State Farm Fire & Cas. Co. v Amazon.com Servs., Inc.

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[*1] State Farm Fire & Cas. Co. v Amazon.com Servs., Inc. 2020 NY Slip Op 20326 Decided on December 8, 2020 Supreme Court, Onondaga County Neri, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

Decided on December 8, 2020
Supreme Court, Onondaga County

State Farm Fire and Casualty Company a/s/o ROBERT MEAD, Plaintiff,

against

Amazon.com Services, Inc. a/k/a AMAZON.COM, INC. a/k/a AMAZON, Defendant.



008550/2019



Dennis D. Murphy for Plaintiff

Leo A. Bohanski for Defendant
Gerard J. Neri, J.

Plaintiff filed the instant action on September 18, 2019 seeking damages it alleges were incurred as a result of a defective thermostat purchased from Defendant Amazon.com Services, Inc. a/k/a Amazom.com, Inc. a/k/a Amazon ("Amazon"). On September 24, 2020, Defendant filed the instant motion for summary judgment alleging it is not a "seller" and therefore cannot be held liable for the alleged damages.

On February 26, 2018, Pamela Mead purchased an Anself RF344 wireless thermostat controller (the "Thermostat") via Defendant's website (see Affidavit of Charles S. Wright, NYSCEF Doc. No. 16, para. 4). Plaintiff alleges the Thermostat was installed at 4154 Norton Road, Syracuse, New York (the "Premises") and on March 9, 2018 the Thermostat caused a fire damaging the Premises (see Complaint, NYSCEF Doc. No. 1, para. 4). Defendant does not dispute that the Thermostat caused the fire.

Defendant argues that it is not a "seller" of the Thermostat and cannot be held strictly liable. The "law of negligence or products liability" depends "on proof that [the] defendant actually designed, manufactured, sold, distributed, or marketed the allegedly defective item" (see Porter v. LSB Indus., Inc., 192 AD2d 205, 211 [Fourth Dept. 1993]). Defendant alleges that Defendant's only connection to the Thermostat was allowing a "third-party seller to publish an offer on Amazon.com and providing FBA [Fulfilment by Amazon] logistics services (see Memorandum of Law, NYSCEF Doc. No. 20, p. 11 of 24). FBA logistics services allows third-party sellers to send their inventory to Amazon fulfillment centers for storage, and when an order is placed for the third-party seller's goods, they are retrieved and shipped by Amazon employees [*2]via UPS or other-like shipping carriers (see Wright Affidavit, NYSCEF Doc. No. 16, para. 19). Defendant further states that Amazon has possession of the items, but not title to the items (ibid). Defendant further states that Amazon is responsible for delivery-related questions, but that the third-party seller remains responsible for product-related customer services (ibid).

Defendant relies on two recent federal cases which addressed Amazon's status. In Eberhart v. Amazon.com, Inc. noted the "Court of Appeal has not precisely identified the nodes that constitute a product's chain of distribution" (Eberhart v. Amazon.com, Inc., 325 F.Supp.3d 393, 397 [S.D.NY 2018]). The court in Eberhart went on to say, "regardless of what attributes are necessary to place an entity within the chain of distribution, the failure to take title to a product places that entity on the outside" (Eberhart at 398). Citing the Restatement of Torts, the Eberhart court noted, "the Restatement excludes "product distribution facilitators"—i.e., '[p]ersons assisting or providing services to product distributors,' such as advertisers, sales personnel, and auctioneers—from the definition of distributors" (Eberhart at 398 citing Restatement (Third) of Torts: Prod. Liab. 1 [1998]). Defendants also proffer Philadelphia Indemnity Ins. Co. v. Amazon.com, Inc., which relied on Eberhart to grant summary judgment in favor of Amazon (see Philadelphia Indemnity Ins. Co. v. Amazon.com, Inc. 425 F.Supp.3d 158, 162-164 [E.D.NY 2019]).

Plaintiff argues the cases proffered by Defendant are not controlling and instead points to cases it claims are persuasive. The first case, Oberdorf v. Amazon.com Inc. (930 F.3d 136 [Third Cir. 2019]) was vacated by an order for rehearing en banc (see Oberdorf v. Amazon.com Inc., 936 F.3d 182 [Third Cir. 2019]). The Third Circuit has subsequently certified the question of an e-commerce business' strict liability for a defective product for review by the Pennsylvania Supreme Court (see Oberdorf v. Amazon.com Inc., 818 F. App'x 138, 143 [Third Cir. 2020]).

Plaintiff next proffers State Farm Fire and Casualty Company v. Amazon.com, Inc. which denied Amazon's motion for summary judgment (see State Farm Fire and Casualty Company v. Amazon.com, Inc., 390 F.Supp.3d 964 [W.D. Wisc. 2019]). In reaching its decision, the district court analyzed a Wisconsin statute which it described thusly: "The gist of this subsection is that a plaintiff can recover from a seller or distributor of a defective product, only if the seller or distributor undertakes the manufacturer's duties, or if the manufacturer is unavailable or judgment proof" (see State Farm at 969). The district court further noted "that Wisconsin product liability law is broadly remedial, and not limited to a narrow specially defined class of defendants" (State Farm at 970). Plaintiff notes the district court concluded: "Amazon took on all the roles of a traditional — and very powerful- reseller/distributor" (State Farm at 972). Plaintiff also notes other federal cases supporting its position.

Plaintiff argues there are not any decisions in New York directly on point. "Where products are sold in the normal course of business, sellers, by reason of their continuing relationships with manufacturers, are most often in a position to exert pressure for the improved safety of products and can recover increased costs within their commercial dealings, or through contribution or indemnification in litigation; additionally, by marketing the products as a regular part of their business such sellers may be said to have assumed a special responsibility to the public, which has come to expect them to stand behind their goods" (Sukljian v. Charles Ross & Son Co., 69 NY2d 89, 95, [1986]). Plaintiff argues the reasons for holding a seller strictly liable in the 1986 Court of Appeals case are analogous to those advanced by the recent federal decisions holding Amazon strictly liable (see Plaintiff's Memorandum of Law, NYSCEF Doc. No. 24, pp. 9-10). Plaintiff further argues that under New York law it is not dispositive that [*3]Amazon does not take title to the product (see Brumbaugh v. Cali, 152 AD2d 69 [Third Dept. 1989]).

Defendant argues in reply that New York law establishes bright-line rules which clearly establish that HoneyMony (a Chinese company) was the seller in the instant transaction and not Amazon (see U.C.C. §2-106 which defines "sale" as "the passing of title from the seller to the buyer for a price"). Defendant reiterates its arguments concerning Eberhart and Philadelphia Indemnity. Defendant distinguishes Brumbaugh by noting the underlying facts of that matter showed the defendant had exclusive rights to market the subject products (see Brumbaugh at 71). Defendant further notes that Plaintiff's reliance on Oberdorf did not account for the subsequent history of the matter which is pending before the Pennsylvania Supreme Court. Defendant claims that State Farm misinterpreted Wisconsin law and similarly argues that Bolger v. Amazon.com, LLC (53 Cal. App. 5th 431 [Ct. App. 2020]) was incorrectly decided by the California Court of Appeals. Neither the State Farm or Bolger matter appear to have been appealed at this time.



Discussion:

The job of this Court is to state what the law is in New York. Initially, "[o]n a motion for summary judgment, facts must be viewed 'in the light most favorable to the non-moving party'" (Vega v. Restani Constr. Corp., 18 NY3d 499, 503 [2012] citing Ortiz v. Varsity Holdings, LLC, 18 NY3d 335, 339 [2011]). "Summary judgment is a drastic remedy, to be granted only where the moving party has 'tender[ed] sufficient evidence to demonstrate the absence of any material issues of fact' and then only if, upon the moving party's meeting of this burden, the non-moving party fails 'to establish the existence of material issues of fact which require a trial of the action'" (Vega at 504 citing Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). Amazon argues it is entitled to summary judgment as it does not qualify as a seller under New York law.

The Court of Appeals has held "[s]trict liability may also be imposed on retailers and distributors of allegedly defective products because such sellers, due to their continuing relationship with the manufactures, are usually 'in a position to exert pressure for the improved safety of products and can recover increased costs within their commercial dealings, or through contribution or indemnification in litigation'" (Finerty v. Abex Corp., 27 NY3d 236, 241 [2016], citing Sukljian v. Ross & Son Co., 69 NY2d 89, 94 [1986]). By this standard, it is clear that Defendant Amazon falls into this category of "retailers and distributors".

Amazon argues the question of title is dispositive. They argue they have temporary possession of a particular item, but never take title. Reviewing the terms and conditions of the Fulfillment by Amazon ("FBA") service agreement, Amazon exercises sufficient control over products sold on the Amazon website. Paragraph F-1 entitled "Your Products" states:

"Once you are accepted into FBA, you must apply to register each product you offer that you wish to include in the FBA program. We may refuse registration in FBA of any product, including on the basis that it is an FBA Excluded Product or that it violates applicable Program Policies. You may at any time withdraw registration of any of Your Products from FBA" (see Amazon Services Business Solutions Agreement, NYSCEF Doc. No. 17, p. 21 of 47).

Paragraph F-6 of the Amazon Services Business Solutions Agreement governs customer returns and it is clear that the consumer deals with Amazon (ibid at 23). Paragraph F-10 entitled "Indemnity" states: "In addition to your obligations under Section 6 of the General Terms of this Agreement, [*4]you also agree to indemnify, defend, and hold harmless us, our Affiliates, and our and their respective officers, directors, employees, representatives, and agents against any Claim that arises from or relates to: (a) the Units (whether or not title has transferred to us, and including any Unit that we identify as yours pursuant to Section F-4 regardless of whether such Unit is the actual item you originally sent to us), including any personal injury, death, or property damage; (b) the shipment, export, or delivery of Your Products to Foreign Addresses (including with respect to any classification data and other information provided by you to us in connection therewith, and notwithstanding any rights we have under Section F-5 or any certifications we may make in connection with the shipment, export, or delivery of Your Products); (c) any of Your Taxes or the collection, payment, or failure to collect or pay Your Taxes; and, if applicable (d) any sales, use, value added, personal property, gross receipts, excise, franchise, business, or other taxes or fees, or any customs, duties, or similar assessments (including penalties, fines, or interest on any of the foregoing) imposed by any government or other taxing authority in connection with the shipment of Foreign-Eligible Products to Foreign Addresses (collectively, 'Foreign Shipment Taxes')" (ibid at 25 of 47, emphasis added).

Viewing these facts in the light most favorable to Plaintiff, Amazon exercises sufficient control over the product to be considered among "retailers and distributors".

Amazon's argument is that they merely provide temporary storage for an item until a third-party seller sells an item to a buyer or is on the periphery of the distribution chain. This characterization minimizes Amazon's role in the transaction. In transactions under the FBA, such as the one at issue, the third-party seller sends its product to Amazon which then stores the item at an Amazon facility (see Affidavit of Wright, NYSCEF Doc. No. 16, para. 18). When a buyer elects to purchase the item at Amazon's website, an Amazon employee prepares the item for shipment and sends the item to the buyer via a shipping carrier (ibid). Amazon then calculates fees pursuant to its agreement with the third-party seller and remits the net to the third-party seller (ibid at para. 21). While Amazon claims the fine print shows the third-party sells the product, in this instance HoneyMony (see Defendant's Memorandum of Law, NYSCEF Doc. No. 20, p. 7 of 24), the packaging the consumer receives is emblazoned with Amazon's logo.

Amazon's arguments that State Farm was wrongly decided, therefore not applicable is unpersuasive. State Farm dealt with a specific Wisconsin statute which makes clear that in the absence of a manufacturer, a "seller or distributor" may be held liable in the manufacturer's place (see Wis. Stat. § 895.047). This Court is not bound by Wisconsin law. However, State Farm is useful in explaining why Amazon may be held liable:

"Amazon provided the only conduit between XMJ, the Chinese seller, and the American marketplace. Without Amazon, XMJ products would not be available at all in Wisconsin. Amazon did not directly set the price for the faucet adapter, but it set the substantial fees that it would retain for itself, so it was positioned to insure against the risk of defective products. As part of the FBA agreement, Amazon required XMJ to register each product, and Amazon reserved the right to refuse to sell any of them. So Amazon was in a position to halt the flow of any defective goods of which it became aware. And Amazon took steps to protect itself by requiring XMJ to indemnify Amazon. Amazon also implicitly represented that the adapter was safe by listing it for sale among its own products, and it expressly guaranteed timely delivery in good condition. And, under Amazon's A to Z [*5]guarantee, Amazon agreed to process returns and refunds if XMJ did not respond. Amazon took on all the roles of a traditional—and very powerful—reseller/distributor. The only thing Amazon did not do was take ownership of XMJ's goods." (State Farm at 972).

State Farm acknowledges in a state where title is dispositive, Amazon would likely win (State Farm at 972-973).

As noted above, title is not dispositive in New York (see Brumbaugh). Amazon's attempt to distinguish Brumbaugh by using Finerty is misplaced. In Finerty, plaintiff sued, among other, Ford Motor Company (Ford USA), Ford Motor Company, Ltd (Ford UK), and Henry Ford & Son, Ltd. (Ford Ireland) for alleged exposure to asbestos while replacing asbestos-containing brakes, clutches, and engine parts (Finerty at 239). Ford USA moved for summary judgment dismissing the complaint "because it was devoid of any allegations supporting a claim that the court should 'pierce the corporate veil' such that Ford USA could be held derivatively liable for acts of Ford UK" (Finerty at 240). Nowhere in Finerty is there an allegation that Ford USA put the subject parts into the stream of commerce. What the Court of Appeals found dispositive was while Ford UK was a wholly owned subsidiary of Ford USA, there was no indication that Ford USA "involved itself directly in [Ford UK]'s affairs such that the corporate veil could be pierced" (Finerty at 242).

There is no question that e-commerce, and specific to this instance Amazon, has revolutionized the way New Yorkers and Americans generally shop. E-commerce has displaced brick and mortar storefronts. The consumer goes to Amazon's website to look for a product in the same manner one would walk into a Lowes, Home Depot, or a neighborhood True Value, or order from one of those entities' website. Amazon by its actions has charted its own course. The product is virtually, and in cases such as a Fulfilment by Amazon transaction, physically on an Amazon shelf. While Amazon has disclaimed title, it certainly maintains possession of the subject product. It is an Amazon employee who handles the product once the consumer makes the decision to purchase. It is Amazon who sets the rules of the transaction to which the consumer purchases the item. If a consumer has a problem with a product, it is Amazon who they contact. It is Amazon who demands indemnification in their services agreement. Amazon seeks to have all the benefits of the traditional brick and mortar storefront without any of the responsibilities. Federal Courts (see Eberhart) and the Parties acknowledge that New York State Courts have not opined on this specific issue. Defendant has failed to meet its burden to obtain summary judgment. Should the Defendant wish to exercise its indemnification rights, upon written notice the Court will allow sixty days for Defendant to commence a third-party action. Based upon the facts of this record and viewing them in the light most favorable to the Plaintiff, summary judgment in favor of the Defendant is not appropriate. The above constitutes the decision of the Court.

NOW, THEREFORE, it is hereby

ORDERED, that Defendant Amazon's motion for summary judgment is DENIED.



Dated: December 8, 2020

ENTER.

HON. GERARD J. NERI, J.S.C.