Court To Reconsider Amazon's Responsibility For Shoddy Marketplace Merchandise

A federal appellate court has granted Amazon's request to reconsider a recent ruling that the company may be liable for shoddy products sold through its marketplace.

Amazon had argued that the original ruling, issued last month by a three-judge panel of the 3rd Circuit Court of Appeals, “will alter vast swaths of commerce” in Pennsylvania.

The 3rd Circuit said in a terse order issued late last week that a majority of the circuit's 14 judges had voted to re-hear the case. The court also vacated its prior ruling.

The court's move comes as Amazon is increasingly coming under scrutiny over the quality of merchandise offered through its marketplace. Late last week, The Wall Street Journal reported that Amazon's site offers more than 4,000 items that “have been declared unsafe by federal agencies, are deceptively labeled or are banned by federal regulators.”

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The legal fight in the 3rd Circuit began in 2016, when Pennsylvania resident Heather Oberdorf alleged in a lawsuit that she was severely injured by a faulty 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 critical because Pennsylvania law makes it easier for injured consumers to recover damages from sellers of defective products than from agents.

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.”

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.

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 circuit judges who ruled in Oberdorf's favor said there are “numerous cases in which neither Amazon nor the party injured by a defective product, sold by Amazon.com, 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 added that the decision could effectively force Amazon to revamp its marketplace's business model.

Amazon the sought re-hearing in front of the full 3rd Circuit. The company argued both that the panel's decision went against prior rulings, and could potentially affect many other online 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 wrote.

A coalition of Silicon Valley business groups backed Amazon's request for a new hearing.

The Internet Association, Computer & Communications Industry Association and TechNet said in a friend-of-the-court brief that the original panel 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.”

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