AUSTIN, Texas (CN) --- Answering a certified question from a federal appeals court, the Texas Supreme Court ruled Friday that Amazon cannot be held responsible for defective products sold on its site by other companies because it is not considered a seller under state law.
Justice Brett Busby delivered the court's opinion and wrote for Amazon to be liable "as a non-manufacturing seller of defective products" under Texas law, it must first qualifier as a seller -- which the justices interpreted as "persons or entities engaged in the business of distributing products through ordinary sales or placing products in the stream of commerce through non-sale commercial transactions."
"Because the product in this case was sold on Amazon’s website by a third party and Amazon did not hold or relinquish title, Amazon is not a seller even though it controlled the process of the transaction and the delivery of the product," Busby wrote.
The case stems from a 2018 incident in which Morgan McMillan’s then-19-month-old daughter opened the battery compartment on a general Apple TV remote control and swallowed the button battery inside. The battery was later surgically removed, but fluid from the battery permanently damaged the child's esophagus.
After the incident, McMillan contacted Amazon to obtain more information about the company she purchased the remote from through Amazon’s website. The remote was sold by USA Shopping 7693, a China-based third-party seller. The Amazon Marketplace account for the seller was connected to an entitled called Hu Xi Jie. Amazon suspended USA Shopping 7693’s account and removed the remote from the website.
McMillan eventually sued both Hu Xi Jie and Amazon for strict liability, alleging they were responsible for design defects in the product. Hu Xi Jie did not respond to the suit even after McMillan attempted to serve it via the Texas Secretary of State’s office.
Amazon then moved for summary judgment, claiming that it could not be held liable since it was not the seller.
The case ended up in the Texas Supreme Court as a certified question after Amazon appealed a federal judge’s ruling that it could be held liable for the allegedly defective remote as a seller. Amazon appealed to the Fifth Circuit, but the New Orleans-based appellate court found Amazon’s business model is new and asked the state high court to weigh in “there are no on-point Texas cases to guide us.” The case was the first of its kind in the Lone Star State.
During oral arguments in March, McMillan’s attorney Jeff Meyerson told the Texas Supreme Court that Amazon “is engaged in the business of selling.” He argued Amazon should be held liable and considered a seller because the retail giant performs "every single function that a seller performs.”
Brendan Murphy, Amazon’s attorney based in Seattle, countered that “Amazon does not do any of the things that sellers do.”
“It doesn’t own the product, it doesn’t select the product, it doesn’t source it, it doesn’t offer it,” he told the justices.
The federal appeals court asked Texas' top court to decide whether Amazon is a seller under state law when it doesn't own the product being sold but controls the transaction and delivery process.
"We answer the Fifth Circuit’s certified question no," Busby wrote.
However, Amazon can be held liable if it one of its own products, such as those in its AmazonBasics line, causes injury to a consumer because in that case it has clear ownership of the product and would be considered the seller.
Reacting to the court’s decision on Friday, McMillan’s attorney said in an interview that he was disappointed with the ruling but that the issue belongs before the Texas Legislature.
“I think it might be a good idea for the Legislature to take a look at the statutes Obviously these laws were written quite some time ago and I think it is about time that they strongly consider changing it and bringing it up to the modern era,” Meyerson said.
Issues regarding liability for e-commerce platforms like Amazon are not touched by current Texas law. Companies that sell products from China in the state will not have to be as concerned if those products are dangerous, according to Meyerson. Based on Friday's ruling, as long as the platform you purchased the product from -- Amazon, eBay or even a brick and mortar location -- does not hold the title to the product, they are immune from being held liable for injuries or damages sustained from the product, he said.
“Buyers and consumers need to be aware when they are buying from Amazon now because they are not going to have a method of recovery if they are injured by some dangerous product,” Meyerson said.
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