A recent 4–3 majority decision [1] from the Louisiana Supreme Court exposes market intermediaries to potential liability for damages caused by products sold by sellers using their platform. In June 2024, the Louisiana Supreme Court answered two certified questions from the United States District Court for the Western District of Louisiana concerning the liability facing online marketplaces when a product sold on their platform by a third-party causes damage. [2] The Court answered two questions: (1) if an online marketplace operator constitutes a “seller” under the Louisiana Products Liability Act (“LPLA”) and (2) whether an online marketplace operator can be liable under a theory of negligent undertaking. [3]
Plaintiff Archie Pickard (“Pickard”) purchased a battery charger on amazon.com that was sold by a third-party seller identified as “Jisell”.[4] Pickard died when the charger malfunctioned, causing a fire in his home. Jisell sold the charger on Amazon and, specifically, utilized Amazon’s service known as “Fulfillment by Amazon” in which a seller’s products are sent to a warehouse operated by Amazon for storage and processing.[5] After receiving a customer’s order, Amazon retrieves the product and delivers it to the buyer.[6] Importantly, the ownership of products such as the battery charger that are sold through “Fulfillment by Amazon” does not transfer to Amazon, but remains with the seller at all times.[7]
Generally, the LPLA only applies to manufacturers.[8] However, the LPLA’s scope extends to sellers in two instances: (1) the seller exercises control over a characteristic of the product’s design, construction, or quality; or, (2) the seller operates as a manufacturer’s alter ego in importing and distributing a foreign manufacturer’s product.[9] The Pickard court found that Amazon was a “seller” as it took “physical custody of the product . . . and controlled the process of the transaction and delivery”.[10]
Turning to the second question, the Court referenced its prior decision in Bujol v. Entergy Services, Inc., applying § 324A of the Restatement of Torts Second as the proper test for determining whether an online marketplace operator is liable for a claim of negligent undertaking.[11] To assert such a claim, a defendant must assume a duty by an affirmative or positive undertaking.[12] Upon such a showing, a defendant is liable for a negligent undertaking if one of the following scenarios applies: (1) a change in conditions increased the risk of harm over the level of risk existing prior to the defendant’s involvement; (2) the defendant’s undertaking supplants, not just supplements, another’s duty; or (3) the harm is suffered because of reliance by the plaintiff on the defendant’s undertaking.[13] Ultimately, the Court referred a determination on whether the facts supported Pickard’s claim for negligent undertaking to the trial court.[14]
Following the Louisiana Supreme Court’s decision in Pickard, marketplace operators should carefully consider their conduct and address whether they are stepping into the shoes of a seller and in turn a manufacturer. Pickard opens the door for applications of the LPLA to parties, such as marketplace operators, that are not colloquially thought of as product sellers. But all is not lost on marketplace operators because there are numerous legal tools in the toolbox via La. R.S. § 2800.53(1)(b) and (d) as explained in the Bujol case. These tools can curtail potential liability and allay some of those fears.
[1] Justice Crain authored the majority opinion with Justices Hughes, Genovese, and McCallum dissenting.
[2] Pickard v. Amazon.com, Inc., 2023-CQ-01596 (6/28/24), 387 So.3d 515.
[3] Id. at 517.
[4] Id. at 518.
[5] Id.
[6] Id.
[7] Id.
[8] La. R.S. 9:2800.52. “This Chapter establishes the exclusive theories of liability for manufacturers for damage caused by their products.”
[9] La. R.S. 9:2800.53(1)(b) and (d). The full text of subsection (d) states “A seller of a product of an alien manufacturer [is a manufacturer] if the seller is in the business of importing or distributing the product for resale and the seller is the alter ego of the alien manufacturer. The court shall take into consideration the following in determining whether the seller is the alien manufacturer’s alter ego: whether the seller is affiliated with the alien manufacturer by way of common ownership or control; whether the seller assumes or administers product warranty obligations of the alien manufacturer; whether the seller prepares or modifies the product for distribution; or any other relevant evidence.”
[10] 387 So.3d at 523 (citing La. R.S. 9:2800.53(2)).
[11] Id. at 526 (citing Bujol v. Entergy Servs., Inc., 2003-0492 (La. 5/25/04), 922 So.2d 1113); Restatement (Second) of Torts § 324A).
[12] Id. at 525 (citing Bujol, 922 So.2d at 1129).
[13] Id. (citing Bujol, 922 So.2d at 1135, 1136, 1148).
[14] Id. at 526 (citing La. S.Ct. Rule XII, § 8; La. R.S. 72.1A; Wightman v. Ameritas Life Ins. Corp., 22-0364 (La. 10/21/22), 351 So.3d 690, 693).