Amazon Responsible For Defective Product Sold By Outside Vendor, Court Says

Siding against Amazon, a federal appellate panel ruled the company may be liable for a shoddy product sold through its marketplace.

The decision, issued Wednesday by a panel of the 3rd Circuit Court of Appeals, stems from lawsuit brought by Pennsylvania resident Heather Oberdorf, who alleged she was severely injured by a defective product she purchased via Amazon.

Oberdorf said she purchased a dog collar from Amazon's marketplace in December of 2014. The vendor was a company called The Furry Gang, which no longer sells through Amazon's platform.

Several weeks after Oberdorf began using the collar, her dog lunged while on a walk and broke the collar's ring, causing the retractable leash Oberdorf was holding to recoil. The leash hit her eyeglasses, causing them to shatter into her eye. As a result, she is now permanently blind in her left eye.

She and her husband sued Amazon in federal court for the Middle District of Pennsylvania, alleging that the company sold a product with a defective design, among other claims.

Amazon countered that it wasn't the “seller,” but merely an agent of the seller. That distinction is important, because Pennsylvania law makes it easier for people who are injured to recover damages from sellers of defective products than from agents of the sellers.

A trial judge agreed with Amazon and dismissed the claims. But the appellate judges voted 2-1 to reinstate the lawsuit. They said in a 34-page opinion that Amazon itself was the “seller” in this situation.

The judges offered several reasons for this conclusion, including that Amazon operates its platform in a way that allows outside vendors to hide their identities -- which leaves customers without the ability to sue those vendors.

“There are numerous cases in which neither Amazon nor the party injured by a defective product, sold by, were able to locate the product’s third-party vendor,” Circuit Judge Jane Richards Roth wrote, in an opinion joined by Circuit Judge Patty Shwartz.

The judges also noted that the company doesn't vet vendors to determine whether they can be hauled into a U.S. court, if their products cause injuries.

“Amazon’s customers are particularly vulnerable in situations like the present case,” the judges wrote. “Neither the Oberdorfs nor Amazon has been able to locate the third-party vendor, The Furry Gang.”

Circuit Judge John Sirica dissented from the ruling. He wrote that Amazon “takes an important part in assisting sales, but is 'tangential' to the actual exchange between customer and third-party seller.”

He also noted the decision could effectively force Amazon to revamp its marketplace's business model.

“The current model of Amazon Marketplace is an open one,” he wrote, adding the company doesn't generally police products sold by outside vendors for dangerousness.

“Though it is possible to envision, as plaintiffs do, a new model for Amazon Marketplace in which the company researches products for potential defects and polices sellers to ensure they do not offer them, such a model would be fundamentally different from the Amazon Marketplace that exists now,” he wrote. “This kind of transformation, though, would have costs as well as benefits, for small entrepreneurs who might be excluded as too risky, and for consumers whose access to all goods would likely be reduced with greater scrutiny of sellers.”

It's not yet clear how the decision could affect other companies offering online marketplaces. The judges who wrote the majority opinion said in a footnote that their ruling was limited to Amazon.

Amazon has faced other lawsuits for selling allegedly defective products, including suits over malfunctioning hoverboards.

Amazon has prevailed in many of those other cases, according to Santa Clara University law professor Eric Goldman, who has been following the lawsuits.

He calls Wednesday's decision “out of sync with dominant line of cases.”

Goldman adds that the panel's decision may not be the final word in the case, noting that Amazon could ask the entire 3rd Circuit to review the case.

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