its website because Amazon was not a “seller” under Tennessee law).

[13] George A. Wright, Limitation of Liability under the LPLA: Can Internet Retailers be Manufacturers?, Keogh Cox (Feb. 10, 2020), https://keoghcox.com/limitation-of-liability-under-the-lpla-can-internet-retailers-be-manufacturers/ [https://perma.cc/45JX-KJWR].

[14] Compare Bolger, 2020 WL 4692387, at * 12, with La Rev. Stat. § 9:2800.53 (2020).

[15] See Bolger, 2020 WL 4692387, at * 12; La Rev. Stat. § 9:2800.53.

[16] See Bolger, 2020 WL 4692387, at * 12.

[17] Id. at *2.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id. at *3.

[23] Amazon has the power and authority to refuse registration. See id.

[24] Id.

[25] Id.

[26] Id.

[27] Id.

[28] Id.

[29] Id.

[30] See Restatement (Second) of Torts § 402A (Am. L. Inst. 1965).

[31] See id.

[32] Id.

[33] Id.

[34] See id.

[35] See id.; see generally Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135 (4th Cir. 2019) (holding Amazon was not liable for defective headlamp that a third party sold on its website because Amazon was not a “seller” under Maryland law); Fox v. Amazon.com, Inc., 930 F.3d 415 (6th Cir. 2019) (holding Amazon was not liable for defective headlamp that a third party sold on its website because Amazon was not a “seller” under Tennessee law); Bolger v. Amazon.com, LLC, D075738, 2020 WL 4692387, at *3 (Cal. Ct. App. Aug. 13, 2020) (holding Amazon liable for defective laptop battery sold by third party on Amazon’s website because of Amazon’s control over the transaction).

[36] Bolger v. Amazon.com, LLC, D075738, 2020 WL 4692387, at *13–14 (Cal. Ct. App. Aug. 13, 2020).

[37]  Id. at *14 (citing O’Neil v. Crane Co., 266 P.3d 987, 995 (Cal. 2012)).

[38] Id.

[39] Id.

[40] Id.

[41] Id.

[42] Id.

[43] Id. at *12.

[44] Id.

[45] Id.

[46] Id.

[47] Id.

[48] Id.

[49] Id.

[50] Id.

[51] Id.

[52] Id.

[53] Id.

[54] Id.

[55] Id.

[56] Id. at *13.

[57] Id.

[58] Id.

[59] Id.

[60] Id.

[61] Compare id. at *12, with La Rev. Stat. § 9:2800.53 (2020).

[62] La Rev. Stat. § 9:2800.52.

[63] Id.

[64] Id.

[65] Id.

[66] See generally Bolger, 2020 WL 4692387, at *12 (holding Amazon liable for defective third-party laptop batter sold on its website); La Rev. Stat. § 9:2800.53 (providing the definition of “manufacturer”).

[67] La Rev. Stat. § 9:2800.53(1)(b).

[68] See generally Bolger, 2020 WL 4692387, at *12  (holding Amazon liable for defective third-party laptop batter sold on its website); La Rev. Stat. § 9:2800.53 (providing the definition of “manufacturer”); see also Wright, supra note 13.

[69] See generally La Rev. Stat. § 9:2800.53 (providing the definition of “manufacturer”).

[70] Slaid v. Evergreen Indem., Ltd., 745 So. 2d 793, 799 (La. Ct. App. 4th Cir. 1999).

[71] Id.

[72] Id.

[73] Parks ex rel. Parks v. Baby Fair Imports, Inc., 726 So. 2d 62 (La. Ct. App. 5th Cir. 1998).

[74] Id. at 63.

[75] Id.

[76] Id. at 64.

[77] Id.

[78] Compare id., with Bolger v. Amazon.com, LLC, D075738, 2020 WL 4692387, at * 12 (Cal. Ct. App. Aug. 13, 2020).

[79] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64; Slaid v. Evergreen Indem., Ltd., 745 So. 2d 793, 799 (La. Ct. App. 4th Cir. 1999).

[80] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64; Slaid, 745 So. 2d at 799.

[81] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[82] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[83] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[84] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[85] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[86] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[87] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[88] Parks, 726 So. 2d at 64.

[89] Id.

[90] See id.; Slaid v. Evergreen Indem., Ltd., 745 So. 2d 793, 799 (La. Ct. App. 4th Cir. 1999).

[91] Compare Bolger, 2020 WL 4692387, at *12, with Parks, 726 So. 2d at 64.

[92] Bolger, 2020 WL 4692387, at *12.

[93] See La Rev. Stat. § 9:2800.53 (2020); Bolger, 2020 WL 4692387, at *12; Parks, 726 So. 2d at 64; Slaid, 745 So. 2d at 799.

[94] See La Rev. Stat. § 9:2800.53; Bolger, 2020 WL 4692387, at *12; Parks, 726 So. 2d at 64; Slaid, 745 So. 2d at 799.

[95] See La Rev. Stat. § 9:2800.53; Bolger, 2020 WL 4692387, at *12; Parks, 726 So. 2d at 64; Slaid, 745 So. 2d at 799.

[96] See La Rev. Stat. § 9:2800.53; Bolger, 2020 WL 4692387, at *12; Parks, 726 So. 2d at 64; Slaid, 745 So. 2d at 799.

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