Law360
(March 24, 2021, 10:40 PM EDT) -- A judge once called Amazon not merely the 800-pound gorilla in the marketplace, but the 8,000-pound one. Yet whether Amazon is actually a seller will be tested again Thursday when the Texas Supreme Court hears the latest consumer attempt to declare the company more than a tech platform.

So far, only a smattering of courts have directly tackled the issue, and only one — a California appeals court — has set a precedent that Amazon is a seller that can be held liable for a defective product.

A highly anticipated ruling on the subject by the Pennsylvania Supreme Court was derailed when Amazon and the plaintiff reached a settlement. In that case, a woman was half-blinded after a retractable leash snapped into her eye from an allegedly defective dog collar bought on Amazon.

Otherwise, courts have mostly ruled in Amazon's favor.

But suits testing whether Amazon can be treated as a seller of goods — thus making it liable for product defects — are expected to grow as brick-and mortar stores continue to close down, a trend that accelerated in the past year because of the pandemic."Amazon has developed a new business model that most courts are not prepared for, just like most brick-and-mortar stores weren't prepared for. Now Amazon's become a major presence in everyone's daily lives, particularly during the pandemic," said Thomas Kurland of Patterson Belknap Webb & Tyler LLP. "But they were able to invent a new business model, providing services that no one else had done before. And the law is catching up to address that, and courts are going to be split on this."
Amazon declares that it isn't a seller. Rather, it says it facilitates the sale of goods on its platform. Traditionally, consumers alleging injuries from a product can sue a seller, manufacturer or distributor. This common law doctrine developed under the rationale that an injured consumer shouldn't have to track down which party to sue and that the involved companies can figure it out, Kurland said.

Suits over defective products have been aimed at Amazon when plaintiffs can't track down the third-party manufacturer, which may be overseas, that made the product at issue. The Pennsylvania case was an example of that.

Here, Law360 takes a look at the case being argued Thursday at the Texas Supreme Court and other recent appellate decisions involving the company's liability over the past year.

"Significant Potential Consequences"

The specific question before the Lone Star State's high court is whether, under Texas law, Amazon is a seller of third-party products sold on its website when Amazon doesn't hold title to the product but still controls the transaction and delivery process through its fulfillment program.

Under that program, third parties pay Amazon a fee to store and ship their products. When someone buys the item on Amazon, Amazon fetches the product from a fulfillment center and sends it to the buyer.

"Our position is that the actions under fulfillment by Amazon perfectly fit the definitions of a seller," said Jeff Meyerson of the Meyerson Law Firm PC, who represents the plaintiff in the Texas case.

"What Amazon is claiming is that its business model exempts it from product liability law. They're seeking a broad ruling, but the certification question is focused on the fulfillment model," Meyerson said.

The case involves Morgan McMillan's toddler daughter, who was harmed by ingesting a button battery from a remote control made overseas. The case made its way to the Texas Supreme Court after the Fifth Circuit voiced doubt it could hear the issue, given the lack of state law on the matter and the "significant potential consequences" of holding online platforms responsible for third parties' defective products.

Amazon's principal argument is that it is more akin to an auctioneer or a delivery service than a traditional seller of goods and therefore had no control over the remote or its quality.

Still, a ruling against Amazon may not necessarily spell total defeat for the online giant since it won't be a decision on the merits of McMillan's claims.
None of the rulings on Amazon's liability as a seller have touched on the merits of plaintiffs' claims, Kurland observed.

"Even if the Texas court concludes that Amazon is a seller in this situation, Amazon still has defenses to that substantive claim that the remote wasn't defective or that there was no other way to design it," Kurland said.
There are other arguments too, such as that the child shouldn't have been left alone with the remote or even more simply, that the battery didn't cause the child's injuries in the first place, Kurland said.

Calif. Supreme Court Sides With Plaintiff

The only precedential opinion so far on whether Amazon can be liable for third-party products came down last summer, when a California state appellate court found the company should be treated like a brick-and-mortar retail store.
In November, the Supreme Court of California declined to review the ruling, which came in a suit brought by Angela Bolger. Bolger bought a replacement laptop battery through Amazon from overseas Lenoge Technology Ltd. and claimed she was severely burned when the battery exploded.
Bolger sued both Lenoge and Amazon, and while Lenoge failed to respond and a default judgment was entered, the trial court found that as an "online marketplace" and not the product's actual seller, Amazon could not be held liable.

In August, a state appeals court found in a 46-page published opinion that the online retailer put itself in the stream of distribution, doing far more than simply providing a website.
Bolger's counsel, Jeremy Robinson of Casey Gerry Schenk Francavilla Blatt & Penfield LLP, told Law360 that his side was never even able to track down who the manufacturer of the battery was.
"Ultimately, it comes down to who should bear the responsibility if you can't find who the seller or the manufacturer is: the person who got hurt or Amazon," Robinson said. "And obviously, Amazon's in a much better position to deal with that kind of thing."

If Amazon wins the McMillan case in Texas, the company could argue that it has won almost every case in the country, except for the one in California, Robinson said.
"They try to argue that our case is basically an anomaly because it's in California and California loves plaintiffs," Robinson said. "So they're saying, well, no other state has that sort of policy. And I think if the Texas Supreme Court sided with the plaintiffs in that case, that would be a sign to Amazon that they're in trouble on this argument."
Pa. Liability Question Sidestepped With Deal
Heather Oberdorf's case took a similar course to McMillan's when the Third Circuit last year asked the Pennsylvania Supreme Court to weigh in on whether Amazon could be liable for an allegedly defective dog collar made by a third party that blinded Oberdorf in one eye.
Oberdorf said she was permanently injured when the collar made by The Furry Gang caused a retractable leash to snap back and hit her glasses and eye in January 2015, according to court records. Oberdorf and her husband sued Amazon over the purchase after they couldn't find how to contact The Furry Gang.
A Pennsylvania federal judge tossed the case in 2018, but the Third Circuit revived her suit in 2019, with a majority finding that Amazon met the definition of a "seller" that can be sued under Pennsylvania's strict liability law, but then agreed to rethink the decision before a full panel.
The anticipated ruling was expected to provide clarity for the booming online marketplace industry, as well as for consumers who often have problems tracking down the third-party manufacturers of products sold on sites like Amazon.
At oral arguments before the full panel in February 2020, the judges signaled they were hesitant to let Amazon escape liability as a seller, with one likening the company's role to "an 8,000-pound gorilla" in the marketplace.
"Amazon isn't the 800-pound gorilla; it's the 8,000-pound gorilla," Circuit Judge Kent A. Jordan said.

But after the Third Circuit kicked the question to the Pennsylvania high court, Oberdorf and Amazon reached a confidential settlement ending the dispute in September.

"I think Amazon saw the writing on the wall for that one," Robinson said. "And they wanted to get that case done before the Pennsylvania Supreme Court weighed in."

Amazon's Ninth Circuit Win
The Ninth Circuit sided with Amazon in a November unpublished opinion that the e-tailer wasn't liable for the sale of a defective hoverboard that caught fire and damaged an Arizona home.

The decision in a suit brought by State Farm Fire and Casualty Co. confirmed the insurer's loss in a lower court, where a judge found that Amazon provides services connecting customers to vendors and has little ability to inspect items after receiving them from third-party vendors.

A little less than a month after the ruling, State Farm asked the Ninth Circuit to send the question of Amazon's liability to the Arizona Supreme Court. The insurer said that the split decision was made without any specific direction from Arizona courts and stripped the state's consumers of protections just because the hoverboard was bought online.

A month before issuing its decision, the Ninth Circuit had mulled whether to seek the Arizona high court's input, but ultimately sided with the lower court. The majority of the panel said Amazon never took title for the hoverboard and that facilitating the sale doesn't make it a direct seller any more than the U.S. Postal Service.

In a dissent, Circuit Judge Richard Clifton said that the case presents questions of Arizona law that are likely to recur in other cases, given how Amazon has changed the marketplace.

State Farm's request to have the Arizona Supreme Court hear the case was denied just before the New Year.

Ohio Justice Says Product Liability Law Is "Stone Age"
The Ohio Supreme Court in October found that Amazon was not liable in a case involving the death of a teen who consumed caffeine powder sold on the site.
The state high court found that under the Ohio Products Liability Act, Amazon.com Inc. is not considered a supplier that can be held liable for the caffeine powder that killed Logan Stiner.

The Ohio Supreme Court in 2019 declined to review a lower court's ruling that held Amazon wasn't liable, but then later reconsidered and took up the Stiner family's appeal.

Amazon had no relationship with the manufacturer or the sellers' distribution channel and lacked control over the product's safety, labeling or manufacturing, the high court said.

In a concurrence, Justice Michael Donnelly said he "reluctantly" sided with the ruling but lamented that the 1988 law is out of date with today's online retail economy.

"Applying the 1980s retail-sales paradigm to modern e-commerce produces results that strike me as inequitable," Justice Donnelly said. "The divide between the pre-Internet age and the current age is so profound that laws like this act might as well have been written in the Stone Age."