Federal Court Determines Amazon Is Not a “Seller” Of Third-Party Marketplace Products Under Illinois Law

King & Spalding

On March 9, 2021, the Northern District of Illinois ruled in favor of Amazon.com, Inc. (“Amazon”) on claims stemming from a house fire that was allegedly caused by defective hoverboards sold by two third-party sellers via Amazon’s online marketplace. The court granted summary judgment after determining that Illinois’s highest court likely would not consider Amazon a “seller” of the hoverboards—an issue that has divided courts across multiple jurisdictions.

  • Plaintiff Great Northern Insurance Company filed suit on behalf of its insureds Dan and Danielle Perper against Amazon and two Chinese companies that manufactured and shipped the allegedly defective hoverboards. The Perpers’ home sustained damage in a fire that they claim was caused by a defective lithium-ion battery in at least one of the hoverboards.
  • Third-party sellers are authorized to sell products to purchasers on Amazon’s online marketplace, subject to the terms of Amazon’s Business Solutions Agreement (“BSA”). The BSA states that third-party sellers are “responsible for any non-conformity or defect in, or any public or private recall of, any of their products.” Third-party sellers set the prices of their products (subject to certain “price parity” provisions imposed by Amazon) and are responsible for properly packaging their products, ensuring compliance with applicable law, and (in the case of “Seller-Fulfilled” products) shipping them directly to the buyer.
    • Additionally, purchasers must agree to Amazon’s Conditions of Use, which state that “Amazon does not assume any responsibility or liability for the actions, product, and content of all these [other businesses] and any other third parties.”
  • In support of its product liability claim, Plaintiff argued that Amazon should be deemed a seller of the hoverboards because it played an integral role in their marketing and distribution by allowing them to be sold in its online marketplace. It argued that, while Amazon never exercised physical control over the products, the BSA granted Amazon “overall control” over third-party sellers’ “interaction[s] with a customer” by virtue of its ability to remove content uploaded by third-party sellers, issue refunds, and withhold remittance payments while investigating customer complaints.
  • The court noted that although Illinois courts have adopted § 402A of the Restatement (Second) of Torts, which subjects “sellers” of a product to strict liability for product defects, neither the Supreme Court nor the Appellate Court of Illinois had decided whether an online marketplace operator qualified as a “seller.”
  • In Hebel v. Sherman Equip., 442 N.E.2d 199, 204 (Ill. 1982), however, the Illinois Supreme Court extended strict liability to entities in the supply chain “[1] who create the risk of harm by participating in the manufacture, marketing and distribution of unsafe products; [2] who derive economic benefit from placing them in the stream of commerce; and [3] who are in a position to eliminate the unsafe character of the product and prevent the loss.” The court ultimately concluded that Plaintiff’s failure to apply those Hebel factors forfeited its argument that Amazon should be considered a seller, but also stated that it “would have been obliged to rule in Amazon’s favor due to the Seventh Circuit’s admonition against expanding state tort liability beyond the bounds established by state courts.”
    • As to Plaintiff’s negligent misrepresentation claim, the court rejected Plaintiff’s argument that the third-party sellers’ statements could be attributed to Amazon simply because Amazon “did not block” the purportedly false content. The court also ruled that the claim was barred by § 230 of the Communications Decency Act, 47 U.S.C. § 230(c), which 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.” Finally, the court found that Plaintiff had not introduced any evidence that the purchasers relied on any misrepresentation by the sellers. The court dismissed Plaintiff’s claim for violation of the Illinois Consumer Fraud and Deceptive Practices Act on similar grounds.
  • This is one of many recent cases concerning whether online retailers can be strictly liable for website transactions involving allegedly defective products manufactured by third parties. Indeed, the Fifth Circuit and Third Circuit recently certified similar questions to the Supreme Courts of Texas and Pennsylvania, respectively. Typically, these cases turn on issues of first impression concerning whether a state’s unique product liability regime would deem an online retailer a “seller” of the product or a mere facilitator (akin to an auctioneer). Accordingly, defendants facing such claims must be careful not to unduly rely on case law from other jurisdictions that could gloss over important state-law distinctions. Indeed, the court in Great Northern faulted Plaintiff for relying upon a recent case decided by a California appellate court and forfeiting more relevant arguments available under Illinois law.
  • The Great Northern Insurance Company a/s/o Dan and Danielle Perper v. Amazon.com, Inc., et al. decision can be read here.

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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