Amazon’s Multi-Front War Against Products Liability Claims Marches On

Posted on September 13th, 2019 by Christopher J. SchroeckChristopher J. Schroeck

A flurry of decisions involving one of the most popular retailers in the world, Amazon.com, have made some fascinating products liability law in recent months.

In Ohio, Amazon faces litigation over the sale of caffeine powder to a teenager, who overdosed on the product and died.  In Stiner v. Amazon., the trial court granted summary judgment to Amazon, concluding that it was not a “supplier” of the product and therefore could not be held liable under the Ohio Products Liability Act.  The Court of Appeals of Ohio upheld this decision, reasoning that, because the product was merely sold on its website by a third party, Amazon was more akin to an auctioneer than a supplier.  Therefore, it had no duty to identify product defects.  The Ohio Supreme Court recently agreed to review this decision on appeal.

In the meantime, the 6th Circuit Court of Appeals decided Fox v. Amazon.com, Inc.¸ an appeal from a grant of summary judgment by the United States District Court for the Middle District of Tennessee.  The opinion is available here.  This fire case involved a hoverboard, again purchased from a third party through Amazons Marketplace program.  In Fox, the Court first rejected the premise that Amazon was a “seller” under the Tennessee Products Liability Act, because it never stored, shipped, or possessed the product.  The product was listed on Amazon’s website, but that did not provide it with enough control to create a duty to investigate its safety.  However, the 6th Circuit applied Restatement (Second) of Torts § 324A, which can create liability when one assumes a duty by taking action.  In December of 2015, Amazon sent out an email to customers warning them of problems with some hoverboards and linking to safety tips.  By the 6th Circuit’s reasoning, that email created a duty for Amazon to act with reasonable care in making that communication.  Because material issues of fact regarding that communication exist, the 6th Circuit reversed summary judgment on this claim. This is a troubling conclusion because it seems to create a disincentive to communicate safety hazards to consumers.

In Oberdorf v. Amazon, the Third Circuit weighed in on a similar issue.  A consumer purchased a retractable dog leash.  The leash failed while she was walking her dog, snapping back and blinding her in one eye.  The United States District Court for the Middle District of Pennsylvania granted summary judgment, holding that a third-party seller listed the product for sale on Amazon’s website, and Amazon had no duty to ensure the product’s safety.  Applying the factors set forth in Restatement (Second) of Torts §402A, the Third Circuit reversed.  It held that Amazon’s marketplace differed from many others in that it controlled every aspect of a customer’s transaction with a third party.  Third party sellers were not even permitted to communicate directly with consumers, which means Amazon received all of the customer complaints regarding third-party products listed on its site.  Amazon also took few, if any, precautions to ensure that third-party vendors were solvent or in good standing under the laws of their country.  As a result, often the actual seller of a product simply could not be found by a consumer seeking recourse.  In this very case the seller, “The Furry Gang”, could not be located.  Moreover, Amazon has significant power over manufacturers which would allow it to impose quality standards if it so desired, and in any case is capable of removing unsafe products from its website.  Based on the application of these factors, the Third Circuit held Amazon was a “seller” subject to strict liability claims under Pennsylvania law.  The Third Circuit has now agreed to reconsider this decision en banc.

Interestingly, the United States Court of Appeals for the Fourth Circuit reached the opposite conclusion in Erie Insurance Company v. Amazon while applying exactly the same law.  Maryland has also adopted Restatement (Second) of Torts §402A.  But the Fourth Circuit concluded Amazon was not a “seller” of a lantern which malfunctioned and caused a fire because a sale involves transfer of title, and Amazon never had title to the lantern.  Although Amazon had actually possessed the product and shipped it from one of its warehouses, it had always been owned by a third-party distributor.

This area of law is extremely unsettled, largely because much of Amazon’s business model is so unique.  In some cases, Amazon never even takes possession of products marketed on its website, simply listing products offered by third parties and taking a commission.  Many of those third parties are overseas and likely judgment-proof.  Amazon also has a “fulfillment by Amazon” model in which it takes physical possession of products for third parties, and ships them when ordered, but does not manufacture or take title to the items.  Determining, in each such circumstance, whether Amazon is a “seller” under the Restatement and relevant state statutes is a difficult and novel issue.  Amazon does not manufacture, design, or in many cases even possess the products at issue, so it makes little sense to hold it liable for their failure.  But the plaintiffs’ bar, seeing many products offered by judgment-proof third parties, obviously disagrees.  The en banc decision in Oberdorf and the Ohio Supreme Court’s decision in Stiner may provide some additional guidance.  If a circuit split remains, perhaps even the Supreme Court will get in on the action.