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Amazon Can Be Liable as Seller in N.Y., State Trial Court Says

Dec. 10, 2020, 4:13 PM

State Farm Fire and Casualty Co. can pursue claims against Amazon.com Inc. over a thermostat blamed for a house fire that was sold through and shipped by Amazon because it is a “seller” under New York law, a trial court said in a matter of first impression for a New York state court.

“Amazon by its actions has charted its own course,” Justice Gerard J. Neri said for the Supreme Court, Onondaga County. “The product is virtually, and in cases such as a Fulfillment by Amazon transaction, physically on an Amazon shelf,” he said. Amazon possesses the product, handles it after purchase, sets the transaction’s rules, and demands indemnification from the third-party seller, he said.

Courts nationwide are grappling with the issue: A state appeals court in California recently held that Amazon could be held liable for web marketplace sales under that state’s law, while the top court in Ohio ruled for Amazon. A U.S. Court of Appeals for the Ninth Circuit ruling in Amazon’s favor under Arizona law is being appealed to the full appeals court, and a panel of the Fifth Circuit just heard argument on a product sold under Texas law.

Amazon has 60 days to file a claim against Chinese merchant HoneyMony if it wants to exercise its indemnification rights, Neri said.

State Farm alleged that Syracuse, N.Y., homeowner Pamela Mead bought an Anself RF344 wireless thermostat through Amazon’s website in a “Fulfillment by Amazon” transaction. The thermostat allegedly caused a fire, and State Farm said it paid the insurance claim.

Amazon asked for summary judgment in its favor. It’s not a seller subject to strict liability under New York law, it argued.

Having title to a product isn’t dispositive for whether a company is a retailer or distributor under the state’s law, the trial court said Tuesday. And, viewed in the light most favorable to State Farm, “Amazon exercises sufficient control over the product to be considered among ‘retailers and distributors,’” it said.

“Amazon seeks to have all the benefits of the traditional brick and mortar storefront without any of the responsibilities,” the court said.

The court cited a federal district court opinion in Wisconsin that said “Amazon was in a position to halt the flow of any defective goods of which it became aware,” implicitly represented the product was safe, and “took on all the roles of a traditional—and very powerful—reseller/distributor,” except for holding title.

Stuttman Law Group PC represented State Farm. Marshall, Dennehey, Warner, Coleman & Goggin represented Amazon.

The case is State Farm Fire & Cas. Co. v. Amazon.com Servs., Inc., 2020 BL 478099, N.Y. Ct. Cl., No. 008550/2019, 12/8/20.

To contact the reporter on this story: Martina Barash in Washington at mbarash@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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