New York’s Appellate Division, First Department recently affirmed a Manhattan trial court’s dismissal of a lawsuit against e-commerce giant Amazon, where the plaintiff alleged personal injuries from an electronic bicycle his father purchased through Amazon in Wallace v. Tri-State Assembly, LLC, 2021 NY Slip Op 06664 (1st Dept. 2021). The subject of an online marketplace’s liability for allegedly defective products sold on its website has garnered increasing attention as e-commerce has become more pervasive, and as the options for customers to use e-commerce platforms to sell their products have expanded.  Our prior legal alert analyzing significant developments in this area can be read here.

Though the Wallace decision leaves open the possibility for fact-specific inquiries into marketplace liability based primarily on the role the marketplace played in facilitating the transaction and the causes of action alleged, Wallace provides a strong defense for e-commerce retailers that allow a seller to market a product on their platforms.  In Wallace, the plaintiff alleged the bike’s handlebars loosened, causing him to fall, and asserted claims for negligence and breach of the implied warranties of fitness and merchantability.  A China-based company listed the bike for sale on Amazon and a New York-based company assembled it; both were ultimately non-parties in the case, leaving Amazon as the sole defendant.  Critical to the decision were the facts that the seller essentially used Amazon’s website to market its product, and at no time did Amazon ever take possession of the product.

The court’s decision relied heavily on the Uniform Commercial Code, which governs business transactions and the sale of consumer goods.  Applying Section 2-314, the Appellate Division found that Amazon did not sell, manufacture, distribute, or assemble the e-bike.  Rather, it was a “provider of services.”  Moreover, Amazon never obtained title to the e-bike under Section 2-106 because the seller shipped the product directly to the consumer. This distanced Amazon from the seller, assembler, and plaintiff such that Amazon could not be held liable as a member of the chain of commerce.  Amazon was, in essence, a marketing platform for the sale of the product.

Amazon’s Conditions of Use also assisted in insulating it from liability. It disclaimed all warranties for products sold by third-parties, such as the warranties of merchantability and that goods are fit for a particular purpose. E-commerce platforms should be mindful, however, that both statutory and case law—such as New York’s General Obligations law—often deem certain provisions that are often found in “fine print” void with an eye towards protecting consumers.

In rendering its decision, the Court considered case law issued by federal, New York state, and California courts which illustrated nuances in this area of law depending on the goods involved, theories for recovery, defenses, and venue.  Notably, the Court considered the plaintiff’s argument that he had no remedy against the non-party seller and assembler, but the court found no basis under the circumstances presented to fashion an equitable remedy that would allow the plaintiff to recover.  The Appellate Division telegraphed that liability for e-commerce platforms is likely to be a fact-specific inquiry that may hinge on the roles of all of the members of the chain of commerce and the causes of action alleged.  

E-commerce companies, consumers, and attorneys alike would be well-advised to be mindful of discerning the specific entities involved in a transaction and their respective roles. The Wallace case, though fact-specific, may provide e-commerce retailers with defenses under New York law where the retailers allow other companies or individuals to market products on the e-commerce platforms.

Read the full decision here.

This alert does not purport to be a substitute for advice of counsel on specific matters.

Harris Beach has offices throughout New York State, including Albany, Buffalo, Ithaca, New York City, Rochester, Saratoga Springs, Syracuse, Uniondale and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.