On practically no issue has this Blog been more insistent than on the principle of Erie conservatism when federal courts sitting in diversity undertake to “predict” state tort law. Our posts on this subject go back to 2006. At that time, we said:
In both of these decisions, novel questions of state law, involving state statutes intended to reduce tort liability, were answered so as to expand liability in ways that no state court had endorsed. Under established principles of federalism, that should not have happened. The Supreme Court made clear in Day & Zimmerman, Inc. v. Challoner, 423 U.S. 3 (1975), that “[a] federal court in diversity is not free to engraft onto those state rules exceptions or modifications which may commend themselves to the federal court, but which have not commended themselves to the State in which the federal court sits.” Id. at 4.
We accompanied the Supreme Court precedent with authority for the same proposition from “every Court of Appeals.” We again addressed Supreme Court precedent here, including:
[A] federal court is not free to apply a different rule however desirable it may believe it to be, and even though it may think that the state Supreme Court may establish a different rule in some future litigation.
Hicks v. Feiock, 485 U.S. 624, 630 n.3 (1988).
Since then, we’ve returned to this proposition time and again – addressing it in the context of First Circuit, Third Circuit, Fourth Circuit, Fifth Circuit, Sixth Circuit, and Eleventh Circuit law − even proposing legislation to codify the Supreme Court’s position.
Now we’re aware of another appeal that has put the Erie conservatism principle front and center. We’ve mentioned before the winning streak that Amazon.com was on in product liability cases, and wondered whether that online business model could eventually affect the market for prescription drugs. Well, the case that prompted that post, Oberdorf v. Amazon.com, Inc., 295 F. Supp.3d 496 (M.D. Pa. 2017), was recently reversed, 2-1, by a Third Circuit panel. See Oberdorf v. Amazon.com Inc., ___ F.3d ___, 2019 WL 2849153 (3d Cir. July 3, 2019) (“applying” Pennsylvania law).
Until then, no court anywhere had found Amazon (or similar entities) to be a product liability “seller” for purposes of strict liability. See Fox v. Amazon.com, Inc., ___ F.3d ___, 2019 WL 2896326, at *7 (6th Cir. July 5, 2019) (applying Tennessee law); Erie Insurance Co. v. Amazon.com, Inc., 925 F.3d 135, 141-42 (4th Cir. 2019) (applying Maryland law); Milo & Gabby LLC v. Amazon.com, Inc., 693 F. Appx. 879, 885 (Fed. Cir. 2017) (applying federal copyright law); Stiner v. Amazon.com, Inc., 120 N.E.3d 885, 893-94 (Ohio App. 2019); Garber v. Amazon.com, Inc., 380 F. Supp.3d 766, 776-78 (N.D. Ill. 2019); Carpenter v. Amazon.com, Inc., 2019 WL 1259158, at *5 (N.D. Cal. March 19, 2019); Eberhart v. Amazon.com, Inc., 325 F. Supp.3d 393, 398-400 (S.D.N.Y. 2018); Allstate N.J. Insurance Co. v. Amazon.com, Inc., 2018 WL 3546197, at *7-12 (D.N.J. July 24, 2018); McDonald v. LG Electronics., USA, Inc., 219 F. Supp.3d 533, 542 (D. Md. 2016); Inman v. Technicolor USA, Inc., 2011 WL 5829024, at *6 (W.D. Pa. Nov. 18, 2011).
Thus, for the Third Circuit to predict that Pennsylvania law would be to the contrary was a huge leap into the unknown that a federal court sitting in diversity jurisdiction should never have made. As Judge Scirica, in dissent, pointed out:
This case implicates an important yet relatively uncharted area of law. No Pennsylvania court has yet examined the product liability of an online marketplace like Amazon’s for sales made by third parties through its platform. Our task, as a federal court applying state law, is to predict how the Pennsylvania Supreme Court would decide the case. We must take special care to apply state law and not to participate in an effort to change it.” In my view, well-settled Pennsylvania products liability law precludes treating Amazon as a “seller” strictly liable for any injuries caused by the defective [product].
Oberdorf, 2019 WL 2849153, at *12 (citation and quotation marks omitted) (dissent).
Here’s a link to Amazon’s petition for en banc review, filed recently. The petition leads with the Erie conservatism principle:
[T]he panel decision is contrary to decisions of the Supreme Court and this Court holding that federal courts sitting in diversity cannot “act as ... judicial pioneer[s]” by deciding “whether and to what extent they will expand state common law.” City of Phila. v. Lead Indus. Ass’n, 994 F.2d 112, 123 (3d Cir. 1993). The majority’s creation of an unprecedented form of “seller” liability under Pennsylvania law − with far-reaching consequences not just for Amazon but also for countless other businesses and service providers − conflicts with Lead Industries Association, as well as Day & Zimmermann v. Challoner, 423 U.S. 3 (1975), Sheridan v. NGK Metals Corp., 609 F.3d 239 (3d Cir. 2010), Travelers Indemnity Co. v. Dammann & Co., 594 F.3d 238 (3d Cir. 2010)...
