Products Liability Law Daily Amazon can be held liable for defective product sold by third party through the online retailer’s website
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Wednesday, July 24, 2019

Amazon can be held liable for defective product sold by third party through the online retailer’s website

By David Yucht, J.D.

Amazon.com, Inc. did not merely provide a marketplace for a third-party seller, the online retailer’s involvement in the sale of a malfunctioning faucet adapter was such that the company could be strictly liable for damages caused by the product in the absence of jurisdiction over the product’s manufacturer.

Amazon.com, Inc. (Amazon) can be held liable under Wisconsin product liability law for a product sold by a third party through its website, Amazon.com, according to a federal district court in Wisconsin. Therefore, the court denied Amazon’s summary judgment motion aimed at dismissing a property damage-strict liability case filed by an insurance company that had paid an Amazon consumer’s damages claim. Moreover, the Communications Decency Act (CDA) did not immunize the online retail giant from liability because the insurance company did not seek to impose liability on Amazon merely because it posted third-party content on its website (State Farm Fire and Casualty Co. v. Amazon.com, Inc., July 23, 2019, Peterson, J.).

Amazon operates the massive online retail website Amazon.com, through which it sells its own products and also provides a platform for more than a million third-party sellers. Amazon provides payment processing for its third-party sellers and it guarantees both timely delivery of products sold by third-party sellers and that the product will arrive in the condition described on the website. If a product is damaged, defective, or materially different than as originally listed, then the buyer can ask the third-party seller for a refund. But if the third-party seller does not respond, then the buyer can return the product directly to Amazon, which will process the return and refund the purchase price and cost of shipping. Under its "Fulfillment by Amazon Program" (FBA) (which applied to this case), third-party sellers pay Amazon a fee to store their inventory at Amazon fulfillment centers in the United States and to ship products to buyers. For the FBA program, Amazon requires that sellers register each product they sell, and Amazon reserves the discretionary right to refuse registration for any product. Amazon also requires sellers to indemnify it for injury and property damage.

The consumer in this case bought a bathtub faucet adapter from a third-party seller on Amazon.com. The adapter malfunctioned and the consumer’s home, which was insured by State Farm Fire and Casualty Company, flooded. State Farm paid to repair the home, and then sued Amazon for strict product liability. The third-party seller was a Chinese company with no presence in the United States and, therefore, was not amenable to personal jurisdiction in Wisconsin. Claiming that it was not a "seller" or "distributor" as defined by Wisconsin law and that it was not liable for third-party content on its website under the CDA, Amazon moved for summary judgment.

Supply chain liability. The court ruled that, under Wisconsin product liability law, Amazon could be held liable for a product sold by a third party through Amazon.com. Consequently, the court denied the online retailer’s motion. Under Wisconsin law, one can recover from a seller or distributor of a defective product if the seller or distributor undertook the manufacturer’s duties, or the manufacturer either is unavailable or is judgment-proof. In determining whether Amazon was a "seller" or "distributor," the court noted that Wisconsin’s product liability statute makes the manufacturer the preferred target of liability, and neither sellers nor distributors are liable for product defects if a manufacturer can be sued in Wisconsin. Sellers and distributors are liable, not because of their own activity, but because they are proxies for absent manufacturers. This statutory scheme suggested to the court that, in the absence of the manufacturer, the entity responsible for getting a defective product into Wisconsin should be liable. The court noted that, here, Amazon did not merely provide a marketplace where third-party sellers sold merchandise to Amazon customers. Amazon was so deeply involved in this transaction that Wisconsin law would treat Amazon as an entity that would be strictly liable for the faucet adapter’s defects, if, as in this case, the manufacturer could not be sued in Wisconsin.

Communications Decency Act. The court also determined that the CDA does not immunize Amazon from liability because State Farm did not seek to impose liability on the online retailer merely because it posted third-party content on its website. The CDA immunizes "interactive computer services" from any claim that treats a defendant as "the publisher or speaker" of third-party content. Amazon argued that it was entitled to CDA immunity because the product description for the defective adapter was written by and provided to Amazon by the third-party seller. According to the court, State Farm was not seeking to treat Amazon as the publisher of the product description; nor was the insurance company attempting to hold Amazon liable for the product description at all. Rather, the insurer was seeking to hold Amazon liable for putting a defective product into the stream of commerce. The court held that this was not activity immunized under the CDA.

The case is No.18-cv-261-jdp.

Attorneys: Teirney S. Christenson (Yost & Baill, LLP) for State Farm Fire and Casualty Co. Travis Evan Romero-Boeck (Quarles & Brady LLP) for Amazon.com, Inc.

Companies: State Farm Fire and Casualty Co.; Amazon.com, Inc.

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