Amazon Might Be Liable for Defective Marketplace Items (But Only When It Tries to Warn Consumers)–Fox v. Amazon

This is one of many lawsuits over defective hoverboards sold by vendors in Amazon’s marketplace. Starting in November 2015, Amazon conducted an investigation into the dangers of hoverboards. On December 11, 2015, Amazon decided the entire category of hoverboards was “bad” and stopped selling them worldwide. It had sold 250,000 hoverboards in the prior 30 days, of which it estimated that 25% hadn’t been deployed yet in the field because they were being held as holiday gifts.

On December 12, Amazon emailed its customers with the subject line: “Important Product Safety Notification Regarding your Order.” The text said: “There have been news reports of safety issues involving products like the one you purchased that contain rechargeable lithium-ion batteries. As a precaution, we want to share with you some additional information about lithium-ion batteries and safety tips for using products that contain them.” The email provided a link to information and safety tips, an option to return the product, and a request to share the email with the hoverboard user. The email didn’t specifically describe the risks or inform recipients that Amazon had stopped selling the items.

The plaintiffs lost their home and suffered physical injuries due to a fire caused by a bad hoverboard. The plaintiffs sued Amazon. The lower court ruled for Amazon because it wasn’t the hoverboard “seller.”

For liability purposes, the Sixth Circuit defines “seller” as “any individual regularly engaged in exercising sufficient control over a product in connection with its sale, lease, or bailment, for livelihood or gain.” The plaintiffs argued that Amazon qualified because it “(1) stored and shipped the hoverboard, (2) initially obtained the payment made in exchange for the hoverboard, (3) retained the payment made in exchange for the hoverboard, and (4) handled all communications with Plaintiff Megan Fox.” The court disagrees factually with #1 and #3 because the marketplace vendor was the seller of record and got money from Amazon. Regarding #2 and #4, the court says these aren’t enough control to qualify as a seller. Amazon didn’t “choose to offer the hoverboard for sale, did not set the price of the hoverboard, and did not make any representations about the safety or specifications of the hoverboard on its marketplace.”

So far, this is good news for Amazon. This extends the lines of cases (many cited below) that Amazon isn’t the seller of marketplace items. It’s probably not thrilled that the “seller” term includes bailees, but the court’s application of the law to the facts worked out OK.

Nevertheless, the court says that Amazon voluntarily assumed a duty to warn the plaintiff by sending the December 12 email, “which plainly sought to warn her of the dangers posed by the hoverboard.” This raises a factual question about whether Amazon’s disclosures did enough to warn the plaintiffs, a question that will almost certainly go to a jury. This poses a dilemma for Amazon. Rolling the dice on a jury trial is risky. If they win the jury trial, they could walk away from this and related cases for potentially not much money. On the other hand, if they lose the jury trial, they could be on the hook for potentially dozens of bad hoverboard incidents. Given the gamble, Amazon might choose to settle the case and cross its fingers that it can strike favorable deals with the other claimants.

Arguably, Amazon could have sidestepped this legal risk by not sending the December 12 email. Some e-commerce executives might take away that lesson. The court does implicitly punish Amazon for voluntarily sending the email. On the other hand, it would have been unconscionable for Amazon to do nothing if, in fact, it concluded that the entire hoverboard category was bad news. The obvious related question is why Amazon’s email didn’t provide sterner disclosures? You almost get the feeling that Amazon sandbagged its customers a bit, hoping to warn them without actually, you know, warning them. If you or I would have written the email without worrying about the financial consequences, our text would have been a lot more explicit than what Amazon sent. After all, we’re talking about serious, serious risks to people and property, so I would have prioritized buyer/user safety above all else. However, Amazon’s terseness is understandable given the amount of money at stake: hoverboards had obviously been a huge financial success, and Amazon probably wasn’t excited about the prospect of 250,000 hoverboards being returned and having to refund millions of dollars. Plus, Amazon had to know it was going to be sued no matter what it did, so any admissions it made in the email might have spurred even more lawsuits. So it’s easy to criticize Amazon for the gentle email “warning,” but it’s less easy to figure out how Amazon could have navigated this unfortunate situation.

Case citation: Fox v., Inc., 19a0123p.06 (6th Cir. June 10, 2019)

Selected Related Posts:

* Amazon Isn’t Liable for Defective Marketplace Sale (No Thanks to Section 230)–Erie Insurance v. Amazon
Online Marketplace Defeats Trademark Suit Because It’s Not the “Seller”–OSU v. Redbubble
Amazon Again Avoids Liability for Defective Marketplace Item–Fox v. Amazon
Recapping a Year’s Worth of Section 230 Cases That Got Stuck in My Blogging Queue
Amazon Doesn’t “Sell” Its Marketplace Goods–Milo & Gabby v. Amazon
eBay Isn’t Liable for Patent-Infringing Marketplace Sales–Blazer v. eBay
Section 230 Doesn’t Protect Amazon From Products Liability Claims–McDonald v. LG
eBay Isn’t Liable for Selling Recalled Merchandise–Hinton v. Amazon