Tuesday, October 26, 2010

Broken monitor, broken promise

Lima v. Gateway, Inc., 710 F. Supp. 2d 1000 (C.D. Cal. 2010)

Lima filed a putative class action on behalf of everyone who bought a Gateway XHD3000 monitor, advertised as "the world's first 'Quad-HD' display, delivering more than four times the resolution of standard 720p high definition along with advanced display technology"; offering a "visually intense" gaming experience designed "to avoid skipped graphics or screen stutter"; and "providing maximum investment protection and long-term functionality." It also advertised that users could watch HD video and movies and high-speed graphics free of visual artifacts, including HD picture-in-picture display. The monitor “would purportedly function as a single, high-quality viewing device for the user's computer and video appliances, including desktop computer, notebook computer, Microsoft Xbox360, Sony PlayStation 3, Nintendo WII, Blu-ray, TiVo, and DirecTV.” Ads stated that there was "not much" that would not connect to the XHD3000 and that a user "can connect 6 devices simultaneously using an array of connectivity options that include HDMI, DVI, component video and S-video." They further claimed that all connected devices could play at "1600p, thanks to our XHD3000's upsampling prowess." Gateway also claimed that the XHD3000's replaceable LCD screen had a minimum lamp life of 50,000 hours, equivalent to approximately five years of continuous use. LCD monitors are expected to have a duration of at least the stated lamp life.

In fact, Lima alleged, problems developed relatively soon after purchase included “flickering images, green tint or bars over the entire screen, vertical multicolor lines, green lines, blanking, severe banding, screen flutter, side button issues, blackouts, red flickering lines, and complete screen failures,” making the monitor useless. Moreover, Gateway didn’t disclose that the monitor wouldn’t achieve its maximum advertised resolution of 2560x1600 pixels unless the consumer purchased a second video card; Lima alleged that, given the ads, Gateway knew or should have known that consumers expected their XHD3000 monitors to perform at this capability without the purchase of additional accessories.

Furthermore, Gateway doesn’t provide video drivers for certain devices, which means that Windows will “identify the monitor as ‘generic’ and constantly remind the user that a driver needs to be installed. Lima further alleged that Gateway failed to restore defective monitors to the advertised specifications whether or not they were under warranty, and fobbed off complaints to local technicians who couldn’t repair the monitor.

Lima alleged that he was deceived by Gateway’s ads. Before purchasing the monitor, he visited Gateway’s website, read ads, and researched the monitor on the internet, comparing its purported capabilities with those of competing high-end monitors (the monitor sold for roughly $1700 initially). He relied on Gateway’s various representations, but experienced trouble with missing drivers and visual artifacts, including opaque green bars and streaks running across the display. He alleged that his monitor was useless for the purposes for which it was purchased: high-resolution, high-speed graphics, cinema-quality video, and high-quality HD TV. The monitor would not even work dependably as a computer monitor. Gateway refused to repair the monitor and offered to replace it with an inferior $200 Acer monitor. His experience was allegedly typical.

Lima argued that Gateway violated the CLRA by (1) representing that its goods had characteristics, ingredients, uses, benefits, or quantities which they did not; (2) representing that its goods were of a particular standard, quality, or grade, when they were of another standard, quality, or grade; and (3) advertising its goods with the intent not to sell them as advertised. In addition, he alleged violation of the FAL through representations and failures to adequately disclose material information that Gateway knew or should have known were deceptive. And he alleged violation of the UCL through the “unlawful” prong via the CLRA and FAL violations, as well as “unfair” business practices because Gateway’s acts immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers, and/or because any utility from such practices was outweighed by the harm caused consumers.

Gateway moved to dismiss, alleging that Lima failed to plead with particularity under Rule 9(b). Under Iqbal and Twombly, he needed to plead enough facts to make his claim to relief plausible.

However, the court concluded that Lima didn’t need to state when his monitor broke. Gateway argued that a manufacturer can’t be liable for simple failure to disclose a defect that manifests after the warranty expires. However, the alleged CLRA violations here weren’t grounded in rights derived from the warranty; instead, Lima alleged affirmative representations that were either false or misleading in light of other representations. So the date of malfunction need not be alleged. Moreover, it wasn’t clear that there was a single moment in time when the monitor “broke,” since Lima alleged that the monitor failed to perform as advertised out of the box and then got worse, failing totally just as the warranty expired. Anyway, Gateway’s warranty arguments were affirmative defenses, which must be pled by the defendant; Lima had no obligation to allege facts related to Gateway’s proposed warranty-based defenses.

More generally, Lima alleged the factual basis of his claims with sufficient specificity under Rule 9(b), which applied to all his claims. The complaint provided the necessary who, what, when, where, and how. It included many direct quotations of Gateway’s statements, provided the timeframe and the location of the statements (packaging, press releases, Gateway’s site, and online review sites such as Amazon, CNET, and PCMAG.com), and described in detail why the alleged representations were false or misleading.

Moreover, although some of the representations were individually non-actionable puffery, they contributed to the totality of the alleged misrepresentations. Satements that the monitor offered a "visually intense" gaming experience or "├╝ber-universal functionality" were not quantifiable and subjective. But they couldn’t be considered in isolation, given the context of the advertising as a whole, with its promises of 2560x1600 resolution and connection to almost any device.

Motion to dismiss denied.

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