5th Circuit Reverses S.D. Ruling Finding Amazon a "Seller" Under Texas Law
We reported in June of 2020 that the Southern District of Texas determined that Amazon was a “seller” under Texas law on its “Fulfillment by Amazon” (“FBA”) platform. In McMillan v. Amazon.com, Inc., 2020 U.S. Dist. LEXIS 102025 (S.D. Tex 2020), _F.Supp.3d _ , at issue was an allegedly defective remote control manufactured in China and sold on Amazon under its FBA platform. The trial court determined that Amazon was “integrally involved” in the stream of commerce, and ruled that it was a “seller” under Texas law for product liability claims that were not protected by the Communications Decency Act.
Amazon appealed to the 5th Circuit; the 5th Circuit certified a single question to the Supreme Court of Texas before ruling on the appeal: May Amazon be held liable as a “seller” under Texas products-liability law for third-party products sold on Amazon’s website and handled through Amazon’s Fulfillment by Amazon program? McMillan v. Amazon.com, Inc., 983 F.3d 194, 196 (5th Cir. 2020), certified question answered sub nom., Amazon.com, Inc. v. McMillan, No, 20-0979, 2021 WL 2605225 (Tex.June 25, 2021). The question was sent to the state court on December 18, 2020.
In its certification of the question, the 5th Circuit acknowledged that online retailers like Amazon have transformed how goods are bought and sold, but lamented that technological innovation has outpaced the legal world. The Texas cases deciding who is a “seller” of a defective product have all been based upon traditional brick-and-mortar retailers; this issue has not been addressed in Texas for e-retailers. The court called Amazon “a global e-commerce behemoth,” which has caused many traditional retailers to disappear. It also discussed the cases from other jurisdictions cited by Amazon supporting its argument that it is not a seller. The 5th Circuit distinguished all of them, based on either the specific state law in question, or the factual differences. Amazon had argued that the appellate court should not certify the question to the Supreme Court of Texas because it would take years to get a response. The 5th Circuit rejected that argument. “To its immense credit, and for several years in a row, the Supreme Court of Texas has decided every argued case by the end of June. And the coronavirus has failed to slow the Court’s pace this Term….By long tradition, the Texas Supreme Court graciously accepts and prioritizes certified questions from this circuit, and we are confident that the Court’s impressive streak of timely clearing its docket will remain unbroken.”
Roughly 6 months after receiving the question, the Supreme Court of Texas answered “no,” ruling that “potentially liable sellers are limited to those who relinquished title to the product at some point in the distribution chain” and stating that third-party sellers do not relinquish title to their products, meaning “Amazon is not a ‘seller’” of such products. Amazon.com, Inc. v. McMillan, 2021 WL 2605885, at *1.
Based upon the answer by the Supreme Court of Texas, the 5th Circuit reversed and remanded to the trial court with instructions to grant Amazon’s motion for summary judgment in full.