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State Farm Fire and Casualty Co. v. Amazon.Com, Inc.

United States District Court, W.D. Wisconsin

July 23, 2019

STATE FARM FIRE AND CASUALTY COMPANY, Plaintiff,
v.
AMAZON.COM, INC., Defendant.

          OPINION AND ORDER

          JAMES D. PETERSON, DISTRICT JUDGE

         Luke Cain bought a bathtub faucet adapter from a third-party seller on Amazon.com. The adapter malfunctioned and flooded Cain's home, which was insured by plaintiff State Farm and Casualty Company. State Farm paid to repair Cain's home, and now it has sued Amazon.com, Inc. for strict product liability under Wis.Stat. § 895.047. The question before the court is whether Amazon can be held liable under Wisconsin product liability law for a product sold by a third party through Amazon.com.

         Amazon moves for summary judgment on two grounds: (1) that it is not a “seller” within the meaning of § 895.047; and (2) that it cannot be held liable for third-party content on its website because § 230(c)(1) of the Communications Decency Act prohibits treating it as a “publisher.” Dkt. 16.

         The court will deny the motion. Amazon does not merely provide a marketplace where third-parties sell to Amazon customers. Amazon was so deeply involved in the transaction with Cain that Wisconsin law would treat Amazon as an entity that would be strictly liable for the faucet adapter's defects, if, as in this case, the manufacturer cannot be sued in Wisconsin. And the Communications Decency Act does not immunize Amazon because State Farm does not seek to impose liability on Amazon merely because it posted some third-party content.

         Although the court issued an order on July 10 telling the parties that it was denying summary judgment, Dkt. 44, neither side submitted any pretrial filings. Trial is scheduled for August 19, and the court is not moving the trial date. There is no longer time for a full round of pretrial submissions and responses, but the court will give the parties until July 30 to submit Rule 26(a)(3) disclosures, as well as all motions in limine, proposed voir dire questions, proposed jury instructions, and proposed verdict forms. The parties will have until August 2 to submit responses. The court will rule on any motions at the final pretrial conference on August 7.

         UNDISPUTED FACTS

         The following facts are undisputed unless noted.

         Defendant Amazon.com, Inc. (which the court will refer to as simply “Amazon”) operates the massive online retail website Amazon.com. Amazon sells its own products on Amazon.com, but it also allows more than a million third-party sellers to use Amazon.com. This case involves one of those third-party transactions.

         In October 2016, Luke Cain bought a swing-arm adapter for a bathtub faucet listed on Amazon.com. Cain bought the product from Amazon because he already pays for an “Amazon Prime” subscription, which covers the cost of shipping for many of the products sold on Amazon.com. Cain found the adapter by visiting Amazon's website and searching for the type of adapter he needed. Cain had seen the product listing for the adapter on a section of Amazon's website that displayed items “frequently bought together.” Dkt. 35, ¶ 6.

         The adapter had been listed on Amazon.com by XMJ, a Chinese company with no presence in the United States. XMJ found a source for the product, acquired it, wrote the product description, and offered it for sale on Amazon.com. Under the terms of its contract with Amazon, XMJ was free to set the price for the adapter, but the price had to be “at least as favorable to Amazon Site users” as to anyone else. Dkt. 19-2, § S-4. Amazon did not at any time own the faucet adapter or any of XMJ's products.

         Amazon provides payment processing for its third-party sellers. Amazon also provides an “A to Z” guarantee for items sold by third parties. This means that Amazon guarantees both timely delivery of products sold by third-party sellers and that the product will arrive in the condition described on Amazon.com. Dkt. 19-4. If a product is damaged, defective, or materially different than listed, the buyer can ask the third-party seller for a refund. But if the third-party seller does not respond, the buyer can return the product directly to Amazon. Amazon will process the return and refund the purchase price and cost of shipping.

         XMJ also participated in the Fulfillment by Amazon (FBA) program, through which Amazon managed the order-fulfillment process. XMJ paid Amazon a fee to store its inventory at Amazon fulfillment centers in the United States and to ship products to buyers. For the FBA program, Amazon required XMJ to register each product it would sell, and Amazon reserved the right to refuse registration for any product, at Amazon's discretion. Id., § F-1. Amazon also required XMJ to indemnify Amazon for any injury or property damage caused by XMJ products. Id., §§ 6, F-10. When a customer purchased an XMJ product, Amazon would remove the product from storage and ship it directly to the customer in an Amazon-branded box.

         In this case, Cain's purchase included the XMJ faucet adapter and another product sold by Amazon itself. Amazon shipped the products together in a single box. Amazon retained 30 percent of the purchase price for the XMJ faucet adapter as a service fee and sent the remainder to XMJ. About a month after the purchase, Cain's home flooded due to a defect in the adapter. Plaintiff State Farm, who had insured Cain's home against property damage, paid for the repairs to Cain's home caused by the flooding.

         ANALYSIS

         This case requires the court to interpret the Wisconsin statute relating to strict product liability in light of the enduring effect of Wisconsin common law on the subject. The court begins with a quick historical recap.

         In 1967, Wisconsin embraced the emerging doctrine of “strict product liability, ” according to which a manufacturer can be held liable for a defective product even without a showing of negligence or other fault on the part of the manufacturer. Dippel v. Sciano, 37 Wis.2d 443, 155 N.W.2d 55 (1967). The strict product liability doctrine is based on a policy determination that, even without a showing of fault, it is appropriate to allocate the cost of defective products to the manufacturer rather than the injured party. The essential principles underlying the doctrine are that the manufacturer can adjust the price of the product to reflect the risks posed by the product and that such cost-shifting will provide the manufacturer an incentive to improve safety. Horst v. Deere & Co., 2009 WI 75, ¶ 24, 319 Wis.2d 147, 769 N.W.2d 536.

         Historically, product liability in Wisconsin was a matter of common law, with the strict liability doctrine patterned on § 402A of the Restatement (Second) of Torts. In 2011, the Wisconsin legislature passed a tort reform bill, which, among other things, codified aspects of products liability law. 2011 Wisconsin Act 2, §§ 29-31 (creating Wis.Stat. § 895.045(3), § 895.046, and § 895.047). The strict product liability doctrine was codified in Wis.Stat. § 895.047. Section 895.047(1) changed the applicable standard for a defective product from the “consumer expectation” standard in the Restatement (Second) of Torts to the “reasonable alternative design” in the Restatement (Third). The difference between these ...


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