Court Finds Amazon Strictly Liable as "Seller"'

Amazon.com is subject to strict liability as a “seller” for the purposes of products liability law, an appellate court has held. In Oberdorf v. Amazon.com Inc., a divided panel of the U.S. Court of Appeals for the Third Circuit found that Amazon is subject to strict products liability law claims because it is a “seller” under Pennsylvania law.

This ruling conflicts with rulings from other federal courts, all of which have found that Amazon was not a seller for products liability purposes under other states’ laws. The Third Circuit has agreed to hear the appeal en banc. ABA Section of Litigation leaders have conflicting opinions on the impact this ruling will have on Amazon and similar companies if it stands.

Amazon Sued by Person Hurt by Dog Collar

A woman bought a dog collar on Amazon.com that was being sold by a third-party vendor. Amazon processed the transaction and collected the money, and the vendor sent the product directly to the woman. The collar broke when the woman’s dog lunged while out for a walk, which caused the retractable leash to recoil back into her eye. She became permanently blind in her left eye from the accident.

The woman could not locate the third-party vendor, which no longer sold products on Amazon.com. Therefore, the woman brought a strict products liability claim against Amazon instead. The district court granted summary judgment in favor of Amazon, finding that Amazon was not a “seller” under Pennsylvania law.    

Third Circuit Becomes First Court to Find That Amazon Is a Seller

On appeal, the Third Circuit reviewed Amazon’s well-known business model: Through an on-line marketplace, Amazon sells its own products directly to consumers and also lists products from more than one million third-party vendors. A third-party vendor decides “which products to sell, the means of shipping, and product pricing.” After the third-party vendor provides information about the product, “Amazon formats the product’s listing on its website.” Third-party vendors sign contracts with Amazon that provide that Amazon has the “sole discretion” on formatting the listing, as well as the right in “sole discretion” to suspend, prohibit, or remove the listing.

Pennsylvania’s strict products liability law is based on the Restatement (Second) of Torts, § 402A, which provides that an actor can only be subject to strict liability for selling a defective product if he is a “seller . . . engaged in the business of selling such a product.” In order to determine if Amazon was a “seller,” the Third Circuit applied a four-part test previously adopted by the Pennsylvania Supreme Court. Applying this test, the court noted that customers can only communicate with third-party vendors through Amazon, which does nothing to confirm whether such vendors are even subject to legal process. The court believed this allowed third-party vendors to conceal themselves and often leave injured customers “with no direct recourse to the third-party vendor” who—like the third-party vendor in this case—can no longer be located.

The court further noted that Amazon exerts significant control over products because, among other things, it can remove a product listing at any time. Amazon’s sole control of the means of communication also put Amazon in a better position than a consumer to prevent the circulation of defective products. Finally, the court concluded that Amazon could distribute the costs of compensating for injuries, and that Amazon already has indemnification language in its agreements with third-party vendors, which should compel it to keep better track of such vendors.

Courts Have Rejected Strict Liability Claims in Other States

Amazon has prevailed on similar claims in the Fourth Circuit and the Sixth Circuit, as well as several district courts. The court noted that it had to apply Pennsylvania law, however, and not the laws from those other states. Thus, it “is of little consequence whether Amazon is a ‘seller’ for purposes of other states’ statutes, as each of those statutory schemes is based on distinct language and policy considerations.” The dissenting judge disagreed, noting that the Pennsylvania Supreme Court would consider relevant decisions from other jurisdictions, and that these “sources, including two federal appellate decisions so far, confirm what Pennsylvania law already makes clear. Amazon’s role in assisting a product’s sale does not make it that product’s ‘seller.’”

Section Leaders View the Potential Impact of This Decision Differently

Based on Amazon’s size and stature, as well as the conflict with rulings from other states, Section of Litigation leaders predicted en banc review. Those predictions were accurate, as en banc review has now been granted. Should the full Third Circuit reach the same conclusion as the panel did, Section leaders disagree about the potential impact of the decision. “This issue is state-specific, and this ruling is not a watershed moment for Amazon,” says Rudy R. Perrino, Los Angeles, CA, cochair of the Section’s Products Liability Litigation Committee. Instead, Perrino believes Amazon likely views this “as a one-off decision, which will not be repeated across the country for two reasons: it was limited to Pennsylvania law and the product seller could not be found.”

Other Section leaders disagree. “The opinion is very controversial and it could have a large impact on Amazon’s business model given the sheer volume of products they sell from third-party vendors,” says Tonya G. Newman, Chicago, IL, another cochair of the Products Liability Litigation Committee. A ruling from the en banc panel is expected in 2020.

*Note: An en banc decision is pending as of April 20, 2020.