We represent a number of clients who either sell their products on Amazon or who have dealt with or are currently dealing with Amazon counterfeiting issues. Our clients often ask us, “Can I sue Amazon or am I stuck in an arbitration clause?” Like many legal questions, the answer often depends on the facts.
This article is intended to help you better understand how Amazon views the enforceability of its arbitration clause, how courts have viewed Amazon’s arbitration clause, and whether there are claims that may not be subject to Amazon’s arbitration clause.
Amazon’s Arbitration Clause
It is first worth looking at the text of Amazon’s arbitration clause:
Amazon and you both consent that any dispute with Amazon or its Affiliates or claim relating in any way to this Agreement or your use of the Services will be resolved by binding arbitration as described in this paragraph, rather than in court, except that (i) you may assert claims in small claims court that is a Governing Court if your claims qualify and (ii) you or we may bring suit in the Governing Courts, submitting to the jurisdiction of the Governing Courts and waiving our respective rights to any other jurisdiction, to enjoin infringement or other misuse of intellectual property rights. There is no judge or jury in arbitration, and court review of an arbitration award is limited. However, an arbitrator can award on an individual basis the same damages and relief as a court (including injunctive and declaratory relief or statutory damages), and must follow the terms of this agreement as a court would.
The arbitration will be conducted by the American Arbitration Association (AAA) under its rules, including the AAA’s Supplementary Procedures for Consumer-Related Disputes. Payment of all filing, administration, and arbitrator fees will be governed by the AAA’s rules. We will reimburse those fees for claims totaling less than $10,000 unless the arbitrator determines the claims are frivolous. Likewise, Amazon will not seek attorneys’ fees and costs from you in arbitration unless the arbitrator determines the claims are frivolous. You may choose to have the arbitration conducted by telephone, based on written submissions, or in person at a mutually agreed location. Amazon and you each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action. If for any reason a claim proceeds in court rather than in arbitration Amazon and you each waive any right to a jury trial.
To summarize, almost any claim against Amazon or its affiliates appears to be covered by the arbitration clause, excluding any request to enjoin infringement or other misuse of intellectual property rights. It also appears that all potential class action claims or requests for a jury trial are waived.
Amazon’s agreements define “Governing Courts” as the state or federal courts in King County, Washington and “Governing Laws” as the laws of the State of Washington. This seems to indicate that any arbitration proceeding falling under Amazon’s clause will have to take place in the State of Washington.
Intellectual Property Claims
Amazon’s arbitration clause seems to leave the door open for plaintiffs to avoid arbitration by asserting intellectual property claims, allowing a lawsuit in the State of Washington “to enjoin infringement or other misuse of intellectual property rights.”
Some cases seem to confirm this interpretation. See Milo & Gabby, LLC v. Amazon.com, Inc., 12 F. Supp. 3d 1341 (W.D. Wash. 2014) (trademark infringement); Rout v. Amazon.com, Inc., 2012 U.S. Dist. LEXIS 170602 (W.D. Wash. 2012) (copyright infringement); Hendrickson v. Amazon, Inc., 298 F. Supp. 2d 914 (W.D. Wash. 2003) (copyright infringement).
For clients who may be faced with counterfeiting on Amazon’s platform or perpetrated by Amazon itself, asserting intellectual property claims may be a route to avoid arbitration.
Forum Selection and Choice of Law Clauses
Clients often ask us whether they really have to arbitrate or file suit against Amazon in the State of Washington and litigate their claims under Washington law.
In most cases, the answer is, “yes.”
In general, the US Supreme Court has supported forum selection clauses like Amazon’s except under extraordinary circumstances. See Bremen v. Zapata Off Shore Co., 407 U.S. 1 (1972) (forum selection clause could be specifically enforced unless Zapata could clearly show that enforcement would be unreasonable and unjust or that the clause was invalid for such reason as fraud or overreaching.); Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991) (finding that even non-negotiated forum select clauses are enforceable).
Cases have also specifically found that Amazon’s forum selection clause and choice of law clause are enforceable. See Segal v. Amazon.com, Inc., 763 F. Supp. 2d 1367 (S.D. Fla. 2011) (finding Amazon’s forum selection clause enforceable and applying Bremen and Carnival Cruise Lines); see also Fagerstrom v. Amazon.com, Inc., 141 F. Supp. 3d 1051 (S.D. Cal. 2015) (finding Amazon’s choice of law clause to be valid).
Based on the case law, then, it appears that courts will uphold Amazon’s forum selection and choice of law clauses.
Arbitration as a Remedy for Suspensions and Monetary Losses
If intellectual property claims are not in play, arbitration may be the only remedy for a dispute involving an account suspension or monetary damages against Amazon. However, the remedies in arbitration may be limited due to the manner in which Amazon takes advantage of Washington law.
For example, Amazon’s Services Business Solutions Agreement allows either party to terminate the agreement at any time: “We may terminate or suspend this Agreement or any Service for any reason at any time by notice to you. You may terminate or suspend this Agreement or any Service for any reason at any time by the means then specified by Amazon.”
Amazon takes the position that, because either party can terminate the agreement at any time, the contract is an at-will contract and Amazon has no duty to reinstate a suspended account, even when they are wrong. Washington law seems to support their position, and the Western District of Washington and the Ninth Circuit have upheld such an at-will provision in a case involving Amazon in the past.
In Hard 2 Find Accessories, Amazon suspended a seller’s account after it had received complaints that the seller was selling counterfeit products. See Hard 2 Find Accessories, Inc. v. Amazon.com, Inc., 58 F. Supp. 3d 1166, 1173 (W.D. Wash. 2014), aff’d 691 Fed. Appx. 406 (9th Cir. 2017).
After the complaints had been resolved, Amazon refused to reinstate the seller’s Amazon account, citing the at-will nature of its agreement with the seller. The seller sued Amazon and argued that Amazon failed to conduct a thorough investigation before terminating the seller’s account.
However, the court found that the at-will relationship created by the agreement between the parties meant that Amazon was under no duty to perform such an investigation or otherwise reinstate the seller’s account.
Even in cases where Amazon is wrong, it may have no duty to reinstate a seller or affiliate account and the only remedy in arbitration may be damages.
Navigating potential lawsuits against Amazon, or issues with an Amazon seller account, can be very difficult and must be handled by competent counsel with knowledge of the process. Though many companies and law firms promise Amazon account reinstatement or success in arbitration, it is important to know what remedies can be provided through these avenues before spending money to proceed down them. Most cases take a delicate balancing of business risk and legal risk and should be approached carefully.