Signing Agreement

Amazon Can be Held Strictly Liable as a Product Seller in New Jersey

This entry was posted by on .

On June 29, 2022, in N.J. Mfrs. Ins. Grp. a/s/o Angela Sigismondi v., Inc., 2022 U.S. Dist. LEXIS 115826 (Sigismondi), the United States District Court for the District of New Jersey held that, Inc. (Amazon) is a “seller” under New Jersey’s product liability statute and can thus face strict liability for damages caused by products sold on its platform. Although the analysis is state-specific, Sigismondi may serve as an important decision for allowing product defect claims to proceed against Amazon when so often the third-party vendor that lists the product is unlocatable, insolvent, or not subject to the jurisdiction of United States courts.

In recent years, Amazon has been fighting product liability claims across the country. Amazon argues it is not a “seller” under states’ product liability laws but is merely an online marketplace that facilitates the sale of products by third-party vendors. What constitutes a “seller” in a particular state must be evaluated state-by-state, but various courts have accepted Amazon’s argument that it is not a “seller.” These decisions are based on Amazon’s level of control in the product sale and often focus on a finding that Amazon did not convey possession of the product or transfer its title.

Products are sold on Amazon in one of three ways. The first way is where Amazon sells, processes and ships the product. An example of this category would be Amazon-branded batteries. Amazon does not dispute it is a seller of these products; Amazon conveys possession and transfers title of the product to the purchaser. The second way is where a third-party sells the product and Amazon “fulfills” the order by storing, processing, and shipping the product through its Fulfillment by Amazon (FBA) program. Amazon conveys possession of the product because it ships the product, but Amazon does not transfer title to the product because it never owns the product. The third way is where a third party sells, processes, and ships the product. Amazon never physically touches the product and, thus, neither conveys possession nor transfers its title. In all three ways, however, the third-party vendor agrees to the Amazon Services Business Solutions Agreement (BSA). Under the Amazon BSA, all products sold and returned on are processed by Amazon exclusively and only Amazon, not the third-party vendor, has any contact with the consumer.

Because Amazon exerts a higher degree of control over sales made through the FBA program, e.g., by storing the product at an Amazon warehouse, retrieving it, packaging it, and shipping it to the consumer, the legal battle has centered on products sold via the FBA program. Sigismondi is significant because the product at issue was not sold through the FBA program so Amazon exerted less control over the sale than in other cases addressing the same issue and reaching the opposite holding.

In Sigismondi, Ms. Sigismondi’s ex-husband bought their children a hoverboard on Amazon from “Paradise 00.” The hoverboard caught fire and burned down the home insured by New Jersey Manufacturers Insurance Group (NJM). NJM brought a claim against Amazon under the New Jersey Products Liability Act (NJPLA). Amazon moved for summary judgment on the basis that it is not a “seller” within the meaning of New Jersey’s products liability statute.

The relationship between Amazon and Paradise 00 was governed by Amazon’s BSA. The BSA requires third-party vendors to provide accurate and complete product information and Amazon retains the sole right to control the product listing. The BSA also requires third-party vendors to indemnify Amazon for any claims or losses arising from their products and requires that third-party sellers maintain liability insurance covering Amazon. Under the BSA, Amazon processes all purchases and refunds and, further, guarantees all Amazon-purchased products under it’s “A-to-z Guarantee”, which provides:

The Amazon A-to-z Guarantee protects you when you purchase items sold and fulfilled by a third-party seller. Our guarantee covers both the timely delivery and the condition of your items. If either are unsatisfactory, report the problem and our team determines whether you are eligible for a refund.

In determining whether Amazon is a seller under the NJPLA thereby making it subject to products liability in New Jersey, the court began its analysis with the plain language of the NJPLA. The statute defines “product seller” as follows:

any person who, in the course of a business conducted for that purpose: sells; distributes; leases; installs; prepares or assembles a manufacturer’s product according to the manufacturer’s plan, intention, design, specifications or formulations; blends; packages; labels; markets; repairs; maintains or otherwise is involved in placing a product in the line of commerce. . . .

N.J.S.A. § 2A:58C-8 (emphasis added).

The court found that the plain language of the statute, particularly the language “otherwise is involved in placing a product in line of commerce”, makes clear that Amazon meets the NJPLA’s definition of seller. As such, the court rejected Amazon’s argument that the court should use a dictionary definition of a seller as one that transfers “a thing that one owns.” The statute does not require ownership or the transferring of title. The court further found that the definition of seller under N.J.S.A. § 2A:58C-8 was consistent with the principles of New Jersey strict products liability law, which holds that a consumer injured by a defective product may bring a strict liability action against any business entity in the chain of distribution.

The Sigismondi decision is unambiguous in finding that Amazon is a product seller under the NJPLA and it may serve as a significant decision going forward. The classification of Amazon as a seller in Sigismondi is particularly important because, unlike in other New Jersey cases (and many cases in other jurisdictions), Sigismondi did not involve a product sold through Amazon’s FBA program where Amazon stores and ships the product. Therefore, Amazon controlled the sale in Sigismondi far less than in other cases that found Amazon is not a seller.

This entry was posted in New Jersey, Products Liability and tagged , , .