AUSTIN, Texas (Legal Newsline) – Amazon and other online marketplaces can’t be held liable for defective products sold on their sites by vendors, the Texas Supreme Court has ruled.
A June 25 opinion authored by Justice Brett Busby answered the question posed by the U.S. Court of Appeals for the Fifth Circuit in a lawsuit brought by a woman whose young daughter swallowed a battery she took out of a remote control purchased on Amazon.
Morgan McMillan tried to hold Amazon liable for the permanent damage caused by the battery’s acid, though the remote was sold by a vendor called USA Shopping 7693. Third parties enter contracts with Amazon to sell their merchandise on the site.
A federal court in Texas denied Amazon’s motion for summary judgment. The company appealed to the Fifth Circuit, which sought clarification on Texas law from the state Supreme Court.
It asked if Amazon is a “seller” of third-party products even when it does not hold the title to the product but controls the transaction and delivery through its Fulfillment by Amazon program.
“Amazon did not make the ultimate consumer sale because Amazon did not hold title to the remote and relinquish it to McMillan; Hu Xi Jie held title at the time of transfer,” Busby wrote.
“McMillan argues that Amazon’s Conditions of Use – which provide for transfer of title upon Amazon’s delivery of a product to the shipping company – establish that Amazon transferred title to her. But Amazon’s ability to transfer title from Hu Xi Jie to a purchaser does not confer title on Amazon.”
Amazon’s possession of third-party products like the remote can be considered an entrustment, Busby wrote.
“By offering suite of marketing, financing and logistics services to third-party sellers, Amazon has developed a business model that is not title dependent,” Busby wrote.
“And though Amazon’s business model gives the company a significant amount of control over the process of the transaction and the delivery of the product, this control does not transform an otherwise non-title-holding sales facilitator into a ‘seller.’”
Two justices dissented in an opinion that Busby wrote “provides little guidance” and fails to “yield a helpful definition that courts can apply consistently to cases involving similar facts.”
Justice Jeff Boyd wrote the dissenting opinion, joined by John Devine.
“Amazon.com is unquestionably a seller when a customer purchases a third party’s product through the Fulfillment by Amazon (FBA) program,” Boyd wrote.
“A third party that chooses to sell its products on Amazon.com’s website and utilize the FBA program physically provides the product to Amazon.com. Amazon.com then stores the product in one of its ‘fulfillment centers.’”
“From that point on, Amazon.com is the ‘sole channel of communication’ between the third party and the ultimate consumer.”