Digesting an opinion by U.S. Court of Appeals for the Third Circuit Judge Anthony J. Scirica (Judge Scirica had no role in WLF’s selecting or editing this opinion for this publication). Ed. note: The presence of asterisks in this Circulating Opinion reflect our editorial removal of text.
Introduction to the Opinion: In Oberdorf, 2019 WL 2849153 (3d Cir. July 3, 2019), the Third Circuit decided that under Pennsylvania common law, Amazon is the “seller” of products offered by third parties through Amazon Marketplace and, in turn, could be strictly liable for harm caused by a defective dog collar purchased from the marketplace. The court then held that § 230 of the Communications Decency Act (CDA) precluded the plaintiff’s claims over Amazon’s editorial function (i.e., its failure to warn) but not the claims tied to its “direct role in the sales and distribution process.” Judge Scirica concurs with the majority’s CDA holding but dissents from the conclusion that Amazon was a “seller.” His dissent persuasively explains why state law compels a contrary outcome and shows how other jurisdictions’ rulings on this core products-liability question reinforce that view.
SCIRICA, Circuit Judge, concurring in part and dissenting in part.
This case implicates an important yet relatively uncharted area of law. No Pennsylvania court has yet examined the product liability of an online marketplace like Amazon’s for sales made by third parties through its platform. Our task, as a federal court applying state law, is to predict how the Pennsylvania Supreme Court would decide the case. Berrier v. Simplicity Mfg., Inc., 563 F.3d 38, 45 (3d Cir. 2009). We must take special care “to apply state law and not … to participate in an effort to change it.” McKenna v. Ortho Pharm. Corp., 622 F.2d 657, 663 (3d Cir. 1980) (internal citation omitted). In my view, well-settled Pennsylvania products liability law precludes treating Amazon as a “seller” strictly liable for any injuries caused by the defective Furry Gang collar.
The plaintiffs weigh in detail policy reasons for allowing them to sue Amazon. Plaintiffs’ theory would substantially widen what has previously been a narrow exception to the typical rule for identifying products liability defendants sufficiently within the chain of distribution. A “seller” in Pennsylvania is almost always an actor who transfers ownership from itself to the customer, something Amazon does not do for Marketplace sellers like The Furry Gang. For similar reasons, every court to consider the question thus far has found Amazon Marketplace not a “seller” for products liability or other purposes; several of those courts have done so under products liability regimes similar to Pennsylvania’s. For these reasons, I respectfully dissent from the majority’s disposition of the claims not barred by the Communications Decency Act (CDA).
*** Products are offered for sale at Amazon.com in three primary ways. *** [A]t issue here, third-party sellers sell products through Amazon Marketplace without additional “fulfillment” services. These sellers, like The Furry Gang, supply and ship products directly to consumers without ever placing the items in Amazon’s possession. ***
Amazon envisions its Marketplace as an open one. It reserves the right to remove sellers’ listings or terminate Marketplace services for any reason and requires sellers to represent they are in good legal standing, but it does not apply a general vetting process to all sellers to identify those who do not in fact meet that standard. Amazon also does not narrow the Marketplace’s offerings by limiting the number of sellers who may offer each type of product: any number of sellers may register. In displaying products to customers, Amazon distinguishes products sold through the Marketplace from those sold directly by Amazon, identifying the seller responsible for the item in a “sold by” line placed prominently next to the price and shipping information. App. 211. The seller’s name also appears on the order confirmation page, before the customer clicks “place your order” to finalize the purchase. Id. Amazon’s conditions of use for customers affirm the distinction, explaining, in Amazon Marketplace purchases from third-party sellers, “you are purchasing directly from those third parties, not from Amazon. We are not responsible for examining or evaluating, and we do not warrant, the offerings of any of these businesses or individuals.” ***
A customer on Amazon Marketplace buys a product that has been chosen, sourced, and priced by the third-party seller. The seller contractually commits to “ensure that [it is] the seller of each of [its] Products” listed for sale. App. 164. In exchange for Amazon’s services including listing the product and managing payments, the seller is charged a monthly fee, as well as a referral fee of a percentage of each sale made. The relationship reflected in the agreement between Amazon and the seller is one of “independent contractors.” Id. at 270. The agreement specifically disclaims other potential relationships: it does not mean to create relationships of “partnership, joint venture, agency, franchise, sales representative, or employment,” nor does it create an “exclusive relationship” constraining either Amazon or the third-party seller from other sales relationships. Id.
For each new listing a seller creates, the seller identifies the product it plans to sell, designates a price, and writes a product description. Amazon requires the description include certain minimum information about the product, and requires the seller to offer a price as favorable as the one it offers in any other sales channels. Amazon also automatically formats the information provided into a product listing page matching others on the Marketplace, and it sometimes modifies listings to streamline user experience: for example, by grouping together the pages of multiple sellers who offer the identical product sourced in different ways. The seller may choose to offer, or not to offer, a warranty on its product. Regardless, the agreement makes the seller “responsible for any nonconformity or defect in, or any public or private recall of, any of [its] products.” Id. at 173.
When a product is sold on Amazon Marketplace, the third-party seller offering the product for sale, as well as the product’s original manufacturer, may each be sued in product liability if the product is defective. This case raises the question whether Amazon, too, can be liable as a “seller” of such a product, because of the assistance it gives to the third-party seller that provided the product to the customer. Plaintiffs answer this question in part by invoking a set of four policy factors laid out in Francioni v. Gibsonia Truck Corp., 472 Pa. 362, 372 A.2d 736, 739 (1977). For the reasons I discuss in Part III, the Francioni factors should come second to an analysis under Pennsylvania law of the defendant’s role in supplying the product. See Cafazzo v. Cent. Med. Health Servs., 542 Pa. 526, 668 A.2d 521, 523 (1995). I begin, instead, with the definition of “seller” under Pennsylvania law.
A seller under Pennsylvania product liability law is one “engaged in the business of selling … a product.” Id. at 523 (quoting Restatement (Second) of Torts § 402A(1)(a) (Am. Law Inst. 1965)). In nearly all cases, “selling” entails something Amazon does not do for Marketplace products: transferring ownership, or a different kind of legal right to possession, from the seller to the customer. Thus, in Pennsylvania, sellers include traditional wholesalers and retailers, as well as those who supply a product through a transaction other than a sale. See, e.g., Chelton v. Keystone Oilfield Supply Co., 777 F. Supp. 1252, 1256 (W.D. Pa. 1991) (wholesaler); Burch v. Sears, Roebuck & Co., 320 Pa.Super. 444, 467 A.2d 615, 618 (1983) (retailer); Francioni, 372 A.2d at 739–40 (lessor); Villari v. Terminix Int’l, Inc., 663 F. Supp. 727, 730–31 (E.D. Pa. 1987) (pest control company supplying insecticide as part of service). Though varied, each of these cases holds liable a “seller” who transferred the right to possess the product from itself to the customer.
Transfer of a right to possession is so typical to “sellers” that exceptions are rare. There is one primary exception in Pennsylvania caselaw: the “manufacturer’s representative.” See Hoffman v. Loos & Dilworth, Inc., 307 Pa.Super. 131, 452 A.2d 1349, 1351 (1982). *** But in no other scenario has a Pennsylvania court imposed “seller” liability on a defendant whose role in the sale did not include transferring ownership or possession of the product. For example, the Pennsylvania Supreme Court considered and rejected “seller” liability for an auctioneer who “never owned, operated or controlled the equipment which was to be auctioned.” Musser v. Vilsmeier Auction Co., 522 Pa. 367, 562 A.2d 279, 279 (1989). As the court explained, in auctioning off a product owned and controlled by the third-party seller, “[t]he auction company merely provided a market as the agent of the seller. … Selection of the products was accomplished by the bidders, on their own initiative and without warranties by the auction company.” Id. at 282. The auction company’s significant role in assisting the sale was nonetheless “tangential” to the core of the transaction, the exchange between the buyer and third-party seller. Id. ***
Amazon Marketplace, like the auctioneer in Musser, takes an important part in assisting sales, but is “tangential” to the actual exchange between customer and third-party seller. 562 A.2d at 282. Like an auctioneer, Amazon Marketplace provides the “means of marketing” to a third-party seller who accomplished the “fact of marketing” when it “chose the products and exposed them for sale.” Id. (citing Francioni, 372 A.2d at 738). Amazon Marketplace’s services to any individual seller for an individual product are not “undertaken specifically,” but rather, as with the auctioneer, provided on essentially similar terms to a large catalogue of sellers. Id.; see id. at 282 n.3. And like an auctioneer, Amazon Marketplace never owns, operates, or controls the product when it assists in a sale. See id. at 279.
Amazon Marketplace’s similarities to the auctioneer emphasize it has little in common with Hoffman’s manufacturer’s representative, the only kind of “seller” held liable despite not having made a transfer of ownership or possession rights. Hoffman, 452 A.2d at 1354. Amazon Marketplace does not offer the co-strategizing relationship promised by manufacturers’ representatives. Amazon Marketplace is not an outsourced sales force working with individual manufacturers to boost sales: it offers a marketing platform, and it is up to the third-party seller to make best use of the platform to maximize sales.
Under Pennsylvania law, then, Amazon was not the seller of The Furry Gang’s product and therefore is not liable for any product defect. Because established Pennsylvania law precludes holding Amazon strictly liable here, I respectfully dissent.
While Pennsylvania law alone dictates this outcome, it is reinforced by “analogous decisions” and “other reliable data.” McKenna, 622 F.2d at 663. Pennsylvania courts have yet to consider whether Amazon is strictly liable for defective products sold through its Marketplace. So just like a Pennsylvania court would, I consider relevant decisions from other jurisdictions. These sources, including two federal appellate decisions so far, confirm what Pennsylvania law already makes clear. Amazon’s role in assisting a product’s sale does not make it that product’s “seller.”
The Sixth Circuit found Amazon Marketplace was not a “seller” after consulting a variety of sources to clarify the term’s expansive but ambiguous meaning within the Tennessee Products Liability Act. Fox v. Amazon.com, Inc., 926 F.3d 295, –––– – –––– (6th Cir. 2019). The Tennessee statute defines “seller” as “any individual or entity engaged in the business of selling a product,” including a “retailer,” “wholesaler,” “distributor,” “lessor,” or “bailor.” Tenn. Code Ann. § 29-28-102(7) (West 2012). Considering and rejecting a more “limited construction” proposed by Amazon, Fox, 926 F.3d at ––––, the court interpreted this definition to include not only those who transfer title, but “any individual regularly engaged in exercising sufficient control over a product in connection with its sale, lease, or bailment, for livelihood or gain,” id. at ––––. The court nonetheless found Amazon Marketplace did not fall within even this more expansive definition. The court held Amazon did not exercise sufficient control to be the product’s “seller” because Amazon “did not choose to offer the [product] for sale, did not set the price of the [product], and did not make any representations about the safety or specifications of the [product] on its marketplace.” Id. at ––––. It noted that, as in this case, Amazon did not fulfill the product and therefore never possessed it or shipped it to the customer. Id.
Even where Amazon Marketplace did fulfill the product at issue, the Fourth Circuit held Amazon was not the product’s “seller” under Maryland common law. Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135, 144 (4th Cir. May 22, 2019). In that case, unlike this one, Amazon “fulfilled” the product by storing it prior to sale then shipping it to the customer. The court held Amazon Marketplace was not a seller because, despite its role in “fulfilling” the sale, it never performed the basic act of sale: it did not “transfer title to purchasers of [the product] for a price.” Id. at 141. The court explained, relying in part on Pennsylvania precedent, those who “own … the products during the chain of distribution are sellers,” while those who “render services to facilitate that distribution or sale[ ] are not sellers.” Id. (citing Musser, 562 A.2d at 283). Amazon, because it only rendered services and did not transfer ownership, was not a seller. Id. at 144. Here, Amazon played an even more limited role: it neither stored nor shipped the product.
Other federal courts have reached the same outcome. Courts have declined to treat Amazon Marketplace as a “sales agent,” as plaintiffs ask us to do. In dismissing a products liability lawsuit against Amazon essentially identical to this one, the District Court for the Southern District of New York considered a New York case that, like Pennsylvania’s Hoffman decision, held a sales agent liable as a “seller.” Eberhart v. Amazon.com, Inc., 325 F. Supp. 3d 393, 398–99 (S.D.N.Y. 2018) (citing Brumbaugh v. CEJJ, Inc., 152 A.D.2d 69, 547 N.Y.S.2d 699, 700–01 (3d Dep’t 1989)); see Hoffman, 452 A.2d at 1354. The court found Brumbaugh exceptional and of no help in establishing liability against Amazon. Eberhart, 325 F. Supp. 3d at 398–99. It reasoned, among New York cases holding defendants liable as sellers, “the vast majority of opinions” involve a defendant who did “at some point, own the defective product.” Id. at 398. And while Brumbaugh’s sales agent, given its exclusive role in connecting the manufacturer with local distributors, was “a mandatory link in [the] distributive chain,” id. at 399 (quoting Brumbaugh, 547 N.Y.S.2d at 701), the court found Amazon Marketplace’s role in merely “facilitating purchases” did not rise to this level. Id. ***
The Third Restatement of Torts’ § 20, defining “seller,” captures state law trends in Pennsylvania, common also to New York, Illinois, and other states, as federal courts considering product liability suits against Amazon Marketplace have noted. See Restatement (Third) of Torts: Prod. Liab. § 20 (Am. Law Inst. 1998); see also, e.g., Eberhart, 325 F. Supp. 3d at 398 & n.4 (finding its conclusion against product liability for Amazon Marketplace “reinforced” by § 20, though New York had not adopted the provision). Although the Supreme Court of Pennsylvania has not yet had occasion to consider § 20, the provision’s incremental clarification of existing law, fully consistent with Pennsylvania case law, is the kind of guidance the Pennsylvania Supreme Court would likely find informative. ***
In Pennsylvania, as in states across the country including New York and Illinois, a business assisting a sale is not a “seller” for products liability purposes unless it takes on the particularly involved retail relationship of sales agent/manufacturer’s representative. The Third Restatement’s § 20 tracks this pattern. Like every federal court to consider this issue so far, I would find Amazon Marketplace not a seller. ***