Update on Amazon's Limitation of Liability

Amazon's Business Solutions Agreement Section 8 limits the liability of Amazon to sellers to up to the equivalent of six months payments the seller has made to Amazon before account deactivation.  This is a clause that Amazon has been waving around in arbitration for years.  Unfortunately, because of Amazon's forced arbitration clause, not many case precedents are set because arbitrations are private.  However, a bankruptcy court in 2022 struck a mighty blow to this clause.  While not binding authority, since the Shaffer court was a federal court sitting in Arizona and not a Washington State court, the case provides persuasive authority to argue against the application of Amazon's precious liability clause.  This article will delve into the case and its implications, particularly on future arbitrations against Amazon.

Background: Shaffer v. Amazon Services LLC

The Shaffer v. Amazon Services LLC case involved Potential Dynamix LLC, an Amazon seller that filed for bankruptcy after Amazon terminated their selling privileges. The dispute centered around a clause in the Amazon Services Business Solutions Agreement that limited Amazon's liability. Amazon argued that damages should be capped based on this clause, but the bankruptcy court in Arizona disagreed. It ruled that the clause violated public policy and was unreasonable, a decision that has potential implications for future arbitration cases involving Amazon.

Implications for Arbitration Cases

1. Challenge to Amazon's Liability Limitation Clause
One key outcome of the Shaffer v. Amazon case is the challenge it presents to the enforceability of Amazon's liability limitation clause. This clause, found in the Amazon Services Business Solutions Agreement, typically caps Amazon's liability to the fees paid by the seller to Amazon in the preceding six months. However, the court's ruling suggests that this clause may be violative of public policy and could be deemed unreasonable in certain situations.

2. Focus on Fairness
The Shaffer v. Amazon case also underscores the importance of fairness in agreements between Amazon and its sellers. The court considered the Agreement a contract of adhesion, meaning it was offered on a "take it or leave it" basis, leaving the seller with little room to negotiate terms. This perceived imbalance in bargaining power could influence future arbitration proceedings, potentially leading arbitrators to scrutinize the fairness of Amazon's standard contracts more closely.  

At Amazon Sellers Attorney, we have successfully argued in arbitrations that section 2 of Amazon's Business Solutions Agreement, which allows Amazon to permanently withhold a seller's funds if the seller is suspected of using the account to commit fraud, illegal activity or a repeated violation of Amazon policy as unconscionable and unenforceable.  However, every arbitration has a different arbitrator, who may not be as well-versed in the law and may make an erroneous ruling.

3. Potential Increase in Claims
The court's refusal to enforce Amazon's liability limitation clause could potentially lead to an increase in the number and size of claims brought against Amazon. If sellers believe that they have a better chance of recovering larger damages, they may be more likely to initiate arbitration proceedings.

​4. Shift in Legal Strategies
The ruling may also prompt a shift in legal strategies. Amazon sellers and their legal teams may start to challenge the applicability of certain clauses in the Amazon Services Business Solutions Agreement, particularly those that seem to favor Amazon disproportionately.

Key Takeaways

The Shaffer v. Amazon Services LLC case represents a significant development in the legal landscape for Amazon sellers. It highlights the potential for challenging certain aspects of the Amazon Services Business Solutions Agreement, particularly the liability limitation clause. While the long-term implications are yet to be seen, it is clear that this case may have a profound impact on future arbitration proceedings involving Amazon. As always, sellers are advised to consult with a qualified legal professional when navigating these complex issues.  Here at Amazon Sellers Attorney, we have qualified lawyers who offer free consultation on arbitrations against Amazon and other ecommerce and Internet sites.  Feel free to call us today or submit your case for a free evaluation.