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Federal Appeals Court Rules On-Line Shoppers Can Hold Amazon Liable for Dangerous Products

Posted July 24, 2019

[Editor’s Note: Products liability law developed because courts decided that it made sense for product sellers to bear the costs of injuries caused by the products they sold.  In this post, Law Clerk Mark Nemr reports on a recent Federal Court decision addressing whether Amazon can be liable as the “seller” of a product.  Jon Karon]

By Mark Nemr

A recent United States Court of Appeals opinion may have provided thousands of online shoppers with legal recourse for defective products.  On July 3rd, 2019, the 3rd Circuit decided in Oberdorf v. Amazon.com Inc. that the multi-billion-dollar online shopping company Amazon could no longer hide behind its identity as an online marketplace for third-party vendors.  Essentially, the Appeals Court decision came down to whether or not Amazon could be considered a “seller” under Pennsylvania’s strict liability laws.

The case involved a woman named Heather Oberdorf who purchased a dog collar through Amazon.  The dog collar was sold by a third-party vendor, “The Furry Gang.”  The collar was shipped to Ms. Oberdorf from The Furry Gang.  While Ms. Oberdorf was walking her dog, the D-ring on the collar broke and the leash was flung back, hitting Ms. Oberdorf in her left eye resulting in permanent blindness.

Ms. Oberdorf sued Amazon in the United States District Court for the Middle District of Pennsylvania, bringing claims for strict product liability, negligence, breach of warranty, and loss of consortium.  Amazon denied these claims asserting that it could not be sued under Pennsylvania’s strict products liability law because it was not the “seller” of the dog collar.  Rather, Amazon claimed to be an “online marketplace” for third-party vendors.   The District Court agreed and granted judgment in Amazon’s favor.  The Federal Appeals court reversed the holding.

In order to determine whether Amazon should be considered a seller, the Appeals Court considered four factors:

  1. Whether the actor is the “only member of the marketing chain available to the injured party for redress”;
  2. Whether “imposition of strict liability upon the actor serves as an incentive to safety”;
  3. Whether the actor is “in a better position than the consumer to prevent the circulation of defective products”; and
  4. Whether “the actor can distribute the cost of compensating for injuries resulting from defects by charging for it in his business…”.

After considering these factors, the Court determined that Amazon exerted “substantial control over third-party vendors” and their products and that it could remove unsafe products from its website.  Because Amazon dealt directly with customer complaints, it was found to be in a better position than third-party vendors to “prevent the circulation of defective products.”  The Court found that Amazon exerted “substantial market control over product sales by restricting product pricing, customer service, and communication with customers.”  For these reasons, the Court found Amazon strictly liable for consumer injuries caused by defective goods purchased on their website.

As the world’s most valuable retail company, this ruling could leave Amazon vulnerable to a number of lawsuits.  About half of the items sold on Amazon’s website are that of third-party vendors and account for more than 18% of the company’s sales.  This decision could affect how Amazon deals with retailers with respect to Amazon’s Services Business Solutions Agreement, which governs how Amazon displays and sells third-party vendor products.  Before this ruling, Amazon was classified as an online marketplace, forcing consumers to go after the third-party vendors in the event of a defective product.  Absent a successful appeal to the Supreme Court, this ruling will provide online shoppers with an extra blanket of security knowing that they have legal recourse available against Amazon in the event of a dangerously defective product.

 

Sources:

https://www.law.com/thelegalintelligencer/2019/07/03/amazon-may-be-sued-in-products-liability-cases-stemming-from-third-party-vendor-sales-3rd-circ-rules/?slreturn=20190623102738

https://arstechnica.com/tech-policy/2019/07/amazon-on-the-hook-for-third-party-goods-that-cause-injury-federal-court-says/

Oberdorf v. Amazon.com Inc., 2019 WL 2849153 (2019)

 


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