Whether Amazon is a “seller” of third parties’ marketplace products when it doesn’t hold title to them, but stores and ships them in fulfilling the order, was the question before the state high court.
Sellers “are those who have relinquished title to the allegedly defective product at some point in the chain of distribution” when the transaction involves a sale, Justice Brett Busby said June 25 in a 5–2 opinion. In non-sale situations such as leases and promotional samples, the title requirement doesn’t apply, he said.
Jeffrey M. Meyerson, who represented the child’s mother, said the legal definitions at issue are “antiquated.”
“The challenge for the court and the parties is that the Legislature needs to catch up with the times,” he said.
Amazon didn’t immediately respond to a request for comment.
The Texas case is the last in a spate of cases at appeals courts around the country, although litigation in lower courts continues.
A California appeals court recently held Amazon potentially liable under state law in a non-"Fulfillment by Amazon” case, where Amazon didn’t touch the product.
Amazon’s actions related to a hoverboard were “consistent with a retailer or a distributor of consumer goods,” the California Court of Appeal, Second Appellate District, said in Loomis v. Amazon.com LLC. Amazon hasn’t asked the California Supreme Court for review, according to Jeremy Robinson of Casey Gerry Schenk Francavilla Blatt & Penfield LLP in San Diego, who helped represent injured plaintiff Kisha Loomis.
The case expanded Amazon’s potential liability under California law after another appellate panel ruled against Amazon in a fulfillment suit, Bolger v. Amazon.com, Inc. And any internal changes it makes in response wouldn’t necessarily be limited to California.
“I do think Bolger and Loomis will force Amazon to take extra steps to prevent defective products from getting through,” Robinson told Bloomberg Law in an email. “California is a big part of the U.S. economy, and I don’t think Amazon can afford to ignore it just because it has won on this issue in a few other states.”
Here, Morgan McMillan alleges her daughter ingested a remote-control battery as a toddler.
The remote’s China-based maker didn’t even try to comply with industry standards, McMillan alleges. Third-party merchant Hu Xi Jie, who did business as USA Shopping, isn’t subject to jurisdiction in Texas, she said in a filing.
A federal district court allowed McMillan to proceed with claims against Amazon on behalf of herself and her daughter, and the company appealed.
Amazon’s business model is new, and prior Texas cases aren’t on point, the U.S. Court of Appeals for the Fifth Circuit said when it sent the question to the state supreme court.
Amazon’s “seller” status under Chapter 82 of the Texas Products Liability Act hinges on determining “whether Amazon’s role in the distribution chain amounts to ‘distributing or otherwise placing’ a product in the stream of commerce,” Busby said for the Texas Supreme Court. Those phrases should be construed by looking at the court’s previous interpretations of Section 402A of the Second Restatement of Torts, the basis of Texas product liability law, he said.
And Chapter 82, “a liability-restricting statute,” doesn’t “expand liability for those not considered sellers under the common law,” he said.
“Our cases and Chapter 82’s language indicate that ordinary sales and non-sale commercial transactions are distinct from one another,” he said. For sale transactions, the seller is identified by looking at the transfer of title, he said.
McMillan obtained the remote control through a sale transaction in which Amazon didn’t hold or relinquish title, and so it can’t be held liable, he said.
Justices Jeffrey S. Boyd and John Phillip Devine dissented. The terms “distributing” and “placing” should be given their ordinary, common meanings, Boyd said. Under those meanings, Amazon “is unquestionably a seller” for purposes of fulfillment transactions, he said.
The case will return to the Fifth Circuit now that the certified question is answered. But not much remains for that court to do, said Meyerson, who practices in Dallas.
Meyerson wasn’t sure about prospects for legislative change in Texas, where the Legislature is out for a year. Legislation is pending in California, but a committee hearing was canceled recently. Robinson said the bill’s sponsors think it’s unnecessary after the Loomis decision.
Robinson, who submitted an amicus brief supporting McMillan, said that neither “the majority nor the dissent engaged in any discussion of the policies involved in holding online marketplaces liable for their defective goods or the real-world consequences of failing to do so (such as leaving a badly hurt young child and her parents with no recourse).”
“Given Amazon’s absolute dominance in the retail market, states can’t afford to just ignore this issue” and should enact legislation, he said.
Perkins Coie LLP and Munsch Hardt Kopf & Harr PC represented Amazon.
The case is Amazon.com, Inc. v. McMillan, Tex., No. 20-0979, 6/25/21.