Luke Cain bought a bathtub faucet adapter from a third-party seller on Amazon.com. The adapter malfunctioned and flooded Cain's home, which was insured by plaintiff State Farm and Casualty Company. State Farm paid to repair Cain's home, and now it has sued Amazon.com, Inc. for strict product liability under
Amazon moves for summary judgment on two grounds: (1) that it is not a "seller" within the meaning of § 895.047 ; and (2) that it cannot be held liable for third-party content on its website because § 230(c)(1) of the Communications Decency Act prohibits treating it as a "publisher." Dkt. 16.
The court will deny the motion. Amazon does not merely provide a marketplace where third-parties sell to Amazon customers. Amazon was so deeply involved in the transaction with Cain that Wisconsin law would treat Amazon as an entity that would be strictly liable for the faucet adapter's defects, if, as in this case, the manufacturer cannot be sued in Wisconsin. And the Communications Decency Act does not immunize Amazon because State Farm does not seek to impose liability on Amazon merely because it posted some third-party content.
UNDISPUTED FACTS
The following facts are undisputed unless noted.
Defendant Amazon.com, Inc. (which the court will refer to as simply "Amazon") operates the massive online retail website Amazon.com. Amazon sells its own products on Amazon.com, but it also allows more than a million third-party sellers to use Amazon.com. This case involves one of those third-party transactions.
In October 2016, Luke Cain bought a swing-arm adapter for a bathtub faucet listed on Amazon.com. Cain bought the product from Amazon because he already pays for an "Amazon Prime" subscription, which covers the cost of shipping for many of the products sold on Amazon.com. Cain found the adapter by visiting Amazon's website and searching for the type of adapter he needed. Cain had seen the product listing for the adapter on a section of Amazon's website that displayed items "frequently bought together." Dkt. 35, ¶ 6.
The adapter had been listed on Amazon.com by XMJ, a Chinese company with no presence in the United States. XMJ found a source for the product, acquired it, wrote the product description, and offered it for sale on Amazon.com. Under the terms of its contract with Amazon, XMJ was free to set the price for the adapter, but the price had to be "at least as favorable to Amazon Site users" as to anyone else. Dkt. 19-2, § S-4. Amazon did not at any time own the faucet adapter or any of XMJ's products.
Amazon provides payment processing for its third-party sellers. Amazon also provides an "A to Z" guarantee for items sold by third parties. This means that Amazon guarantees both timely delivery of products sold by third-party sellers and that the product will arrive in the condition described on Amazon.com. Dkt. 19-4. If a product is damaged, defective, or materially different than listed, the buyer can ask the third-party seller for a refund. But if the third-party seller does not respond, the buyer can return the product directly to Amazon. Amazon will process the return and refund the purchase price and cost of shipping.
XMJ also participated in the Fulfillment by Amazon (FBA) program, through which Amazon managed the order-fulfillment process. XMJ paid Amazon a fee to store its inventory at Amazon fulfillment centers in the United States and to ship products to buyers. For the FBA program, Amazon required XMJ to register each product it would sell, and Amazon reserved the right to refuse registration for any product, at Amazon's discretion.
In this case, Cain's purchase included the XMJ faucet adapter and another product sold by Amazon itself. Amazon shipped
ANALYSIS
This case requires the court to interpret the Wisconsin statute relating to strict product liability in light of the enduring effect of Wisconsin common law on the subject. The court begins with a quick historical recap.
In 1967, Wisconsin embraced the emerging doctrine of "strict product liability," according to which a manufacturer can be held liable for a defective product even without a showing of negligence or other fault on the part of the manufacturer. Dippel v. Sciano ,
Historically, product liability in Wisconsin was a matter of common law, with the strict liability doctrine patterned on § 402A of the Restatement (Second) of Torts. In 2011, the Wisconsin legislature passed a tort reform bill, which, among other things, codified aspects of products liability law. 2011 Wisconsin Act 2, §§ 29-31 (creating
For our purposes, the important part of the statute is § 895.047(2), which codifies the common law principle that strict liability can extend to entities besides the manufacturer under certain circumstances. That subsection provides:
(2) LIABILITY OF SELLER OR DISTRIBUTOR.
(a) A seller or distributor of a product is not liable based on a claim of strict liability to a claimant unless the manufacturer would be liable under sub. (1) and any of the following applies:
1. The claimant proves by a preponderance of the evidence that the seller or distributor has contractually assumed one of the manufacturer's duties to manufacture, design, or provide warnings or instructions with respect to the product.
2. The claimant proves by a preponderance of the evidence that neither the manufacturer nor its insurer is subject to service of process within this state.
3. A court determines that the claimant would be unable to enforce a judgment against the manufacturer or its insurer.
(b) The court shall dismiss a product seller or distributor as a defendantbased on par. (a) 2. if the manufacturer or its insurer submits itself to the jurisdiction of the court in which the suit is pending.
In our case, all agree that that the unknown manufacturer of the faulty adapter would be liable under subsection (1), and that neither the manufacturer nor its insurer is subject to service of process within Wisconsin. So the question is whether Wisconsin law allows State Farm to recover from Amazon in the absence of the responsible manufacturer.
A. Amazon may be held liable under
This case is in federal court on the basis of diversity jurisdiction, so the court applies the law of the forum state, Wisconsin. And, if Wisconsin law is unclear, the court must predict how the Wisconsin Supreme Court would decide the issue. Cmty. Bank of Trenton v. Schnuck Markets, Inc. ,
The question begins as one of statutory interpretation. Wisconsin courts start with the language of the statute, and if its meaning is plain that is the end of the analysis. State ex rel. Kalal v. Circuit Court for Dane Cty. ,
The key dispute is whether Amazon qualifies as a "seller" or "distributor." Amazon says that "seller" means one who holds title to property and transfers that title to another. And because Amazon never takes title to the goods sold by third parties, it cannot be a seller. But State Farm contends that "seller" is not so restrictive, and the concept includes entities involved in a sale, even if the entity does not take or transfer actual ownership.
The statutory sections devoted to product liability do not expressly define "seller" or "distributor." In some cases, the common meaning of a term may be ascertained from dictionary definitions.
So neither the statutes nor dictionaries provide decisive, or even helpful, definitions. But the structure and purpose of the product liability statutes are informative. The language of § 895.047(2) is phrased in negative form. It says that sellers and distributors are not liable under strict liability unless certain conditions are met. This is significant because nothing in this subsection affirmatively defines the class of entities that are liable under strict liability. This suggests that the purpose of subsection (2) was to limit when a plaintiff may target a nonmanufacturer defendant, but not who may be held liable as a nonmanufacturer defendant.
Looking more broadly at the structure of the statute, under
A related statutory section,
Because the terms and structure of the statute does not completely answer the central question, the court will turn to Wisconsin caselaw. As demonstrated by Richards ,
Kemp v. Miller ,
This doesn't mean that an entity is strictly liable in Wisconsin if it plays only a peripheral role in putting a defective article into the stream of commerce. Wisconsin courts have held the contrary. See, e.g., Estate of Cook by Cook v. Gran-Aire, Inc. ,
So the question is this: is Amazon a peripheral entity like an auctioneer or is it an integral part of the chain of distribution more akin to the lessor in Kemp ? The undisputed facts show that Amazon is an integral part of the chain of distribution, an entity well-positioned to allocate the risks of defective products to the participants in the chain.
Amazon provided the only conduit between XMJ, the Chinese seller, and the American marketplace. Without Amazon, XMJ products would not be available at all in Wisconsin. Amazon did not directly set the price for the faucet adapter, but it set the substantial fees that it would retain for itself, so it was positioned to insure against the risk of defective products. As part of the FBA agreement, Amazon required XMJ to register each product, and Amazon reserved the right to refuse to sell any of them. So Amazon was in a position to halt the flow of any defective goods of which it became aware. And Amazon took steps to protect itself by requiring XMJ to indemnify Amazon. Amazon also implicitly represented that the adapter was safe by listing it for sale among its own products, and it expressly guaranteed timely delivery in good condition. And, under Amazon's A to Z guarantee, Amazon agreed to process returns and refunds if XMJ did not respond. Amazon took on all the roles of a traditional-and very powerful-reseller/distributor. The only thing Amazon did not do was take ownership of XMJ's goods.
In states in which the formal transfer of ownership is a prerequisite to strict liability, Amazon would prevail. See, e.g., Erie Ins. Co. v. Amazon.com, Inc. ,
Amazon contends that no other court has held it strictly liable for third-party sales through Amazon.com. None of those cases are binding precedent. And most of the cases cited by Amazon did not involve transactions that were part of the FBA program, through which Amazon plays a particularly significant role in the distribution of third-party products. After briefing was completed, the Third Circuit concluded that Amazon was strictly liable for a defective product sold by a third-party seller, applying principles from § 402A of the Restatement (Second) of Torts, and Pennsylvania common law. Oberdorf v. Amazon.com Inc. , No. 18-1041,
Amazon did not own the product that XMJ sold to Cain. But in light of the facts of this case, that is a mere technicality. At least for products sold under Amazon's FBA program, Amazon otherwise serves all the traditional functions of both retail seller and wholesale distributor. Like the lessor in Kemp , Amazon bears responsibility for putting the defective product into the stream of commerce in Wisconsin, and Amazon is well positioned to allocate among itself and its third-party sellers the risks that products sold on Amazon.com would be defective. Wisconsin law is clear that it would not leave Cain (and his insurer) to bear that risk alone.
B. Amazon is not immune under the Communications Decency Act
Amazon contends that even if it were a seller under Wisconsin product liability law, it is immune from liability under the Communications Decency Act (CDA).
Amazon says that it is entitled to CDA immunity because the product description for the defective adapter was written by, and provided to Amazon by, XMJ. Thus, Amazon's argument goes, it cannot be held liable for the content of the product description. But State Farm is not seeking to treat Amazon as the publisher of the product description; nor is State Farm attempting to hold Amazon liable for the product description at all. Rather, State Farm is seeking to hold Amazon liable for putting a defective product into the stream of commerce. "In strict product liability actions, the 'act' to which the seller's responsibility attaches is not an act of negligence. If indeed it is an act at all, it is simply the act of placing or maintaining a defective product in the stream of commerce." Fuchsgruber ,
Amazon cites three cases in which it says courts applied the CDA to claims involving products listed by third-party sellers on Amazon's website. But in one of the cases, the court did not actually rule on the issue. Stiner ,
Amazon also cites the Wisconsin Supreme Court's recent decision in Daniel v. Armslist , which held that the CDA preempted a gun victim's negligence claims against a website that hosted classified ads for gun sales.
CONCLUSION
Amazon has transformed retailing in the United States, and in the process it has taken on many roles that had been served by brick-and-mortar stores, shopping malls, and wholesalers and distributors. This has been a boon to consumers, because through Amazon consumers can purchase a vast range of products, supplied by manufacturers and sellers across the globe, that would otherwise not be available to Wisconsin buyers. But what recourse does a Wisconsin buyer have if one of these third-party products is defective and causes injury or damage? If, as in this case, the manufacturer and the third-party seller are foreign entities that cannot be sued in Wisconsin courts, Amazon's answer is that there is no recourse.
This answer cannot be squared with Wisconsin's law of strict product liability. Particularly when Amazon provides order fulfillment services through its FBA program, Amazon is properly considered a seller for purposes of Wisconsin strict product liability law for products sold by third parties through Amazon.com. And Amazon is not immune under the Communications Decency Act for claims that it sold a defective product.
ORDER
IT IS ORDERED that:
1. Defendant Amazon.com, Inc.'s motion for summary judgment, Dkt. 16, is DENIED.
2. Motions in limine and other pretrial filings are due on July 30, 2019. Responses are due on August 2, 2019.
Notes
Amazon relies on definitions from Black's Law Dictionary 1567 (10th ed. 2014) ("seller" is "[s]omeone who sells or contracts to sell goods ... the transferor of property in a contract of sale");
The retroactive application of § 895.046 was held unconstitutional in Gibson v. American Cyanamid Co. et al. ,
