• by Wendy Davis  @wendyndavis, July 26, 2019

Business groups representing Silicon Valley's largest companies are urging a federal court to reverse a recent ruling against Amazon over defective products.

The decision “threatens to chill the creation and growth of innovative online services, open the door to litigation against online providers in a wide range of circumstances, undermine the development of e-commerce, and harm the U.S. economy,” the Internet Association, Computer & Communications Industry Association and TechNet write in a proposed friend-of-the-court brief filed this week with the 3rd Circuit Court of Appeals.

The organizations are urging the appellate court to reconsider a 2-1 ruling that Amazon may be responsible for injuries caused by faulty products sold through its marketplace. That decision, issued earlier this month, stems from a lawsuit brought by Pennsylvania resident Heather Oberdorf, who alleged she was severely injured by a poor quality dog collar 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 critical because Pennsylvania law makes it easier for injured consumers to recover damages from sellers of defective products than from sellers' agents.

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

Amazon recently asked the entire circuit to reconsider that ruling. The Silicon Valley groups are supporting Amazon's request. They argue that Section 230 of the Communications Decency Act immunizes Amazon from liability for activity by third parties, such as the Furry Gang.

Many courts have “invoked Section 230 immunity to bar claims that seek to impose liability against the operator of an online marketplace for facilitating third-party sales,” the groups write.

They add that this month's panel decision could lead Amazon -- and other companies -- to revise their business models.

“Faced with costly litigation and potential liability, service providers like Amazon would be pressed to simply stop allowing third-parties to offer products through their sites or otherwise reduce services,” the groups write. “Additionally, the threat of liability that the panel’s novel decision would impose could force internet service providers and websites to block user-generated content to reduce risk, leading to a less open and collaborative internet.”