New York Court Rules That Amazon May Face Liability as a Seller Under State Law

Earlier this month, a state court in New York addressed an issue that has confronted many state courts across the U.S. Insurance company State Farm Fire and Casualty Co. had sued Amazon under the theory that it was liable as a seller under state law. No New York court had resolved this question. The court in this Onondaga County case determined that Amazon could be held liable as a seller. According to the court, Amazon possesses the product, determines the rules of the purchase, handles the product after the purchase, and demands indemnification from the third-party seller. In addition, the court noted that Amazon products can be considered to be virtually on Amazon shelves. They may even be physically on Amazon shelves in some cases.

This case arose from a house fire in Syracuse, which was allegedly caused by an Anself RF344 wireless thermostat. The homeowner bought the thermostat from Amazon through a Fulfillment by Amazon transaction. After the thermostat caused the house fire, State Farm paid the insurance claim.

In a motion for summary judgment, Amazon argued that it is not a seller with title to a product, so it should not be subject to strict liability. However, the court decided that the question of whether a company has title to a product does not necessarily determine whether it is a retailer or distributor. As a federal court in Wisconsin had noted, Amazon has the opportunity to stop distributing defective products of which it becomes aware, and it implicitly tells consumers that its products are safe. The court felt that Amazon sought to have the rights of a traditional seller without the obligations. Moreover, summary judgment motions must be viewed in the light most favorable to the non-moving party. Under that standard, Amazon had sufficient control over the thermostat to be considered a seller. It still can file an indemnification claim against the Chinese company that produced the thermostat.

Additional cases involving Amazon and seller liability have reached appellate courts in California and Ohio. The appellate court in California ruled against Amazon, while the appellate court in Ohio ruled in its favor. Another case in Arizona resulted in a federal Ninth Circuit ruling in favor of Amazon, although that case was decided by a panel of judges and will be appealed to the full Ninth Circuit. A panel of Fifth Circuit judges has heard a similar case arising from Texas, but they have not reached a decision.

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