Loomis v. Amazon.com LLC

Filed 4/26/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
KISHA LOOMIS, B297995
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. BC632830)
AMAZON.COM LLC,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County. Ralph C. Hofer, Judge. Reversed and
remanded with directions.
The Dolan Law Firm, Christopher B. Dolan, Dianna Albini,
Megan Irish, Jill McDonell; Casey Gerry Schenk Francavilla
Blatt & Penfield and Jeremy K. Robinson for Plaintiff and
Appellant.
Perkins Coie, Max L. Rothman and Brendan Murphy for
Defendant and Respondent.
Fred J. Hiestand for The Civil Justice Association of
California as Amicus Curiae on behalf of Defendant and
Respondent.
________________________________
Kisha Loomis brought suit against Amazon.com LLC
(Amazon) for injuries she suffered from an allegedly defective
hoverboard. The hoverboard was sold by a third party seller
named TurnUpUp through the Amazon website. The trial court
granted summary judgment in favor of Amazon. The primary
issue on appeal is whether Amazon may be held strictly liable for
Loomis’s injuries from the defective product. Recently, the
Fourth District addressed this issue as a matter of first
impression in Bolger v. Amazon.com, LLC (2020) 53 Cal. App. 5th
431 (Bolger), review denied November 18, 2020. Bolger held
Amazon “is an ‘integral part of the overall producing and
marketing enterprise that should bear the cost of injuries
resulting from defective products.’ ” (Id. at p. 453.) Our own
review of California law on strict products liability persuades us
that Bolger was correctly decided and that strict liability may
attach under the circumstances of this case. We reverse and
remand with directions.
I. FACTS
Loomis ordered a hoverboard on Amazon’s website on
November 28, 2015. The listing identified the seller to be
TurnUpUp, a name used by SMILETO to sell its products on
Amazon’s marketplace. SMILETO is allegedly a company based
in China. The hoverboard was shipped to Loomis by Forrinx
Technology (USA), Inc. Loomis was notified by Amazon that the
product shipped on December 1, 2015. On December 11, 2015,
Loomis sent an e-mail inquiring whether the hoverboard would
be delivered in time for Christmas. The e-mail was sent through
Amazon’s website. Loomis received the hoverboard on December
16, 2015. Loomis gifted the hoverboard to her son. On New
Year’s Eve, he plugged it into an outlet in Loomis’s bedroom to
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charge. Loomis’s boyfriend later discovered a fire burning in her
bedroom. Her bed and the hoverboard were on fire. Loomis
suffered burns to her hand and foot as a result of fighting the fire.
A. Third Party Sales on Amazon.com
Amazon.com is an online marketplace where Amazon and
third party sellers list their products for sale. Amazon describes
its marketplace as “an online mall” which provides an “online
storefront” to third party sellers. Where Amazon is the seller of a
product, it is identified as the seller on the product detail page,
and it sources the product, sets the price, and holds title to it.
This case does not involve an Amazon-listed product. Where a
third party is the seller, it is identified as such on the product
detail page and again on the order confirmation page before the
user places the order. The third party sources the product, sets
the price, and holds title to it.
All third party sellers operate under the Amazon Services
Business Solutions Agreement (BSA). The BSA requires a seller
to “ensure that [it is] the seller of each of [its] Products” and to
provide Amazon with accurate, updated product information in a
specified format. A third party seller chooses what products to
sell and at what price. However, the BSA requires pricing parity,
where the price is “at least as favorable to Amazon Site users as
the most favorable terms” offered by the seller elsewhere.
Amazon provides payment processing for all third party
sales. It remits the purchase price to the third party seller on a
set schedule minus any service fees it may charge. Amazon
collects a “referral fee,” a percentage of the sale price per item
sold by the third-party seller, depending on the nature of the item
sold. For toys, such as hoverboards, the referral fee is 15 percent
of the sale price. The seller is required to route all payments and
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refunds through Amazon, who may withhold payments,
sometimes permanently, from the seller based upon its
investigation of any disputes or claims. Refunds due to
purchasers are calculated by the seller according to Amazon’s
refund policies and routed through Amazon. The BSA further
required all communications between the seller and buyer to be
made through Amazon.
Under the BSA, Amazon expressly reserves the right to
control of its website and listings: “We have the right in our sole
discretion to determine the content, appearance, design,
functionality and all other aspects of the Amazon Sites, including
by redesigning, modifying, removing or restricting access to any
of them, and by suspending, prohibiting or removing any listing.”
The BSA also allows Amazon in its sole discretion to refuse to
process or cancel any transactions.
The seller must also ensure its materials, products, offers
and sales comply with all applicable laws. The BSA advises third
party sellers they are “responsible for any non-conformity or
defect in, or any public or private recall of, any of [their] Products
or other products provided in connection with [the] Products.” In
addition to Amazon’s own efforts to monitor recalls, the BSA
requires third party sellers to notify Amazon “promptly” of any
public or private recalls of their products.
Sellers also agree to indemnify Amazon from any liability
arising from its products. For those sellers whose gross proceeds
exceed a specified threshold, which was applicable to TurnUpUp,
the BSA also requires them to acquire excess insurance naming
Amazon as an additional insured.
Some third party sellers utilize Fulfillment by Amazon
(FBA) services, which allow the seller to store its inventory in an
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Amazon warehouse. If a product is sold under the FBA, Amazon
packages and ships the product to the purchaser. TurnUpUp did
not elect to utilize the FBA services.
Amazon provides purchasers with what it calls an “A-to-z
Guarantee:” “We want you to buy with confidence any time you
make a purchase on the Amazon.com Website or use Amazon
Pay. . . . The condition of the item you buy and its timely delivery
are guaranteed under the unconditional A-to-z Guarantee.”
Amazon, however, does not consider the A-to-z Guarantee to
constitute a warranty for the products it lists. It instead warns
purchasers in its Conditions of Use that third parties sell
products through Amazon and that Amazon is “not responsible
for examining or evaluating, and [does] not warrant, the offerings
of any of these businesses or individuals . . . . Amazon does not
assume any responsibility or liability for the actions, product, and
content of all these and any other third parties.”
B. The Sale of Hoverboards on Amazon
More than 380,000 hoverboards were purchased through
Amazon in 2015. The vast majority were sold by third party
sellers. Under the BSA, Amazon charged TurnUpUp various fees
for its services, including a $39.99 monthly nonrefundable
subscription fee and a 15 percent referral fee that was calculated
from the total sales price of each product. For the transaction at
issue, Amazon received a referral fee of $55.50 from the $370 sale
of the TurnUpUp hoverboard to Loomis. For the period between
September 14, 2015, and December 16, 2015, TurnUpUp sold
hoverboards totaling $736,366.68 through Amazon. Amazon
received $110,645.92 in fees from those sales.
In late November 2015, Amazon’s product safety team
began investigating hoverboards in response to press reports that
5
hoverboards were involved in fires. It identified 17 reports of fire
or smoke allegedly caused by hoverboards sold through Amazon.
These 17 reports involved different models and manufacturers.
On December 10, 2015, Amazon decided to remove all third
party hoverboard listings from its website. It sent all prior
hoverboard purchasers an e-mail notifying them of the reports of
safety problems with hoverboards. Loomis testified in her
deposition she did not recall receiving such an e-mail from
Amazon.
During this time, the Consumer Product Safety
Commission (CPSC) conducted its own investigation into
hoverboard safety and was in contact with Amazon about it. On
February 18, 2016, the CPSC issued a letter stating that it
regarded hoverboards that do not comply with a draft
Underwriters Laboratories voluntary standard as presenting a
potential “substantial product hazard.” The CPSC announced
recalls of certain hoverboard models in July 2016.
C. The Legal Proceedings
Loomis brought suit against Forrinx1 and Doe defendants
for products liability and fraud on September 2, 2016. In a form
complaint, Loomis alleged three “counts” related to the product
liability cause of action. Count one alleged strict products
liability, count two alleged negligence, and count three alleged a
breach of warranty. Loomis later amended her complaint to
substitute Amazon into the lawsuit for a Doe defendant.
Amazon moved for summary judgment on a number of
grounds, including that it did not fall within the chain
1 Forrinx failed to appear and a default was entered against
it.
6
of distribution for product liability purposes, it could not be liable
under the “marketing enterprise theory” for those entities that
fell outside the chain of distribution, and the federal
Communications Decency Act (47 U.S.C. § 230) (CDA) barred
Loomis’s claims.2 The trial court granted Amazon’s motion for
summary judgment. Loomis timely appealed.
II. DISCUSSION
At issue in this appeal are Loomis’s strict and negligent
product liability claims.3 She contends summary adjudication
was improperly granted due to Amazon’s participation in the
vertical chain of distribution for the product. Amazon disclaims
any liability on the ground it is neither a manufacturer nor seller
of the hoverboard. We conclude there exist triable issues of
2 Under the CDA, “[n]o provider or user of an interactive
computer service shall be treated as the publisher or speaker of
any information provided by another information content
provider.” (47 U.S.C. § 230 (c)(1).) “No cause of action may be
brought and no liability may be imposed under any State or local
law that is inconsistent with this section.” (Id., (e)(3).)
3 Loomis acknowledges her fraud claim (second cause of
action) and breach of warranty claim (count three of the first
cause of action) are not at issue in this appeal. In the
respondent’s brief, Amazon informed us that we need not
address its CDA-based arguments as “[Loomis] has abandoned
her fraud claim and frames her remaining claims as based solely
on Amazon’s role in the transaction, not on the website’s content.”
We understand this statement to mean Amazon concedes the
CDA only applied to shield it from Loomis’s fraud claim and not
her strict liability and negligence claims. Accordingly, we agree
we need not address whether the CDA provides immunity to
Amazon from the strict liability and negligence claims.
7
material fact which warrant reversal of summary adjudication as
to these claims.4
A. Standard of Review
A defendant moving for summary judgment must show
that one or more elements of a cause of action cannot be
established or that there is a complete defense to the cause of
action. (Code Civ. Proc., § 437c, subd. (p)(2); Miller v. Department
of Corrections (2005) 36 Cal. 4th 446, 460.) Once the defendant’s
burden has been met, the plaintiff is required to show a triable
issue of material fact as to the cause of action or defense. (Code
Civ. Proc., § 437c, subd. (p)(2).) A triable issue of fact is created
when the evidence reasonably permits the trier of fact, under the
applicable standard of proof, to find the purportedly contested
fact in favor of the party opposing the motion. (Lugtu v.
California Highway Patrol (2001) 26 Cal. 4th 703, 722.) The
plaintiff may not rely on the allegations in her pleadings but
must set forth the specific facts showing the triable issue. (Code
Civ. Proc., § 437c, subd. (p)(2).)
We review the record de novo, considering all the evidence
set forth in the moving and opposing papers except that to which
4 Loomis also contends her claim for punitive damages
survives summary adjudication because her products liability
claims do. Amazon does not address this issue in its respondent’s
brief. Below, it sought summary adjudication of punitive
damages on the ground Loomis had no viable underlying claims
to support it. It presented no argument as to the merits of the
claim. Loomis is correct that a punitive damages award may
properly be entered in a strict products liability suit. (Grimshaw
v. Ford Motor Co. (1981) 119 Cal. App. 3d 757, 807-808,
disapproved on a different ground by Kim v. Toyota Motor Corp.
(2018) 6 Cal. 5th 21.)
8
objections were made and sustained. We liberally construe the
evidence in support of the plaintiff opposing summary judgment
and resolve doubts concerning the evidence in her favor. (Code
Civ. Proc. § 437c, subd. (c); Yanowitz v. L’Oreal USA, Inc. (2005)
36 Cal. 4th 1028, 1037; AARTS Productions, Inc. v. Crocker
National Bank (1986) 179 Cal. App. 3d 1061, 1064–1065.)
B. The Doctrine of Strict Products Liability in
California
Greenman v. Yuba Power Products, Inc. (1963) 59 Cal. 2d
57, 62 (Greenman) established the doctrine of strict products
liability when it held “[a] manufacturer is strictly liable in tort
when an article he places on the market, knowing that it is to be
used without inspection for defects, proves to have a defect that
causes injury to a human being.” “The purpose of such liability is
to insure that the costs of injuries resulting from defective
products are borne by the manufacturers that put such products
on the market rather than by the injured persons who are
powerless to protect themselves.” (Id. at p. 63.)
The California Supreme Court extended the doctrine to
retailers in Vandermark v. Ford Motor Co. (1964) 61 Cal. 2d 256
(Vandermark), reasoning, “Retailers like manufacturers are
engaged in the business of distributing goods to the public. They
are an integral part of the overall producing and marketing
enterprise that should bear the cost of injuries resulting from
defective products. [Citation.] In some cases the retailer may be
the only member of that enterprise reasonably available to the
injured plaintiff. In other cases the retailer himself may play a
substantial part in insuring that the product is safe or may be in
a position to exert pressure on the manufacturer to that end; the
retailer’s strict liability thus serves as an added incentive to
9
safety. Strict liability on the manufacturer and retailer alike
affords maximum protection to the injured plaintiff and works no
injustice to the defendants, for they can adjust the costs of such
protection between them in the course of their continuing
business relationship.” (Id. at pp. 262-263.)
California courts must consider the policies underlying the
doctrine to determine whether to extend strict liability in a
particular circumstance. (Anderson v. Owens–Corning Fiberglas
Corp. (1991) 53 Cal. 3d 987, 995 (Anderson); O’Neil v. Crane Co.
(2012) 53 Cal. 4th 335, 362–363 (O’Neil).) The public policies
articulated in Greenman and Vandermark that form the
foundation for the application of strict liability are the following:
(1) whether Amazon may play a substantial part in insuring that
the product is safe or may be in a position to exert pressure on
the manufacturer to that end, (2) whether Amazon may be the
only member in the distribution chain reasonably available to the
injured plaintiff, and (3) whether Amazon is in a position to
adjust the costs of compensating the injured plaintiff amongst
various members in the distribution chain. (Vandermark, supra,
61 Cal.2d at pp. 262-263.)
Applying these policy considerations, courts have extended
strict products liability to entities within the chain of
distribution, including bailors and lessors (Price v. Shell Oil
Company (1970) 2 Cal. 3d 245, 248); wholesalers and distributors
(Barth v. B. F. Goodrich Tire Co. (1968) 265 Cal. App. 2d 228, 252-
253; Canifax v. Hercules Powder Co. (1965) 237 Cal. App. 2d 44, 52
(Canifax)); and sellers of mass-produced homes (Kriegler v.
Eichler Homes, Inc. (1969) 269 Cal. App. 2d 224, 227). Courts
have found these defendants were responsible for passing the
product down the line to the consumer, had the ability to affect
10
product safety by exerting pressure on the manufacturer, and
were able to bear the cost of compensating for injuries. (Arriaga
v. CitiCapital Commercial Corp. (2008) 167 Cal. App. 4th 1527,
1535 (Arriaga).) Courts, however, have declined to extend the
doctrine to hotel proprietors (Peterson v. Superior Court (1995) 10
Cal. 4th 1185); sellers of used products (Wilkinson v. Hicks (1981)
126 Cal. App. 3d 515); and auctioneers (Tauber–Arons Auctioneers
Co. v. Superior Court (1980) 101 Cal. App. 3d 268 (Tauber-Arons)),
who were found to have little to no relationship with the
manufacturer and thus lacked the ability to affect product safety.
A consumer injured by a defective product “may now sue
‘any business entity in the chain of production and marketing,
from the original manufacturer down through the distributor and
wholesaler to the retailer; liability of all such defendants is joint
and several.’ ” (Wimberly v. Derby Cycle Corp. (1997) 56
Cal. App. 4th 618, 628.) The purpose for this approach “is to
extend liability to all those engaged in the overall producing and
marketing enterprise who should bear the social cost of the
marketing of defective products.” (Kaminski v. Western
MacArthur Co. (1985) 175 Cal. App. 3d 445, 455-456.)
“The strict liability doctrine derives from judicially
perceived public policy considerations, i.e., enhancing product
safety, maximizing protection to the injured plaintiff, and
apportioning costs among the defendants. [Citations.] Where
these policy justifications are not applicable, the courts have
refused to hold the defendant strictly liable even if that
defendant could technically be viewed as a ‘ “link in the chain” ’
in getting the product to the consumer market. [Citation.] In
other words, the facts must establish a sufficient causative
relationship or connection between the defendant and the product
11
so as to satisfy the policies underlying the strict liability
doctrine.” (Arriaga, supra, 167 Cal.App.4th at p. 1535.)
The court in Bay Summit Community Assn. v. Shell Oil Co.
(1996) 51 Cal. App. 4th 762 (Bay Summit), set forth three factors
to determine whether such a causative relationship or connection
exists when the defendant falls outside the vertical chain of
distribution. Under the marketing enterprise theory or stream of
commerce approach, the plaintiff must show: “(1) the defendant
received a direct financial benefit from its activities and from the
sale of the product; (2) the defendant’s role was integral to the
business enterprise such that the defendant’s conduct was a
necessary factor in bringing the product to the initial consumer
market; and (3) the defendant had control over, or a substantial
ability to influence, the manufacturing or distribution process.”
(Id. at p.776; Kasel v. Remington Arms Co. (1972) 24 Cal. App. 3d
711 (Kasel).)
C. Bolger v. Amazon.com LLC
In Bolger, the Fourth District applied strict products
liability analysis to substantially identical facts as presented in
this case. There, the plaintiff bought a replacement battery for
her laptop from a third party seller through the Amazon website.
The battery allegedly exploded several months later, causing
severe burns. (Bolger, supra, 53 Cal.App.5th at p. 437.) The trial
court granted summary judgment in favor of Amazon on the
ground it did not distribute, manufacture, or sell the product in
question. The Fourth District reversed. (Id. at p. 439.)
The Bolger court found Amazon was “a direct link in the
chain of distribution, acting as a powerful intermediary between
the third party seller and the consumer.” (Bolger, supra, 53
Cal.App.5th at p. 438.) “As a factual and legal matter, Amazon
12
placed itself between [the seller] and Bolger in the chain of
distribution of the product at issue here. Amazon accepted
possession of the product from [the seller], stored it in an Amazon
warehouse, attracted Bolger to the Amazon website, provided her
with a product listing for [the seller’s] product, received her
payment for the product, and shipped the product in Amazon
packaging to her. Amazon set the terms of its relationship with
[the seller], controlled the conditions of [the seller’s] offer for sale
on Amazon, limited [the seller’s] access to Amazon’s customer
information, forced [the seller] to communicate with customers
through Amazon, and demanded indemnification as well as
substantial fees on each purchase. Whatever term we use to
describe Amazon’s role, be it ‘retailer,’ ‘distributor,’ or merely
‘facilitator,’ it was pivotal in bringing the product here to the
consumer.” (Ibid.)
After concluding Amazon was a link in the chain of
distribution, the Bolger court found the policies articulated in
Greenman, Vandermark, and their progeny supported imposition
of strict liability. The court found Amazon was the only member
of the enterprise reasonably available to an injured consumer in
some cases, it played a substantial part in ensuring the products
listed on its website were safe, it could and did exert pressure on
upstream distributors like the instant seller to enhance safety,
and it had the ability to adjust the cost of liability between itself
and its third party sellers. The court concluded Amazon should
be held liable if a product sold through its website turned out to
be defective, since strict liability in the instant case afforded
maximum protection to the injured plaintiff and worked no
injustice to Amazon. (Bolger, supra, 53 Cal.App.5th at pp. 453-
455.)
13
In Bolger, Amazon presented many of the same arguments
to disclaim liability as it does in this case. (Bolger, supra, 53
Cal.App.5th at pp. 455-458.) The court rejected each of these
arguments.
Amazon initially focused on dictionary or Commercial Code
definitions of “seller” and “distributor” to argue those definitions
did not apply to it. It asserted it was a service provider that was
not subject to strict liability and that had no control over the
selection of the product or its pricing. (Bolger, supra, 53
Cal.App.5th at p. 456.)
The court explained strict products liability was created
judicially because of the economic and social need for the
protection of consumers in an increasingly complex and
mechanized society. The scope of strict liability was expanded
when necessary to account for market realities and to cover new
transactions, such as this one, in widespread use in today’s
business world regardless of labels or dictionary definitions.
(Bolger, supra, 53 Cal.App.5th at p. 456.)
The court rejected Amazon’s assertion it was merely a
service provider with no control over the product. It held,
“Nothing aside from Amazon’s own choices required it to allow
[the seller] to offer its product for sale, to store [the seller’s]
product at its warehouse, to accept Bolger’s order, or to ship the
product to her. It made these choices for its own commercial
purposes. It should share in the consequences.” (Bolger, supra,
53 Cal.App.5th at p. 457.) The court concluded Amazon’s control
over both the product and the sales transaction formed the basis
for its liability. (Id. at pp. 458-459.)
Additionally, Amazon argued, as it does here, that the
Legislature, not the court, was the appropriate forum to address
14
whether those policies would be served in new contexts. The
Bolger court found this argument ran “directly contrary to
California law” on strict liability, which was created by the courts
and expanded and contracted where warranted by its purposes.
(Bolger, supra, 53 Cal.App.5th at p. 459.)
Lastly, the court found the federal CDA did not shield
Amazon from strict liability because liability was based on
Amazon’s own conduct, not the content of the seller’s product
listing. (Bolger, supra, 53 Cal.App.5th at p. 465.)
Amazon contends Bolger was erroneously decided because
it ignores long-standing limitations on strict liability law.
According to Amazon, these long-standing limitations include a
“threshold requirement” for strict liability expressed in O’Neil
and case law excluding service providers from strict liability. We
explain below (post, sec. D,3) how Amazon has misinterpreted
O’Neil and the cases regarding liability of service providers.
We are also not persuaded by Amazon’s argument that
Bolger improperly applied strict liability to “facilitators.”
Amazon argues, “Before the Fourth District’s Bolger decision, the
lower courts uniformly . . . rejected claims against service
providers that facilitated, or were even necessary to consummate,
sales.” In each of those cases, however, the courts did not refuse
to impose strict liability simply because the defendant facilitated
a sale. The courts each examined the underlying policies and
determined strict liability as to finance lessors and auctioneers
was not appropriate. (Arriaga, supra, 167 Cal.App.4th at p. 1537
[“The policy considerations behind imposing strict products
liability on those involved in the vertical distribution of consumer
goods are not furthered by including finance lessors.” (Italics
omitted.)]; Tauber-Arons, supra, 101 Cal.App.3d at p. 274 [“The
15
real issue in this case is whether the policy of the doctrine of
strict liability established by the decisions of the appellate courts
in this state justifies the imposition of strict liability under such
circumstances.”]; Brejcha v. Wilson Machinery, Inc. (1984) 160
Cal. App. 3d 630 [relying on Tauber-Arons].)
Amazon next criticizes Bolger for relying on “vague and ill-
defined policy notions” that were “cited six decades ago.” As
Bolger observed, this argument directly conflicts with the
Supreme Court’s repeated observation that “[t]he question
whether to apply strict liability in a new setting is largely
determined by the policies underlying the doctrine.” (O’Neil,
supra, 53 Cal.4th at pp. 362–363; Anderson, supra, 53 Cal.3d at
p. 995; see also Bay Summit, supra, 51 Cal.App.4th at p. 774.)
We conclude Bolger has properly applied well-established strict
liability law to the facts of its case and was correctly decided.
D. Analysis
1. Vertical Chain of Distribution
As technology advances, innovation is paving the way to
new business practices. Amazon is on the leading edge of e-
commerce. Based on our review of Amazon’s third-party business
model under the BSA, we are persuaded that Amazon’s own
business practices make it a direct link in the vertical chain of
distribution under California’s strict liability doctrine.
Contrary to Amazon’s assertion that it merely provided an
online storefront for TurnUpUp and others to sell their wares, it
is undisputed Amazon placed itself squarely between TurnUpUp,
the seller, and Loomis, the buyer, in the transaction at issue.
When Loomis wanted to buy a hoverboard for her son, she
perused product listings on Amazon’s website. Amazon took
Loomis’s order and processed her payment. It then transmitted
16
the order to TurnUpUp, who packaged and shipped the product
to Loomis.
When Loomis wondered whether the hoverboard would
arrive in time for Christmas, she communicated her concerns
through Amazon. TurnUpUp was not allowed to communicate
with Loomis directly. If Loomis had wanted to return the
hoverboard, the return would have been routed through Amazon.
Amazon remitted Loomis’s payment to TurnUpUp after
deducting its fees, including a 15 percent referral fee based on the
total sale price. These facts undermine Amazon’s
characterization of its marketplace as an online mall providing
online storefronts for sellers. Owners of malls typically do not
serve as conduits for payment and communication in each
transaction between a buyer and a seller. Moreover, they do not
typically charge a per-item fee rather than a fixed amount to rent
their storefronts. Instead, these actions – 1) interacting with the
customer, 2) taking the order, 3) processing the order to the third
party seller, 4) collecting the money, and 5) being paid a
percentage of the sale – are consistent with a retailer or a
distributor of consumer goods.
2. Stream of Commerce Approach
Although we conclude Amazon is a link in the vertical
chain of distribution, we nevertheless recognize e-commerce may
not neatly fit into a traditional sales structure. The stream of
commerce approach or market enterprise theory offers an
alternative basis for strict liability.
“[U]nder the stream-of-commerce approach to strict
liability no precise legal relationship to the member of the
enterprise causing the defect to be manufactured or to the
member most closely connected with the customer is required
17
before the courts will impose strict liability. It is the defendant’s
participatory connection, for his personal profit or other benefit,
with the injury-producing product and with the enterprise that
created consumer demand for and reliance upon the product (and
not the defendant’s legal relationship (such as agency) with the
manufacturer or other entities involved in the manufacturing-
marketing system) which calls for imposition of strict liability.
[Citation.]” (Kasel , supra, 24 Cal.App.3d at p. 725.) Thus, a
defendant may be strictly liable under the stream of commerce
approach if: “(1) the defendant received a direct financial benefit
from its activities and from the sale of the product; (2) the
defendant’s role was integral to the business enterprise such that
the defendant’s conduct was a necessary factor in bringing the
product to the initial consumer market; and (3) the defendant
had control over, or a substantial ability to influence, the
manufacturing or distribution process.” (Bay Summit, supra, 51
Cal.App.4th at p. 778.)
Viewing the evidence in the light most favorable to Loomis,
there exists a triable issue of material fact as to each of the three
factors identified above. First, Amazon does not dispute it
received a direct financial benefit in the form of fees, including a
monthly subscription fee and a 15 percent referral fee, from the
sale of the product. However, it contends the fees it charges must
also be connected to its activities in bringing the product to the
initial consumer market. (Bay Summit, supra, 51 Cal.App.4th at
p. 776 [“Shell directly profited from its activities in creating a
market for the polybutylene plumbing system and from each sale
of the plumbing system.”].) It argues it has engaged in no such
activities, and has derived no financial benefit, because the
market for hoverboards existed regardless of Amazon.
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Contrary to Amazon’s broad interpretation of what
constitutes “the initial consumer market,” caselaw tells us “the
relevant market in which the defendant was deemed a
participant was the initial distribution to the consuming public of
the particular defective product of a given manufacturer,” “not
just products of the same classification.” (Tauber-Arons, supra,
101 Cal.App.3d at p. 276; see also Kasel, supra, 24 Cal.App.3d at
p. 725 [defendant’s participation in the enterprise which
distributed and created consumer demand for “Remington
Express” shot shells]; Bay Summit, supra, 51 Cal.App.4th at p.
776 [polybutylene plumbing system].) Therefore, we need to
determine whether Amazon received a direct financial benefit
from its activities to bring TurnUpUp hoverboards to market.
To this end, Amazon presented no evidence that it did not
play a role in establishing a market for TurnUpUp hoverboards.
Instead, it presented testimony that it had no information what
other sales channels TurnUpUp used to sell its hoverboards. By
contrast, the evidence shows Amazon received $110,645.92 from
its sale of TurnUpUp hoverboards from September 14, 2015 to
December 16, 2015. At a minimum, this evidence creates a
triable issue of material fact as to whether Amazon received a
direct financial benefit from its activities and sales of the product.
For the same reason, there exists a triable issue with
respect to the second factor—whether Amazon’s role was integral
to the business enterprise. Amazon has failed to meet its burden
to demonstrate this factor cannot be established because it has
presented no evidence of its role in bringing TurnUpUp’s
hoverboards to market.
Third, the record demonstrates Amazon had substantial
ability to influence the manufacturing or distribution process
19
through its ability to require safety certification, indemnification,
and insurance before it agrees to list any product. For example,
the BSA allows Amazon to require certification of products it lists
from the Underwriter’s Laboratories, which, among other things,
establishes standards for manufacturing practices. Amazon’s
contention that it has no relationship with the manufacturer or
the distributors has no bearing on whether it can influence the
manufacturing process.
We are persuaded the trial court erroneously granted
summary adjudication on the strict liability claim based on a
stream of commerce approach.
3. Service Provider
Amazon disputes it plays a role in the vertical distribution
chain or the stream of commerce because it is not a
manufacturer, seller, or supplier, but merely a service provider.
It seizes on a single sentence in O’Neil to create a “threshold
requirement” for the imposition of strict liability. The sentence
in O’Neil reads: “That the defendant manufactured, sold, or
supplied the injury-causing product is a separate and threshold
requirement that must be independently established.” (O’Neil,
supra, 53 Cal.4th at p. 362.) Amazon would have us interpret
that sentence in O’Neil to limit strict liability only to
manufacturers, sellers, and suppliers. Read in context, however,
it is clear O’Neil did not intend to overturn five decades of case
law extending strict liability to lessors, bailors, and others within
the stream of commerce who may not bear the label of
manufacturer, seller, or supplier. (See, e.g., Fortman v. Hemco,
Inc. (1989) 211 Cal. App. 3d 241, 251 [“entities in the stream of
commerce for purposes of strict liability are not limited to those
20
readily identifiable as designer, manufacturer, or vendor of the
defective product”].)
In O’Neil, the plaintiff sought to impose strict liability on a
manufacturer who supplied a nondefective part that was later
used with a defective product that caused injury. By this
sentence, the high court merely indicated an innocent
manufacturer may not be held strictly liable for a defective
product made, sold, or supplied by someone else. (O’Neil, supra,
53 Cal.4th at p. 362.)
We likewise reject Amazon’s argument it is merely a
service provider who is not subject to strict products liability. We
have identified how it was instrumental in the sale of the
hoverboard to Loomis.
Even if Amazon may be characterized as a service provider,
Murphy v. E. R. Squibb & Sons, Inc. (1985) 40 Cal. 3d 672
(Murphy) and Hernandezcueva v. E.F. Brady Co., Inc. (2015) 243
Cal. App. 4th 249 (Hernandezcueva), cited by Amazon, are
instructive on the issue of when strict liability attaches to service
providers.
In both cases, the court determined the defendant provided
both a service and sale of a product. Therefore, “[t]he propriety of
imposing strict liability on a party that both supplies and installs
a defective component hinges on the circumstances of the
transaction.” (Hernandezcueva, supra, 243 Cal.App.4th at p.
260.) In Murphy, the court determined the service aspect of the
defendant pharmacist’s role predominated over its sale of
prescription drugs. (Murphy, supra, 40 Cal.3d at p. 675.) In
Hernandezcueva, the court determined the subcontractor that
installed drywall in a commercial project provided both a service
(the installation) and the sale of a product (the drywall). Despite
21
its dual role, the subcontractor was a participant in the stream of
commerce for strict liability purposes. (Hernandezcueva, supra,
at p. 263.)
Here, Amazon provides a service to TurnUpUp in the form
of a website to list its product and, as described above, was also
instrumental in the sale of the product by placing itself squarely
between TurnUpUp and Loomis. That it did not hold title to the
product and did not have physical possession of the hoverboard
does not automatically render it solely a service provider and
remove it from strict liability. Canifax, supra, 237 Cal. App. 2d 44
is instructive on this issue.
In Canifax, the customer purchased the defective fuse (and
related supplies) from a jobber, who in turn placed an order with
the defendant, who passed on the order for the fuse to the
manufacturer. The manufacturer shipped the fuse directly to the
jobber and the defendant paid the manufacturer from the
proceeds it received from the jobber. (Canifax, supra, 237
Cal. App. 2d 44 at p. 48.) The defendant disputed strict liability
on the basis it did not manufacture the fuse, sell the fuse, and
never had possession of the fuse. The court held, “The fact that it
chooses to delegate the manufacture of [the] fuse to another and
that it causes the manufacturer to ship the product directly to the
consumer cannot be an escape hatch to avoid liability.” (Id. at p.
52.)
The circumstances surrounding the sale of the hoverboard
are materially similar to those surrounding the sale of the fuse in
Canifax. As in Canifax, Amazon did not manufacture the
hoverboard, did not sell the hoverboard, and never had physical
possession of the hoverboard. These facts, however, “cannot be
an escape hatch to avoid [strict] liability.” (Canifax, supra,
22
237 Cal.App.2d at p. 52.) This is because, like the defendant in
Canifax, Amazon took the order for the hoverboard, took the
payment, and passed the order up the chain of distribution. (Id.
at p. 50.)
4. Out-of-State Cases
We are not persuaded by Amazon’s reliance on those
decisions that restrict strict liability to sellers or manufacturers
by applying out-of-state law. (Erie Ins. Co. v. Amazon.com, Inc.
(4th Cir. 2019) 925 F.3d 135, 140 [“products liability under
Maryland law. . . is imposed on sellers and manufacturers (a
manufacturer also being a seller)”]; Stiner v. Amazon.com, Inc.
(Ohio 2020) 2020-Ohio-4632 [Ohio Products Liability Act]; Fox v.
Amazon.com, Inc. (6th Cir. 2019) 930 F.3d 415, 425 [Tennessee
Products Liability Act]; Milo & Gabby LLC v. Amazon.com, Inc.
(Fed.Cir. 2017) 693 F.Appx 879, 890 [addressing federal
intellectual property law]; Garber v. Amazon.com, Inc. (N.D.Ill.
2019) 380 F. Supp. 3d 766, 779 [Illinois law on products liability];
State Farm Fire and Cas. Co. v. Amazon.com, Inc. (W.D.Wis.
2019) 390 F. Supp. 3d 964 [Wisconsin products liability statute].)
We need not stray so far afield when California courts have
provided extensive analysis of strict liability doctrine in
California.
We have identified the acts constituting Amazon’s
participation in the distribution chain. “Whatever term we use to
describe Amazon’s role, be it ‘retailer,’ ‘distributor,’ or merely
‘facilitator,’ it was pivotal in bringing the product here to the
consumer.” (Bolger, supra, 53 Cal.App.5th at p. 438.) These acts
support our conclusion that Amazon is in the vertical chain of
distribution of the alleged defective hoverboard. Next, we assess
whether applying strict liability to Amazon’s third-party seller
23
business model supports the relevant public policy
considerations.
5. Policy Considerations Underlying the Doctrine
Are Furthered by Imposing Strict Products Liability
in This Case
In analyzing whether strict liability is appropriate in new
circumstances, courts assess whether relevant public policy goals
are furthered by its application. (Bay Summit, supra, 51
Cal.App.4th at p. 774.) As noted earlier in this opinion, the
relevant public policy considerations are: (1) whether Amazon
may play a substantial part in insuring that the product is safe or
may be in a position to exert pressure on the manufacturer to
that end, (2) whether Amazon may be the only member in the
distribution chain reasonably available to the injured plaintiff,
and (3) whether Amazon is in a position to adjust the costs of
compensating the injured plaintiff amongst various members in
the distribution chain. (Vandermark, supra, 61 Cal.2d at pp. 262-
263.) We address each in turn.
As to product safety, Amazon contends it has no proactive
authority over product design or manufacture because its
relationship is typically with the distributor or retailer, not the
manufacturer. It asserts it can only reactively address safety
issues by removing or suspending sellers after a product has been
shown to be unsafe. Thus, imposing strict liability on it will not
enhance product safety.
By its very argument, Amazon acknowledges it plays a role
in ensuring product safety. Indeed, sellers are required under
the BSA to comply with all applicable laws, including,
presumably, consumer safety laws and regulations. The evidence
shows Amazon may require proof that a product complies with
24
recognized safety standards before it is listed. For example,
Amazon may require documentation or certification from the
Underwriter’s Laboratories, which sets forth standards for
manufacturing practices and devises safety tests for products.
Additionally, Amazon on occasion has consulted with the CPSC
to determine if there are specific regulations or issues related to
products it lists that are “outside of the norm.”
These steps, which Amazon has taken to ensure product
safety in limited circumstances, refute its contention it has no
ability to proactively affect product safety. Application of strict
liability in this case may incentivize Amazon to expand its safety
compliance requirements to more products and thus further the
goal of product safety.
Moreover, we agree with Bolger that “[j]ust like a
conventional retailer, Amazon can use its power as a gatekeeper
between an upstream supplier and the consumer to exert
pressure on those upstream suppliers (here, third party sellers)
to enhance safety.” (Bolger, supra, 53 Cal.App.5th at p. 454.)
Under the BSA, “Amazon sets fees that it would retain for the
sale of a third-party product, protects itself by requiring third-
party vendors to indemnify Amazon should any ‘claim, loss,
damage, settlement, cost, expense or other liability’ occur, and
reserves the right to refuse to provide . . . services for a product
that does not comport with Amazon’s policies. With the rights
retained, Amazon could halt the placement of defective products
in the stream of commerce, deterring future injuries.” (Gartner v.
Amazon.com, Inc. (S.D.Tex. 2020) 433 F. Supp. 3d 1034, 1044,
citation omitted.)
As to consumer compensation, Amazon may be the only
member of the distribution chain reasonably available for an
25
injured consumer to recover damages. Amazon contends there is
no evidence to show how frequently an injured plaintiff is truly
left without recourse. The record shows, however, that Forrinx,
the only other defendant in this matter, failed to appear and a
default was taken against it. Indeed, the same issue arose in
Bolger, where two defendants failed to appear, and a third could
only be served in China. (Bolger, supra, 53 Cal.App.5th at p. 453;
see also Fox v. Amazon.com, Inc., supra, 930 F.3d at p. 424.)
As to loss spreading, Amazon can adjust the costs of
consumer protection between it and third party sellers through
its fees, indemnity requirements, and insurance. Amazon does
not argue it is unable to spread the costs in these, and other,
ways. It instead contends these costs will result in higher prices
to be paid by consumers and small businesses will also be
required to bear these higher costs. Amazon’s argument
obfuscates the goal of loss spreading. At issue is whether the loss
should be borne solely by the injured consumer who may have no
recourse against other defendants, or whether it may be spread
among those who profited from the sale of the defective product.
In our view, these policy considerations support the application of
strict liability to Amazon’s third party seller business model.
Lastly, Amazon contends the policies articulated by the
California Supreme Court in Greenman and Vandermark are
incomplete and have been eroded by subsequent events. Indeed,
Amazon questions whether strict liability has brought benefits
commensurate with its substantial costs. These are issues best
directed to the California Supreme Court, who created strict
products liability doctrine almost 60 years ago and whose
decisions we are bound to follow. (Auto Equity Sales, Inc. v.
Superior Court (1962) 57 Cal. 2d 450, 455.)
26
Accordingly, we hold the application of strict liability to
Amazon’s third-party seller business model is supported by the
relevant public policy consideration discussed in Vandermark.
III. Summary Adjudication Was Improperly Granted as
to the Negligent Products Liability Claim
Loomis also challenges the summary adjudication of her
negligence claim, contending Amazon failed to meet its burden to
demonstrate that one or more elements of the claim cannot be
established or that there is a complete defense to the claim.
Amazon argues it does not owe Loomis a duty of care for the
same reason it is not strictly liable: it did not manufacture or sell
the product. It asserts “[a]n element of a product-liability claim
is that the defendant manufactured or sold the product. Her
failure to establish that element doomed her . . . strict-liability
and negligence claims.” Amazon’s position is reasonable given
that “[t]he theories of negligence and strict liability ‘parallel and
supplement each other’ [citation], and the same policy
considerations that militate for or against imposition of strict
liability may apply with equal force in the context of negligence.
[Citations.]” (Bettencourt v. Hennessy Industries, Inc. (2012) 205
Cal. App. 4th 1103, 1118.) However, Amazon provides no legal
support for its argument that negligent products liability may
only be imposed on manufacturers and sellers.
Instead, a duty of care may be imposed on a defendant who
is not a manufacturer or seller in the context of a negligent
products liability claim if certain policy factors are met. The
O’Neil court explained, “Courts of this state have traditionally
considered several factors in determining the existence and scope
of duty: ‘the foreseeability of harm to the plaintiff, the degree of
certainty that the plaintiff suffered injury, the closeness of the
27
connection between the defendant’s conduct and the injury
suffered, the moral blame attached to the defendant’s conduct,
the policy of preventing future harm, the extent of the burden to
the defendant and consequences to the community of imposing a
duty to exercise care with resulting liability for breach, and the
availability, cost, and prevalence of insurance for the risk
involved.’ ” (O’Neil, supra, 53 Cal.4th at p. 364.)
Aside from those factors which parallel strict liability
doctrine, Amazon provided no analysis as to how it did not owe a
duty of care to Loomis under those factors. For this reason, the
trial court erred in granting summary adjudication as to the
negligent products liability count.5
5 Our conclusion that Amazon has failed to meet its burden
on summary adjudication is not the equivalent of a finding that
Amazon owed Loomis a duty of care or was negligent under these
circumstances.
28
DISPOSITION
The judgment is reversed. The trial court is directed to
vacate its order granting summary judgment. A new order shall
be entered (1) denying summary adjudication of Loomis’s strict
products liability and negligent products liability claims as well
as her claim for exemplary damages, and (2) granting summary
adjudication of the remaining claims. Upon entry of the new
order, the trial court shall conduct further proceedings not
inconsistent with this opinion. Loomis shall recover her costs on
appeal.
OHTA, J.*
I concur:
STRATTON, Acting P. J.
* Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
29
Wiley, J., Concurring.
The Amazon is the world’s largest river. Amazon.com
supposedly chose its trademark because it aimed to create the
world’s largest river of commerce. Amazon.com can control what
it created.
Unbeknownst to Amazon, a manufacturer may use
Amazon’s site to sell a defective product that will cause future
accidents. Perhaps it is a computer battery that can explode.
(Bolger v. Amazon.com, LLC (2020) 53 Cal. App. 5th 431, 444
(Bolger).) Perhaps it is a hoverboard that ignites fires.
Whatever it is, Amazon is situated swiftly to learn of and to
contain the emerging problem, thereby reducing accidental
injuries. Amazon can cabin the danger by stopping sales.
Amazon can alert past buyers who have yet to experience the
lurking hazard: Amazon has information about its customers
and their purchases. Other measures are possible.
Once Amazon is convinced it will be holding the bag on
these accidents, this motivation will prompt it to engineer
effective ways to minimize these accident costs. Tort law will
inspire Amazon to align its ingenuity with efficient customer
safety. Customers will benefit.
Amazon maintains it already safeguards customer safety.
(E.g., Bolger, supra, 53 Cal.App.5th at pp. 442–443.) On appeal,
Amazon’s brief says it “voluntarily implemented a product safety
system years ago, independent of the specter of tort liability, and
. . . it spends hundreds of millions of dollars annually to ensure
that products offered on the website are safe, compliant, and
authentic.” The cited source of this assertion is not the record,
but rather an online press release “written by Amazon” posted in
“response to a Wall Street Journal story about the safety of
1
products offered in [the Amazon.com] store.” (Amazon, Product
safety and compliance in our store (Aug. 23, 2019),
[as of Apr. 5, 2021], archived
at (AboutAmazon.com).)
Amazon’s cited post makes the following admissions:
“[W]e [at Amazon.com] have developed, and continuously
refine and improve, our tools that prevent suspicious, unsafe, or
non-compliant products from being listed in our store. [¶] Our
proactive measures begin when a seller attempts to open an
account. Our new seller account vetting includes a number of
verifications and uses proprietary machine learning technology
that stops bad actors before they can register or list a single
product in our store. All products offered in our stores must
comply with applicable laws and regulations, and our own
policies. For example, we require toys to be tested to relevant
safety standards set by the Consumer Product Safety
Commission. We have a dedicated global team of compliance
specialists that review submitted safety documentation, and we
have additional qualification requirements that sellers must
meet to offer products. In 2018, our teams and technologies
proactively blocked more than three billion suspect listings for
various forms of abuse, including non-compliance, before they
were published to our store. [¶] Once a product is available in
our store, we continuously scan our product listings and updates
to find products that might present a concern. Every few
minutes, our tools review the hundreds of millions of products,
scan the more than five billion attempted daily changes to
product detail pages, and analyze the tens of millions of customer
reviews that are submitted weekly for signs of a concern and
2
investigate accordingly. Our tools use natural language
processing and machine learning, which means new information
is fed into our tools daily so they can learn and constantly get
better at proactively blocking suspicious products. [¶] In
addition, we provide a number of ways for regulatory agencies,
industry organizations, brands, customers, and our customer
service teams to report safety issues. When we receive these
reports, we move quickly to protect customers, remove unsafe
products from our store, and investigate. For example, if a
customer reports a concern with a product, a customer service
associate can instantly trigger an investigation. Additionally,
because of our direct relationships with customers, we are able to
trace and directly notify customers who purchased a particular
product online and alert them to a potential safety issue—our
systems are far more effective than other online and offline
retailers and customers can feel confident they’ll have the
information they need. [¶] We also regularly work with agencies
including the Food and Drug Administration and Consumer
Product Safety Commission, and the information we share helps
them identify trends and develop regulations. We are active in
industry working groups and committees that are dedicated to
developing new solutions and guidelines that will benefit all
retailers and consumers. [¶] We invest significant resources to
protect our customers and have built robust programs designed
to ensure products offered for sale in our store are safe and
compliant. We want customers to shop with confidence and if
ever a customer has a concern, they can contact our customer
service team, and we will investigate.” (AboutAmazon.com,
supra.)
3
These words are good. The admissions confirm the obvious:
Amazon can control its river. It can undertake cost-effective
steps to minimize accidents from defective products sold on its
website. Strict tort liability will underline the priority Amazon
places on its safety efforts.
Thus we have an easy case that beautifully illustrates the
deep structure of modern tort law: a judicial quest to minimize
the social costs of accidents—that is, the sum of the cost of
accidents and the cost of avoiding accidents. Judges have been
applying this social cost-benefit analysis as a felt instinct for a
long time, as we shortly will survey. That deep structure makes
this case simple to decide. When efforts to minimize accident
costs are relatively inexpensive and apt to be effective, courts
impose tort duties. Amazon has cost-effective options for
minimizing accident costs. Amazon therefore has a duty in strict
liability to the buyers from its site, including Kisha Loomis.
I
In large measure, tort law is cost-benefit analysis.
Comparing the cost to the benefit of an activity is rational
thinking. All else equal, it is rational to invest in ventures where
the expected return exceeds the cost. Conversely, it is irrational
to spend $2 of your own money to get something you value only at
$1.
The judicial use of cost-benefit analysis is familiar
throughout tort doctrine, in the doctrines of negligence as well as
strict liability. In contrast to formal cost-benefit analyses in
other spheres, this judicial practice does not compare quantified
sums of dollar and cents on a balance sheet; case records nearly
never contain precise data of the right kind. Rather, the
4
litigation setting forces judicial reasoning to be more seat-of-the-
pants, more commonsensical than that.
We see this commonsensical method over and over through
the decades.
The intellectual history of cost-benefit analysis in tort law
goes back at least a century. (E.g., Berkovitz v. American River
Gravel Co. (1923) 191 Cal. 195, 199 (Berkovitz); see also Chicago,
Burlington & Quincy Railroad Co. v. Krayenbuhl (Neb. 1902) 65
Neb. 889, 902–904 [91 N.W. 880, 882–883].)
Shortly we return to the 1923 Berkovitz decision.
In 1944, Justice Roger Traynor—California’s most
esteemed jurist—explained tort doctrine must aim to minimize
the social costs of accidents. (Escola v. Coca Cola Bottling Co.
(1944) 24 Cal. 2d 453, 462 (conc. opn. of Traynor, J.) [“public
policy demands that responsibility be fixed wherever it will most
effectively reduce the hazards to life and health inherent in
defective products”] (Escola); see also Greenman v. Yuba Power
Products, Inc. (1963) 59 Cal. 2d 57, 63–64 (Traynor, J.)
[unanimous court adopts logic of Traynor’s concurring Escola
opinion] (Greenman).)
Justice Traynor’s Greenman decision had enormous impact.
“Within a decade of Greenman, a majority of jurisdictions in the
United States had adopted causes of action in strict product
liability. Today all but a handful of states employ some version of
products liability law.” (Goldberg et al., Tort Law:
Responsibilities and Redress (3d ed. 2012) p. 887.)
Shortly after Escola, Judge Learned Hand formalized tort
law’s efficiency calculus with enduring precision. (United States
v. Carroll Towing Co. (2d. Cir. 1947) 159 F.2d 169, 173
[defendant’s duty is a function of three variables: (1) the
5
probability of an accident; (2) the gravity of the injury from an
accident; versus (3) the burden—that is, the cost—of adequate
precautions]; see Posner, A Theory of Negligence (1972) 1 J. Legal
Stud. 29, 32–33.)
In 1970, Professor (and now Senior United States Circuit
Judge) Guido Calabresi treated tort law’s deep structure in his
landmark book, The Costs of Accidents (Calabresi). In
Calabresi’s approach, courts can use cost-benefit analysis to
appraise whether defendants can make cost-effective accident
avoidance investments. Where the benefit of investments in
accident avoidance outweighs the cost, courts should impose tort
duties on defendants. But courts refrain from imposing tort
duties in situations where the options for accident avoidance are
so limited that the costs of accident avoidance do not outweigh
the benefits. (Cf. Posner, Guido Calabresi’s The Costs of
Accidents: A Reassessment (2005) 64 Md. L.Rev. 12, 15
[Calabresi’s framework approximated cost-benefit analysis].)
In 1978, the California Supreme Court’s Barker decision
explicitly put cost-benefit analysis into the heart of tort law.
(Barker v. Lull Engineering Co. (1978) 20 Cal. 3d 413.) The
question was whether a vehicle called a high-lift loader was a
defective product. Lumber tipped off a loader working on a hilly
construction site. The falling lumber injured the driver, who
sued the manufacturer, saying the loader was a defective
product: the manufacturer could have made the loader with
stabilizing mechanical arms, which the driver maintained would
have prevented the tipping and his injury. The manufacturer
disagreed, saying its loader design was not defective at all; rather
the problem was the bad decision to use the loader on a steep hill,
where of course things would tip over. To resolve the issue, our
6
Supreme Court crafted a cost-benefit standard: do the benefits of
the challenged design outweigh the risk of danger inherent in
such design? (Id. at pp. 418–421 & fn. 2, 426–427, 430–435.)
Thus, a product is defective if its design embodies excessive
preventable danger: that is, unless the benefits of the design
outweigh the risk of danger inherent in such design. (Soule v.
General Motors Corp. (1994) 8 Cal. 4th 548, 567, 570.) The Barker
decision also formulated the alternative “consumer expectations”
test. (Barker, at pp. 429–430.)
By the 1980s, the notion of tort cost-benefit analysis was
mainstream. (See Evra Corp. v. Swiss Bank (7th Cir. 1982) 673
F.2d 951, 958 (Posner, J.) [“The amount of care that a person
ought to take is a function of the probability and magnitude of
the harm that may occur if he does not take care”].)
In 2016, the California Supreme Court cited Calabresi’s
enduring cost-benefit approach in its unanimous Kesner opinion.
(Kesner v. Superior Court (2016) 1 Cal. 5th 1132, 1153, citing
Calabresi, supra [courts should assign tort liability to ensure
those best situated to prevent injuries are incentivized to do so]
(Kesner).)
We return to Kesner shortly.
This developing tort doctrine brings us to today and to
Amazon.
Under this doctrine, Amazon owes its customers a duty in
strict liability because Amazon’s position in the distribution chain
allows it to take cost-effective steps to reduce accidents. The cost-
benefit analysis in Amazon’s case is not a close call: the benefits
of the actions Amazon can take to minimize accidents vastly
outweigh the costs of these actions to Amazon. Amazon’s options
are practical and cost-effective; indeed, Amazon says it is already
7
taking these actions. Amazon thus must face strict liability for
Loomis’s fiery encounter with the hoverboard she bought from
Amazon’s site. Imposing this duty on Amazon creates financial
incentives that back up Amazon’s good words about its concern
for customer safety.
Some suggest considerations of moral justice can compete
with tort law’s calculus of social benefit. (E.g., Simons, Tort
Negligence, Cost-Benefit Analysis, and Tradeoffs: A Closer Look
at the Controversy (2008) 41 Loyola L.A. L.Rev. 1171, 1172–1173;
Schwartz, Mixed Theories of Tort Law: Affirming Both
Deterrence and Corrective Justice (1997) 75 Tex. L.Rev. 1801,
1819–1820.) This case presents no potential conflict like that.
The only time Amazon’s brief uses the word “justice” is to write
“the Bolger Court saw the ‘novelty of these issues’ as an opening
to use law as ‘an instrument of justice’ to implement ‘current
concepts of what is right and just.’ 53 Cal. App. 5th at 462
(quoting Kriegler v. Eichler Homes, Inc., 269 Cal. App. 2d 224,
227 (1969)).” If they ever do, moral justice and cost-benefit
analyses do not conflict in this case.
II
The case law jibes completely with this cost-benefit
analysis. This is true for decisions that impose tort duties, as
well as for decisions that refuse to impose tort duties. We see this
consistency in both categories of decisions. We begin with
decisions that impose duties.
A
Courts impose tort duties on entities situated to take cost-
effective measures to reduce the costs of accidents. Six
precedents illustrate this point.
8
1
Justice Traynor’s Escola opinion proposed making Coca
Cola strictly liable for an exploding cola bottle. The company was
positioned to fix the problem through efficient accident avoidance
measures. Coca Cola could have pressurized bottles more
carefully, bought stronger bottles, tested more thoroughly,
switched to cans, or used any combination of tactics. (See Escola,
supra, 24 Cal.2d at p. 459 [“The bottle was admittedly charged
with gas under pressure, and the charging of the bottle was
within the exclusive control of [Coca Cola]”]; id. at p. 461 [Coca
Cola “had exclusive control over both the charging and inspection
of the bottles”]; id. at p. 462 (conc. opn. of Traynor, J.) [the bottler
“is best situated to afford such protection” from the problem of
exploding soda bottles].) Coca Cola made the key decisions and
so was positioned to make soda containers safer—or, if cost-
effective fixes were impossible, to stop marketing the product
altogether. Justice Traynor thus urged strict liability to force the
company to internalize the accident costs it had been imposing on
its customers. The Supreme Court unanimously affirmed the
judgment against Coca Cola. (Id. at p. 461.)
2
In the same way, the Greenman decision imposed strict
liability on a lathe maker that could have used better set screws
to hold spinning wood more securely. Improved screws could
have made the wood less likely to fly off the lathe and hurt the
operator. (See Greenman, supra, 59 Cal.2d at p. 60.) Again, tort
law forced the manufacturer to internalize the costs of accidents
from its product.
9
3
The Vandermark opinion extended strict liability to a car
retailer that sold a new Ford to one Chester Vandermark.
(Vandermark v. Ford Motor Co. (1964) 61 Cal. 2d 256.)
Vandermark claimed the car’s braking defect caused it to crash.
For the unanimous court, Justice Traynor applied strict liability
to the retailer as well as to the manufacturer, because the
retailer was positioned to take actions to reduce the costs of
accidents from defective products. The retailer was part of the
manufacturer’s overall marketing enterprise and in some cases
would be the only member of that enterprise reasonably available
to injured plaintiffs. The retailer’s continuing business
relationship with the manufacturer would allow dealers to exert
pressure on the possibly remote manufacturer as an added safety
incentive. (See id. at pp. 261–263.) The dealer never suggested
its ability to exert pressure on Ford was so costly and ineffective
as to be impractical.
4
Rowland v. Christian (1968) 69 Cal. 2d 108 is another
important case imposing tort liability on a decision maker
positioned to undertake efficient accident precautions. The
opinion put a duty on Nancy Christian, who knew the bathroom
faucet handle in her apartment was cracked and needed
replacing. Christian invited James Rowland to the apartment.
Rowland said he was going to the bathroom. The handle broke
and cut Rowland when he tried to use it. The court held
Christian owed a duty to warn Rowland of the faucet crack. (Id.
at pp. 110–112.)
This ruling made perfect cost-benefit sense. It would have
cost Christian little to share her knowledge of the latent danger
10
with Rowland. The information would have allowed Rowland to
take suitable care. Imposing this accident avoidance duty on the
knowledgeable property possessor was efficient and thus socially
rational. The fact this was a negligence case shows cost-benefit
analysis in tort law is not confined to the context of strict
liability.
5
The previously mentioned Kesner case illustrated the logic
of tort law’s cost-benefit analysis, and again outside the strict
liability setting. Employees unwittingly carried workplace
asbestos dust home to family members, who breathed it in and
developed mesothelioma from the take-home exposure. The
unanimous Supreme Court ruled the employers had a duty to the
family members. (Kesner, supra, 1 Cal.5th at pp. 1141, 1156,
1165.)
The tort goal was “incentivizing reasonable preventative
measures.” (Kesner, supra, 1 Cal.5th at p. 1151.) The employers
did “not claim that precautions to prevent transmission via
employees to off-site individuals—such as changing rooms,
showers, separate lockers, and on-site laundry—would
unreasonably interfere with business operations.” (Id. at p.
1153.) Employers “are generally better positioned than their
employees or members of their employees’ households to know of
the dangers of asbestos and its transmission pathways, and to
take reasonable precautions to avoid injuries that may result
from on-site and take-home exposure.” (Ibid.; see also id. at p.
1156 [“Businesses making use of asbestos were well positioned,
relative to their workers, to undertake preventive measures, and
[the employers] cite no evidence to suggest such measures would
have been unreasonably costly.”].)
11
The cost-benefit analysis thus was simple: the employers
had cost-effective accident avoidance measures available to them,
so they owed a duty in tort to family members facing take-home
asbestos exposure. (See Kesner, supra, 1 Cal.5th at pp. 1154–
1156.)
6
Amazon repeatedly cites a Court of Appeal decision: Bay
Summit Community Assn. v. Shell Oil Co. (1996) 51 Cal. App. 4th
762 (Bay Summit), which concerned Shell Oil’s liability for leaky
polybutylene plumbing systems. This decision is instructive, as
is the whole polybutylene saga. Both cut against Amazon.
Polybutylene was a plastic used for water piping.
“Beginning in the late 1970s, polybutylene plastic plumbing
systems—touted as being cheaper and more durable than copper
pipe systems—were installed in new homes nationwide . . . .
Over the years, several million homes, many of them mobile
homes, were built with polybutylene plumbing systems. Before
long, the plumbing systems began to experience failures of the
fittings and of the pipe itself.” (Hensler et al., Class Action
Dilemmas: Pursuing Public Goals for Private Gain (2000) p. 375,
fn. omitted (RAND).)
Polybutylene piping was the classic defective product. It
seemed like a good thing when introduced, but over time it
literally failed to hold water. Chlorine in drinking water
apparently caused it eventually to crack and leak, leading to
nationwide litigation and massive settlements involving some
220,000 replumbing jobs and many millions of dollars. (RAND,
supra, at p. 390.)
In 1977, Shell Oil Company had begun manufacturing
polybutylene resin—the raw material for the pipes—and it was
12
the sole manufacturer of polybutylene resin. But Shell entirely
withdrew the product from the U.S. market in 1996. (RAND,
supra, at p. 375.)
The Bay Summit decision was one chapter in the
nationwide litigation that drove Shell out of the polybutylene
market. In Bay Summit, the case’s record was very limited and
in conflict as to (1) whether Shell did in fact control the
manufacturing or distribution process and (2) whether it was an
integral factor in bringing a polybutylene plumbing system to
market. (Bay Summit, supra, 51 Cal.App.4th at p. 778.) The
court remanded the case for a factual determination of whether
Shell “had control over, or a substantial ability to influence, the
manufacturing or distribution process.” (Ibid.) Absent this
ability to control or influence the manufacturing or distribution
system, Shell could not be strictly liable for leaking polybutylene
plumbing systems.
Bay Summit is a disastrous precedent for Amazon because,
unlike in Bay Summit, there is no doubt about Amazon’s ability
to control the distribution system Amazon invented. Amazon is
the distribution system. It thus should be strictly liable for
defective products people buy from its site.
Beyond the particular Bay Summit decision, the entire
polybutylene saga is an example of how tort law can lead to
socially rational decisionmaking by forcing commercial actors to
internalize the costs of their actions. According to the RAND
analysis, the final outcome was that polybutylene piping
disappeared from the U.S. marketplace because it was faulty.
Apparently it was cheaper to switch to different kinds of plastic
than to bear the tort liability for polybutylene. If the product is
13
defective, the sooner it is fixed or disappears, the better. This
saga favors Loomis, not Amazon.
These six cases show courts have used cost-benefit analysis
to decide whether to impose tort duties. Six cases on the other
side of the coin show the same method.
B
Courts refrain from imposing tort duties where measures to
avoid accidents are burdensome and unlikely to be cost-effective.
This notion initially may seem off-putting: do we not seek to
avoid accidents at all costs? No, we do not. As Calabresi
explained, “[w]e take planes and cars rather than safer, slower
means of travel.” (Calabresi, supra, at p. 18.) At some point, a
quest for perfect safety becomes irrationally expensive. Six cases
show how judicial cost-benefit analysis can locate this point.
1
The previously cited Berkovitz decision illustrates this
judicial instinct. It used the cost-benefit method long before that
terminology appeared in tort decisions.
The Berkovitz accident was in 1919. Two couples in a
“Dodge touring car” were breaking the speed limit at 2:00 a.m. in
a city and rear-ended a gravel truck going about 10 miles per
hour. (Berkovitz, supra, 191 Cal. at pp. 197–198.) People in the
Dodge sued the truck company, claiming the truck’s coal-oil tail
lamp was out. If true, that would have violated the law requiring
a night light and thus would have been negligence per se. The
evidence conflicted about the coal-oil lamp. The truck driver said
he saw the reflection of the tail light three or four blocks before
the accident scene and it was working then, so by his account the
light must have failed in those three or four blocks—just
moments before the crash. (Id. at p. 198.) The Supreme Court
14
ruled that, under these circumstances, the truck company was
entitled to an excuse instruction. (Id. at pp. 199–200.) The
Berkovitz court permitted the excuse defense because it, in
essence, decided the conduct the trucker described was efficient.
The trucker claimed he made sure his light was working just
before the accident. There was no other better and yet practical
way for the trucker to check his tail light: in 1919, dashboard
alerts about failed tail lights were things of the future. In that
year, the only way the trucker could have been more cautious
would have been to post a person “over the rear light to observe
whether it is constantly burning.” (Id. at p. 199.) This lookout
notion was obviously preposterous in the court’s view. This
extreme measure would have been socially uneconomical—like
forcing all interstate traffic today to drive at 10 miles per hour to
minimize accidents. That much safety would be socially
irrational.
Because the precaution cost would have been high while
the accident risk from a very-briefly-unlit tail light was low, the
Berkovitz decision refused to impose an absolute per se duty on
the trucker. The cost of the additional precaution was socially
irrational: posting lookouts on the back of every motor vehicle
would have been more costly than the safety benefit would
justify.
2
A second example is O’Neil v. Crane Co. (2012) 53 Cal. 4th
335 (O’Neil). Amazon relies on O’Neil, but that decision
contradicts Amazon’s argument.
The key feature about the O’Neil case was that defendant
Crane made valves but was being sued for replacement asbestos
gaskets Crane did not make. When workers refurbish an old
15
leaky valve, they predictably put new replacement gaskets in the
valve. But the O’Neil decision held valve maker Crane owed no
tort duty, either in negligence or strict liability, to people
repairing its valves who breathed dust from the replacement
asbestos gaskets Crane did not make. (O’Neil, supra, 53 Cal.4th
at p. 342.)
Crane could foresee workers repairing its valves would use
asbestos gaskets made by other companies. (O’Neil, supra, 53
Cal.4th at p. 342.) So why did Crane have no tort duty? Because
the Supreme Court said the cost of imposing this duty on one
firm to warn of dangers from products from other manufacturers
would outweigh the benefit of resulting injury reductions. This
duty would be tremendously and ineffectively overbroad: like
requiring “match manufacturers to warn about the dangers of
igniting dynamite.” (Id. at p. 361.) But when every firm must
warn everybody about everything, the costly exercise does no
good. “ ‘To warn of all potential dangers would warn of nothing.’ ”
(Id. at p. 363, quoting Andre v. Union Tank Car Co., Inc. (1985)
213 N.J. Super. 51, 67 [516 A.2d 277, 286].)
O’Neil’s cost-benefit analysis meant the court refused to
impose a tort duty where it would be socially irrational to do so.
Crane did not control the marketing of gaskets made by other
firms. Amazon, by contrast, completely controls its river. There
is nothing socially irrational or ineffectively redundant about
making Amazon strictly liable for accidents from products bought
from its website.
3
The same principle governed Peterson v. Superior Court
(1995) 10 Cal. 4th 1185, 1188–1189 (Peterson), which ruled land
and hotel owners are not strictly liable for injuries to their
16
tenants and guests caused by an unknown defect in the premises.
The owners remained liable in negligence; injured guests
retained a strict liability action against the manufacturer,
distributors, and retailers of the allegedly defective products.
But to extend the strict liability duty to land owners for unknown
defects owners did not create and could not discover through a
reasonable inspection would mean imposing costly duties without
a compensating benefit in accident reduction. “A landlord or
hotel owner, unlike a retailer, often cannot exert pressure upon
the manufacturer to make the product safe and cannot share
with the manufacturer the costs of insuring the safety of the
tenant, because a landlord or hotel owner generally has no
‘continuing business relationship’ with the manufacturer of the
defective product. . . . ‘The cost of insuring risk will not be
distributed along the chain of commerce but will probably be
absorbed by tenants who will pay increased rents.’ ” (Id. at p.
1199.) “Because of the practical impossibility of obtaining expert
knowledge of all the components of an apartment, landlords must
rely on others for their safe manufacture, installation and repair.
In this respect, landlords are in no better position to know of
defects than are tenants.” (Id. at p. 1209.)
By contrast, Amazon is in a better position than its
customers to learn of and to combat defects in products on its
website.
4
Parsons v. Crown Disposal Co. (1997) 15 Cal. 4th 456
(Parsons) is conceptually similar to O’Neil and Peterson. Darrell
Parsons was riding his horse on an urban bridle path when a
truck noisily lifted a nearby trash bin. The crashing sound made
the horse bolt, throwing Parsons to the ground. (Id. at p. 462.)
17
Parsons sued the trash company. The Supreme Court ruled the
company owed Parsons no tort duty. The Supreme Court used a
“social utility analysis” to evaluate accident avoidance measures
the trash company could have taken: “changing the hours of
collection, temporarily ‘blocking off’ the area with warning cones
or tape, posting warning signs, providing riders with a schedule
of collection times, or a combination of these methods.” (Id. at p.
474.) The court rejected Parsons’s proposals because they would
increase “the burden on machine operators over what was
considered reasonable.” (Ibid.) These precautions “unreasonably
would impair the utility” of the trash company, which ran a
business “of high social utility.” (Ibid.) And imposing these
duties on the trash company would imply similar restrictions on
a wide “range of socially useful activities that may produce such
noises and provoke such fright.” (Id. at pp. 474–475.)
The Supreme Court illustrated its cost-benefit analysis
with commonsense examples:
“Should a homeowner whose property abuts this extensive
bridle path (or who has horse-owning neighbors) be obligated to
peek over his or her six-foot fence to make sure that no horse is
near before starting a power lawn mower? Should he or she be
required somehow to keep a constant lookout while mowing the
lawn, lest he or she frighten a horse that approaches shortly after
lawn mowing begins? Should a homeowner or building contractor
be obligated to undertake similar procedures before and during
use of chain saws, leaf blowers, or other loud power tools? What
about noise from passing cars and trucks on the adjacent
highways, or from a picnicker’s radio, or from an emergency siren
or alarm, or from a jetliner’s sonic boom? We conclude that
imposing a duty in the present case to guard against fright to a
18
horse might well subject all manner of actors to the same duty
and potential liability, with obvious and detrimental
consequences stifling to the community.” (Parsons, supra, 15
Cal.4th at p. 475, emphasis in original.)
In short, this seat-of-the-pants cost-benefit analysis showed
the accident avoidance Parsons had proposed for the trash
company was not worth its cost. These proposed safety measures
were just as obviously inefficient as lookouts on 1919 trucks to
see if the coal-oil lamp was still lit. (Cf. Grady, The American
Negligence Rule (2019) 53 Val.U. L.Rev. 545, 576 [Parsons
basically held the untaken precautions “flunked the Learned
Hand formula”].)
When accident avoidance will be costly and ineffective, the
Supreme Court refuses to burden defendants with tort duties.
Amazon loses under this rule, for it can take cost-effective actions
to minimize the cost of accidents. Indeed, it claims it already
does.
The same rule explains the lower court California cases on
which Amazon relies. These Court of Appeal decisions concern
two situations: secondhand dealers and finance lessors. We treat
each in turn.
5
The secondhand dealer cases declined to impose a duty in
strict liability because the dealers were unable to take cost-
effective measures to minimize accidents from the secondhand
machines they sold.
Wilkinson v. Hicks (1981) 126 Cal. App. 3d 515 (Wilkinson)
is representative. Robert Wilkinson injured his hand operating a
50-year-old Niagara punch press at the Mac Smith Company.
Benmatt Industries owned the press for many years. Then
19
defendant Roy Hicks, a dealer in secondhand industrial
machinery, bought it from Benmatt and sold it “as is” to Mac
Smith Company. Wilkinson sued Hicks, but the trial court
disallowed the strict liability claim. Only the negligence action
went to the jury, which ruled against plaintiff Wilkinson. (Id. at
pp. 516–519.)
On appeal, the court affirmed secondhand dealer Hicks
owed no strict liability duty to Wilkinson. Imposing strict
liability on secondhand dealers would require them “routinely to
dismantle, inspect for latent defects, and repair or recondition
their products.” (Wilkinson, supra, 126 Cal.App.3d at p. 521.)
That rule “would effect a radical change in the nature of the used
product market, which would deprive that market of [its]
desirable flexibility.” (Ibid.) The proposed rule would make used
goods dealers the insurers of the goods they sold. (Ibid.) This
would increase the prices of secondhand goods. (Id. at p. 520.)
In a nutshell, plaintiff Wilkinson proposed requiring
secondhand dealers to take expensive safety measures:
dismantling, inspecting, repairing, and granting a mandatory
warranty. The court, quite reasonably, was not convinced these
steps were cost-effective in light of the existing strict liability
duties on the original manufacturer and its original distribution
network. Wilkinson’s proposed safety measures were too
expensive and ineffective to be socially desirable. So Hicks owed
no strict liability duty to Wilkinson. (Accord, Brejcha v. Wilson
Machinery, Inc. (1984) 160 Cal. App. 3d 630; Tauber–Arons
Auctioneers Co. v. Superior Court (1980) 101 Cal. App. 3d 268.)
In contrast, the measures Amazon can take to minimize the
cost of accidents are cost-effective and socially efficient.
20
6
The same principle guided the finance lessor decision in
Arriaga v. CitiCapital Commercial Corp. (2008) 167 Cal. App. 4th
1527. Guillermo Arriaga suffered a work injury while operating
a glue spreader machine. Black Bros. manufactured the glue
spreader and sold it to Klors, which resold it to CitiCapital
(actually, its predecessor, which we ignore), which leased it to
AVP, which sold it to Orepak, which employed Arriaga. (Id. at
pp. 1532–1533.) The injured Arriaga sued many parties,
including CitiCapital. The court analogized CitiCapital’s role to
that of a bank that loaned purchase money to AVP. (Id. at p.
1536.) The court refused to put a duty of strict liability on
CitiCapital in part because the court could not see what
CitiCapital might do to “enhance product safety.” (Id. at p. 1537.)
“[T]he finance lessor is not in any position to either directly or
indirectly exert pressure on the manufacturer to enhance the
safety of the product.” (Id. at p. 1538; see also ibid. [“the finance
lessor does not have control over, or a substantial ability to
influence, the manufacturing or distribution process”]; id. at 1539
[“the finance lessor’s relationship with a particular manufacturer
does not, in the normal course, possess the continuity of
transactions that would provide a basis for indirect influence over
the condition and safety of the product”].)
In short, there was no action, let alone any cost-effective
action, the finance lessor could take to reduce the likelihood of
glue spreader accidents. The Arriaga court thus refused to
impose tort duties on the finance lessor. The contrast with
Amazon’s situation is obvious.
*******
21
Amazon’s citations thus offer it no support. All involve
defendants who, unlike Amazon, had no cost-effective way to
reduce the costs of accidents.
This case is easy. Amazon is well situated to take cost-
effective measures to minimize the social costs of accidents.
Strict liability will prompt this beneficial conduct. Loomis wins
this appeal. The case will return to the trial court for resolution
of issues the appeal has not addressed.
WILEY, J.
22