Amazon Warns New Court Ruling Will 'Alter Vast Swaths Of Commerce'

Amazon is asking a federal appellate court to reconsider its recent decision that the company may be liable for shoddy products sold through its marketplace.

The ruling, issued by a three-judge panel, “will alter vast swaths of commerce” in Pennsylvania, Amazon writes in papers filed this week with the 3rd Circuit Court of Appeals. The company is seeking a re-hearing in front of all the active judges in the circuit.

The original 2-1 decision stems from a lawsuit brought by Pennsylvania resident Heather Oberdorf, who alleged she was severely injured by a defective product she purchased via Amazon's marketplace from the vendor The Furry Gang.

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 key 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 issued earlier this month that Amazon itself was the “seller.”

The judges offered several reasons, including that Amazon doesn't vet marketplace 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.”

Oberdorf said in her lawsuit that she purchased a dog collar from Amazon's marketplace in December of 2014. 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.

The two judges who ruled on Oberdorf's favor wrote 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 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.

Amazon is now arguing that the majority's opinion goes against prior rulings.

“Before the panel majority’s decision, every court to consider the issue had ruled that Amazon was not a legal 'seller' of products listed and sold by third parties on Amazon’s marketplace,” the company writes.

“The majority’s new rule was not grounded on clear and unmistakable precedent from any Pennsylvania court,” Amazon adds. “Rather, the majority relied on a host of policy considerations -- acting, in effect, as a super-legislature -- including the argument that Amazon should absorb and pass on to customers the costs of the majority’s new rule.”

The company also says the ruling will affect numerous other platforms.

“Its new form of 'seller' liability finds no support in Pennsylvania law and will have dramatic implications for thousands of businesses that facilitate the sale of products by third parties,” Amazon writes.

The Oberdorfs haven't yet responded to Amazon's new court papers.

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