Santa Monica Observer - Community, Diversity, Sustainability and other Overused Words

By Craig Crosby
The Counterfeit Report 

California is Among Few States that Hold Amazon Liable for Selling Dangerous and Defective Products From Third-Party Sellers

Amazon is notorious for hosting sellers who peddle dangerous and defective products.

 

The Counterfeit Report

March 31, 2021, Los Angeles, CA – Amazon continues to destroy the retail economy, retail workers, and related services despite hundreds of lawsuits that expose its dangerous business practices. Undeterred by pending legislation, executive orders, and just plain common sense and ethics, the website grabs the retail dollars previously injected into local economies and support trades and turns them into higher salaries for Amazon management and inestimable wealth for CEO Jeff Bezos. The profits are indeed enormous, bolstered by the avoidance of income tax: Amazon paid no federal income tax on $11.2 billion in profit in 2018 and a 1.2% tax rate on a $13.3 billion profit in 2019

"Applying the 1980s retail-sales paradigm to modern e-commerce produces results that strike me as inequitable," says Ohio Supreme Court Justice Michael Donnelly. "The divide between the pre-Internet age and the current age is so profound that [existing commerce] laws like this act might as well have been written in the Stone Age." Stiner v. Amazon.com, LLC

Amazon is notorious for hosting sellers who peddle dangerous and defective products. Multiple lawsuits name Amazon when plaintiffs can't track down the third-party manufacturer or seller (who may be overseas) that made the product at issue. The individual consumer ends up bearing all of the costs associated with a defective product. Amazon continues to enrich itself through its transaction fees, but unlike brick and mortar retailers, Amazon avoids liability for faulty products they enable to be sold to consumers. When injuries occur because of these defective products and the victim is uninsured or lacks savings, it is the taxpayers that end up paying for their medical and other necessities as they recover. We all end up subsidizing the sale of defective products while Amazon takes its transaction fee for each item sold.

Amazon doesn't just abet in the sale of products causing physical injury; it also helps undermine American businesses by allowing the sale of counterfeit and replica products. There is no incentive for Amazon to police its platform when they can dodge liability for hosting the sale of counterfeit, fraudulent, replica, and dangerous products while reaping enormous profits. An astonishing 200,000 brands are fighting counterfeit and fraudulent products on Amazon's websites.

In debate is the onus of one-time vetting of sellers and products by Amazon, or burdening each individual consumer, manufacturer, and trademark-holder with the impossible task of checking each and every online listing and purchase.

Amazon has mixed results in fighting off seller liability. Courts applying the law of six states (Ohio, Maryland, Tennessee, Arizona, Illinois, and Indiana), including the Ohio Supreme Court and three federal appeals courts, have held Amazon is "not a seller." Meanwhile, the California Court of Appeal and federal district courts in New Jersey, Mississippi, and Wisconsin have allowed claims to proceed, mostly in cases where Amazon inventories and delivers the item ("Fulfilled by Amazon" or "FBA"). A New York trial court recently went the same way, in contrast to an earlier federal court decision in the state. And in a few instances, in Pennsylvania, Minnesota, and Arkansas, Amazon has settled or resolved cases before the issue was decided.

Deposed Amazon executives and internal corporate documents show that Amazon charges a listing fee, controls the listing content, gets a flat fee per-unit-sold, collects the money, processes rebates and refunds under their A-Z guarantee. Amazon takes a 15 to 40 percent cut of the total sale. Strict liability would incentivize Amazon to stop selling dangerous and defective products and purchase insurance with some of their profit so the innocent and unsuspecting consumers (their customers) aren't left devastated and destitute. Amazon can protect the public and minimize its own risk and exposure by simply holding its vendors accountable.

However, Amazon does the opposite of being a good steward and protecting the public. 'It's on a quest to sell all things to all people through merchandise and pharmaceutical sales, personal data mining, entertainment, and company takeovers. The allegations against Amazon range from the individual (the mistreatment of workers and differential pricing to customers), the market (anti-competitive behavior including the suppression of competitor products), and social (tax avoidance) -- suggest an organization that not only lacks a moral compass but could be well on its way to a state of 'profound immorality' says Professor Sarah Kaine.

There have been times when Amazon has been held accountable. For example, five California County Attorney's General joined the San Diego DA's Office in a coalition suing Amazon for misleading buyers by featuring "reference pricing" in its advertisements for various products. On Tuesday, Amazon agreed to a payment of $1.7 million in penalties along with restitution and reimbursement of the costs incurred by prosecutors.

What is clear is that the law needs to expand to account for the new way to sell goods to consumers via e-commerce platforms. Amazon has faced more than 60 federal lawsuits over product liability, anti-trus, and intellectual property infringement in the past decade. The suits are a grim catalog of disaster and injuries, with cases in multiple states put on hold while the situation shakes out.

In the interim, Amazon is able to charge ahead, profiting from hosting the sales of multiple products which never should have been sold to the public. Consumers simply don't have a chance.

It is clear that e-commerce platforms have evolved and continue to expand, and tort law is starting to catch up. Amazon has faced hundreds of federal lawsuits product liability in the past decade.

Some of the significant lawsuits are presented below, others can can be viewed here, and federal decisions here.

Craig Crosby et al. v. Amazon.com Inc.

This U.S. District Court - Central District of California class-action lawsuit alleges Amazon, as a direct seller and through its third party sellers, deceives the public by falsely advertising, marketing, and selling defective, fraudulent, and often dangerous lithium-ion 18650 battery cells and products containing them. Despite the September 2020 lawsuit and legal notice in 2019, Amazon continues as a direct seller to list and sell the dangerous fraudulent items. Several of the lawsuits below also involve lithium-ion batteries. Read more here.

Maglula Ltd. v. Amazon.com Inc.

A U.S. District Court for the Eastern District of Virginia action for trademark counterfeiting, trademark infringement, copyright infringement, and unfair competition under federal, state, and/or common law arising from Defendants Amazon.com, Inc.'s and Amazon.com Services, Inc.'s unauthorized use of Maglula's trademarks. Read more here.

Bolger v. Amazon.com, LLC, 53 Cal. App.5th 431 (Cal. Ct. App. 2020). decision

Plaintiff Angela Bolger purchased a laptop computer battery from a third-party seller advertising on Amazon's platform. The battery was delivered to Bolger from Amazon's "Fulfilled By Amazon" (FBA) logistical service, in an Amazon box, sealed by Amazon shipping tape. Amazon charged Bolger's credit card for the $12.30 purchase price and took a total fee for the transaction of $4.87, or approximately 40 percent of the purchase price. Bolger believed Amazon sold her the battery. Bolger alleged that she was severely burned when the battery exploded several months later. Bolger suffered severe third-degree burns to her arms, legs, and feet, and was hospitalized for two weeks. Amazon moved for summary judgment, arguing that its website was an "online marketplace" so the doctrine of strict products liability did not apply to it because Amazon did not "distribute, manufacture, or sell the product in question." While the trial court agreed and granted Amazon's motion, the California Court of Appeals reversed the decision, calling Amazon a "powerful intermediary" with control over both the product and the transaction and that imposing the same brick-and-mortar retail store strict liability afforded "maximum protection to the injured plaintiff" while working no injustice on Amazon. The California Supreme Court has refused to review the decision. This is the only precedential opinion so far on whether Amazon can be liable for third-party products.

Morgan McMillan v. Amazon.com, LLC

Amazon's business model is new, and prior Texas cases aren't on point, the U.S. Court of Appeals for the Fifth Circuit said when it sent the question to the Texas Supreme Court. Morgan McMillan alleges her daughter ingested a remote-control battery as a toddler. The remote's China-based maker didn't even try to comply with industry standards, McMillan alleges. Third-party merchant Hu Xi Jie, who did business as USA Shopping, isn't subject to jurisdiction in Texas, she said in a filing. The ruling will likely lead to significantly more lawsuits in Texas against Amazon and other third-party e-commerce platforms, and could change the Texas Products Liability law for all involved. E-commerce sellers, platforms, suppliers, and hosts are all anxiously awaiting this ruling as a result.

Heather Oberdorf v. Amazon.com, LLC

PA. Liability Question Sidestepped With Deal

Heather Oberdorf's case took a similar course to McMillan's when the Third Circuit last year asked the Pennsylvania Supreme Court to weigh in on whether Amazon could be liable for an allegedly defective dog collar made by a third-party that broke and blinded Oberdorf in one eye. Oberdorf said she was permanently injured when the collar made by 'The Furry Gang' caused a retractable leash to snap back and hit her glasses and eye in January 2015, according to court records. Oberdorf and her husband sued Amazon over the purchase after they couldn't find how to contact The Furry Gang. A Pennsylvania federal judge tossed the case in 2018, but the Third Circuit revived her suit in 2019, with a majority finding that Amazon met the definition of "a seller" that can be sued under Pennsylvania's strict liability law, but then agreed to rethink the decision before a full panel. The anticipated ruling was expected to provide clarity for the booming online marketplace industry, as well as for consumers who often have problems tracking down the third-party manufacturers of products sold on sites like Amazon. At oral arguments before the full panel in February 2020, the judges signaled they were hesitant to let Amazon escape liability as a seller, with one likening the company's role to "an 8,000-pound gorilla" in the marketplace. "Amazon isn't the 800-pound gorilla; it's the 8,000-pound gorilla," Circuit Judge Kent A. Jordan said. But after the Third Circuit kicked the question to the Pennsylvania high court, Oberdorf and Amazon reached a confidential settlement ending the dispute in September. "I think Amazon saw the writing on the wall for that one," Robinson said. "And they wanted to get that case done before the Pennsylvania Supreme Court weighed in."

Kisha Loomis v. F , Amazon.com, LLC

(Update: The California Court of Appeals heard arguments on Amazon's liability for sales of defective products which injure Amazon customers on February 23rd.)

Kisha Loomis was burned and her house caught fire when a hoverboard she bought for her son for Christmas 2015. The hoverboard burst into flames and blew up in her home on Dec. 31, 2015, burning Loomis and her home. The hoverboard was manufactured in China by a Chinese company "Smileto" and sold under the alias "TurnUpUp" on Amazon as a Smart Balance Wheel. Smileto sold over 380,000 hoverboards on Amazon in the 4th Quarter leading up to Christmas. The cause of the fire was exploding defective lithium-ion batteries. The Chinese manufacturer went out of business as did the U.S. distributor. The only one left in the chain of distribution was Amazon. During the fire, the plaintiff suffered severe burns, and a bedroom sustained heavy fire damage. Although Amazon stopped selling hoverboards, Amazon neither stopped delivery of those in transit, nor did Loomis receive any notice from Amazon about the potential for fire. Christopher Dolan, Appellant Loomis' attorney, stated, "This is one of the most important cases before the courts. A mom-and-pop toy store which sold the same product would be held liable as a retailer, but Amazon, the biggest online retailer with 46% of online sales and valued at over a trillion dollars, will go scot-free? This is a crime. First, they drive retailers out of business and then claim that they can't be held liable as a retailer even though they control the whole transaction. As they take over the world of sales, they must also assume the responsibility those brick and mortar stores they put out of business had. Let's face it, Amazon is selling products, making a huge profit, and not making an effort to assure that the foreign and domestic goods they sell are safe. They want all of the money but none of the responsibility. They have to be stopped."

Stiner v. Amazon.com, LLC / decision - summary judgment for Amazon - affirmed

Ohio Justice Says Product Liability Law Is "Stone Age"

The Ohio Supreme Court in October found that Amazon was not liable in a case involving the death of a teen who consumed caffeine powder sold on Amazon. The state high court found that under the Ohio Products Liability Act, Amazon.com, Inc. is not considered a supplier that can be held liable for the caffeine powder that killed Logan Stiner. The Ohio Supreme Court in 2019 declined to review a lower court's ruling that held Amazon wasn't liable but then later reconsidered and took up the Stiner family's appeal. Amazon had no relationship with the manufacturer or the sellers' distribution channel and lacked control over the product's safety, labeling or manufacturing, the high court said. In a concurrence, Justice Michael Donnelly said he "reluctantly" sided with the ruling but lamented that the 1988 law is out of date with today's online retail economy." Applying the 1980s retail-sales paradigm to modern e-commerce produces results that strike me as inequitable," Justice Donnelly said. "The divide between the pre-Internet age and the current age is so profound that laws like this act might as well have been written in the Stone Age."

State Farm Fire and Casualty Co. v. Amazon.com, LLC

Amazon's Ninth Circuit Win

In a November unpublished opinion, The Ninth Circuit sided with Amazon that the e-tailer wasn't liable for the sale of a defective hoverboard that caught fire and damaged an Arizona home. The decision in the suit brought by State Farm Fire and Casualty Co. confirmed the insurer's loss in a lower court, where a judge found that Amazon provides services connecting customers to vendors and has little ability to inspect items after receiving them from third-party vendors. A little less than a month after the ruling, State Farm asked the Ninth Circuit to send the question of Amazon's liability to the Arizona Supreme Court. The insurer said that the split decision was made without any specific direction from Arizona courts and stripped the state's consumers of protections just because the hoverboard was bought online. A month before issuing its decision, the Ninth Circuit had mulled whether to seek the Arizona high court's input, but ultimately sided with the lower court. The majority of the panel said Amazon never took title for the hoverboard and that facilitating the sale doesn't make it a direct seller any more than the U.S. Postal Service. In a dissent, Circuit Judge Richard Clifton said that the case presents questions of Arizona law that are likely to recur in other cases, given how Amazon has changed the marketplace. State Farm's request to have the Arizona Supreme Court hear the case was denied just before the New Year.

A new bill in the California Assembly has the potential to alter substantially the existing legal framework of products liability for online retailers. Assembly Bill No. 1182 ("AB 1182"), which was introduced on February 18, 2021, would impose strict product liability on online retailers who (1) communicate offers of sale and (2) facilitate payment between a third-party seller and a purchaser, even if the online retailer never takes physical possession of the product.

Until then, consumers have the option to shop the major retailers (Kroger, Costco, Home Depot, Target, Lowes, Best Buy, etc.), who offer consumers competitive local and direct online purchase options with prompt delivery.

 

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