Split Emerges Over Products Liability for Online Markets

• Pages: 24-25
• Date: 01 January 2023
• Author: Aubrey Eyrolles
• Subject Matter: Civil Law

The Dallas County trial court

granted the defendant’s plea to the

jurisdiction and dismissed the case.

The Dallas Court of Appeals armed

the dismissal. The Travis County trial

court, however, denied the plea. The

Austin Court of Appeals armed the

plea denial as to the fraud claim but

reversed on the other claims.

On a consolidated appeal, the Texas

Supreme Court declined to address

whether it should adopt a doctrine

of derivative sovereign immunity for

contractors. Instead, it applied a “con-

trol-based immunity standard” used

by other courts determining whether

sovereign immunity applied to govern-

ment contractors. The court explained

that immunity would extend to the con-

tractor if “the government [told] the

contractor what to do and how to do

it (as opposed to the contractor hav-

ing ‘some discretion in performing the

contract’).” The court observed that in

those circumstances, immunity applied

because the government was acting

through the contractor, and thus, the

“complained-of conduct” was attribut-

able to the government.

Looking to the plaintis’ allegations

and the contract between the commis-

sion and the defendant, the high court

concluded that the game designer

was not immune because it retained

sucient discretion over the word-

ing of the instructions. The court also

rejected the defendant’s argument that

it was immune because the commis-

sion approved of the f‌inal game design,

noting that “close supervision and f‌inal

approval of work over which a contrac-

tor has discretion are not the same as

the government specifying the manner

in which a task is to be performed.”

ABA leaders see the decision as

consistent with the purpose of the sov-

ereign immunity doctrine. “If you look

at sovereign immunity strictly as pro-

tecting the government, then leaving a

contractor exposed to liability neither

furthers nor inhibits the government’s

protecting itself,” explains Brian R.

Gaudet, Houston, TX, publication editor

of the Litigation Section’s Construction

Litigation Committee. “Sovereign

immunity and derivative sovereign

immunity are intended to keep the

judiciary from interfering with the acts

of the executives,” notes Erin Frazee

Masini, Washington, DC, cochair of

ABA Section of Public Contract Law’s

Acquisition Reform & Emerging Issues

Committee. “I think the supreme court’s

reasoning is correct.”

“This decision reemphasizes caution

and care on a day-to-day basis,” Masini

concludes. The defendant made the

commission’s changes to the game but

did not look at whether those changes

warranted changes to the instructions.

“Just because the government approves

your work does not mean you are o

the hook for liability,” Masini warns.

Split Emerges Over

Products Liability for

Online Markets

By Aubrey Eyrolles, Litigation News

Contributing Editor

In a decision that highlights an emerg-

ing split, a state supreme court has held

that Amazon is not liable for products

sold by a third-party vendor on its web-

site. Meanwhile, another line of cases

has come to the opposite conclusion.

ABA Litigation Section leaders suggest

that online marketplaces may respond

by imposing stricter controls over prod-

ucts sold on their platforms.

In Stiner v. Amazon.com, Inc., a

teenager died after ingesting a fatal

dose of a caeine powder called “Hard

Rhino,” which he obtained from a friend

who bought it from a third-party ven-

dor, Tenkoris, on Amazon’s website.

The teenager’s family sued Amazon

for products liability and negligence

under the theory that Amazon supplied

“Hard Rhino.” The trial court found that

Amazon was not liable as a supplier and

granted summary judgment. The inter-

mediate appellate court armed.

On appeal, the Supreme Court of

Ohio armed, reasoning that Ohio’s

Products Liability Act does not intend

to impose liability on persons without

sucient control over the product, as

it excludes persons that act only in a

“f‌inancial capacity” from the def‌inition

of supplier. Because Tenkoris placed the

product on Amazon’s site, wrote the

product description, and sold, fulf‌illed,

packaged, and shipped the product

directly to customers, the court con-

cluded that Amazon was not a supplier

that placed the product in the stream

of commerce.

The court likewise rejected the

plainti’s arguments that Amazon

should be held liable because of the

control it exercised over third-party

vendors. While Amazon “prevent[ed]

sellers from contacting customers,”

“reserve[d] the right to alter the con-

tent of product descriptions,” and

“impose[d] restrictions on pricing,” that

control was insucient to qualify it as

a seller, as Amazon had no relationship

with the manufacturer and no role in

labeling or packaging the product.

Other courts have likewise held

that Amazon lacks sucient control

over the product to be held liable. For

example, in Fox v. Amazon, Inc., the U.S.

Court of Appeals for the Sixth Circuit

held that even though the company

possessed the hoverboard at issue and

shipped it from its location, Amazon

did not decide to sell the product or

make any representations about it.

By contrast, other courts have

found that Amazon can be liable for a

defective product when it possesses

the product and sells it to the cus-

tomer. In Bolger v. Amazon.com, LLC,

a California appellate court found that

Amazon was a “seller” where it stocked

and shipped the product to the cus-

tomer on behalf of a third-party vendor.

The U.S. District Court for the Southern

District of Texas came to the same con-

clusion in McMillan v. Amazon.com, Inc.

On appeal, however, the U.S. Court of

Appeals for the Fifth Circuit certif‌ied

the question to the Supreme Court of

Tex as , which held that because Amazon

did not hold title, it was not a supplier.

Litigation Section leaders predict

a change in products liability juris-

prudence. “You can’t divorce product

liability from the notion of some level of

responsibility on the consumer to edu-

cate himself or herself. We won’t neces-

sarily see courts placing this burden on

the consumer, but we may see a rea-

sonable person standard develop over

time, by which defendants could dem-

onstrate that the consumer knew or

should have known that they were buy-

ing from a third party and not Amazon,”

predicts Tonya G. Newman, Chicago,

IL, cochair of the Section’s Products

Liability Litigation Committee.

Section leaders also suggest proac-

tive strategies that companies may use

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