RICHMOND, Va. (CN) - Does retail giant Amazon bear responsibility when a third-party seller’s product malfunctions and burns down a family’s house? That was the question before a Fourth Circuit panel Thursday in what one attorney called “the flaming headlamp case.”
The attorney for the family’s insurance company tried to persuade a three-judge panel of the Richmond, Virginia-based federal appeals court to overturn a district court ruling dismissing the insurer’s negligence and product liability claims.
Representing Erie Insurance Company, John Weston of the Philadelphia-based firm Sacks Weston and Diamond opened with what could best be considered a joke in the usually stuffy appeals court: “This is the ‘flaming headlamp case,’” he said.
Back in 2014, Minh and Anh Nguyen received a battery-operated headlamp, purchased from Amazon, from a friend as a gift. The trouble started once the Nguyens began using the headlamp – it malfunctioned and caught fire, burning their house to the ground.
After filing a claim with Erie, the Nguyens received over $300,000 for the fire damage. The insurer then set out to reclaim that hefty sum.
That effort led Erie to Amazon and the third-party seller of the headlamp, China-based Dream Light. Claiming negligence, breach of warranty, and strict liability, Erie aimed to keep Amazon as a defendant in the suit despite the retailer’s claim that Dream Light was responsible as a third-party seller using its website.
Erie said Amazon was directly involved in the sale. It argued that while the headlamp at issue was purchased through the retailer’s platform, Amazon also warehoused the product, which gave it ownership.
But a federal judge in Maryland was not convinced. U.S. District Judge Roger Titus dismissed the claim last year, finding that Amazon was not the seller and could not be held liable as such. Amazon was also insulated from the lawsuit by the Communications Decency Act, which service providers like Amazon from liability for content created by a third party.
During oral arguments Thursday, Weston said the lower court got it wrong. Instead, he argued, Maryland state law, including its Uniform Commercial Code, defines sellers as “a person who sells or contracts to sell goods,” which should include Amazon considering its platform was used in the transaction and the product was warehoused at an Amazon facility.
“The Commercial Code definition is a passing of title. Amazon has power to transfer that title,” West said, noting that transfer of ownership from Dream Light to Amazon to the Nguyens holds the online retailer responsible. “That section exists to avoid hidden interests.”
But Brendan Murphy, an attorney with the Seattle-based Perkins Coie representing Amazon, said the broader nature of these kinds of complaints against Amazon were new at the federal appeals level, but not so new at the state level. He said a number of state courts have sided with the retailer in part thanks to disclaimers on Amazon’s website.
“Every court that has considered this issue, Amazon’s liability, has found they are not,” Murphy said, noting the third-party seller relationship is clear in who is responsible for what.
“The offer is written, price is set, and title is set by the seller,” he added. “‘Fulfillment by Amazon just means we warehouse the product… Title doesn’t go to Amazon.”
U.S. Circuit Judge Paul Niemeyer, a Ronald Reagan appointee, seemed more sympathetic to Amazon’s argument, calling its third-party retail service more of a “consignment shop” then a business deal between seller which could carry with it changes in product ownership.
He said Amazon merely “participates in the sale,” before clarifying the product was sold by Dream Light with the manufacturer as the final seller.
Meanwhile, U.S. Circuit Judge Diana Gribbon Motz, a Bill Clinton appointee, wondered if the case was even appropriate for a federal appeals court. She asked both parties if the case would be better certified to the Maryland Supreme Court “instead of federal judges guessing” on how to interpret the state law.
Both Amazon and Erie seemed open to the idea, but also stressed the appeals court could solve the problem as well. Murphy said that even if state courts did rule one way or the other, a decision from the Fourth Circuit could help guide the lower courts.
Chief U.S. Circuit Judge Roger Gregory was also on Thursday’s panel. The judges did not indicate when they will issue a ruling in the case.
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