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Great Northern Insurance Co. v. Amazon.Com, Inc.

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

August 20, 2019

GREAT NORTHERN INSURANCE COMPANY, Plaintiff,
v.
AMAZON.COM, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Gary Feinerman, Judge.

         Great Northern Insurance Company brought this suit in the Circuit Court of Lake County, Illinois, against Amazon.com, Inc., alleging that it violated Illinois law in its sale of a defective “hoverboard” to non-parties Dan and Danielle Perper. Doc. 1 at 11-21. As the Perpers' insurer, Great Northern pursues subrogated claims for product liability, negligent failure to warn, negligent misrepresentation, and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. Amazon timely removed the suit to federal court under the diversity jurisdiction, 28 U.S.C. § 1332(a), Doc. 1 at 1-4, and now moves under Civil Rule 12(b)(6) to dismiss all claims except for the product liability claim. Doc. 9. The motion is granted in part and denied in part.

         Background

         In resolving a Rule 12(b)(6) motion, the court assumes the truth of the operative complaint's well-pleaded factual allegations, though not its legal conclusions. See Zahn v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir. 2016). The court must also consider “documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice, ” along with additional facts set forth in Great Northern's brief opposing dismissal, so long as those additional facts “are consistent with the pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (internal quotation marks omitted). The facts are set forth as favorably to Great Northern as those materials allow. See Pierce v. Zoetis, Inc., 818 F.3d 274, 277 (7th Cir. 2016). In setting forth the facts at the pleading stage, the court does not vouch for their “objective truth.” Goldberg v. United States, 881 F.3d 529, 531 (7th Cir. 2018).

         On November 1, 2015, the Perpers bought a “Smart Unicycle 2 Wheel Self Balancing Electric Scooter Balance Hover Board Colour Black” (the “Hoverboard”) through Amazon's website. Doc. 1 at p. 12, ¶ 10. Although the Amazon listing described the Hoverboard as containing a “genuine Samsung battery package, ” it actually had “a counterfeit Samsung battery package produced by a Chinese manufacturer.” Id. at p. 13, ¶ 18. The listing did not warn about the danger posed by the Hoverboard's battery package, nor did Amazon communicate any warning to the Perpers after the sale. Ibid. On February 16, 2016, the Hoverboard's battery spontaneously combusted, resulting in a fire that severely damaged the Perper residence. Id. at pp. 12-13, 16, ¶¶ 12-14, 31.

         At the time the Perpers bought the Hoverboard, unknown manufacturers were producing hoverboards in large quantities, and Amazon was engaged in an “aggressive sales campaign” to increase hoverboard sales during the holiday season. Id. at pp. 14-15, ¶¶ 21-22. Following the sale to the Perpers but before the fire at their home, Amazon became aware of at least nine fires caused by similar hoverboards sold on its website. Id. at pp. 13-14, ¶ 19.

         As the Perpers' insurer, Great Northern paid $3, 830, 588.18 to or on behalf of the Perpers as a result of the fire and is subrogated to their rights in this case. Id. at p. 13, ¶¶ 15-17.

         Discussion

         I. Negligent Failure to Warn Claim

         For its negligent failure to warn claim, Great Northern alleges that Amazon failed to warn the Perpers of the substantial risk of fire posed by the Hoverboard's battery pack. Id. at pp. 17-18, ¶¶ 35-45. “It is well recognized that a failure to warn of a product's dangerous propensities may serve as the basis for holding a manufacturer or seller strictly liable in tort.” Woodill v. Parke Davis & Co., 402 N.E.2d 194, 196 (Ill. 1980). To state such a claim, the plaintiff must “plead … that the defendant … knew or should have known of the danger that caused the injury, and that the defendant … failed to warn plaintiff of that danger.” Id. at 198. Significantly, a negligent failure to warn claim is viable only if the defendant knew or should have known of the danger “at the time the product left its control.” Modelski v. Navistar Int'l Transp. Co., 707 N.E.2d 239, 246 ( Ill. App. 1999). Illinois law accordingly does not recognize a post-sale duty to warn consumers of design or manufacturing defects discovered after the time of sale. Jablonski v. Ford Motor Co., 955 N.E.2d 1138, 1160 (Ill. 2011) (“[A] manufacturer is under no duty to issue postsale warnings or to retrofit its products to remedy defects first discovered after a product has left its control.”).

         That aspect of Illinois law dooms Great Northern's claim. Although its complaint is vague on the question, Great Northern's opposition brief characterizes its negligent failure to warn claim as a post-sale duty to warn claim, not as a time-of-sale claim. Doc. 12 at 4 (“Plaintiff alleges that[, ] as a seller, Amazon … had a duty to warn of the dangers of the hoverboard after the sale of the product.”) (emphasis added). Because no such post-sale duty exists under Illinois law, Great Northern's claim is dismissed. See Thornton v. M7 Aerospace LP, 796 F.3d 757, 767-68 (7th Cir. 2015) (rejecting a post-sale duty to warn claim).

         As Great Northern correctly observes, Doc. 12 at 5, the Supreme Court of Illinois has not “foreclose[d] the possibility that a postsale duty to warn could be recognized in the future in Illinois.” Jablonski, 955 N.E.2d at 1162. But that recognition has not yet occurred, and this court “would need strong evidence that the Supreme Court of Illinois [wa]s on the brink of changing its position before [this court] could do likewise.” Rennert v. Great Dane L.P., 543 F.3d 914, 917 (7th Cir. 2008); see also ibid. (“We cannot overturn or disagree with a state court's authoritative rulings when we sit in diversity. Quite to the contrary, we are bound by them.”). No. such evidence, let alone strong evidence, is apparent, so the law remains that there is no post-sale duty to warn under Illinois law. Cf. Home Valu, Inc. v. Pep Boys-Manny, Moe & Jack of Del., Inc., 213 F.3d 960, 963 (7th Cir. 2000) (holding that a federal court “faced with two opposing and equally plausible interpretations of state law” should generally “choose the narrower interpretation which restricts liability, rather than the more expansive interpretation which creates substantially more liability”) (internal quotation marks omitted); see also Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 635-36 (7th Cir. 2007) (same); S. Ill. Riverboat Casino Cruises, Inc. v. Triangle Insulation & Sheet Metal Co., 302 F.3d 667, 676 (7th Cir. 2002) (same). It follows that Great Northern's negligent failure to warn claim must be dismissed.

         II. Negligent Misrepresentation Claim

         For its negligent misrepresentation claim, Great Northern alleges that Amazon's website falsely stated that the Hoverboard had a genuine Samsung battery package, that the Perpers purchased the Hoverboard, and that the Hoverboard resulted in a fire that damaged their home. Doc. 1 at pp. 13, 19, ¶¶ 18, 48. To state a negligent misrepresentation claim under Illinois law, the plaintiff must allege “(1) a false statement of material fact; (2) carelessness or negligence in ascertaining the truth of the statement by the party making it; (3) an intention to induce the other party to act; (4) action by the other party in reliance on the truth of the statement; (5) damage to the other party resulting from such reliance; and (6) a duty on the party making the statement to communicate accurate information.” Tricontinental Indus., Ltd. v. ...


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