Monday, July 16, 2012

how standing cuts down class actions

Granfield v. NVIDIA Corp., 2012 WL 2847575 (N.D. Cal.)
Some of the subtler moves against class actions, along with some of the more blatant ones, have to do with standing.  This case features both.  Granfield, a citizen of Massachusetts, alleged that NVIDIA made defective graphics processing units (“GPUs”) for a variety of manufacturers, and that her computer suffered permanent damage because of that.
To display images, a computer’s CPU sends messages to the GPU, connected to the motherboard.  A GPU package has a die (silicon chip) soldered onto the substrate of the circuit board via bumps of solder that carry signals and power.  When a GPU is turned on, the die becomes hot and heats the substrate.  In 2006, NVIDIA began experiencing cracks at the substrate-to-bump interface, and began using high-lead solder in an attempt to fix the problem, but it allegedly made the problem worse.  Also, NVIDIA allegedly used an underfill material incapable of withstanding ordinary operating temperatures, so it couldn’t hold the bumps in place and computers stopped performing their ordinary functions.  The results: corrupted video images, distorted lines, garbled characters, and complete monitor/display system failure.  HP allegedly investigated in 2006 and found the causes, but NVIDIA refused the blame, even in 2007 when HP provided NVIDIA with “overwhelming” evidence.  Likewise, Dell allegedly notified NVIDIA of defects by early 2007, but NVIDIA still shipped defective GPUs.
The court dismissed Granfield’s claims under California law (following Mazza) and every state other than Massachusetts for lack of standing, since she made her purchase in Massachusetts.  She did plead a violation of Chapter 93A.  She alleged facts indicating that NVIDIA’s sale of GPUs that it knew would cause damage to the computers in which they were installed was an unfair business practice.  Even if NVIDIA wouldn’t have had to disclose the defect under a common-law fraud standard, the consumer protection law covers more than common-law fraud. She couldn’t, however, maintain a breach of implied warranty claim, because she didn’t allege that the GPUs at issue were “goods” as the term is used in the commercial code.  Rather, they were components of a good and not detachable from the rest of the computer at the time of sale.
Finally, and getting to the more subtle but equally significant use of standing to constrain class actions, the court dismissed claims “based on alleged defects in products other than the product that [Granfield] purchased” for lack of standing.  Of course, taken literally, this idea guts the class action entirely: she only purchased one computer; the rest of the class purchased the others.  The idea is that other people purchased one of eleven other models of NVIDIA GPU named in the claim, and so she didn’t have standing to represent them, even though she seems to have alleged that the defect was the same in all models.  This shouldn’t be a standing issue; it should be and previously was an issue of whether the class claims were sufficiently unified/representative.  Because of the comparative subtlety of this standing argument, it’s not clear that courts accepting it have understood the extent to which they’ve diverged from previous precedent.

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