Wednesday, June 26, 2013

HP's power and performance claims were mere puffery

Elias v. Hewlett-Packard Co., --- F.Supp.2d ----, 2013 WL 3187319 (N.D. Cal.)

Elias bought an HP computer through HP’s website with a “recommended” graphics card, which HP marketed and advertised as a “faster, higher performance, more powerful and/or upgraded” computer component. However, although the graphics card manufacturer expressly recommended a 300-watt or greater power supply, Elias’s computer only had 220 watts.  HP didn’t tell Elias about the recommendation or offer a power supply upgrade.  HP didn’t disclose that using the graphics card with the 220-watt power supply would decrease the computer's performance, efficiency, and life-span, and increase its safety hazards, including the risk of catching fire.  Within the first year, Elias’s computer began to “randomly freeze, restart, or shut down,” and 17 months after purchase, the computer “shorted out,” “melted,” and was damaged beyond repair. HP refused to repair or replace it.  He filed a putative class action making the usual California claims.

The court didn’t dismiss the breach of warranty claims because Elias specifically alleged that the power supply was insufficient for the components, that the insufficiency was likely to result in malfunctions beyond normal troubleshooting, and that the defects manifested during the one-year warranty period.  Elias also stated a claim under the Song-Beverly Act.

The court then dismissed Elias’s consumer protection claims based on alleged affirmative misrepresentations.  The claims to which he pointed were nonactionable puffery: “ultra-reliable performance,” “full power and performance,” “versatile, reliable system,” “delivers the power you need,” “packing power and style into your tightest spaces,” and “Compact but powerful,” were all puffery, despite Elias’s allegation that the small physical size of the computer was part of the problem in terms of overheating/power supply.  Nor was offering the upgraded graphics card for sale with this model an affirmative representation that the power supply would be sufficient for it.  Even viewing the claims in their totality, the combination of puffing statements doesn’t automatically create an actionable misrepresentation.

The fraudulent omission claims also failed.  For failure to inform consumers of a risk outside the warranty period, there can only be materiality and thus liability if the failure poses safety concerns or if it’s linked with an affirmative misrepresentation.  But what about a risk inside the warranty period? The court agreed that “[i]t makes logical sense that the average consumer would expect the manufacturer to disclose significant defects of any nature that arise within the warranty period. But outside of that warranty period, the average consumer would only expect the manufacturer to guarantee against unreasonable safety risks.” Thus, Elias could allege fraudulent omissions beyond safety-related concerns if those omissions led to malfunctions during the warranty period, whereas omissions outside the warranty period would only be actionable if there was some kind of safety issue. 

Elias alleged that, due to the insufficient power supply, HP's computers were more likely to catch fire, creating a significant safety risk.  But he didn’t allege that anyone’s computer ever actually caught fire, or explain why a melting computer would create an unreasonable safety risk.  Nor did he cite facts beyond hypotheticals to show a nexus between the deficient power supply and the ultimate risk of fire.

As for events within the warranty period, Elias didn’t sufficiently allege HP’s awareness of the defect to trigger its duty to disclose.  Conclusory allegations of knowledge or intent aren’t enough without a plausible basis for such knowledge.  Elias cited to recommendations by manufacturers of minimum power supplies for certain graphics cards, but didn’t allege that HP knew of these manufacturer recommendations at the time of sale. Though HP offered a webpage on “Troubleshooting Power Supply Issues,” which discusses the need for adequate power supplies, that didn’t show that HP was aware that the specific customizable computers at issue in this case lacked sufficient power supplies at the time of purchase.  Thus, Elias failed to allege intentional concealment, though he had leave to amend.

As for unfairness under the UCL, the court allowed Elias leave to amend to add the allegation that HP stopped offering customers the option to “select upgraded, power-hungry components in the models at issue in the complaint.”  This might support a UCL claim based on unfair business practices as HP’s acknowledgement of the problem.  The UCL unlawfulness claim also failed without a predicate violation of the UCL’s ban on fraudulent conduct, since breach of warranty isn’t itself an unlawful act for purposes of the UCL.

No comments:

Post a Comment