- Federal Court Rules Amazon Can Be Held Liable for Third Party Sellers’ Products
- New Ruling Finds eCommerce Platform Liable for Third Party Seller Products
- Amazon’s Acceptance of “Any” Vendors Opened Door to Complaints and Liability for Third Party Sellers
- How Third Party Vendors on Amazon Are Seemingly Allowed to Cause Brand Infringement
- Third Party Seller Product Liability and the Law
- Third Circuit Court Finds Amazon Liable for Third Party Sellers Due to Creating an Enabling Environment
- ANALYSIS: Amazon’s ‘Pivotal’ Role May Hinder Liability Defense
- The New Shopping Cart
- Old Principles, ‘New Transaction’
- Who Is Responsible?
- Products Liability Lawsuit Against Amazon Has Settled, Mooting Pa. Supreme Court Argument | The Legal Intelligencer
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- The Plaintiff Appeals to the Third Circuit Court
- Amazon Rushes to Settle the Case Before Supreme Court Weighs In
Federal Court Rules Amazon Can Be Held Liable for Third Party Sellers’ Products
A federal court passed down a blockbuster ruling last week, holding that e-commerce giant Amazon can be held liable for third party sellers’ products, effectively allowing Amazon to be held liable for defective products sold by third party vendors via the Amazon marketplace.
New Ruling Finds eCommerce Platform Liable for Third Party Seller Products
Departing from the ruling of other federal courts that had previously held that Amazon could not be held liable, the 3rd Circuit Court of Appeals in Philadelphia reversed a previous ruling, thus becoming the first circuit court to rule against Amazon.
With this holding, Amazon could be facing a myriad of lawsuits soon as approximately half of the goods currently sold on Amazon come from third party vendors.
In the past few years, Amazon has faced increasing criticism from consumers over Amazon’s decision to open the marketplace to Chinese vendors as the website immediately became filled with third-party vendors that sold cheap goods that were often found to be either counterfeit or defective.
Amazon’s Acceptance of “Any” Vendors Opened Door to Complaints and Liability for Third Party Sellers
As Amazon increasingly ceded ground to third-party sellers, it was not only consumers that complained. Other third-party vendors also began to complain that they were constantly being undercut by copycat sellers that sold copies of their goods that were both cheaper and of lesser quality.
As a consequence, these vendors often ended up with reviews that negatively affected their brand when the complaining consumers had not even purchased the products from the true vendor.
Moreover, these vendors complained that even if Amazon shut down the copycat accounts, new accounts engaging in the same behavior were up within a matter of days, sometimes within hours.
As a result, many authentic brands have pulled their goods from Amazon, increasingly leaving consumers with access to only counterfeit goods or goods of less quality overall. It’s no wonder a court would find Amazon to have liability for third party sellers’ products causing harm in the marketplace.
How Third Party Vendors on Amazon Are Seemingly Allowed to Cause Brand Infringement
For instance, if a consumer searches for SPANX®, a famous trademarked brand of shapewear, the search query will return hundred of hits for SPANX® products at considerably lower prices, sometimes more than 50% cheaper, than SPANX® sells for identical products on its own website. If a potential consumer looks at the reviews, many complain that the products lack true packaging, seemed used, and are of poor quality.
Despite this, however, Amazon allows the vendor goods to be marked as SPANX® and links the SPANX® vendor link to a storefront that uses SPANX® with the federal registered ® symbol. Similarly, other confusing storefronts exist for famous brands without any true vetting from Amazon that ultimately may mislead or confuse consumers over who the true source of the goods is.
Third Party Seller Product Liability and the Law
While product liability is generally governed by state law, a significant amount of lawsuits against Amazon have often found their way to federal courts because more and more consumers have appealed to the federal courts to find recourse. As the third party vendors often close shop and disappear when sued, leaving both Amazon and consumers without any trace of their whereabouts, consumers have appealed to federal courts for help.
Third Circuit Court Finds Amazon Liable for Third Party Sellers Due to Creating an Enabling Environment
In the 3rd Circuit decision, the court held that because Amazon’s business model specifically enables third party vendors to essentially conceal their true identities from consumers, third party sellers have been able to sell defective, dangerous, and counterfeit goods without any type of quality control or oversight. As such, because many consumers have been injured (e.g., blinded, house burnt down, etc.) without any sort of recompense, the 3rd Circuit decided that Amazon should be open to liability for injury caused by these third party vendors on its marketplace platform.
While this ruling finding Amazon liable for third party sellers’ products marks a significant victory for consumers and authentic brand owners a, only time will tell whether other circuit courts, and perhaps one day the Supreme Court, will rule in the same favor.
ANALYSIS: Amazon’s ‘Pivotal’ Role May Hinder Liability Defense
Amazon is facing a web of product liability claims after products purchased via its online marketplace are alleged to have caused harm. Although the online giant generally has been successful at fending off strict liability claims to date, a recent California appellate decision could breathe new life into plaintiffs’ claims across the country.
The California court determined that Amazon played an “integral part” in getting the allegedly defective product to the consumer.
That analysis may make it harder for other courts to ignore public policy arguments favoring the imposition of liability, and harder for them to rely on dictionary definitions when deciding whether Amazon is a “seller” or “supplier” of third-party goods.
While those terms are important when seeking to impose strict liability under state doctrines, they come from an era when traditional brick-and-mortar sales were the norm, not e-commerce.
The recent decision also is an example of how the law must evolve along with real life, as ubiquitous, global e-commerce has made archaic definitions of sellers and suppliers obsolete and left consumers without the protections that product liability law intended.
The New Shopping Cart
Most are familiar with Amazon’s website, which has become even more vital to many during the pandemic as social distancing measures remain in place for the foreseeable future.
Casual jaunts to the store are a thing of the past for many and have been replaced by even more Amazon home deliveries.
But what happens when a product ordered through Amazon is defective? The short answer is it depends on how state strict liability laws are interpreted.
Pending cases against Amazon allege injuries or damages such as burns from an exploding laptop battery, internal injuries from a toddler swallowing a button battery, the death of a high school student after ingesting caffeine powder, blindness from a defective dog collar, and fires from overheated hoverboards. Some of these products originated from foreign manufacturers or suppliers that, without access to Amazon’s marketplace, may not have reached these customers.
Plaintiffs have argued public policy considerations support holding Amazon, a known U.S. entity, accountable for its overarching role in e-commerce. But such arguments have not fared well overall, running headlong into legal definitions of “seller” and “supplier” developed for brick-and-mortar relationships that are increasingly rare.
Amazon generally has successfully argued that it does not meet the definition of a supplier or seller under state law, so it is not subject to strict liability.
Old Principles, ‘New Transaction’
In Bolger v. Amazon.com Inc., the plaintiff bought a replacement laptop battery from Amazon that was sold by third-party Lenoge Technology (HK) Ltd. The battery exploded and allegedly burned Bolger.
To determine whether the doctrine of strict liability applied to Bolger’s injuries, the California Court of Appeal, Fourth District, said it must review the underlying principles to determine if the doctrine applies to a “new transaction now in widespread use,” i.e., purchasing a product from a third-party seller via Amazon.
The court vacated the trial court’s entry of summary judgment in favor of Amazon, rejecting any argument that Amazon was a “mere bystander to the vast digital and physical apparatus it designed and controls.
” Regardless of the terminology used to describe Amazon’s role, the court said, the online giant “was pivotal in bringing the product here to the consumer,” and thus the strict liability doctrine should apply.
Who Is Responsible?
Bolger’s focus on public policy and Amazon’s “control over both the product at issue and the transaction that resulted in its sale” may influence other courts’ analyses, albeit according to each court’s state law framework.
For example, the Pennsylvania Supreme Court is now faced with deciding if Amazon is strictly liable for a third-party vendor’s defective product, which Amazon neither owned nor possessed. While the U.S.
Court of Appeals for the Third Circuit initially examined public policy factors similar to those reviewed in Bolger, and said Amazon was strictly liable for a dog collar that allegedly broke and damaged the plaintiff’s eye, that decision was vacated upon rehearing and the issue was then sent to the state’s high court for resolution. Bolger‘s assessment of Amazon’s control over third-party purchases may impact the Pennsylvania court’s analysis.
The same may be said of the Fifth Circuit’s analysis in reviewing whether the U.S. District Court for the Southern District of Texas properly concluded that Amazon is a “seller” under Texas’s strict liability statute and thus liable for claimed internal injuries to a 19-month-old girl who swallowed a button battery.
In Texas, a “seller” is “engaged in the business of distributing or otherwise placing, for any commercial purpose, in the stream of commerce for use or consumption a product or any component part thereof.
” Amazon may be hard-pressed to shirk the California appellate court’s determination of its integral role in its online marketplace.
In the case of an Ohio teen who died after allegedly ingesting caffeine powder, Bloomberg Law reported that oral arguments focused on the “otherwise participates in” language of the Ohio product liability statute.
That statute defines a supplier as one who “sells, distributes, leases, prepares, blends, packages, labels, or otherwise participates in the placing of a product in the stream of commerce.” Plaintiff’s counsel argued that “otherwise participates in” was added “because times change.
” The Ohio Supreme Court may find the Bolger court’s take on Amazon’s e-commerce business model persuasive.
Other cases in the Ninth Circuit where hoverboards allegedly caused damage and harm may also find it more challenging to accept Amazon’s arguments attempting to minimize its level of control over sales via its platform, especially where California law is concerned.
Now faced with an appellate court’s opinion taking into account how transactions have evolved online, we may see at least some courts wise conclude that public policy considerations support holding Amazon responsible for its role in creating the popular e-commerce marketplace. As these cases continue to progress, more and more courts must address how strict liability doctrines should be applied in the digital era.
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Products Liability Lawsuit Against Amazon Has Settled, Mooting Pa. Supreme Court Argument | The Legal Intelligencer
News Amazon Prime delivery box. Photo: Diego M. Radzinschi/ALM
Two months after the Pennsylvania Supreme Court agreed to consider whether online retail giant Amazon can be subject to a products liability lawsuit under Pennsylvania laws, the case serving as the vehicle for those arguments has settled.
According to the docket in the U.S. Court of Appeals for the Third Circuit, the lawsuit, captioned Oberdorf v. Amazon, has been dismissed upon agreement of the parties. The accord means that questions about whether online retailers can be sued in Pennsylvania for potentially defective products sold on their websites will ly not be answered any time soon.
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Amazon Skirts Potential Liability Precedent by Settling Personal Injury Case
In an unusual move, e-commerce giant Amazon has settled a product liability claim, paying the plaintiff an undisclosed amount for injuries she suffered because of an allegedly defective product purchased on the site.
The settlement brings to a close a case that was pending in the Pennsylvania Supreme Court and suggests the tide may be turning when it comes to Amazon’s liability.
In the past, Amazon has maintained that it is only a blameless advertising portal for other companies. Recent court decisions have challenged that position, however, with an increasing number of courts finding the company can be held liable for selling defective products without warning consumers about the risks.
Amazon’s Usual Argument Starting to Hold Less Sway
In December 2014, a Pennsylvania woman purchased a Dogaholics collar on Amazon from a third-party seller (The Furry Gang). A month later, she was walking her 70-pound dog when the ring on the collar broke. The retractable leash snapped back and hit her in the eye, breaking her eyeglasses and causing permanent vision loss in her left eye.
The woman tried to find information on The Furry Gang, but couldn’t, so she and her husband filed a personal injury lawsuit against Amazon. Amazon argued the plaintiff’s claims were barred under the Communications Decency Act (CDA), which shields companies from liability for publishing third-party information.
According to Amazon, since the company did not manufacture the product—it only provided a platform on which the third-party seller could advertise it—Amazon was not a “seller” under the law, but only a publisher of third-party content. Therefore, the company argued, it could not be held responsible for the plaintiff’s injuries. Amazon has used this same argument repeatedly and has largely escaped liability as a result.
The district court agreed with Amazon and in December 2018, granted the company summary judgment. “The Amazon Marketplace serves as a sort of newspaper classified ad section,” U.S. District Judge Matthew Brann wrote, “connecting potential customers with eager sellers in an efficient, modern, streamlined manner.”
The Plaintiff Appeals to the Third Circuit Court
The plaintiff appealed to the Third U.S. Circuit Court of Appeals (which serves Pennsylvania, New Jersey, Delaware, and the Virgin Islands), where her attorneys argued that Amazon was more than just a seller, and was involved in the sale process in its entirety.
The Third Circuit came back with a split vote 2-1 that Amazon was strictly liable for consumer injuries caused by defective goods purchased on Amazon.com.
In the majority opinion, Judge Jane Richards Roth wrote that Amazon’s involvement in transactions “extends beyond a mere editorial function; it plays a large role in the actual sales process.
” To the extent that the plaintiff’s claims relied on Amazon’s role as an actor in the sales process, she added, “they are not barred by CDA.”
The court later vacated that ruling and decided to rehear the case en banc—meaning that all of the judges (rather than just a select panel) would be present. In June 2020, the court decided to ask the Pennsylvania Supreme Court to review the case. The court agreed but never got the chance to share its opinions.
Amazon Rushes to Settle the Case Before Supreme Court Weighs In
Before the Supreme Court could weigh in, Amazon settled the case with the plaintiff. She told the Third Circuit Court on Wednesday, September 23, 2020, that the two parties had come to an agreement, putting an end to this case.
It seems clear that Amazon took this action to avoid a potentially dangerous precedent in Pennsylvania. Should the court have ruled in the plaintiff’s favor, it would have been much more difficult for Amazon to maintain its innocence where defective products are concerned.
Other verdicts, however, have already set change in motion. In September 2019, the U.S.
District Court for the Western District of Wisconsin denied Amazon’s motion for summary judgment in a case concerning an allegedly defective bathtub faucet adapter purchased on the site.
The court held that Amazon took on more than a peripheral role in putting the Chinese-manufactured product onto the U.S. market and that the CDA did not protect Amazon because its liability was not posting content from a third party.
In January 2020, in a case involving an allegedly defective remote control, the Southern District of Texas also found that Amazon could be a “seller” under state product liability statutes, noting that the company was integrally involved in and exerting control over the sales of third-party products.
In August 2020, a third court—the California state appeals court—found that Amazon played a pivotal role in every step of the purchase of an allegedly defective laptop battery, thus placing itself in the chain of distribution.
It stored the product in its warehouses, received payment, shipped the product, and set the terms of its relationship with the third-party seller.
“Under established principles of strict liability,” the court stated, “Amazon should be held liable if a product sold through its website turns out to be defective.”
Amazon stated it would appeal the decision.