• by Wendy Davis  @wendyndavis, September 30, 2020

Amazon has settled a high-stakes battle over its liability for defective merchandise that left a woman blind in one eye, the company's lawyer told a federal judge.

News of the settlement was revealed in papers that were quietly filed late last week. Terms were not disclosed.

The deal brings an end to a closely watched fight over Amazon's legal responsibility for products sold through its online marketplace.

The battle dated to 2016, when Pennsylvania resident Heather Oberdorf alleged 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, claiming that the company sold a product with a defective design.

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 on the grounds 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 alleged 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 left eye and permanently blinding her in one 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. A coalition of Silicon Valley business groups -- including the Internet Association, Computer & Communications Industry Association and TechNet -- backed Amazon's request.

The 3rd Circuit sent the case to Pennsylvania's highest court, which was slated to rule on whether Amazon would be considered a seller under Pennsylvania law.

But Amazon and Oberdorf reached a settlement before that court issued a decision.

In August, an appellate court in California ruled against Amazon in a similar dispute. In that case, the judges said Amazon was comparable to a seller, and has the same legal responsibility as other sellers of faulty merchandise, even for items offered by third parties through Amazon's marketplace.

That matter stemmed from a lawsuit by Angela Bolger, who was badly burned when a laptop battery she purchased through Amazon exploded. Amazon's site identified the seller as “E-Life,” which was a business name for Lenoge Technology.

Amazon said in August it planned to appeal that ruling.