In a law review article set to be published in the Cornell Law Review, Professor Tanya J. Monestier of the Roger Williams University School of Law argues that Amazon and other similar online marketplaces may be liable for defective good sold on their marketplaces under the Uniform Commercial Code. This argument is particularly noteworthy because the cases thus far against online marketplaces have focused almost exclusively on tort theories of strict liability and negligence.
The likely reason most lawyers and courts have shied away from arguing the UCC as a basis for liability is that a superficial reading of the pertinent code sections suggests the warranty requirements of the UCC don’t attach to companies that don’t transfer the title of goods. Basically, the reasoning goes the relevant UCC duties only apply if the defendant is a “seller,” which, in turn requires a “sale.” And the UCC defines a “sale” as the passing of title from the seller to the buyer for a price.” And since online marketplace operators like Amazon try very hard to avoid taking title to products sold by third-party vendors, they argue they cannot be considered a seller under the UCC. And, indeed, a few courts have agreed with that analysis.
Not so fast, says Monestier. She argues that is not the only reading of the UCC, nor even the most plausible one. Instead, there is some ambiguity in how broadly a “seller” can be defined and it is possible to be deemed a “seller” even without passing title. Monestier also points out that from a practical standpoint, online marketplaces such as Amazon often take possession of the goods being sold by third parties and, in Amazon’s case at least, have the power to “commingle” goods of the same type from all different sellers, including those sold by the marketplace itself. Since Amazon does not track which good belong to which seller, Monestier argues it has taken title to all of them.
Monestier also points out some of the potential benefits of suing under the UCC, such as being able to recover economic losses (generally barred under tort law by the economic loss rule) and facing a less stringent test for “merchantability” than under tort law. In addition, contract law does not entail the traditional policy-based analysis of product liability law, which may be good or bad depending on the receptiveness of the court to that kind of argument.
To my knowledge, this argument has not yet been tested in court anywhere in the country, so stay tuned.