In July 2020, the Pennsylvania Supreme Court agreed to tackle the thorny question of whether Amazon can be held liable for defective products sold by third parties on its website. The Third Circuit offered up the case in June after hearing arguments in February and concluding that it was “unable to predict based on existing case law, if and how the Pennsylvania Supreme Court would apply [the law] to e-commerce businesses like Amazon.” The Pennsylvania Supreme Court agreed to address this matter of first impression and decide whether Amazon faces strict liability for products purchased from third-party vendors when the product “was neither possessed nor owned by” Amazon.
The case stems from claims filed by the plaintiff against Amazon advancing strict liability theories (failure to warn and design defect), after she sustained injuries from an allegedly faulty dog collar purchased from a third party vendor on Amazon.com. As in other jurisdictions that apply the Restatement (Second) of Torts, Section 402A, strict products liability in Pennsylvania extends only to “sellers” of products. The determination of whether an entity is a “seller” requires the consideration of multiple factors primarily focused on teasing out the level of control an entity has, such as warranty, title, control sufficient to inspect, economic benefit, control over design and manufacture. Amazon won summary judgment in the district court in December 2018 after the court determined that an online retailer like Amazon did not constitute a “seller” as defined under Pennsylvania tort law.
On appeal, the Third Circuit reversed, holding that Amazon did meet the criteria of a “seller,” but this holding was effectively nullified when the Third Circuit agreed to hear the case en banc. Before certifying the matter for review by the state Supreme Court, the Third Circuit expressed uncertainty as to the correct test for applying strict liability to an online marketplace. Specifically, the Third Circuit was unsure whether it was required to determine, as a threshold matter, whether Amazon “is in the business of selling the kind of product at issue.”
Amazon has continued to argue that being a seller requires the transfer of ownership from one party to another – clearly inapplicable in the case of third party vendors who merely use Amazon’s platform to facilitate transactions. Plaintiff, on the other hand, has claimed that the “extreme” degree of control that Amazon exerts on all parties transacting over its marketplace renders it a seller within the meaning of Pennsylvania law and, therefore, Amazon should not be able to dodge liability when a product proves ultimately defective.
Determination of this issue will greatly impact Amazon’s, and other online marketplaces’, exposure to liability for products sold by third parties on their websites in states that follow the Restatement’s approach to strict liability in the Third Circuit and potentially beyond.