Products Liability Law Daily Pennsylvania high court asked to clarify application of §402 A to e-commerce businesses
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Wednesday, June 3, 2020

Pennsylvania high court asked to clarify application of §402 A to e-commerce businesses

By Pamela C Maloney, J.D.

The question of how Pennsylvania’s test for applying the Restatement (Second) of Torts §402 A should be applied to online marketplaces like Amazon was certified to the Pennsylvania Supreme Court.

Noting that e-commerce businesses presented a novel situation with regard to §402 A’s definition of "seller," the U.S. Court of Appeals for the Third Circuit certified the following question to the Pennsylvania Supreme Court: "under Pennsylvania law, is an e-commerce business, like Amazon, strictly liable for a defective product that was purchased on its platform from a third-party vendor, which product was neither possessed nor owned by the e-commerce business?" (Oberdorf v. Amazon.com, Inc., June 2, 2020, Smith, B.).

A consumer had purchased a dog collar sold by a third-party vendor on Amazon.com, an online marketplace on which Amazon retailed its own products along with those offered by third-party vendors. While taking her dog for a walk, the dog unexpectantly lunged, causing the D-ring on the collar to break and the leash to recoil back and hit the consumer’s face and eyeglasses. As a result, the consumer was rendered permanently blind in one eye. When neither Amazon nor the consumer were able to locate a representative of the third-party vendor, the consumer sued Amazon.com, claiming that the online retailer was strictly liable under the Restatement (Second) of Torts §402 A because it had facilitated and participated in the sale and distribution of the dog collar.

The district court dismissed the case, finding that Amazon was not subject to strict products liability claims because it was not a "seller" under Pennsylvania law [see Products Liability Law Daily’s December 22, 2017 analysis]. On appeal, a divided panel vacated the district court’s ruling, finding that under the four-factor test articled by the Pennsylvania Supreme Court for the application of §402A, Amazon was strictly liable for the consumer’s injuries [see Products Liability Law Daily’s July 8, 2019 analysis]. Amazon filed a petition for rehearing, which was granted.

Pennsylvania strict liability law. According to the Third Circuit, a review of Pennsylvania Supreme Court decisions revealed that there were two possible tests for determining whether §402A applied to a defendant. The first test involved a one-step analysis that requires a court to weigh four policy factors: (1) was the defendant the only member of the marketing chain available to the injured party for redress; (2) did imposition of strict liability serve as an incentive to safety; (3) was the defendant in a better position than the consumer to prevent circulation of the defective product; and (4) could the defendant distribute the costs of strict liability?

The second test followed a two-step analysis, which requires an initial determination of whether the defendant was in the business of selling the type of product at issue followed by the application of the four policy factors. If a defendant was not in the business of selling that type of product, then there was no need for a court to consider the four-factor test because strict liability was not applicable. The Third Circuit concluded that it was unclear whether the application of §402A involved a one- or two-step approach, and requested clarification from the Pennsylvania high court on how to perform the first step—determining whether a defendant was in the business of selling the kind of product at issue.

E-commerce businesses. In response to this question, Amazon argued that a "seller" must transfer either ownership or some type of legal right to possession, which Amazon did not do in this case because the third-party vendor had stored, packaged, and shipped the dog collar to the consumer. Thus, it was the third-party vendor who had transferred legal possession of the product. The Third Circuit noted that while this rule-like definition has found some support in Pennsylvania case law, the commonwealth’s courts did not "slavishly adhere" to the language of §402 A. Instead, past cases disregarded artificial distinctions that frustrated the intended purposes underlying strict liability and consistently employed a fact-intensive approach determine whether a defendant could be found strictly liable.

The Third Circuit suggested that the concept of "tangentiality" was the appropriate framework to use in determining whether a defendant was selling the kind of product at issue, noting that Pennsylvania courts often considered whether a defendant’s role in the transaction was too tangential to impose strict liability. However, the Third Circuit was uncertain about both the role of, and weight to be given to, tangentiality in the §402 A analysis.

Unable to predict how the Pennsylvania Supreme Court would rule in this dispute, which involved an issue of first impression and substantial public importance, the Third Circuit certified the question to the high court.

The case is No. 18-1041.

Attorneys: David F. Wilk (Lepley, Engelman, Yaw & Wilk, LLC) for Heather R. Oberdorf and Michael A. Oberdorf. John J. Hare (Marshall Dennehey Warner Coleman & Goggin) for Amazon.com, Inc.

Companies: Amazon.com, Inc.

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