Great N. Ins. Co. v. Amazon.com, Inc.

524 F.Supp.3d 852

GREAT NORTHERN INSURANCE COMPANY a/s/o Dan and Danielle Perper, Plaintiff,

v.AMAZON.COM, INC., Shenzhen Double King Technology Co., Ltd., and Paradise 00, Defendants.

19 C 684

United States District Court, N.D. Illinois, Eastern Division.

Signed March 9, 2021

Edward M. Ordonez, Jonathan Michael Heilman, Schueler Dallavo & Casieri, Chicago, IL, for Plaintiff.

W. Brendan Murphy, Perkins Coie LLP, Seattle, WA, Jillian Brett Sommers, Perkins Coie LLP, Chicago, IL, for Defendant Amazon.com, Inc.

MEMORANDUM OPINION AND ORDER

Gary Feinerman, United States District Judge

Great Northern Insurance Company alleges in this suit under Illinois law that Amazon.com, Inc. and two Chinese companies—Shenzhen Double King Technology Co., Ltd. and Paradise 00—are responsible for defective hoverboards that caused substantial fire damage to the home of its insureds/subrogors, Dan and Danielle Perper. Doc. 43. Earlier in the suit, the court dismissed Great Northern's negligent failure to warn claim against Amazon. Docs. 31-32 (reported at 2019 WL 3935038 (N.D. Ill. Aug. 20, 2019) ). With discovery complete, Amazon moves for summary judgment on the remaining claims against it. Doc. 85. The motion is granted.

Background

The court recites the facts as favorably to Great Northern as the record and Local Rule 56.1 permit. See Johnson v. Advocate Health & Hosps. Corp. , 892 F.3d 887, 893 (7th Cir. 2018). At this juncture, the court must assume the truth of those facts, but does not vouch for them. See Gates v. Bd. of Educ. of Chi. , 916 F.3d 631, 633 (7th Cir. 2019).

A. Amazon.com and Third-Party Sellers

Amazon operates an online marketplace at www.amazon.com. Doc. 91 at ¶ 10. In addition to offering Amazon's own products for sale, the website provides a forum for millions of other parties—which the court will call "third-party sellers"—to sell their own products. Id. at ¶¶ 10-11. Great Northern objects to the term "third-party sellers," preferring instead "applicants." E.g. , id. at ¶¶ 7-8, 10, 12, 17, 19. Because the distinction is semantic and Great Northern itself uses the term "third-party sellers" in its Local Rule 56.1(b)(3)(C) statement, Doc. 92 at ¶¶ 3, 9-11, the court will do the same.

1. Business Solutions Agreement

To gain access to Amazon's online marketplace, a third-party seller must enter into the Amazon Services Business Solutions Agreement ("BSA"). Doc. 91 at ¶¶ 10, 15. Amazon can amend the BSA at its sole discretion. Doc. 94 at ¶ 22. The BSA requires third-party sellers to "source," "offer," and "sell"—and in some instances "fulfill"—the products they list for sale. Doc. 91 at ¶ 16 (quoting Doc. 92-2 at 47, § S-2.1). Those provisions give rise to three categories of rights and obligations.

First, third-party sellers are responsible for sourcing their products from manufacturers or upstream distributors and communicating their offers on a detail page for each product. Id. at ¶¶ 17-18, 21. A third-party seller's identity is twice communicated to customers—first, in the "sold by" line on the product detail page, and second, on the order confirmation page before the customer clicks the "place your order" button. Id. at ¶ 30. When communicating an offer, a third-party seller must provide "accurate and complete Required Product Information," including a product description and pricing information. Id. at ¶ 17 (quoting Doc. 92-2 at 46, § S-1.1). A third-party seller sets the prices of its products and may offer warranties of its choosing. Id. at ¶¶ 23, 25. At all relevant times, the BSA required each third-party seller to ensure—via its "price parity" provision—that the price and offer terms for products offered by the seller on amazon.com were "at least as favorable to Amazon Site users as the most favorable offer terms upon which a product is offered or sold via [the seller's other] Sales Channels." Doc. 92-2 at 49, § S-4; Doc. 94 at ¶ 28. The BSA confers on Amazon the authority to remove, in its sole discretion, any content uploaded by third-party sellers. Doc. 94 at ¶ 23.

Second, the BSA outlines the respective roles of Amazon and third-party sellers as to payment, product packaging, and delivery. Amazon is responsible for processing payment, and remits to the third-party seller the funds collected from the customer on its behalf, less fees agreed to in the BSA. Id. at ¶ 3. A third-party seller must properly package its products, ensure that they comply with applicable law, and—in the case of "Seller-Fulfilled" products—ship them directly to the buyer. Doc. 92-2 at 47, § S-2.1; Doc. 91 at ¶¶ 9, 24. When fulfilling an order, a third-party seller must "identify [itself] as the seller of each of [its] Products on all packing slips or other information included or provided in connection with [its] Products and as the Person to which a customer may return the applicable product." Doc. 92-2 at 47-48, § S-2.1. And the third-party seller is "responsible for any non-conformity or defect in, or any public or private recall of, any of [its] Products." Id. at 56, § W-3.5.

Third, the BSA describes the respective responsibilities of Amazon and third-party sellers in the event of a customer dispute. If a customer has a problem with a product, she may contact the third-party seller directly using a messaging system provided by Amazon or, alternatively, contact Amazon's customer service department. Doc. 94 at ¶ 30; Doc. 92-2 at 14 (48:13-15). Amazon retains "broad ability" to investigate returns, credit card chargebacks, customer claims, and other types of disputes. Doc. 94 at ¶ 15. While such an investigation is under way, Amazon may withhold from the third-party seller remittance of payment for the product in question. Id. at ¶ 14. Moreover, the BSA incorporates Amazon's "A-to-Z" guarantee, under which Amazon guarantees the timely delivery and quality of products sold by third-party sellers. Id. at ¶ 26; Doc. 92-2 at 48-49, § S-3.2. Pursuant to the guarantee, a buyer can bring a complaint to the third-party seller, and if the seller does not respond to the customer's reasonable satisfaction, Amazon will refund the customer's purchase. Ibid. Absent circumstances such as credit card fraud, for which Amazon assumes responsibility, the third-party seller is required to reimburse Amazon for such refunds. Doc. 92-2 at 48-49, § S-3.2.

2. Conditions of Use

Purchasers of products on the website are subject to Amazon's Conditions of Use. Doc. 91 at ¶¶ 13-14. A section titled "Other Businesses" states, in relevant part: "Parties other than Amazon operate stores, provide services, or sell product lines through the Amazon Services.... We are not responsible for examining or evaluating, and we do not warrant the offerings of, any of these businesses or individuals or the content of their Web sites. Amazon does not assume any responsibility or liability for the actions, product, and content of all these and any other third parties." Id. at ¶¶ 13-14 (quoting Doc. 88-8 at 6).

B. The Hoverboards

Danielle Perper and Marcie Kleinman each ordered a hoverboard on Amazon's website in November 2015 as a holiday gift for the Perpers’ children. Id. at ¶¶ 7-8. Perper purchased a hoverboard from Paradise, and Kleinman purchased one from Shenzhen, each a third-party seller based in China. Id. at ¶¶ 3-4. In connection with their purchases, Perper and Kleinman received order receipts with product descriptions authored by Paradise and Shenzhen, respectively. Id. at ¶¶ 36-37. Perper's order receipt stated that her hoverboard was "sold by" Paradise and referred to the product as a "Fortech Smart Scooter Two Wheels Self Balance Electronic with Samsung Battery (Blue)." Id. at ¶ 36 (quoting Doc. 88-7 at 2). Kleinman's order receipt stated that her hoverboard was "sold by" Shenzhen. Doc. 88-6 at 2. Kleinman decided to buy the product—described as a "Smart Unicycle 2 Wheel Self Balancing Electric Scooter Balance Hover Board Colour Black," ibid. —because she "fe[lt] safer purchasing from Amazon" than from the "random websites" she came upon while searching on Google for hoverboards, Doc. 92-3 at 4 (12:11-18); Doc. 94 at ¶ 31.

Shenzhen and Paradise "fulfilled" the orders, meaning they shipped the hoverboards directly to Kleinman and Perper. Doc. 91 at ¶ 9. In February 2016, the Perpers’ children were playing on one of the hoverboards at their home in suburban Chicago. Doc. 43 at ¶¶ 11, 15; Doc. 90 at 1-2. That evening, a fire broke out in the area of the home where both hoverboards were being stored, causing significant damage. Doc. 43 at ¶¶ 11, 16-17, 19. Great Northern alleges that the fire was caused by a defective lithium-ion battery pack in one or both of the hoverboards. Id. at ¶¶ 21, 23-27.

Discussion

Great Northern's remaining claims against Amazon sound in product liability, negligent misrepresentation, and statutory consumer fraud. Id. at ¶¶ 28-48.

I. Product Liability Claim

For its product liability claim, Great Northern alleges that Amazon sold, distributed, and/or played an integral role in the marketing and distribution of the two hoverboards, at least one of which had a defective lithium-ion battery pack, and that it failed to warn about the defect(s). Id. at ¶¶ 28-37. Great Northern does not defend the failure-to-warn component of its claim, thereby abandoning it. See Gates , 916 F.3d at 641 ("The district court was not required to address a claim or theory that plaintiff did not assert [in opposition to summary judgment].").

As for the defective design component of the claim, Illinois has adopted § 402A of the Restatement (Second) of Torts, which subjects manufacturers and "sellers" of a product to strict liability for product defects. See Crowe v. Pub. Bldg. Comm'n of Chi. , 74 Ill.2d 10, 23 Ill.Dec. 80, 383 N.E.2d 951, 952-53 (1978) ; see also Apperson v. E.I. du Pont de Nemours & Co. , 41 F.3d 1103, 1106 (7th Cir. 1994). Although § 402A does not define the term "seller," Illinois law construes it to encompass "all persons in the distributive chain" of a...