Amazon asks Minnesota justices to extinguish $4 million battery fire suit

Amazon said it operates as an online marketplace and cannot be held to the same product liability standards as retailers like Walmart and Target.ST. PAUL, Minn. (CN) — An insurance company asked the Minnesota Supreme Court Monday to hold Amazon liable for a $4 million property fire caused by a defective cellphone battery sold through the e-commerce site.The case presents a landmark test for Minnesota’s high court over whether modern online marketplaces can be held to the same strict product liability standards that have applied to traditional retailers for decades.Berkley Regional Insurance Company argues Amazon must be accountable in instances where overseas, untraceable third-party vendors and manufacturers cannot be reached, leaving victims and insurers to absorb losses.“Retailers who distribute defective products into Minnesota have strict liability for the damages that those products cause,” Berkley’s attorney, Jeffrey Markowitz, said. “Yet today it [Amazon] argues it can avoid strict liability that has applied to its brick-and-mortar competitors for decades.”Under Minnesota law, strict product liability holds commercial entities liable for injuries or property damage caused by defective products, regardless of whether the company exercised reasonable care or acted negligently.Amazon argues it functions merely as an online marketplace for third-party vendors rather than a seller or distributor, exempting it from liability.Markowitz pushed back on that distinction, warning if the court rules in favor of Amazon, competitors seeking “equal footing” could adopt the same model to evade liability.“It still possesses, controls, markets and physically distributes these products,” he said. “Amazon is doing the functional equivalent of traditional retail sales, just without title.”The bench was largely skeptical of Amazon’s argument, noting someone must bear the burden for defective products from insolvent, unvetted, foreign third-party sellers.“Why isn’t it fair to hold Amazon to that same basic standard that required the person who marketed the product to the end consumer to identify two things, who’s the manufacturer and then bear the risk if they’re not solvent?” Justice Karl Procaccini said.The case stems from a 2018 building fire in Edina, Minnesota, that resulted in nearly $4 million in property damage paid for by Berkley Insurance.The defective phone battery that caused the fire was sold by Yishda — a Chinese replacement electronics merchant — and listed as an “Amazon’s Choice” product at the top of the search results.Berkley then sued Amazon, Yishda and an unknown manufacturer Amazon was unable to identify — though Yishda’s insolvency hampered Berkley’s ability to recover damages, leaving Amazon as the sole suable defendant.While insurance companies are in the business of covering losses, Berkley claims it shouldn’t be forced to absorb costs or bear the burden from defective products that should never have reached consumers.After a lower federal court granted summary judgment to Amazon in 2023, the Eighth Circuit took up Berkley’s appeal — later certifying the product liability question to the Minnesota Supreme Court.Strict liability applies to all commercial actors integral to the production and marketing of a product, Berkley claims, arguing Amazon did not merely host an ad, but actively managed every step of the transaction and profited off of it.Amazon contends state law strictly limits liability to entities within the chain of distribution who actually manufacture or hold title to a product — arguing a marketplace platform is not a “seller” or “distributor.”“Amazon is not Walmart,” Amazon’s attorney, Gregory Miller, said. “We are not retailing the products. We do not select a single product, source it from the manufacturer, put it on a shelf, sell it directly and then reap the profit of the wholesaler.”Markowitz pushed back, arguing control and marketing yield liability regardless of physical possession. He posed a hypothetical where Walmart replaced its physical inventory with holograms while maintaining its contractual control, arguing the retail giant would still be liable even without touching the goods.Justice Reynaldo Aligada — the newest member of the bench — empathized with Amazon’s concerns, acknowledging that forcing an e-commerce platform to inspect millions of global, third-party products is a brutal operational standard.“They can’t really test products in the traditional way, so how are they managing their own risk when there is someone across the world that is selling a product through a website?” he asked. “How do they know whether they have a trustworthy product or not?”Markowitz said Amazon could obtain liability insurance and require manufacturers to meet certain product-safety standards.Concluding its argument, Amazon warned that judicial intervention is unnecessary and unwise given the lack of widespread safety issues and the unknown consequences of abandoning settled product liability standards, claiming e-commerce companies are not a “rogue entity.”A majority of federal and state courts — including Texas, Ohio and the Fourth and Sixth Circuit — have refused to expand strict product liability to online marketplaces.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads