California Closer to Codifying Strict Liability for Online Retailers

With the implosion of online shopping, California is looking to modernize its product liability laws with the introduction of Assembly Bill (“AB”) 1182, which would impose strict liability for online retailers.

The authors of AB 1182 hope to hold online retailers liable, especially those who distribute goods manufactured by companies located in foreign countries who may be outside the jurisdiction of California’s judicial system.

AB 1182 proposes to add section 1714.46 to the Civil Code. As drafted, the section would impose strict liability on an online retailer for all damages caused by a defective product when the retailer:

(1) Transmits or otherwise communicates between a third party and purchaser an offer for the sale or purchase of the defective product that is accepted by the purchaser; and

(2) Processes, collects, or administers the payment for the purchase or sale of the defective product.

The bill states that the proposed section is not intended to affect existing law related to strict products liability but to “clarify the law governing” online sales of consumer goods.

A recent example of the imposition of strict liability on online retailers is the decision by the California Court of Appeal in Bolger v. Amazon.com, LLC (2020) 53 Cal.App.5th 431 (Bolger). In Bolger, the plaintiff sued Amazon and other defendants, including Lenoge Technology (Lenoge), a third-party seller on Amazon, when an after-market laptop battery she purchased from Amazon exploded and she suffered severe burns as a result. The plaintiff alleged that Lenoge, under the fictitious name “E-Life,” was listed as the seller of the replacement battery on Amazon’s website. However, the plaintiff alleged that Amazon charged the plaintiff for the purchase, retrieved the product from its location in an Amazon warehouse, and shipped the product in Amazon-branded packaging.

Although the trial court granted summary judgment in favor of Amazon on the ground that Amazon was not strictly liable for defective products offered by third-party sellers on its website, the Court of Appeal disagreed. The Court found that Amazon was a direct link in the chain of distribution and plays a “substantial part in ensuring the products listed on its website are safe, it can and does exert pressure on upstream distributors (like Lenoge) to enhance safety, and it has the ability to adjust the cost of liability between itself and its third-party sellers.” The Court of Appeal further held that the Communications Decency Act of 1996 shielded Amazon from liability since the plaintiff’s strict liability claims depended on Amazon’s actions, not its status as a speaker or publisher of content provided by Lenoge for its product listing.

Within the past 10 years, the authors of AB 1182 note that online sales of consumer goods in the United States jumped from less than 5 percent to more than 20 percent. More recently, the COVID-19 pandemic increased online sales by 40 percent. There is clearly a trend showing consumers becoming more reliant on online retailers such as Amazon. A cursory look at the offerings on Amazon show an array of consumer goods manufactured by companies located outside the United States and made available on Amazon. The authors of AB 1182 believe that with some of these manufacturers being outside the jurisdiction of California’s court system, California’s consumers need some recourse for damages caused by defective products made by these foreign manufacturers.