Tuesday, May 27, 2014

Ninth Circuit revives consumer claims against Sony

In re Sony PS3 “Other OS” Litig., 551 Fed.Appx. 916, No. 11–18066 (9th Cir. Jan. 6, 2014) (belated; just showed up in Westclip)
The court of appeals partially reversed the dismissal of plaintiffs’ claims against Sony for disabling the ability of the PS3 to use other operating systems (enabling the machine to run as a computer) via a software update. There was no breach of express warranty, though promotional materials allegedly promised that this feature would be available for the advertised ten-year lifespan of the PS3.  The statements didn’t include those exact terms, and the ToS expressly informed consumers that updates and services “may cause some loss of functionality.”  The express one-year warranty applied instead, and the update came after a year.  Similarly, the claims for breach of the implied warranties of merchantability and fitness for a particular purpose were properly dismissed, as was the federal Magnuson-Moss Warranty Act claim.
However, some of the CLRA claims shouldn’t have been dismissed.  Plaintiffs alleged that Sony’s representations at the time of sale “mischaracterized the dual functionality of the PS3—and were likely to deceive members of the public—because Sony later restricted users to using either the Other OS feature or accessing the PSN [PlayStation Network] feature, but not both.”  Plaintiffs alleged that they reviewed Sony’s website, relevant internet articles, and the box label before buying, and that they relied on Sony’s representations. They also alleged damages because they paid more for the PS3 than they otherwise would.  This was enough.  The CLRA claim that required pleading fraud was properly dismissed because plaintiffs failed to allege the requisite intent; it wasn’t enough to plead that Sony believed that it could terminate the dual functionality when they didn’t allege that Sony planned to terminate the dual functionality at the time of sale.  CLRA claims based on unconscionability also failed.  Plaintiffs failed to allege any underlying “agreement” that promised them dual functionality for the lifespan of the PS3. 
Based on this result, FAL and UCL claims, including UCL unfairness claims, were also revived. For unfairness, plaintiffs sufficiently alleged that Sony caused them substantial injury by charging a premium for the PS3’s dual functionality and then discontinuing access to both the Other OS and PSN features. They also alleged that they could not have reasonably avoided this injury because they would have lost access to the PSN if they chose not to download the update which disabled the Other OS feature, and that there were no countervailing benefits to consumers or competition that outweigh the substantial injury to consumers.
CFAA claims and unjust enrichment claims were also properly kicked out (the software was voluntarily installed and there were adequate legal remedies available, respectively).

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