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Oberdorf v. Amazon.Com Inc.

United States Court of Appeals, Third Circuit

July 3, 2019

AMAZON.COM INC., a Washington Corporation

          Argued October 3, 2018

          On Appeal from the United States District Court for the Middle District of Pennsylvania (D.C. Civil No. 4-16-cv-01127) District Judge: Honorable Matthew W. Brann

          David F. Wilk (Argued) Lepley, Engelman & Yaw Counsel for Appellants

          Eric D. Miller [*] (Argued) William B. Murphy Laura Hill Perkins Coie, Timothy J. McMahon Marshall, Dennehey, Warner, Coleman & Goggin Counsel for Appellee

          Before: SHWARTZ, SCIRICA and ROTH, Circuit Judges



         On January 12, 2015, Heather Oberdorf returned home from work, put a retractable leash on her dog, and took the dog for a walk. Unexpectedly, the dog lunged, causing the D-ring on the collar to break and the leash to recoil back and hit Oberdorf's face and eyeglasses. As a result, Oberdorf is permanently blind in her left eye.

         Oberdorf bought the collar on As a result of the accident, she sued, including claims for strict products liability and negligence. The District Court found that, under Pennsylvania law, Amazon was not liable for Oberdorf's injuries. In its opinion, the District Court emphasized that a third-party vendor-rather than Amazon itself-listed the collar on Amazon's online marketplace and shipped the collar directly to Oberdorf. Those facts were the basis for the District Court's two main rulings.

         First, the District Court found that Amazon is not subject to strict products liability claims because Amazon is not a "seller" under Pennsylvania law. Second, the District Court found that Oberdorf's claims are barred by the Communications Decency Act (CDA) because she seeks to hold Amazon liable for its role as the online publisher of third-party content.


         Both issues in this case pertain to Amazon's role in effectuating the sale of products offered by third-party vendors. Therefore, we begin by describing the anatomy of a sale on[1]

         Amazon Marketplace

         Amazon is the world's most valuable retail company.[2] Its website is an online marketplace where Amazon retails its own products as well as those of more than one million third-party vendors.[3] These third-party vendors decide which products to sell, the means of shipping, and product pricing. For its part, Amazon lists the products on the Amazon Marketplace, collects order information from consumers, and processes payments. In exchange for these services, Amazon collects fees from each third-party vendor.

         In order to use Amazon's services, a third-party vendor must assent to Amazon's Services Business Solutions Agreement. This Agreement governs every step of the sales process.

         Once a third-party vendor has assented to the Agreement, the vendor chooses which product or products it would like to sell using Amazon's website. This choice is, with some notable exceptions, left to the discretion of the vendor. Among the exceptions are products that Amazon determines are illegal, sexually explicit, defamatory, or obscene.

         When the third-party vendor has chosen a product that it wants to offer on Amazon's website, the vendor provides Amazon with a description of the product, including its brand, model, dimensions, and weight. Pursuant to the Agreement, the vendor must also provide Amazon with digital images of the product, as well as other information such as shipping and handling options, product availability, in-stock status, and any other information reasonably requested by Amazon.

         Based on this information, Amazon formats the product's listing on its website. This function, too, is provided for in the Agreement, by which Amazon retains the right in its sole discretion to determine the content, appearance, design, functionality, and all other aspects of the Services, including by redesigning, modifying, removing, or restricting access to any of them. In fact, the Agreement grants Amazon a royalty-free, non-exclusive, worldwide, perpetual, irrevocable right and license to commercially or non-commercially exploit in any manner, the information provided by third-party vendors.

         The third-party vendor can then choose which, if any, of Amazon's other services it will use in conjunction with listing its product on Amazon's website. For example, Amazon offers "Amazon Clicks," an advertising service in which Amazon highlights and promotes the vendor's product to customers. Amazon also offers a "Fulfillment by Amazon" service, in which it takes physical possession of third-party vendors' products and ships those products to consumers. Otherwise, the vendor itself is responsible for shipping products directly to consumers.

         The listed price for the product is chosen by the third-party vendor, subject to one exception: Vendors may not charge more on Amazon than they charge in other sales channels. Nor, according to the Agreement, may third-party vendors offer inferior customer service or provide lower quality information about products than in other sales channels. To the extent that third-party vendors need to communicate with customers regarding their orders on Amazon, they must do so through the Amazon platform.

         With these preliminaries completed, Amazon lists the product online and sales begin. As customers make purchases on Amazon's website, Amazon collects payment and delivers order information to the third-party vendor. At checkout, the customer can choose any shipping method offered by the third-party vendor, and any promises made by the vendor with respect to shipping date must be met. Amazon ensures compliance with this obligation by requiring the vendor to send Amazon shipping information for each order. In addition, vendors have a powerful interest in providing quality products and ensuring timely delivery, as Amazon allows shoppers to publicly rate the vendors and their products.

         In exchange for its role in the transaction, Amazon collects two types of fees: one is a commission, typically between seven and fifteen percent of the overall sales price; the other is either a per-item or monthly fee, depending on the third-party vendor's preference. At least once every two weeks, Amazon remits all sales proceeds, minus fees, to the vendor. Pursuant to the Agreement, Amazon is classified as the third-party vendor's "agent for purposes of processing payments, refunds, and adjustments . . . receiving and holding Sales Proceeds on your behalf, remitting Sales Proceeds to Your Bank Account, charging your Credit Card, and paying Amazon and its Affiliates amounts you owe . . .."[4]

         Throughout each step of the sales process, Amazon may at any time cease providing any or all of the Services at its sole discretion and without notice, including suspending, prohibiting, or removing any listing. Amazon also retains other important privileges. For example, Amazon can require vendors to stop or cancel orders of any product. If Amazon determines that a vendor's actions or performance may result in risks to Amazon or third parties, it may in its sole discretion withhold any payments to the vendor. Furthermore, Amazon requires that its vendors release it and agree to indemnify, defend, and hold it harmless against any claim, loss, damage, settlement, cost, expense, or other liability.

         The Dog Collar

         On December 2, 2014, Heather Oberdorf logged onto Amazon's website. She typed search information for dog collars into Amazon's search terms box. She decided to purchase the dog collar at issue, which was sold by a third-party vendor, "The Furry Gang." The Furry Gang shipped the dog collar directly from Nevada to Oberdorf, who put the collar on her dog, Sadie. Then, on January 12, 2015, while Oberdorf was walking Sadie, the D-ring on the collar broke and the retractable leash recoiled into Oberdorf's eyeglasses, injuring her and permanently blinding her in her left eye.

         Neither Amazon nor Oberderf has been able to locate a representative of The Furry Gang, which has not had an active account on since May 2016.

         Procedural History

         Oberdorf filed a complaint in the United States District Court for the Middle District of Pennsylvania, bringing claims for strict product liability, negligence, breach of warranty, misrepresentation, and loss of consortium.[5] Oberdorf propounds two separate theories of strict product liability: (1) failure to provide adequate warnings regarding the use of the dog collar, and (2) defective design of the dog collar. She also asserts a variety of negligence theories, namely that Amazon was negligent in (1) distributing, inspecting, marketing, selling, and testing of the dog collar in an unreasonable manner; (2) allowing the dog collar to enter the stream of commerce in a dangerous condition; (3) failing to conduct a proper hazard analysis; (4) failing to follow the guidelines of the "safety hierarchy"; and (5) failing to provide the product with features, elements, precautions, or warnings that would have made it safer.

         The District Court granted Amazon's motion for summary judgment, finding that (1) Amazon cannot be sued under Pennsylvania's strict products liability law because it does not constitute a "seller" within the meaning of Pennsylvania strict liability law, and (2) Oberdorf's claims are barred by the CDA because she seeks to hold Amazon liable for its role as the online publisher of a third party's content.


         The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have jurisdiction pursuant to 28 U.S.C. § 1291. Because our review of a district court's grant of summary judgment is plenary, we affirm only where "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[6] In determining whether summary judgment is appropriate, we view all facts and make all reasonable inferences in favor of the non-moving party, in this case, the Oberdorfs.[7]


         We begin our analysis by addressing Amazon's contention that it is not subject to Oberdorf's strict products liability claims.

         Because our subject matter jurisdiction stems from the parties' diverse citizenship, we apply Pennsylvania law in deciding whether the District Court properly dismissed Oberdorf's strict products liability claim.[8] The Pennsylvania Supreme Court has made clear that the Second Restatement of Torts § 402A applies to Pennsylvania strict products liability claims.[9] Section 402A specifically limits strict products liability to "sellers" of products.[10] Amazon relies on this limitation as its defense, claiming that it is not a "seller" because it merely provides an online marketplace for products sold by third-party vendors. We disagree.[11]


         Amazon relies heavily on the Pennsylvania Supreme Court's decision in Musser v. Vilsmeier Auction Co, Inc.[12] to support its contention that it is not a "seller." Although Musser is a significant case to which we look for guidance, it does not command the result that Amazon seeks.

         The plaintiff in Musser was injured by a tractor that his father had bought at an auction house. Following his injury, he sought to hold the auction house strictly liable as a "seller" of the allegedly defective tractor. The Pennsylvania Supreme Court held that the auction house could not be considered a "seller," and thus that the plaintiff must prove that the auction house acted unreasonably (i.e., bring a negligence claim) in order to hold it liable.[13] In making this ruling, the court relied on the policy rationale articulated in comment f of § 402A of the Second Restatement of Torts:

The basis of the rule is the ancient one of the special responsibility for the safety of the public undertaken by one who enters into the business of supplying human beings with products which may endanger the safety of their persons and property, and the forced reliance upon that undertaking on the part of those who purchase such goods. This basis is lacking in the case of the ordinary individual who makes the isolated sale, and he is not liable to a third person or even to his buyer in the absence of his negligence.[14]

         The court noted that, when the above policy rationale "will not be served, persons whose implication in supplying products is tangential to that undertaking will not be subjected to strict liability for the harms caused by defects in the products."[15] Therefore, because "[t]he auction company merely provided a market as the agent of the seller," the court concluded that applying strict liability doctrine to the auction house would not further the doctrine's underlying policy justification.[16]

         In its opinion, the Pennsylvania Supreme Court made clear that courts later tasked with determining whether an actor is a "seller" should consider whether the following four factors apply:

(1) Whether the actor is the "only member of the marketing chain available to the injured plaintiff for redress";
(2) Whether "imposition of strict liability upon the [actor] serves as an incentive to safety";
(3) Whether the actor is "in a better position than the consumer to prevent the circulation of defective products"; and
(4) Whether "[t]he [actor] can distribute the cost of compensating for injuries resulting from defects by charging for it in his business, i.e., by adjustment of the rental terms."[17]

         We consider below each of the four factors articulated in Musser.


         The first factor is whether Amazon "may be the only member of the marketing chain available to the injured plaintiff for redress."[18] In Musser, the court found that this factor failed to support a finding that the auction house was a "seller" because in an auction there is a vendor, for whom the auctioneer is the agent and who may be amenable to suit under § 402A for negligence or breach of warranty.[19] In other words, the plaintiff in Musser could sue the other parties in the sales distribution chain.

         Amazon contends that, just as every item offered at an auction house can be traced to a seller who may be amenable to suit, every item on Amazon's website can be traced to a third-party vendor. However, Amazon fails to account for the fact that under the Agreement, third-party vendors can communicate with the customer only through Amazon. This enables third-party vendors to conceal themselves from the customer, leaving customers injured by defective products with no direct recourse to the third-party vendor. 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 or manufacturer.[20]

         In this case, Amazon's Vice President of Marketing Business admitted that Amazon generally takes no precautions to ensure that third-party vendors are in good standing under the laws of the country in which their business is registered. In addition, Amazon had no vetting process in place to ensure, for example, that third-party vendors were amenable to legal process. After Oberdorf was injured by the defective collar, neither she nor Amazon was able to locate The Furry Gang. As a result, Amazon now stands as the only member of the marketing chain available to the injured plaintiff for redress.

         The first factor weighs in favor of imposing strict liability on Amazon.[21]


         The second factor we consider is whether "imposition of strict liability upon the [actor would] serve[] as an incentive to safety."[22] In Musser, the Pennsylvania Supreme Court "fail[ed] to see how the imposition of strict liability [on the auction house] would be more than a futile gesture in promoting the manufacture and distribution of safer products," chiefly because the auction house was "not in the business of designing and/or manufacturing any particular product or products."[23] Amazon asserts that it does not have a relationship with the designers or manufacturers of products offered by third-party vendors. Therefore, it contends that imposing strict liability would not be an incentive for safer products. Again, we disagree with Amazon.

         Although Amazon does not have direct influence over the design and manufacture of third-party products, Amazon exerts substantial control over third-party vendors. Third-party vendors have signed on to Amazon's Agreement, which grants Amazon "the right in [its] sole discretion to . . . suspend[], prohibit[], or remov[e] any [product] listing, "[24] "withhold any payments" to third-party vendors, [25] "impose transaction limits, "[26] and "terminate or suspend . . . any Service [to a third-party-vendor] for any reason at any time."[27] Therefore, Amazon is fully capable, in its sole discretion, of removing unsafe products from its website. Imposing strict liability upon Amazon would be an incentive to do so.

         The second factor favors imposing strict liability on Amazon.[28]


         The third factor we consider is whether Amazon is "in a better position than the consumer to prevent the circulation of defective products."[29]

         In Musser, the court indicated that the auctioneer was not in a better position than the consumer to prevent the circulation of defective products because it lacked an "ongoing relationship with the manufacturer from which some financial advantage inures to [its] benefit . . .."[30] Similarly, in Nath v. National Equipment Leasing Corp., [31] the Pennsylvania Supreme Court held that, because financing agencies perform only a "tangential" role in the sales process, "their relationship with a particular manufacturer does not, in the normal course, possess the continuity of transactions that would provide a basis for indirect influence over the condition and the safety of the product."[32] Here, while Amazon may at times lack continuous relationships with a third-party vendor, the potential for continuing sales encourages an on-going relationship between Amazon and the third-party vendors.

         Moreover, Amazon is uniquely positioned to receive reports of defective products, which in turn can lead to such products being removed from circulation. Amazon's website, which Amazon in its sole discretion has the right to manage, serves as the public-facing forum for products listed by third-party vendors. In its contract with third-party vendors, Amazon already retains the ability to collect customer feedback: "We may use mechanisms that rate, or allow shoppers to rate, Your Products and your performance as a seller and Amazon may make these ratings and feedback publicly available."[33] Third-party vendors, on the other hand, are ill-equipped to fulfill this function, because Amazon specifically curtails the channels that third-party vendors may use to communicate with customers: "[Y]ou may only use tools and methods that we designate to communicate with Amazon site users regarding Your Transactions . . .."[34]

         The third factor also weighs in favor of imposing strict liability on Amazon.[35]


         The fourth factor we consider is whether Amazon can distribute the cost of compensating for injuries resulting from defects.

         In Musser, the court "acknowledge[d] that it would be possible for the auctioneer to pass on the costs of imposing strict liability upon him; possibly as [the injured plaintiff] suggests, by indemnity agreements between the auctioneer and the seller."[36] However, although the court found that extending the meaning of "seller" to include the auctioneer would provide another remedy for injured customers, the court demurred, stating that this would "only marginally" promote the "purpose of the policy considerations" underlying § 402A.[37]

         In this case, however, Amazon has already provided for indemnification by virtue of a provision in the Agreement:

You release us and agree to indemnify, defend, and hold harmless us, our Affiliates, and our and their respective officers, directors, employees, representatives, and agents against any claim, loss, damage, settlement, cost, expense, or other liability (including, without limitation, attorneys' fees) . . ..[38]

         Moreover, Amazon can adjust the commission-based fees that it charges to third-party vendors based on the risk that the third-party vendor presents.

         Amazon's customers are particularly vulnerable in situations like the present case. Neither the Oberdorfs nor Amazon has been able to locate the third-party vendor, The Furry Gang. Conversely, had there been an incentive for Amazon to keep track of its third-party vendors, it might have done so.

         The fourth factor also weighs in favor of imposing strict liability on Amazon. Thus, although the four-factor test yielded a different result when applied by the Musser court to an auction house, all four factors in this case weigh in favor of imposing strict liability on Amazon.[39]


         We do not rely exclusively upon the four-factor test to reach our conclusion that Amazon is subject to strict products liability claims for sales involving third-party vendors. Our reasoning is consistent with that in other Pennsylvania cases.

         Notably, in Hoffman v. Loos & Dilworth, Inc., [40] the Pennsylvania Superior Court decided that a sales agent was a "seller" under § 402A, and thus subject to strict product liability under Pennsylvania law.[41] Although Hoffman predates Musser, its holding remains valid, as neither Musser nor any subsequent decision by the Pennsylvania Supreme Court has called Hoffman's holding into question.[42] Moreover, Hoffman addresses Amazon's main argument: Amazon claims that it cannot be considered a "seller" because it does not take title to or possession of the products sold by third-party vendors. The court held in Hoffman that under Pennsylvania law a participant in the sales process can be held strictly liable for injuries resulting from defective products, even if the participant does not take title or possession of those products.[43]

         Hoffman involved bulk sales of linseed oil. The manufacturer's sales agent, E.W. Kaufmann Co., would transmit orders for linseed oil from the packager to the distributor. That was Kaufmann's only role in the sales process. As part of the summary judgment briefing in Hoffman, Kaufmann submitted an affidavit from its principal executive, stating that it did not take title, possession, or ownership of any of the relevant linseed oil during the distribution or sales process.[44] Nonetheless, the court made clear that strict liability in Pennsylvania is properly extended "to anyone 'who enters into the business of supplying human beings with products which may endanger the safety of their persons and property.'"[45] Because Kaufmann's tasks amounted to being "in the business of selling or marketing merchandise," rather than performing a "tangential" role, it could be held strictly liable for injuries resulting from defects in that merchandise.[46]

         In reaching this conclusion, the court discussed two prior Pennsylvania Supreme Court cases, both of which also inform our judgment that Amazon is subject to strict liability. The first of these is Francioni v. Gibsonia Truck Corp., [47] in which the Pennsylvania Supreme Court decided that the term "seller," as used in ยง 402A, does not limit strict products liability to the context of sales; that is to say, the term "seller" can also extend to lessors and bailors. The court held that strict products liability should be ...

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