Amazon again.

A couple of months ago, I wrote about the division of opinion among state courts as to whether Amazon can be held strictly liable for injuries caused by third-party sellers’ defective products.  https://www.videntpartners.com/blog/2020/amazon-liable-third-party-sellers%E2%80%99-defective-products.  I concluded that “[t]his is an evolving area of the law, and it appears that Amazon’s years of successfully raising the ‘we’re merely an online marketplace’ defense may be coming to an end.”

In a beautifully written opinion by Judge Don Willett, the Fifth Circuit has just certified this question to the Texas Supreme Court.  (Interestingly, Judge Willett was himself a Justice of that court for 12 years before being appointed to the Fifth Circuit in 2017.)  I can’t improve on Judge Willett’s language, so below are key excerpts from McMillan v. Amazon.com, https://www.ca5.uscourts.gov/opinions/pub/20/20-20108-CV0.pdf  (5th Cir. 12/18/2020) (citations and all but one footnote omitted):

This Texas tort case has potentially sweeping implications.  Online retailers like Amazon have transformed how goods are bought and sold.  But when safety disputes arise, are e-commerce retailers like virtual big-box stores (who would be strictly liable for injuries caused by products sold through their own websites), or more akin to an online flea market (a mere information conduit that connects buyers and sellers)?  As often happens, technological innovation has outpaced legal adaptation.  None of Texas’s bricks-and-mortar precedents has determined whether an e-tailer like Amazon should be deemed a “seller” when vendors’ products turn out to be unsafe.  Given the dearth of on-point caselaw and the significant potential consequences of holding online marketplaces responsible for third-party sellers’ faulty products, we certify this important question to the only court that can adjudicate it with finality: the Supreme Court of Texas.

* * *

The Texas Products Liability Act defines a “seller” as “a person who is engaged in the business of distributing or otherwise placing, for any commercial purpose, in the stream of commerce for use or consumption a product or any component part thereof.”…

No Texas court has yet decided whether an online retailer like Amazon is a “seller” under Texas products-liability law.  Ordinarily, we would “make an Erie guess as to what the Texas Supreme Court would most likely decide,” mindful that our task is “to predict state law, not to create or modify it.”

The parties and two amici, Public Justice and the United States Chamber of Commerce, focus on Amazon’s control over the transaction and offer competing analogies drawn from caselaw.  But…the available precedent does not yield an airtight answer.

* * *

The district court reasoned that…Amazon was a “seller” because…“Amazon is integrally involved in and exerts control over the sale of third-party products.”  Amazon is the “sole channel of communication between customers and vendors.” …Amazon also requires third parties using FBA [Fulfillment by Amazon] to register their products, and Amazon can exclude the registration of any product….

On appeal, Amazon argues that Texas precedent is clear and that other courts around the country have answered the seller question in Amazon’s favor.   As explained below, these decisions are not on all fours.

Amazon’s chief argument is that it simply facilitates online sales for third-party products, so it’s more like an auctioneer or a delivery service, like UPS, than a traditional seller.  The auctioneer analogy seems off-kilter….[T]hose deemed “sellers” for strict-liability purposes are “those whose business is selling, not everyone who makes an occasional sale” of the product….Amazon cannot genuinely contend that it only makes occasional sales or that it is not in the business of selling.

Nor is Amazon like UPS.  Amazon claims it is like a delivery service, but it ignores its role in both the commercial transaction and [the] delivery of products.  Plus, Amazon sometimes uses UPS to deliver products through FBA.  Indeed, that is what happened here.  If UPS’s role in this transaction was to deliver the remote control, Amazon’s role was necessarily distinct….

Amazon is correct that most courts that have considered its seller status have ruled in Amazon’s favor.  These decisions turned on state laws in Tennessee, Maryland, New York, California, Arizona, New Jersey, and Ohio.  But as amicus Public Justice points out, these cases are distinguishable due to dissimilar facts or states’ differently worded laws.  Some of these states require transfer of title for seller status to attach.  Other cases dealt with whether Amazon was a “supplier,” not a “seller.”  Some didn’t involve the FBA program, so Amazon was exerting less control over the transaction and distribution….

Not all of the decisions have gone Amazon’s way.  As one district court noted: “While many courts that initially considered the issue found in Amazon’s favor, some more recent cases have reached different results, with appeals on a few of these cases still pending.  Indeed, this is a developing area of law.”  About five months ago, the Third Circuit certified the seller question to the Pennsylvania Supreme Court.  And just three months ago, a California appellate court found that Amazon was a “seller.”   The California Supreme Court recently denied Amazon’s petition for review.  [Note:  I discussed the California case in the blog post cited in the first paragraph of this post, supra. – MA]  

In sum, the mechanics of Amazon’s business model are novel, as is the broad wording of Texas’s products-liability statute, and there are no on point Texas cases to guide us.  Cases from other circuits are also unhelpful, given the differences in state laws and facts.

The court proceeds to explain its reasons for certifying the question to the Texas Supreme Court.  Here’s the heart of that explanation (which is among the reasons I characterized this opinion as “beautifully written”):

While certification “is not a panacea for resolution of . . . complex or difficult state law questions,” it “may be advisable where important state interests are at stake and the state courts have not provided clear guidance on how to proceed.”  True, certification is wholly discretionary, not obligatory.  But federal-to-state certification is prudent when consequential state-law ground is to be plowed, such as defining and delimiting state causes of action.  State judiciaries, after all, are partners in our shared duty “to say what the law is” – equal partners, not junior partners.  [Nice one, Judge Willett, getting in a quote from Marbury v. Madison! – MA]

By any measure, this case hits the certification bull’s-eye.  It poses a res nova, determinative question of Texas law with far-reaching consequences and no instructive state-court guidance.  It is a Certification 101 exemplar that calls for cooperative judicial federalism, leaving a weighty ruling on Texas negligence law to those elected to rule on Texas negligence law.  As the Third Circuit noted when it certified a similar question to the Pennsylvania Supreme Court, “[e]-commerce businesses present a novel situation, raising several unresolved questions.”  As things stand – a close question of first impression with scant on-point precedent – any Erie guess would involve more divining than discerning.  Like the Third Circuit, why speculate when we can certify, letting state-court handiwork supplant federal-court guesswork?  This purely legal issue, one guaranteed to recur, “should be answered by the only court that can issue a precedential ruling that will benefit all future litigants, whether in state or federal court.”

Judge Willett concludes with a bow to his former colleagues on the Texas Supreme Court and a flourish in a footnote:

A final note, regarding timing.  When certification was raised at oral argument, [plaintiff’s] counsel, while conceding “clearly, that’s an option,” surmised that any ruling from the Texas Supreme Court might take “a couple of years” due to COVID-related delays.  Such concern is misplaced.  To its immense credit, and for several years in a row, the Supreme Court of Texas has decided every argued case by the end of June.  And the coronavirus has failed to slow the Court’s pace this Term.  To be sure, today’s case is a vital and vexing one.  But by long tradition, the Texas Supreme Court graciously accepts and prioritizes certified questions from this circuit, and we are confident that the Court’s impressive streak of timely clearing its docket will remain unbroken.51

51 No pressure.

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