And The Liability Shield

Amazon Liability is the world’s largest online retail marketplace. In the subrogation world, it’s common knowledge that, in states that allow strict liability claims against entities in the supply chain, Amazon attempts to preclude any liability by arguing that it is not a “seller” of a product in question. Instead, Amazon has successfully argued that it only provides a platform for a buyer and seller to connect for the purchase of a product; therefore, it should not be subject to strict products liability.

However, in two recent decisions, this argument has failed. First, in Oberdorf v., Inc., 930 F.3d 136 (3rd Cir., July 3, 2019), the Third Circuit Court of Appeals found that Amazon should be liable under Pennsylvania law for injuries related to a failed dog collar. The District Court had initially dismissed the strict product liability claims against Amazon, finding that it is not a “seller” because a third-party vendor had listed the product on the Amazon website and had shipped the collar directly to the plaintiff. Unfortunately, the third-party vendor could not be located for the lawsuit.

In applying Pennsylvania law, the Third Circuit Court of Appeals reversed the decision, holding Amazon to strict liability. The court discussed four different factors that supported this decision:

  1. The parties could not locate the third-party vendor, therefore, “Amazon now stands as the only member of the marketing chain available to the injured plaintiff for redress;”
  2. The court found that the imposition of liability acts as an incentive for Amazon to remove unsafe products from its website;
  3. Amazon was in a better position than the consumer to prevent the circulation of defective products; and
  4. Amazon, through indemnification and vendor fees, can distribute the cost of compensating for defective products.

Likewise, in the latest decision on this issue, State Farm Fire and Casualty Co. v., Inc., 390 F.Supp.3d 964 (W.D. Wis., July 23, 2019), the U.S. District Court for the Western District of Wisconsin held that Amazon was a “seller” within Wisconsin’s strict product liability statute, in that a formal transfer of ownership was not necessary to hold an entity strictly liable for a defective product under Wisconsin law. The court found that Amazon was an integral part of the chain of distribution and was well-positioned to allocate the risks of an injury due to a defective product to participants in the supply chain.

It should be noted that these two decisions follow a May decision from the Fourth Circuit Court of Appeals, where, under Maryland law, Amazon was shielded from strict liability. In that case, Erie Insurance Co. v., Inc., 925 F.3d 135 (4th Cir. 2019), the court focused on whether Amazon ever possessed “title” to the product that caused property damage, whereby Amazon could have then transferred title to the consumer upon purchase. As the court decided that Amazon had never received “title” to the product (despite taking physical possession in storing the product until purchase, hosting the website where it was purchased, shipping the product after purchase, collecting money from the purchaser, and collecting a fee from the purchase price), Amazon was not a “seller” in terms of product liability law.

These decisions and the complexities of product liability law mean that it’s more important than ever to understand the laws of the jurisdiction where the injury occurred and what needs to be proven in a product liability case. If there are any questions related to a product failure, please contact Gary Wickert at [email protected] to discuss your options and how to most effectively recover your subrogation claim.