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En Banc Third Circuit Sends Online Marketplace Liability Issue to Pennsylvania Supreme Court

Last week the Third Circuit made its most recent move in the Oberdorf v. Amazon case: asking the Pennsylvania Supreme Court whether an e-commerce business – such as Amazon – is strictly liable for a defective product that was sold on its platform by a third-party vendor that the e-commerce business did not possess or own. Given the lack of clarity, and the “substantial public importance” of this issue, the Third Circuit asked the Pennsylvania Supreme Court to weigh in.

Background

In Pennsylvania, as in many jurisdictions that apply the Restatement (Second) of Torts, Section 402A or statutes similar to section 402A, strict products liability is limited to “sellers” of products. Courts balance multiple factors to make the determination – issues such as warranty, title, control sufficient to inspect, economic benefit, control over design and manufacture, and the like come up frequently. At the core, though, much of the focus revolves around the level of control an entity has. 

Originally, this case came to the Third Circuit after the Middle District of Pennsylvania granted summary judgment in Amazon’s favor on Heather Oberdorf’s claims. The plaintiff sued Amazon under Pennsylvania law based on strict liability (failure to warn and design defect), negligence based on a variety of theories, breach of warranty, misrepresentation and loss of consortium after she was allegedly injured by a faulty dog collar. The plaintiff purchased a dog collar from a third-party vendor using Amazon, which shipped the collar directly to her. Amazon moved for summary judgment, which the district court granted – primarily because it found Amazon was not a “seller” within the meaning of Pennsylvania law.

The Third Circuit initially reversed, holding Amazon is categorically a “seller” within the meaning of Pennsylvania law, though the court agreed to hear the appeal en banc, effectively nullifying the prior opinion. Until the Third Circuit agreed to rehear the case en banc – nullifying the earlier opinion – this was the only appellate court to find that Amazon was a “seller” under these circumstances. It heard oral argument specifically on the “seller” issue earlier this year.

Certifying the Issue to the Pennsylvania Supreme Court

The Third Circuit said it is “unable to predict how the Pennsylvania Supreme Court would rule” as to if and how Pennsylvania law applies to Amazon. Under Pennsylvania Law – Pennsylvania adopted the Restatement (Second) of Torts, Section 402A – to be strictly liable, a company must be a section 402A “seller.” The Third Circuit stated it is unable to determine what the correct test is for applying section 402A to e-commerce businesses – and whether the appropriate test is a one-step test or a two-step test. The one-step test would consist of four policy factors1 to determine “seller” status. The two-step test is the same as the one-step test, but with a prerequisite determination that a company “is in the business of selling the kind of product at issue.”

The Third Circuit went further, asking for guidance as to how to perform the first step if the appropriate test includes a prerequisite determination of whether a company is in the business of selling the product at issue. The court addressed Amazon’s argument on that point, “that a ‘seller’ must transfer either ownership of or some kind of legal right to possession.” The court noted that Pennsylvania law and various courts around the country apply this “bright-line approach,” but Pennsylvania law “does not slavishly adhere to the language of section 402A.”

The Court suggested that the concept of “tangentiality” could be the appropriate framework to determine if a company is selling the kind of product at issue. That is, whether a company’s role in a transaction is too tangential to impose strict liability. However, the Court also said it is uncertain of the role and weight of tangentiality in the section 402A analysis.

The Third Circuit found that this “is an issue of first impression and substantial public importance.” It certified the following question to the Supreme Court of Pennsylvania:

“Under Pennsylvania law, is an e-commerce business, like Amazon, strictly liable for a defective product that was purchased on its platform from a third-party vendor, which product was neither possessed nor owned by the e-commerce business?”

For now, the issue remains unsettled. The authors continue to monitor this case and similar cases around the nation for developments in online marketplace liability.


1The four policy factors are the following: (1) is the defendant the only member of the marketing chain available to the injured party for redress; (2) does imposition of strict liability serve as an incentive to safety; (3) is the defendant in a better position than the consumer to prevent circulation of the defective product; and (4) can the defendant distribute the costs of strict liability?

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume X, Number 170

TRENDING LEGAL ANALYSIS


About this Author

Blake A. Angelino Litigation Attorney Faegre Drinker Biddle & Reath Chicago, IL
Associate

Blake litigates, advises and assesses risk on behalf of clients in complex litigation, including product liability and mass torts, as a member of the firm’s nationally ranked product liability group. Blake has represented numerous Fortune 500 companies in the life sciences, compressed and natural gas, and construction sectors. Particularly, he collaborates with teams to represent drug and device clients to protect and defend their life-changing products.

Product Liability Litigation Expertise

Blake has experience taking and defending depositions, drafting dispositive...

312-356-5145
Patrick H. Reilly Litigation Attorney Faegre Drinker Biddle & Reath Indianapolis, IN
Partner

Patrick Reilly represents multinational and Fortune 500 clients in complex litigation, regularly acting as national coordinating counsel to manufacturers in product liability actions. He also advises on sports law matters.

Patrick’s complex litigation experience includes:

  • Acting as national coordinating counsel to clients defending against mass torts, including managing thousands of cases, formulating strategies to attack and pare down the plaintiffs’ allegations, developing the company case, selecting and working up bellwether trials, structuring and negotiating global settlements, and supervising local counsel.
  • Trial.
  • Taking and defending fact and expert witness depositions.
  • Drafting dispositive motions, including Daubert, summary judgment, trial briefs and appellate briefs.
  • Oral arguments and hearings.
  • Mediation and negotiation (from pre-suit resolution to global settlements).

Products Liability

Patrick has represented national and international manufacturers of a variety of products in state and federal courts across the United States and in Canada. His representation ranges from single-plaintiff cases to class actions to MDLs.

Patrick has particular experience defending Fortune 100 and Fortune 500 drug and device manufacturers in mass torts. His pharmaceutical experience includes drugs, reagents, vaccines, injections and therapeutics for treatments such as arthritis, erectile dysfunction, protein buildup and other conditions. His device and diagnostic experience includes joint implants, IVC filters, hernia mesh, pelvic mesh, pain pumps and IV tubing. Patrick also represents clients in product liability litigation related to human tissue and allograft.

Patrick also defends national and international manufacturers in the automotive, marine and watercraft, transportation and recreational vehicle industries. Clients he represents in this space include a Fortune 500 manufacturer of engines, filtration and power generation products, one of North America’s largest producers of semi-trailers, one of the world’s largest manufacturers of snowmobiles, ATVs and neighborhood electric vehicles, and one of the world’s largest beverage companies.

Sports Law

Patrick litigates sports law matters from contract disputes to class actions. His expertise includes collegiate athletics, Olympic sports and esports, and he has represented:

  • The National Football League (NFL).
  • The National Hockey League (NHL).
  • The National Collegiate Athletic Association (NCAA).
  • USA Track and Field.
  • Diadora Shoe Company.

Personal Interests

Patrick passionately promotes diversity in the legal field through mentorship and leadership in legal organizations.

Patrick enjoys advising sports entities, but also likes to personally get into the game. At Butler University, Patrick served as captain of the varsity men’s soccer team and earned ESPN Academic All-American Honors.

317-237-1087
Michael Zogby, Drinker Biddle Law Firm, Florham Park, New York, Intellectual Property Litigation Attorney
Partner

Michael C. Zogby has an extensive trial and litigation practice encompassing products liability, medical device, class action, commercial, intellectual property, mass tort, and multidistrict proceedings. He has served as trial counsel, national liaison counsel, and discovery counsel in a variety of litigations throughout the United States.

Mike serves as a faculty member at the National Trial Advocacy College at the University of Virginia School of Law, an intensive hands-on- trial advocacy training program for practicing...

973-549-7209