Erie Ins. Co. v. Amazon.com

Brief Fact Summary.

A purchaser bought a product from defendant’s website to give to a friend. The product malfunctioned and the friend’s home caught fire. Plaintiff, an insurance company, paid the resulting losses and sought reimbursement from defendant in a products liability suit.

Synopsis of Rule of Law.

A seller is one that offers property for sale, with sale defined as the transfer of ownership of and the title to property from one entity to another for a price.

Facts.

Dream Light, a manufacturer of headlamps, had an agreement where it shipped its inventory to Amazon.com (“Amazon”) (defendant). Once an order was received online for the product, Amazon would retrieve the headlamp from the inventory, box it, and ship it to the purchaser. One day in Maryland, Trung Cao purchased a headlamp on the Amazon website. Amazon packaged and shipped the headlamp to Cao using a third-party shipper, UPS Ground. Cao gave the headlamp to one of his friends as a gift. The headlamp’s batteries malfunctioned and it caused the friends’ home to catch on fire. The insurer of the home, Erie Insurance Company (“Erie”) (plaintiff), had to pay the $300,000 in damages to the house. Erie sued Amazon to obtain reimbursement. Erie alleged negligence, breach of warranty, and strict liability in tort. Amazon contended that it was not the “seller.” Erie, however, argued that Amazon took so much control over the transaction that it effectively became the seller. Amazon moved for summary judgment and the trial court granted the motion. Erie appealed.

Issue.

Whether defendant is subject to liability for a defective product that a customer purchased on its website from a third-party seller with defendant “fulfilling” the transaction by storing and shipping the product?

Held.

No. In this particular transaction, Amazon is not the seller and is therefore not liable under Maryland law.

Concurrence.

Justice Motz

While the majority was correct that Amazon is not a “seller” under Maryland law, this may not always be the case. Amazon disrupts the traditional supply chain by cutting out the middleman. Amazon’s business model shields it from the traditional products liability. A change in public policy may justify a change in products liability law given Amazon’s novel business model.

Discussion.

Under Maryland law, products liability may be imposed on sellers and manufacturers. The defect in the product must be shown to exist either when the product left the seller or manufacturer, or when the sale was made. The ordinary meaning of “seller” is “one that offers property for sale.” Meanwhile, “sale” is defined as the “transfer of ownership of and title to property from one entity to another.” The court finds no indication that the term “seller” should be understood in any manner other than its ordinary manner under Maryland law. Those who render services to facilitate the distribution or sale of a product are not sellers. Here, Amazon facilitated the sale for Dream Light’s headlamps. Dream Light was therefore the seller, not Amazon.