Amazon Loses – It Is a Seller Under Wisconsin’s Products Liability Law

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As most subrogation professionals know, Amazon has been fighting products liability claims across the country for some time now. While it has been largely successful in doing so in the past, in a recent decision, Wisconsin sided with the plaintiff. In the case of State Farm Fire & Cas. Co. v. Amazon.com, Inc., 2019 U.S. Dist. LEXIS 122316, 2019 WL 3304887, the United States District Court for the Western District of Wisconsin denied the motion for summary judgment filed by defendant Amazon.com, Inc. (Amazon). The court held that Amazon was so deeply involved with the transaction at issue that it was an entity that could be held strictly liable under Wisconsin law. It also held that 47 U.S.C. § 230 of the Communications Decency Act (CDA) did not immunize Amazon because its liability was not based on posting content from a third party.

In State Farm, Luke Cain (Cain), who was insured by State Farm Fire and Casualty Company (State Farm), purchased a bathtub faucet adapter from a third-party seller on Amazon.com. The third-party seller was XMJ, a Chinese company with no presence in the United States. A month after purchasing the item, the adapter failed due to a defect, causing flooding in Cain’s home. State Farm paid for repairs associated with the flooding and brought this subrogation action against Amazon. Thereafter, Amazon filed a motion for summary judgment arguing that: 1) it was not a “seller” within the meaning of Wisconsin’s products liability statute, Wis. Stat. § 895.047; and 2) the CDA prohibited treating it as a “publisher” of third-party content posted on its website.

In its analysis, the court looked at several key facts about XMJ’s relationship with Amazon and Amazon’s services to Cain as the purchaser. It noted that Amazon provided payment processing and guaranteed the purchases. It also highlighted that XMJ participated in Amazon’s Fulfillment by Amazon (FBA) program, pursuant to which Amazon stored XMJ’s products and fulfilled its orders. Amazon also required XMJ to register its products for sale and reserved the right to refuse registration. In addition, Amazon required XMJ to indemnify Amazon for any injury or property damage caused by XMJ’s products.

Upon analyzing the applicability of the Wisconsin strict liability statute, Wis. Stat. § 895.047(2), the court easily determined that the unknown manufacturer would be liable and that it was not subject to process in Wisconsin. Thus, the only question remaining was whether the plaintiff could recover from Amazon in the manufacturer’s absence. The court disagreed with Amazon’s argument that it could not be held liable as a seller because it never took title to the product. Instead, the court held that Wisconsin’s statute does not restrict liability for defective products to a narrow class such as sellers or distributors. Rather, the statute limits the circumstances under which a plaintiff can hold a nonmanufacturing defendant liable. Because the court found that Amazon took on more than a peripheral role in putting the defective product into the stream of commerce, the court held that State Farm could hold Amazon liable as a seller or distributor.

The court also declined to apply the immunity provided in the CDA to Amazon. The CDA provides immunity to interactive computer services from claims based on content written and provided by third parties. Since the products liability claim at issue was not based on whether Amazon published XMJ’s product listing but, rather, on Amazon’s role in the chain of distribution, the court held that the CDA did not apply. Thus, the court denied Amazon’s motion for summary judgment. Soon after it did so, the parties settled the case.

This case is just one of several addressing the evolving status of Amazon as a product seller and its claim for immunity from products liability claims based on the CDA. The case serves as a reminder that when investigating a potential product defect claim, it is important for a subrogation professional to obtain all of the facts regarding Amazon’s involvement in the posting, sale and shipment of the product at issue. The strength of a strict liability case against Amazon may be dependent on several key elements specific to your case, such as the seller’s involvement in Amazon’s FBA program. As more Amazon cases are decided and parties appeal to various courts, the evolution of Amazon’s products liability and CDA defenses is sure to continue.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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