Friday, January 21, 2011

Printer error: Strict liability preserves certain class action claims

Kowalsky v. Hewlett-Packard Co., --- F.Supp.2d ----, 2010 WL 5141869 (N.D. Cal.)

This putative class action focuses on certain HP 8500 series printers, which were marketed as premier all-in-one fax/copier/scanners with 50-sheet automatic document feeders ("ADF"). HP also allegedly represented that the 8500 Printer was capable of scanning and copying documents fed through the 50-sheet ADF at speeds of 34 pages per minute in color and 35 pages per minute in black and white. However, the printer allegedly had a design defect that causes the printer to randomly skip pages when copying, scanning, and faxing, making the ADF useable for only two to three sheets at a time. Plaintiff alleged that he researched the printer’s specs on HP’s and other websites, and relied on HP’s representations. He went through two replacement printers, both with the same problems. He sued for the usual California causes of action as well as breach of express and implied warranty.

The court rejected a Rule 9(b) challenge, because the complaint described the circumstances constituting fraud or mistake with sufficient particularity to satisfy the heightened pleading standard. HP argued that plaintiff should have quoted the actual statements, but the court found that, though he could have provided greater specificity, the allegations of specific content were sufficient, and he also identified the date and location (HP’s website) of the representations on which he allegedly relied.

Though 9(b) does not require heightened pleading of allegations of knowledge or intent, conclusory allegations still don’t suffice. Thus, generalized claims that HP knew or should have known of the defect are insufficient. Plaintiff, however, did more: he attempted “to construct a factual context in which Defendant's prior knowledge of the defect is plausible.” He relied primarily on a sampling of consumer complaints posted on HP’s own support website, two of which were posted before his purchase. “More importantly, Plaintiff alleges that HP has acknowledged the problem on its own website and quotes language from an HP webpage that describes the problem, admits there is no solution to the problem, and suggests a ‘workaround.’” These facts were sufficent to allege awareness, at least by the time plaintiff accessed that webpage (December 2009). The question was whether the court could reasonably infer that HP knew of the defect prior to plaintiff’s purchase. HP argued that a few comments weren’t sufficient.

The court concluded that “in some cases, allegations of consumer complaints posted on a defendant's own customer support website may be sufficient to raise a reasonable inference that the defendant knew of a product defect. As Plaintiff points out, it is reasonable to infer that a company monitors the complaints it receives on its website, and without the benefit of formal discovery, it is difficult to imagine what other publically available facts a plaintiff may rely on.” Here, however, the allegations were insufficient. “Although Plaintiff points to two complaints posted on HP's website prior to his purchase, he also alleges that he spent 5-10 hours researching the 8500 Printer on HP's website and reputable third-party websites, and that he read both editor and user reviews of the product, before making a purchase. Considering that Plaintiff would not have purchased the printer had he known about the defect, Plaintiff must not have come across complaints about the defect despite his thorough research.” This suggested that complaints were just beginning to surface when plaintiff bought his printer. “The Court is sensitive to the fact that Plaintiff is unlikely to have access to the details of HP's product testing process without discovery. Nonetheless, the FAC does not allege, even on information and belief, that HP tests its products before advertising them or attempt to show, based on the timing and regularity of defect experienced by Plaintiff and other putative class members, that such testing would likely have revealed the defect.”

Thus, plaintiff failed to sufficiently allege prior knowledge of the defect, which was fatal to some—though not all—of his theories under California consumer protection law. The UCL imposes strict liability on false statements that are likely to deceive members of the public. HP argued that it couldn’t be held liable absent a showing that it knew of the defect and intended to deceive consumers, but the court distinguished the case on which it relied, which found for a defendant who’d instituted an overinclusive and speedy recall when it discovered a problem. Because “it does not appear that the alleged defect was particularly difficult to detect or that HP took comprehensive steps to inform the public and remedy the problem after it learned of the defect,” HP was subject to the usual strict liability. The court noted that a non-dangerous printer defect doesn’t necessarily demand an extensive recall and informational campaign, but plaintiff alleged that HP has only offered an ineffective workaround and continued to replace printers with equally defective products. “[A]t this stage the plausible factual allegations in Plaintiff's complaint do not suggest the ‘exemplary’ conduct that informed the court's decision, on summary judgment, in” the other case. Thus, the court followed “the weight of California authority, which states that the UCL imposes strict liability for statements that are likely to deceive the public.”

So, were HP’s statements likely to deceive reasonable consumers? HP’s alleged representations of speed and capacity described specific characteristics, not puffery. And plaintiff properly alleged that they were likely to mislead. “Although it may be literally true that the 8500 Printer has an automatic document feeder that holds 50 pages and that the printer can copy and scan from this feeder at a rate of 34 or 35 pages per minute, it appears that the Printer is not capable of copying and scanning at such speeds in a reliable manner. While a reasonable consumer would expect the occasional printer jam or skipped page, it is plausible that the general consuming public would expect the 8500 Printer to achieve the advertised speed and page capacity without the regularly recurring problems that Plaintiff alleges.” It was also plausible, based on plaintiff’s own experience and on the complaints on HP’s website, that consumers actually relied on the misrepresentations, including numerous complaints “indicating that the problem was material enough to cause consumers to return the product or buy a new one.”

The court dismissed the claim for breach of express warranty because plaintiff never requested a refund, but and also dismissed the claim for breach of implied warranty of merchantability. The Beverly-Song Act prohibits manufacturers and sellers from disclaiming the implied warranties guaranteed by the Act in any sale in which express warranties are given, but that applies only to consumer goods sold at retail in California. Plaintiff alleged that he was, at all material times, a resident of New Jersey and that he purchased the printer online. He alleged no facts sufficient to show that the sale should be considered a sale in California (only that HP is a California corporation with its principal place of business in Palo Alto). The implied warranty may be modified or excluded if an explicit disclaimer mentions merchantability and is conspicuous. California courts traditionally required that the buyer have knowledge or be chargeable with notice of the disclaimer before the bargain is complete, but here the limited warranty was available on HP's website, and there were no allegations that plaintiff couldn’t have returned the printer within a reasonable period after receiving the product and reading the warranty documents included with the printer. That was sufficient notice of the disclaimer.

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