Third Circuit Rules That Amazon is a "Seller" and Can Be Strictly Liable for Product Defect
The Third Circuit in an interesting new case, reversed a district court’s grant of summary judgment for Amazon finding that the on-line retailer could be strictly liable for products liability because it qualified as a “seller” of a defective dog leash under Pennsylvania law. The court also reversed a finding that Section 230 of the Communications Decency Act (“CDA”) barred other claims against Amazon, and said that the giant retailer could be liable if it was an “actor” in the sales process and not just acting as a publisher of the third-party seller’s content. The court expressly found that under Pennsylvania law an actor need not hold the title to the property to be considered a seller. This is important as many cases ruling in favor of Amazon in similar contexts have based their rulings on the concept that since Amazon doesn’t hold title to the products it cannot therefore be a seller.
In analyzing the case and finding that Amazon could be strictly liable the court applied a four-factor test and found all four factors weighed in favor of holding Amazon liable:
(1) Whether the actor is the “only member of the marketing chain available to the injured plaintiff for redress”; The court found this factor present as the third-party seller who sold the defective product could not be found by Amazon or by the Plaintiff.
(2) Whether “imposition of strict liability upon the [actor] serves as an incentive to safety”; The court found that “although Amazon does not have direct influence over the design and manufacture of third-party products, Amazon exerts substantial control over third-party vendors. Third-party vendors have signed on to Amazon’s Agreement, which grants Amazon “the right in [its] sole discretion to . . . suspend, prohibit, or remov[e] any [product] listing,” “withhold any payments” to third-party vendors, “impose transaction limits,” and “terminate or suspend . . . any Service [to a third-party-vendor] for any reason at any time.” Therefore, Amazon is fully capable, in its sole discretion, of removing unsafe products from its website.”
(3) Whether the actor is “in a better position than the consumer to prevent the circulation of defective products”; Here the court reasoned that “while Amazon may at times lack continuous relationships with a third-party vendor, the potential for continuing sales encourages an on-going relationship between Amazon and the third-party vendors.” The court also found that “Amazon is uniquely positioned to receive reports of defective products, which in turn can lead to such products being removed from circulation. Amazon’s website, which Amazon in its sole discretion has the right to manage, serves as the public-facing forum for products listed by third-party vendors. In its contract with third-party vendors, Amazon already retains the ability to collect customer feedback.” Finding third-party vendors “ill-equipped to fulfill this function, because Amazon specifically curtails the channels that third-party vendors may use to communicate with customers” the court found Amazon in a better position than the consumer to prevent circulation of the defective products.
(4) Whether “[t]he [actor] can distribute the cost of compensating for injuries resulting from defects by charging for it in his business, i.e., by adjustment of the rental terms.” The court found this factor weighed in favor of holding Amazon liable as Amazon includes provisions in all of its contracts with its third-party sellers, which require the sellers to indemnify Amazon.
With regard to the CDA argument, the court explained that “unlike the first issue, this is a question of federal law” and concluded that “the CDA bars some, but not all, of Oberdorf’s claims”. According to the court, “[t]he CDA states, in relevant part, that “[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 . . .” and that the CDA “bars lawsuits seeking to hold a service provider liable for its exercise of a publisher’s traditional editorial functions—such as deciding whether to publish, withdraw, postpone, or alter content.” The court explained that the “CDA is intended to allow interactive computer services companies “to perform some editing on user-generated content without thereby becoming liable for all defamatory or otherwise unlawful messages that they didn’t edit or delete.” The court went on “to the extent that Oberdorf is alleging that Amazon failed to provide or to edit adequate warnings regarding the use of the dog collar, we conclude that that activity falls within the publisher’s editorial function. That is, Amazon failed to add necessary information to content of the website. For that reason, these failure to warn claims are barred by the CDA. However, because the District Court did not parse Oberdorf’s claims in order to distinguish between “failure to warn” claims and claims premised on other actions or failures in the sales or distribution processes, we will vacate its holding that Oberdorf’s claims are barred by the CDA.”
In remanding the issue back to the trial court for additional analysis, the Third Circuit disagreed that all of Oberdorf’s claims sought to treat Amazon as the publisher or speaker of information provided by another information content provider. The court found that “Amazon is a “seller” of products on its website, even though the products are sourced and shipped by third-party vendors” and that “Amazon’s involvement in transactions extends beyond a mere editorial function; it plays a large role in the actual sales process.“ The court ruled that “to the extent that Oberdorf’s claims rely on allegations relating to selling, inspecting, marketing, distributing, failing to test, or designing, they pertain to Amazon’s direct role in the sales and distribution processes and are therefore not barred by the CDA safe harbor provision.”
In bringing claims against Amazon relating to sales on its website, litigants would do well to hi-light what role Amazon played in the sales process and to focus allegations on Amazon’s role in “selling, inspecting, marketing, distributing, failing to test, or designing” to ensure getting around Section 230 of the Communications Decency Act.
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