AMAZON AVOIDS LIABILITY FOR DEFECTIVE PRODUCT

A federal appellate court recently affirmed a finding by a Maryland district court that online retailer Amazon is not liable for damages related to a house fire caused by a defective headlamp purchased on the site. The ruling is good news for Amazon, but the appellate court limited the district court’s more sweeping judgment.

Trung Cao purchased a headlamp on Amazon’s website and then gave it to friends as a gift. The headlamp’s batteries apparently malfunctioned, igniting the friends’ house and causing over $300,000 in damages.

Erie Insurance Company, which insured the house, paid the loss and then filed suit against Amazon seeking reimbursement from Amazon arguing that Amazon has liability under Maryland law because it was the “seller” of the headlamp.

The district court granted summary judgment to Amazon, finding that Amazon was not the “seller” and that the Communications Decency Act immunized Amazon from liability. The appellate court upheld the finding that Amazon was not a seller, but overruled the immunity ruling.

The court agreed that Amazon was not a “seller” in this instance because the services it provided were limited to “fulfillment.” Under its fulfillment program, Amazon provides logistics services for a fee. Sellers ship inventory to an Amazon warehouse for storage and, once Amazon receives an order online for a product, Amazon retrieves the product from inventory, boxes it, and ships it to the purchaser.

That’s what happened here. Dream Light (the company that offered the light for sale) shipped its headlamps to Amazon’s warehouse in Virginia, and, when Cao’s order for one came in, Amazon packaged and shipped it to Cao using the third party shipper, UPS Ground. As part of its fulfillment services, Amazon also collected payment and, after withdrawing its service fee, remitted the balance to Dream Light. Dream Light set the price for the headlamp and created the content of the product’s description used on the Amazon site.

Under these circumstances, the court found that the sale occurred when “title” to the lamp passed from Dream Light to Mr. Cao. Title never passed to Amazon, and therefore, Amazon never “sold” the product to Cao. As the court noted, “ after Amazon received the headlamp at its warehouse, there was no action or agreement that amounted to the consummation of a sale of the headlamp by Dream Light to Amazon. Indeed, even as Amazon possessed the headlamp in its warehouse, Dream Light set the price for the sale of the product to purchasers, designed the product description for the website, paid Amazon for its fulfillment services, and ultimately received the purchase price paid by the purchaser.” In a sense, Amazon was no more the seller than UPS, who delivered the lamp.

That was the good news for Amazon. The bad news was that the appellate court found that the Communications Decency Act did not apply here. The CDA protects online service providers from liability for content supplied by third parties. So if the lawsuit were based on the product description supplied by Dream Light, the CDA would almost certainly have protected Amazon. But according to the appellate court, the lawsuit wasn’t based on third party content. It was based on Amazon’s own actions – fulfilling Cao’s order. That conduct, in the appellate court’s view, was materially different from the activity the CDA protects.

Any win is good news, but the court’s CDA decision takes one bullet out of Amazon’s holster in similar cases going forward.

COMMUNICATIONS DECENCY ACT PROTECTS DARK WEB SITE

A tragic case from a federal court in Utah reminds us that the law – in this case the Federal Communications Decency Act – can sometimes yield results that leave many people scratching their heads. Even when the court applies the law entirely correctly.

The parents of a 13 year old boy, referred to in the complaint as "G.S.", brought a complaint against several defendants seeking damages resulting from their son’s overdose death. The boy obtained the drug U-47700 from a website that he accessed by using the Tor Browser. U-47700 is an opioid analgesic with approximately 7.5 times the potency of morphine.

Tor moved to dismiss the complaint against it, citing the protection of the CDA. Tor provides software for enabling anonymous communication and transactions on the internet. To use the Tor Browser, an individual must visit Tor’s website to download the software. When downloaded, the Tor Browser automatically starts Tor background processes and routes Internet traffic through the Tor network, which relays traffic through a worldwide network. The Tor network provides security to a user’s location and Internet usage to anyone conducting network surveillance or traffic analysis. This is the “dark web” we often read about.

The theory of the parents’ case was relatively simple. Anyone involved in the chain that allowed G.S. to purchase the drugs that ultimately killed him should be responsible. I suspect any parent would feel the same way.

But the law wasn’t on their side. The CDA says that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” In the mainstream internet world, the CDA means that if a person posts something on Facebook or uploads a video to YouTube, neither of those platforms are liable for the content of the uploaded material. The CDA has been the law since 1996, and most people generally understand its provisions.

And here, TOR was merely a conduit for information provided by the drug supplier. As the court noted, “the content that provides the basis for liability here—information regarding U47700 and the ability to purchase it on the dark web—was not created by Tor. Rather, a third party provided the information and G.S. accessed it through use of the Tor Browser.” That is the very essence of the CDA.

I suspect it gave the District Court Judge very little pleasure to issue the order in this case. But the law is clear and the facts in this one compelled that result.