Products Liability Law Daily Wal-Mart.com not liable for allegedly defective 3D printer bought on its website
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Tuesday, January 5, 2021

Wal-Mart.com not liable for allegedly defective 3D printer bought on its website

By Nicholas Kaster, J.D.

The court took note of the fact that a growing number of federal and state courts agree that an online marketplace operator is not a "seller" of a third-party vendor's products-especially, as here, when that operator does not "fulfill" the order.

A federal district court in Indiana has granted summary judgment to Wal-Mart.com in a product liability action brought against it for damages caused by an allegedly defective 3D printer bought on its website. Wal-Mart.com was neither the seller nor the manufacturer of the product, thus precluding recovery under the Indiana Product Liability Act, the court held (Indiana Farm Bureau Insurance v. Shenzhen Anet Technology Co., Ltd., December 29, 2020, Pratt, T.).

Background. The case arose from the purchase of a 3D printer from CNMODLE on the Wal-Mart.com website. The printer was manufactured by Shenzhen Anet Technology Co., Ltd., a China-based company. A few months after receipt, the 3D printer caught fire and caused significant damage to real and personal property owned by the purchasers. Indiana Farm Bureau Insurance paid the purchasers for their loss under their homeowners’ insurance policy. Farm Bureau, as subrogee of the insureds, then brought suit against Wal-Mart.com, Anet, and CNMODLE for the damages, asserting claims under the Indiana Product Liability Act (IPLA) for breach of the implied warranty of merchantability and for various negligence allegations related to the marketing, promotion, advertisement, distribution, and sale of the 3D printer.

The Wal-Mart.com website allows approved third-party sellers to offer their products for sale to retail customers, including those in Indiana. On a product's listing page, a disclaimer informs customers that the vendor provided the information (and that WalMart.com has not verified it) and that the vendor is selling and shipping the product. The website largely requires third-party vendors to handle all cancellations, returns, refunds, and customer service adjustments. For providing this marketplace environment for vendors, Wal-Mart.com receives a referral fee.

The website did not provide product content details, description, images, or any other information about the 3D printer-that information was furnished by CNMODLE, which also stored and shipped the product to the purchasers. This information was disclosed on the product listing page.

As the only one of the four defendants to be successfully served and to appear, Wal-Mart.com moved for summary judgment on all claims, asserting that it was neither a seller nor a manufacturer of the allegedly defective product.

Product liability claims. Wal-Mart.com argued that it was not a seller under the IPLA, noting that it "never purchased, possessed, took title, shipped, or distributed the 3D printer kit." All these facts were disclosed to the purchasers, and Wal-Mart.com's role, it argued, "was limited to providing a website platform for CNMODLE to display the 3D printer kit for sale."

In response, Farm Bureau argued that Wal-Mart.com was not only a seller under the IPLA but also a "manufacturer" pursuant to the statute's "domestic distributor exception." Under the IPLA, actions for strict liability in tort are restricted to manufacturers of defective products. However, the IPLA renders a seller or distributor the "manufacturer" of a product if the seller or distributor is the manufacturer's "principal" distributor or seller and if the court cannot "hold jurisdiction" over the true manufacturer.

The court found that the evidence and case law supported Wal-Mart.com. Under the IPLA's domestic distributor exception, to impose strict liability on a non-manufacturer, the claimant must demonstrate that the defendant is a "principal distributor or seller." As used in the statute, "principal" means "chief; leading; most important or considerable; primary; original."

In support of its domestic distributer exception position, Farm Bureau argued that the text of the Indiana Code does not say that the seller or distributor has to be the principal seller or distributor, just that it has to be "a" principal seller or distributor. It further argued that Wal-Mart.com profits from sales, processes returns, provides customer service and satisfaction guarantee, and has at least 206 different Anet products being offered on its website.

The court determined that Wal-Mart.com was not a distributor or seller of any sort, "principal or otherwise." First, even if Wal-Mart.com profited from sales by collecting a fee of 15 percent of the gross sales price of the 3D printer, this did not make it a seller. Second, although Wal-Mart.com may have had "at least 206 different Anet products for sale" at the time of Farm Bureau's August 2020 search of the site, no evidence showed any "volume of business" demonstrating mass acquisitions of Anet products by Wal-Mart.com around the time the purchasers acquired the 3D printer. Indeed, the court stated, Wal-Mart.com neither ordered nor received the 3D printers at issue.

Next, even accepting that it "processes" payments and returns, "controls format and terms of sale," and "provides customer service and satisfaction guarantee" for third-party vendors on its marketplace site, Wal-Mart.com was never in possession of any of Anet's 3D printers, nor did it manufacture, supply, distribute, assemble, design, or sell them.

Simply put, the court stated, Wal-Mart.com was not a seller under the IPLA, and could not be considered a manufacturer under the even higher demands of the domestic distributer exception. Myriad burgeoning federal and state court cases agree that an online marketplace operator is not a "seller" of a third-party vendor's products-especially, as here, when that operator does not "fulfill" the order, the court stated. Accordingly, the court granted Wal-Mart.com's motion for summary judgment on Farm Bureau's product liability claims.

Implied warranty of merchantability and negligence claims. In addition to its product liability claims, Farm Bureau asserted claims for breach of an implied warranty of merchantability and common law negligence.

Wal-Mart.com argued that because the IPLA governs all claims caused by an allegedly defective product whether styled as strict liability, negligence, or implied warranty claims, the court should enter summary judgment on Farm Bureau's separate claims for implied warranty of merchantability and negligence. Because Farm Bureau's warranty claim actually was a tort claim "disguised as a claim for breach of implied warranty of merchantability," Wal-Mart.com maintained, "it is subsumed by the IPLA and must be dismissed."

Wal-Mart.com was mostly right, the court concluded, noting that the IPLA effectively supplants both common law negligence claims and breach of implied warranty claims when, as here, they sound in tort. But when a claim is subsumed by the IPLA, the proper action is not necessarily dismissal, but rather acknowledgement that the claims have merged, the court stated.

This caveat noted, the court granted summary judgment for Wal-Mart.com on Farm Bureau's common law negligence and breach of implied warranty claims because Wal-Mart.com, as discussed above, was neither a seller nor a manufacturer under the IPLA.

This case is No. 4:19-cv-00168-TWP-DML.

Attorneys: Cameron A. Morgan (McNeely Law LLP) for Indiana Farm Bureau Insurance. Kevin C. Schiferl (Frost Brown Todd LLC) for Wal-Mart.com USA, LLC, Shenzhen Anet Technology Co., Ltd., CNMODLE, Inc. and CNMODLE.

Companies: Indiana Farm Bureau Insurance; Wal-Mart.com USA, LLC; Shenzhen Anet Technology Co., Ltd.; CNMODLE, Inc.; CNMODLE

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