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Can You Be Liable for Hurting a Seller's Amazon Ranking?


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5/24/2018
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Less than 1 week ago, China-based retailer Shenzhen Roubilin Network Technology Co., Ltd. ("RBL") sued North Carolina-based ChannelAdvisor Corp. ("CAC")  in Federal Court in the Southern District of New York, claiming that CAC should be held liable in breach of contract because defendant, through a series of actions, caused RBL's Amazon rankings to, for lack of a better term, "tank," and therefore allegedly caused RBL $2,000,000 in damages.

The (Alleged) Facts in Shenzen Roubilin v. ChannelAdvisor

More specifically, RBL contends as follows:

"Plaintiff RBL is a seller and distributor of household goods and entered into a valid service agreement (“Agreement” or “Contract”) with Defendant ChannelAdvisor Corp. (“ChannelAdvisor”) on July 30, 2017 to increase its marketing presence on major online retail platforms, specifically Amazon and eBay. As part of the Agreement, ChannelAdvisor provided Plaintiff a software platform (“the ChannelAdvisor System”) to help manage the several thousand product listings owned by Plaintiff, with the intention of increasing their visibility on these sites to increase sales ...

"ChannelAdvisor made several failed attempts to upload RBL’s data and caused a larger number of RBL products to be removed, or “delisted,” from Amazon and eBay. After repeated warnings to be extra cautious from RBL staff, ChannelAdvisor went ahead and attempted to upload data for two of RBL’s largest accounts. Consequently, more than 2000 product listings were delisted from Amazon by ChannelAdvisor’s gross negligence. Several hundred more were subsequently delisted from eBay. It is undisputed that neither Amazon or eBay initiated the delistings."

Can ChannelAdvisor Be Held Liable in Breach of Contract, When it Appears the Real Issue is Negligence?

New York's courts have set forth the general rule as follows:

A breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated and the legal duty springs from circumstances extraneous to, and not constituting elements of, the contract, Sommer v Federal Signal Corp., 79 NY2d 540, 583 NYS2d 957, 593 NE2d 1365 (1992); Clark-Fitzpatrick, Inc. v Long Island R. Co., 70 NY2d 382, 521 NYS2d 653, 516 NE2d 190 (1987); D'Ambrosio v Engel, 292 AD2d 564, 741 NYS2d 42 (2d Dept 2002); Non-Linear Trading Co., Inc. v Braddis Associates, Inc., 243 AD2d 107, 675 NYS2d 5 (1st Dept 1998).

To that end, and, more to the point in this case, an allegation that work was performed in a less than skillful and workmanlike manner states a cause of action for breach of contract, not negligence. See, Gordon v Teramo & Company, Inc., 308 AD2d 432, 764 NYS2d 144 (2d Dept 2003).

According to one of New York's appellate courts, tort liability (such as negligence) arises only where catastrophic consequences flow from a party's failure to perform its contractual obligations with due care. Verizon New York, Inc. v Optical Communications Group, Inc., 91 AD3d 176, 936 NYS2d 86 (1st Dept 2011).

Thus, in short, at first blush it appears that RBL is making the right kind of claim in this case.

What Are RBL's Potentially Recoverable Damages for the (Alleged) Breach of This Service Contract?

From my review of the service agreement, it appears the defendant made a serious blunder in drafting this agreement, because it does not have a limited liability clause, which would likely have prevented anyone contracting with them from recovering any damages beyond the value paid by the subscriber.

On the other hand, that doesn't necessarily mean that RBL can recover (at least insofar as New York law is concerned) whatever damages may have resulted from CAC's mistakes; the courts have stated rather clearly that a party's recovery is ordinarily limited to general damages which are the natural and probable consequence of the breach, and any additional recovery must be premised upon a showing that the unusual or extraordinary damages sought were within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting. Brody Truck Rental, Inc. v. Country Wide Ins. Co., 277 A.D.2d 125, 717 N.Y.S.2d 43 (1st Dep't 2000).

Candidly, I think that RBL will have an extraordinarily difficult time prevailing on that aspect of its claim here, for two (2) reasons:

First, not only will it be hard, if not impossible, to demonstrate that CAC contemplated incurring that degree of liability at the time of the contract; and, 

Second, I don't see how RBL will be able to prove, in a manner that satisfies evidentiary protocols, the actual measure of damages they incurred, because it inherently requires a tremendous amount of speculation (which won't be admissible).

 



Category: Breach of Contract

Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer

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