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Amazon and Products Liability: What A Difference the Mason-Dixon Line Makes

Less than two months apart, two U.S. Courts of Appeal examined the same two issues involving Amazon and came to diametrically opposed conclusions on one of them.  The issues were: (a) whether the Communications Decency Act (“CDA”) insulated Amazon from liability for injuries caused by a defective product purchased on its website; and (b) whether Amazon was liable for those injuries as the “seller” of the defective product.  Both Circuit Courts concluded that the CDA did not insulate Amazon from liability.  However, the Third Circuit ruled that Amazon was a “seller” and the Fourth Circuit ruled that it was not.

The sales transactions in the two cases were similar.  In the Third Circuit case, the plaintiff was a Pennsylvania resident.  She purchased a dog collar on Amazon’s website which had been listed for sale on that website by a vendor known as “The Furry Gang” under Amazon’s “Services Business Solutions Agreement” (the “Vendor Contract”). The Furry Gang shipped the collar directly to the plaintiff.  When the plaintiff was walking her dog, the D ring on the collar broke, causing a retractable leash to retract and strike the plaintiff in the eye, blinding her in that eye. She sued Amazon, alleging that it failed to provide adequate warnings about the risks of using the collar and that Amazon was strictly liable as the seller of a defective product. 

In the Fourth Circuit case, a Maryland resident purchased a lantern on Amazon’s website which had been listed for sale on that website by a vendor known as “Dream Light” under the terms and conditions of the same form of Vendor Contract that The Furry Gang had with Amazon.  However, unlike the Third Circuit case, Amazon packed and shipped the lantern to the purchaser from one of its warehouses.  The purchaser gave the lantern to a friend as a gift.  The battery pack malfunctioned, causing extensive fire damage to the friend’s home.  The friend’s insurance company sued Amazon to recover the repair costs, alleging that Amazon was strictly liable as the seller of the defective product.

In both cases, Amazon moved for summary judgment.  Amazon asserted that it was not responsible for the information about the collar and lantern published on its website because that information was provided by The Furry Gang and Dream Light and the CDA provides that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Amazon also asserted that The Furry Gang and Dream Light, not it, were the “sellers” of the defective products.  The trial courts ruled in favor of Amazon on both issues. The plaintiffs appealed.

Both Circuit Courts held that the CDA did not insulate Amazon from liability because neither plaintiff was seeking to hold Amazon responsible as “publisher” for what The Furry Gang or Dream Light said about their respective products on Amazon’s website.  As the Fourth Circuit put it, “There is no claim made based on the content of speech published by Amazon — such as a claim that Amazon had liability as the publisher of a misrepresentation of the product or of defamatory content.” 

On the issue of whether Amazon was a “seller” of the defective products, however, the two Circuit Courts reached opposite conclusions.  The Third Circuit weighed four factors that the Pennsylvania Supreme Court had identified as indicative of whether a party is a “seller” for products liability purposes.  Those factors are:

(1) Whether the actor is the “only member of the marketing chain available to the injured plaintiff for redress”;

(2) Whether “imposition of strict liability upon the [actor] serves as an incentive to safety”;

(3) Whether the actor is “in a better position than the consumer to prevent the circulation of defective products”; and

(4) Whether “[t]he [actor] can distribute the cost of compensating for injuries resulting from defects by charging for it in his business, i.e., by adjustment of the rental terms.”

Based on provisions in the Vendor Contract that: (a) required vendors to communicate with purchaser only through Amazon; (b) authorized Amazon to refuse to list a vendor’s product on its website for any reason; and (c) required vendors to indemnify and hold Amazon harmless against claims arising from the sale of their products, the Third Circuit concluded that all four factors weighed in favor of Amazon being a “seller.”  

The Fourth Circuit’s approach was simpler.  It said that “the ordinary meaning of “seller” is “one that offers [property] for sale,” with “sale” defined as “the transfer of ownership of and the title to property from one person to another for a price.”  Focusing on ownership, the Fourth Circuit said that there was no evidence that Amazon ever held title to the defective lantern.  Even though the lantern had been shipped from Amazon’s warehouse, Dream Light held title to the lantern until title passed to the purchaser.  The fact that Amazon, not the vendor, had packed and shipped the product to the purchaser did not make Amazon the owner of it.

The different conclusions cannot be explained by differences between Pennsylvania products liability law and Maryland products liability law.  Both states have adopted the identical Restatement (Second) of Torts § 402A (1965) as the basis for products liability.  As the judge who issued an opinion concurring in part and dissenting in part in the Third Circuit case pointed out, Pennsylvania courts have also historically determined whether a party is a seller using the same “title” test used by the Fourth Circuit.  As suggested by the opinions of the concurring and dissenting judge in the Third Circuit case and the judge who wrote a concurring opinion in the Fourth Circuit case, the different conclusions seem to have resulted from the law lagging behind the digital world.  As the concurring judge in the Fourth Circuit case put it, “Amazon disrupts the traditional supply chain.”  The concurring and dissenting judge in the Third Circuit case said “This case implicates an important yet relatively uncharted area of law.”  Applying traditional law to a non-traditional business model produces unpredictable results.

At least neither purchaser paid with Bitcoin.