United States: Online Pharmaceuticals – Not Much Online Liability

Last Updated: July 12 2018
Article by James Beck

We've seen stories lately that an increasing trend towards online sales of prescription drugs could become as much of a threat to retail drugstores as online shopping generally has become to department stores. For non-prescription drugs, that future is already here – just Google "OTC Drugs Online" and check out the results. Or you can go to your favorite general online marketplace and search for the name of a commonly used OTC drug.

When we see something like this, we immediately wonder, "what are the product liability implications?" We thought we'd take a look.

For this thought experiment, assume that plaintiff X purchased a generic drug online through a large internet marketplace, and now claims to have suffered injury. We're using generic drugs as an example because preemption would preclude product liability claims against the manufacturer – but if it's a foreign manufacturer, as is often the case online, well.... But put that aside for the moment, too.

What happens when a plaintiff sues the operator of an online marketplace for injuries caused by a product purchased through that market place?

The plaintiff almost always loses.

Why? Two reasons. First, unless the operator actually buys the product and resells it (which happens sometimes, but not a lot), the marketplace isn't considered a product "seller." It's more like the shopping mall than like any individual store. Second, a federal statute, the Communications Decency Act, precludes a website operator from being liable for content on its site that is created and uploaded by others.

Both prongs of this defense were recently on display in Oberdorf v. Amazon.com, Inc., 295 F. Supp.3d 496 (M.D. Pa. 2017), which dismissed a non-drug/device product-related personal injury claim brought by plaintiffs who were allegedly injured by a product allegedly bought on the "Amazon Marketplace." This "marketplace" is described as:

a vehicle through which third parties may independently offer products for sale. This service . . . is currently utilized by more than one million third-party vendors. These third-party vendors decide which products they wish to sell, obtain their stock from manufacturers or upstream distributors, and set their own sales price. They provide a description (including, perhaps, a photograph) of the product to [the marketplace], which [it] uses to create a listing on its website.

Id. at 497-98 (footnote omitted). Notably, this is one of the sites where one can currently purchase OTC drugs.

According to Oberdorf, marketplace users "are informed that they are purchasing from an identified third party, and not from [the marketplace] itself." Id. at 498. Except is special cases, the marketplace itself "has no interaction with the third-party vendor's product at any time." Id. The site's supervision over its third-party marketers is limited to: (1) collecting payments, from which it deducts its fee; (2) its platform being the exclusive means of communicating with customers; (3) editorial rights over the contents and appearance of product listings; and (4) imposing rule governing shipping and returns. Id.

Plaintiffs purchased the product in Oberdorf from a third-party vendor that, once suit was brought, they were "unable to make contact" or serve with process. Id. They sued the marketplace instead

Plaintiffs lost, on the two above-mentioned grounds. Under Pennsylvania common law, an online retailer was not a "seller" of such products, as that term was used in Restatement (Second) of Torts §402A (1965). It did not design, manufacture, or sell the product. Instead of being a store, the online marketplace acted more like "a sort of newspaper classified ad section." 295 F. Supp.3d at 501. Oberdorf compared the marketplace to a product auctioneer that, in Musser v. Vilsmeier Auction Co., 562 A.2d 279 (Pa. 1989), was held not to have attributes of a "seller" that could be subject to §402A strict liability:

Like an auctioneer, [the marketplace] is merely a third-party vendor's "means of marketing," since third-party vendors − not [the marketplace] − "cho[o]se the products and expose[ ] them for sale by means of" the Marketplace. Because of the enormous number of third-party vendors (and, presumably, the correspondingly enormous number of goods sold by those vendors) [the marketplace] is similarly "not equipped to pass upon the quality of the myriad of products" available on its Marketplace. And because [the marketplace] has "no role in the selection of the goods to be sold," it also cannot have any "direct impact upon the manufacture of the products" sold by the third-party vendors.

Oberdorf, 295 F. Supp.3d 501 (quoting Musser).

In holding online websites displaying goods sold by others not to be product "sellers" subject to strict liability, Oberdorf appears squarely in the legal mainstream. In the only state court decision we've seen that's on point, an Ohio trial court held:

[The internet platform] did not in any way modify the [product] purchased by [plaintiff's decedent]. Nor did [it] distribute the product as the packaging, handling and shipping were performed by [another defendant] and shipped directly to [still another defendant]. {the platform's] services − allowing the product to be uploaded to its marketplace − were not connected to any aspect of the product which ultimately resulted in the decedent's death. Any issues with labeling, concentration, instructions, warnings, etc., were aspects of the product are unconnected to the services [the platform] performed.

Stiner v. Amazon.com, Inc., 2017 WL 9751163, at *6, slip op. (Ohio C.P. Sept. 20, 2017). That the actual sellers were "a Chinese company . . . not subject to process" or "insolvent" did not justify imposing liability on someone who was not a seller at all. Id. at *5. See id. at *7-9 (not a seller under state Little FDCA Act or Uniform Commercial Code either).

Similar federal decisions include: Milo & Gabby LLC v. Amazon.com, Inc., 693 F. Appx. 879, 885 (Fed. Cir. 2017) (online marketer not a product "seller" for purposes of copyright infringement); Fox v. Amazon.com, Inc., 2018 WL 2431628, at *2, 7 (M.D. Tenn. May 30, 2018) (online "information service and system designed so multiple users across the world can access its servers and browse its marketplace at the same time" not a "seller" as defined by Tennessee product liability statute); Erie Insurance Co. v. Amazon.com, Inc., 2018 WL 3046243, at *2 (D. Md. Jan. 22, 2018) (website operator not a "seller" under Uniform Commercial Code") (fire subrogation case); McDonald v. LG Electronics., USA, Inc., 219 F. Supp.3d 533, 542 (D. Md. 2016), reconsideration denied, 2017 WL 4163348, at *1-2 (D. Md. May 8, 2017) (online marketer not a product "seller" under strict liability or the UCC); Inman v. Technicolor USA, Inc., 2011 WL 5829024, at *6 (W.D. Pa. Nov. 18, 2011) (online auctioneer not a "seller" for §402A purposes); Stoner v. eBay, Inc., 2000 WL 1705637, at *2 (Cal. Super. Nov. 1, 2000) (online auctioneer not "an active participant in the sale of the auctioned goods and services" so as to be liable for copyright infringement).

The second basis for immunity of an Internet website from liability for online sales made by those advertising on the site was federal preemption. Oberdorf held that all the plaintiff's tort claims were barred by 47 U.S.C. §230 (the "Communications Decency Act" or "CDA"), which provides that "[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider."

[I]t is clear from [plaintiffs'] papers that they are, in fact, attempting to hold [defendant] liable for its role in publishing an advertisement for [the seller's] product. In other words, [plaintiffs] are attempting to "treat[ defendant] as the publisher or speaker of ... information provided by" the seller. Therefore, these claims are barred by §230 of the CDA.

Oberdorf, 295 F. Supp. at 502-03 (footnote omitted) (quoting statute). See also Id. at 503 n.52 (CDA would bar product liability claims had they not already been dismissed).

Once again, Oberdorf appears to be in the strong majority of courts holding that product liability actions brought against non-seller online entities are barred by the CDA. In general, the CDA "provides immunity to [any] publisher or speaker of information originating from another information content provider." Green v. America Online, 318 F.3d 465, 471 (3d Cir. 2003). The CDA has repeatedly been held to preempt product liability claims against website owners. See Erie Insurance, 2018 WL 3046243, at *3 ("even if I am incorrect with respect to my conclusion that [defendant] is not a seller . . ., I conclude that the CDA would preclude the claims in any event"); McDonald, 219 F. Supp.3d at 538 (CDA immunized online retailer from warning-based claims); Hinton v. Amazon.com.DEDC, LLC, 72 F. Supp.3d 685, 691-92 (S.D. Miss. 2014) (CDA immunized online retailer from product liability suit over product obtained from third-party through interactive internet site); Inman, 2011 WL 5829024, at *6-7 (CDA precluded all claims against internet retailers for injury from allegedly toxic products purchased online); Doe v. MySpace, Inc., 629 F. Supp.2d 663, 665-66 (E.D. Tex. 2009) (CDA barred strict liability claim); Reyes v. LA VaporWorks, 2017 WL 1717406, at *1-2 (Cal. Super. Feb. 16, 2017) (CDA prevents "plaintiffs in product liability cases [from] seeking to hold interactive computer service providers liable for the failure to prevent or screen" "defective product[s] from allegedly being sold" online); Stoner, 2000 WL 1705637, at *3 (in enacting the CDA "Congress intended to remove any legal obligation of interactive computer service providers to attempt to identify or monitor the sale of such products"); Stiner, 2017 WL 9751163, at *11-14 ("to the extent that §230 is applicable to the instant case, the immunity provided thereunder would further support the finding already made by the court that [defendant] is not a supplier or seller of the [product] and that it cannot be held liable under the specific facts of this case"); cf. Gentry v. eBay, Inc., 121 Cal. Rptr.2d 703, 712-16 (Cal. App. 2002) (CDA precludes action against online auctioneer for allegedly counterfeit products); Gibson v. Craigslist, Inc., 2009 WL 1704355, at *4 (S.D.N.Y. June 15, 2009) (CDA immunizes online website from liability for facilitating sales of "inherently hazardous objects, such as handguns").

The practical reason why we're seeing a proliferation of attempts to sue internet platforms was alluded to in both Oberdorf and Stiner – online sales platforms are allowing a plethora of products to be sold by a myriad of manufacturers who, before such technologies, had no way of selling worldwide. The proliferation of online product retailing is leading to more and more situations where product liability plaintiffs are left with nobody, as a practical matter, for them to sue. It will be very interesting to see what happens when some plaintiff claims SJS-TENS from some drug purchased online.

Particularly after Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) ("BMS"), and Daimler AG v. Bauman, 134 S. Ct. 746 (2014), how many of the "more than one million third-party vendors," Oberdorf, 295 F. Supp.3d at 498, on that particular website, and uncounted others utilizing similar websites worldwide, are likely even to be subject to personal jurisdiction anywhere in the United States? Moreover, as we have discussed before, the expansive "stream of commerce" jurisdiction theory, which purports to allow suit anywhere that a product happened to injure someone has never commanded a majority on the Supreme Court, and is falling further out of favor after BMS. With traditional defendants disappearing, it is not surprising to see plaintiffs attempt to sue non-traditional entities, but for now the law is not letting them get away with it.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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