Date v. Sony Electronics Inc., 2009 WL 435289 (E.D. Mich.)
The court rejected a proposed class action settlement because it didn’t give the class a good enough deal. Date sued on behalf of a nationwide class over the following facts: Sony advertised certain TV sets as being capable of displaying 1080p (progressive) resolution, but those sets didn’t accept a 1080p digital signal. Instead, at best they can display an upconverted 1080i (interlaced) signal from a 1080p device. The upconversion process results in artifacts like feathering. The Sony TVs at issue cannot be redesigned or augmented to display native 1080p digital video input.
Currently, only Blu-Ray disc players, gaming devices like Playstation 3, certain hi-def DVD players, and some personal computers can transmit a 1080p signal. It’s unlikely that over-the-air signals will ever be broadcast in 1080p, though some on-demand movies are now being streamed in 1080p.
The sets at issue sold for between $3000 and $15,000. From 2004-2006, Sony sold about 3000 of the really expensive ones and 172,000 of the (somewhat) lower-end models.
The basic claim is that there’s a material difference between 1080p and 1080i, and that Sony’s advertising actively misled consumers about what Sony offered: calling the display resolution “1080p” was deceptive because the sets don’t display 1080p resolution, can’t accept 1080p video signals, and can’t display video at 1080p resolution through the PC or HDMI input jacks. Claims included breach of contract and warranty, false advertising, unjust enrichment, and violation of the Magnusson-Moss Warranty Act.
Sony argued that representing that a TV has a certain display resolution tells a consumer only what the display resolution is, not which of the many types of video signals the TV can accept. (What what? Look, this stuff is confusing, and was probably more confusing in 2005. But there’s a difference between confusing and deceptive. You tell me you’ve got a 1080p TV, I’m going to believe it, you know, displays 1080p signals output by 1080p devices.)
The proposed settlement offered three benefit levels. If a class member (purchaser/recipient) called Sony before January 8, 2008 and specifically complained about the 1080p input and inability to use the TV as a computer monitor, that person would get $90. Class members with the really expensive models would get $180 in e-credit (of which more soon) and the ones with the relatively less expensive models would get $60 in e-credit, as long as they’d bought an 1080p device such as an HD-DVD or Blu-ray player before July 25, 2008. If they hadn’t, they’d get $75 in e-credit or $28 in e-credit, respectively, so long as they bought a Sony Blu-ray player between July 25, 2008 and 30 days after the final judgment became final. (I foresee a LOLcats: final judgment is final.)
So, e-credits are good towards either buying things at Sony’s online store, for the larger award, or good towards buying a Sony Blu-ray player, for the smaller award.
The court wasn’t impressed. Not many people are eligible for cash: only 234, for a total cash payout by Sony of $21,060. Calling to complain wasn’t sufficient to qualify; callers had to use the “magic words.” People in what’s probably the largest group, the third, would have to buy a Sony Blu-ray player, costing more than their “benefit,” in order to get any value. Those who “decline to further enrich Sony by purchasing a Sony Blu-ray Disc Player receive nothing.” And even once they buy a 1080p device, their TV still won’t be able to display its signals. So, in order to get the third benefit, the class member has to buy a device that doesn’t work with his/her TV set. And in fact, people who don’t buy a 1080p device get nothing; the court found no reason to assume that even half the class would qualify for any part of the settlement.
Sony argued that the settlement is predicated on Sony’s belief that class members haven’t been harmed unless they have a device generating a 1080p signal. However, the court agreed that consumers are entitled to what Sony advertised they’d get. Sony argued that 1080p devices can output 1080i signals that the Sony TVs will accept. The court found this analogous to advertising a car as being able to run on gas or electricity, then delivering a car that does not allow you to plug it in for electric power. “Simply stated, Sony admits that these televisions, advertised and sold as capable of displaying 1080p resolution, are currently incapable of displaying 1080p resolution.”
Most of the objections filed to the settlement complained that they did not want to have to buy a 1080p device in order to qualify for the settlement, because that wasn’t a remedy for the misrepresentation. The objectors wanted either a true 1080p capable TV set or compensation for the premium they paid for a 1080p set.
Sony’s basic argument defending the reasonability of the settlement was that the settlement was good for the class because the claims couldn’t succeed as a matter of law. Plaintiff maintained that the case is meritorious, but settlement is appropriate because of the risks of trial. An objector, who has his own class action pending and who appeared by counsel, argued that there was a strong likelihood of success.
The court agreed that plaintiff’s case has the hallmarks of merit. Ad claims by Sony included “Full HDTV,” the “Worlds Greatest High Definition Television,” “new display technology ... to meet and exceed the demands of a High Definition Image at its full 1080 line resolution,” and ability to display digitally transmitted high definition signals without interlacing. Sony also stated in the specifications sheet that the televisions’ native video resolution was 1080p. A jury could conclude that the plaintiff was promised “a 1080p television that accepted and displayed 1080p resolution natively.” (Indeed, what else could have he been promised?) These claims are not puffery.
Sony noted that a California district court granted summary judgment to another manufacturer on similar claims. In Johnson v. Mitsubishi Digital Electronics America, Inc., 578 F.Supp.2d 1229, 1238 (C.D. Cal. 2008), the court concluded that, although Mitsubishi designated its television set as a 1080p television set, the phrase 1080p “does not convey a specific claim that is recognizable to the targeted customer.” The court disagreed; unlike the plaintiff in that case, the plaintiff here testified that the term did have a specific meaning to him. (Plus, the fact that the term might not have had a “specific meaning” to a buyer in the sense that the buyer couldn’t define it doesn’t mean it wasn’t factual, credible, and material. I can’t tell you how my Bluetooth works or what makes it different from other forms of connection, but I know I paid extra for it.)
The Johnson court thought 1080p only had meaning for engineering professionals, but Sony touted 1080p on its specification sheet for consumers. The term 1080p “carries a specific meaning for a reasonable consumer, and … Plaintiff and at least some of the class members were well aware of the specific meaning of and advantages of owning a television set capable of 1080p resolution when they purchased the television sets at issue.” The Johnson plaintiff just blindly wanted a top of the line set, but that doesn’t “dumb down” the plaintiff/objectors here.
The court noted: “Although the objectors are few, the objections illuminate the inherent unreasonableness of the settlement.” The settlement only benefits people who buy a device that doesn’t work with their TV set: “throwing good money after bad.” Sony’s argument was that no one without a 1080p device has been harmed. But, the court reasoned, class members “purchased these high-end televisions because of the advertised ‘bells and whistles’--1080p display resolution--and were misled and short-changed by Defendants. The class members thought they had purchased a 1080p capable television, in the midst of an electronics world that changes and upgrades everyday. These purchasers eagerly anticipated the possibility of 1080p over-the-air television signals, and 1080p devices, which have become a reality, e.g. Blu-ray, computers and Playstation 3.” This is a key point: class members expected to be able to use these new devices. If they haven’t bought such devices (perhaps, as the court surmised, because they learned that the devices wouldn’t display properly on their equipment), that doesn’t mean they got the benefit of their bargain. This is especially true because 1080p devices are so new to the market; only in January 2008 did an industry standard emerge.
Because of its inadequacy, the court further determined that the settlement didn’t serve the public interest because it didn’t hold Sony accountable for its conduct and didn’t deter Sony from future misrepresentations. Instead, class members have to buy more from Sony.
Thus, the settlement was rejected: it failed to meet the requirement that it be fair, adequate and reasonable.