The Internet Remains Broken In The Ninth Circuit And, At Least For Now, The Third

Legal Issues

from the third-state dept

Hopes that the Ninth Circuit would correct its earlier awful ruling against HomeAway and Airbnb were dashed recently when the court denied the petition for rehearing. We had supported that petition because the original decision read in an exception to Section 230’s statutory protection that is not present in the statute, is out of step with prior precedent (including in the Ninth Circuit itself), and threatens the Internet economy. Unfortunately, now that rehearing has been denied, any platform that facilitates commercial speech, and whose revenue model depends on facilitating the transactions arising from commercial speech, will no longer be able to reliably depend on Section 230’s protection, at least not in the Ninth Circuit.

It also remains vulnerable in the Third. The Oberdorf v. Amazon case allowed a products liability claim to proceed against Amazon based on Pennsylvania law. Subsequently, a district court in New Jersey ? a state within the Third Circuit, for which the Oberdorf would be binding precedent ? decided to allow a similar products liability claim to proceed against Amazon based on New Jersey law, finding that, under its relevant statute, Amazon is a “seller” for purposes of its products liability law.

All these decisions are troubling, and the New Jersey one pointedly illustrates why. Not only does this decision incorporate the same analytical defects as the previous decisions, but it also reflects how all the ignorance about and hostility toward Section 230 of late has been infecting the courts.

As we explained before, all these decisions look past these platforms’ role as an enabler of other people’s speech. In the case of Amazon, it is other people who say they have something to sell. Denying these platforms Section 230 protection for this sort of user speech means that few, if any, platforms will be able to remain available to facilitate similar commercial speech offering something to sell. Before cheering how this state of affairs might hobble Amazon, however, bear in mind that it will hobble ANY platform that offers independent merchants a chance to offer their goods to a wider audience – including platforms that might be able to compete with Amazon. The more distaste we have for large, incumbent market players, either as platforms or even direct merchants, the more this turn of events should alarm us, because it will ensure we remain stuck with the ones who are already well-capitalized enough to endure this liability minefield and prevent us from getting any new ones.

In most of these cases the courts tried to pretend that there is something different about Amazon’s relationship with third party vendors that should put them on the hook for their liability. In this case, the New Jersey court didn’t like that Amazon fulfilled orders, or otherwise reserved the right to exercise editorial control over the listings it hosted.

It is true that the agreements did not make Amazon the ultimate decisionmaker as to the prices or physical qualities of the product. As to the sale process, however, the level of control was greater. For example, Amazon processed all payments. [The seller] was required to provide information about its product in the manner that Amazon prescribed. Amazon exercised control over the listing itself?in particular, it retained the right to change, suspend, prohibit or remove listings. If notified that a product was defective, Amazon had the power to take it off the shelf, i.e., to remove the website listing and thereby shield innocent consumers. Under the EBA program, Amazon even had the right to dispose of products that were defective. Compare Oberdorf in which the vendor did not use Amazon?s fulfillment services, so Amazon never physically possessed or shipped the product. Not so here. The vendor in our case signed the FBA and used the fulfillment services, so Amazon physically took custody of, packaged, and shipped the scooter which injured the plaintiff. [p. 26]

The above paragraph shows how a significant problem with this decision is how the court seriously overestimates just what sort of “control” Amazon actually has over the products sold through it. In reality there is no practical way for Amazon to police all the listings for all goods that all its users try to sell. The court confused Amazon’s efforts to contractually reserve the right to try to police the listings anyway, which is exactly the sort of policing that Section 230 tries to encourage, with the actual ability to police each and every listing, which is functionally impossible. Just as Amazon could not possibly police all of its user reviews, and Section 230 exists to relieve them from the burden of this impossible task by shielding them from liability arising from these reviews, it could not possibly police all of its listings either, and so Section 230 should similarly insulate them from liability from this form of user expression too. Courts have been wrong to deny them this statutory protection, and especially so when this denial has been based on the unfounded and erroneous assumption that all this policing was something a platform could actually do.

Meanwhile, the fact that these decisions each quibble over the definition of “seller” under each individual state’s law, on their way to deciding whether transactional platforms like Amazon should be liable for problems with their users’ content, is itself further evidence that this sort of judicial inquiry should have been barred by the statute entirely. One of Section 230’s most important provisions is its preemption provision, which forbids any state or locality from mucking about with its local law in a way that interferes with the reliable protection Section 230 is supposed to provide any online service provider, whose services are inherently available across the nation. It’s easy to understand that this provision means that states can’t change their definition of “defamation” in order to make a platform become liable for user content. But courts seem to be struggling to recognize that this provision should apply to any other state that would seek to make a platform liable for something wrong in their users’ content (in this case the offer to sell a defective product). Allowing platforms’ liability to hinge on the specific drafting of these state laws turns Section 230’s protection into something inconsistent and provincial, instead of predictable and therefore useful, as Congress had intended.

The New Jersey decision did not blaze new ground here, however; it ended up being fairly consistent with the Oberdorf decision that preceded it. But it is notable for its candid hostility toward, and, dare I say, ignorance about, Section 230. In particular, in a chilling footnote, it dismissed Professor Jeff Kosseff’s well-researched book, “The Twenty-Six Words That Created the Internet,” and instead cited one of the completely fictional diatribes recently published in the New York Times as one of its sources underpinning its erroneous belief in the limits of Section 230.

I am not oblivious to the context or the stakes here. It has been said that the ?twenty-six words? of Section 230 of the CDA, enacted in 1996, made e-commerce itself economically feasible by permitting platforms such as Amazon.com to match sellers with buyers without taking on the seller?s liabilities. See, e.g., J. KOSSEFF, The Twenty-six Words that Created the Internet, Cornell University Press (2019). It would perhaps be more sober and accurate to say that the twenty-six words of Section 230 promoted or facilitated important aspects of the internet as we now know it. A recent New York Times article, to pick an example almost at random, is a useful backgrounder on Section 230?s evolution as a tool for promotion of e-commerce (whether sly or serendipitous depends on your point of view). https://nvw.nytimes.com/2019/08/06/technology/section-230-hate-speech.html The article notes that political leaders as ideologically diverse as House Speaker Nancy Pelosi (D-CaI) and Senator Ted Cruz (R-Tex) have publicly criticized Section 230 as a giveaway to the tech industry, and have raised the possibility of reform or abolition. [fn. 18]

The court does go on to say that it was only crediting the animus against Section 230 insofar as it applied to e-commerce.

These e-commerce issues are to be distinguished. however, from others that are driving the current debate, such as Section 230?s grant of immunity for speech-based harms such as hate speech or libel. Id.; see also Reno v. ACLU, 521 U.S. 844 (1997). [id.]

But this clarification is hardly reassuring. Not only does it ignore that commercial speech is inseparable from any other sorts of expression Section 230 reaches, but if the court was in any way relying upon this ignorant media coverage, which almost universally misunderstand the purpose, value, and mechanics of the statute, then no wonder it felt comfortable ignoring them itself in gutting this critical statutory protection.

Fortunately, the one bit of tentative good news is that, unlike the Ninth Circuit, the Third Circuit has now granted rehearing of its Oberdorf decision. And, as a result, the district court in New Jersey has stayed the effect of its own decision, pending that reconsideration. Hopefully on further review the Third Circuit will be able to recognize how Section 230 is supposed to apply to even these transactional platforms, and the importance of not interfering with this operation.

Filed Under: 3rd circuit, 9th circuit, housing, rentals, section 230, transactions
Companies: airbnb, amazon