Member Article

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 products 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.

The bill, similar to one that passed the Assembly last year before stalling in the State Senate, was likely inspired by the recent California Court of Appeals decision in Bolger v. Amazon.com, LLC, 53 Cal. App.5th 431 (Cal. Ct. App. 2020). In Bolger, the plaintiff had purchased a laptop computer battery from a third-party seller advertising on Amazon’s platform. Amazon collected payment from the plaintiff and shipped the battery to her from its warehouse in Amazon packaging. The plaintiff alleged that she was severely burned when the battery exploded several months later. She then sued Amazon and several other defendants asserting causes of action for strict products liability and negligence. 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 it did not “distribute, manufacture, or sell the product in question.” 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. The court concluded that imposing strict liability afforded “maximum protection to the injured plaintiff” while working no injustice on the defendants, “for they can adjust the costs of such protection between them in the course of their continuing business relationship.” The California Supreme Court has refused to review the decision.

In one respect, AB 1182 would partially codify the Bolger decision and would impose strict liability on an “electronic place” that communicates an offer of sale a between a third party and a purchaser and processes payment for the sale “to the same extent as a retailer would be liable for selling the defective product in the retailer’s physical store.”

More importantly, however, AB 1182 would also expand on the rule announced in Bolger and impose strict liability even if the online retailer never has physical possession of the product. As discussed above, the laptop battery at issue in Bolger had actually been stored in Amazon’s physical warehouse—a fact the Court of Appeals appeared to find compelling. However, if AB 1182 passes as currently drafted, that distinction would be meaningless.

Given its potential to alter dramatically the products liability landscape in California, AB 1182 should be on every online retailer’s radar. Even retailers who currently follow a dropship model—simply advertising and selling third party products and leaving the design, manufacture, storage, and shipping of those products to those third parties—could be held strictly liable. And regardless of the outcome of AB 1182, the bill serves as an important reminder that online retailers should carefully review their supply contracts to assess indemnity and risk-shifting provisions as well as vet suppliers’ product safety policies and track records.

AB 1182 will next move to committee. The full bill can be viewed here.