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New Trend? Federal Judge Says Amazon Can be Liable For Selling Defective Third-Party Products

By Joseph Fawbush, Esq. on November 04, 2019

A federal district judge in Mississippi has ruled that Amazon can be held liable for selling defective third-party products under state law. This ruling is the latest in a number of lawsuits facing Amazon over third-party products that have injured consumers. Most federal courts have held that Amazon is not liable in such instances.

Combustible Hoverboards Causing Fires

The case involved the sale of Chinese hoverboards, which were popular in 2015. These self-balancing scooters have caused hundreds of fires. State Farm, the home insurer for one of the buyers, is seeking to hold Amazon liable for the $600,000 in damages associated with the home fire caused by the defective hoverboard.

Third-Party Products Proliferate on Amazon

Approximately half of all products on Amazon are sold through third parties. Amazon has argued that it is not liable for products sold by third parties under product liability laws.

Amazon offers millions of third parties the opportunity to sell products on its website, many of which are foreign entities. It stores the pre-packaged products in its warehouse until it is bought. Once purchased, Amazon ships it to the consumer directly.

Courts Split on the Issue

The recent ruling in Mississippi goes directly against a previous federal district court decision in Arizona, which held that Amazon did not participate significantly in the "stream of commerce" and so could not be held liable for the defective hoverboards.

The U.S. Third Circuit Court of Appeals has held that Amazon can be liable for the damage caused by a third-party's defective product under Pennsylvania law. In August, the Third Circuit agreed to rehear the case en banc.

A full round-up of the case law is beyond the scope of a blog, but suffice it to say that courts are divided - and many federal district courts have weighed in, doing their best to interpret state law in the absence of guiding state Supreme Court decisions.

Significant Implications

As one of the largest companies in the world, and with a dominant market share in a number of industries, how federal courts interpret state laws regarding product liability could impact whether consumers can hold Amazon liable for defective products it sells. Amazon earns billions per quarter on third-party products. Further, because many of the manufacturers cannot be held accountable, Amazon is often the best (or only) liable party available to injured consumers.

It is a topic product liability attorneys are watching closely.

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