Monday, July 01, 2013

Failure to quote exact ad text dooms complaint

Bilodeau v. McAfee, Inc., 2013 WL 3200658 (N.D. Cal.)

McAfee markets and endorses software, including software from RPC/Capital Intellect.  Bilodeau alleged that, after she searched for software to repair her computer, she clicked on an ad by McAfee for RPC; McAfee’s website then represented that RPC, Registry Power Cleaner, would “accurately identify, report and repair a variety of computer errors and other problems, enhance the performance, speed, and security of her computer, and perform other beneficial tasks ...”  Relying on these representations, she installed RPC, which told her that her computer needed critical repairs; as a result, she allegedly continued using the software beyond the 30-day trial period and was charged for it.  She alleged that she was misled.

First, Bilodeau alleged that McAfee’s representation that RPC would accurately report errors was inaccurate, because the software is allegedly designed to invariably report errors.  A computer forensics expert tested it on “a brand new virtual computer system” and found that RPC “still reported that numerous errors existed on the system.” Thus, she alleged, the errors allegedly detected on her own computer didn’t exist or pose any actual risk.  Second, she alleged that RPC’s error reports were misrepresentations that induced her to keep the software and pay.

The court first found that Bilodeau alleged particularized injury sufficient for Article III standing.  McAfee argued that she didn’t allege that RPC failed to fix her computer or that the errors RPC found didn’t exist.  Though other courts have reached different results on nearly identical complaints, the court found that Bilodeau alleged economic injury stemming from the misrepresentations: she paid because of the error reports, and she alleged that RPC couldn’t actually do what it promised, so she didn’t get the benefit of her bargain.

However, the complaint failed to satisfy Rule 9(b).  Initially, it needed to distinguish between representations made by McAfee and those made by Capital Intellect, the other defendant.  Bilodeau alleged that she downloaded the software relying on defendants’ representations, without explicitly saying who said what, which was essential to their respective liabilities.

More importantly, the court found paraphrasing the allegedly false representations without citation was insufficient to provide the necessary specificity to put defendants on notice.  There were direct quotes from McAfee’s RPC website: RPC will “[r]epair[ ] PC registry errors”; “[improve [PC] speed”; “[s]can[ ] for hidden threats”; “[p]revent [ ] frequent crashes,” and “[s]afely repair harmful registry errors that make your PC unstable.”  But Bilodeau also alleged that defendants represented that RPC would “accurately identify, report and repair a variety of computer errors,” without attributing these representations to any specific defendant at any specific time.

Rule 9(b) didn’t allow the court to evaluate these representations “regardless of the form they took,” because McAfee argues that it only represented that the software would repair, improve speed, scan for hidden threats, and prevent frequent crashes, and did not represent that RPC would accurately report errors.  

Comment: I really don’t understand what an ordinary consumer should understand distinguishes “scanning for hidden threats” from “accurately reporting errors.” What’s the point of repair software that inaccurately reports errors?  I guess we’re all supposed to assume that repair software is like a shady auto shop; we believe its dire predictions at our peril?  Indeed, the court noted that the parties disputed the distinction between scanning and reporting functions, but it concluded that neither defendants nor the court could evaluate Bilodeau’s claims without clarity “as to what exactly was represented by whom.”

The court was particularly troubled because the generalized nature of the allegations paralleled complaints filed in a number of suits by plaintiffs’ counsel against various computer scan software makers.  Each complaint alleged that a forensic expert had evaluated the program and found that it falsely reported problems.  This similarity magnified the plausibility and specificity issues with the complaint—cutting and pasting is disfavored and undermines claims for relief.

True, Rule 9(b) can be satisfied without direct quotations, if they’re sufficiently specific.  But here, allegations that defendants represented that RPC would “accurately report harmful errors,” or “accurately identify, report and repair a variety of computer errors and other problems,” were not “concrete” and “technical.”  Since the lawsuit turned on how the representations compared to the actual functionality, lack of specificity was fatal to Bilodeau’s claims.

The same was true for RPC’s alleged misrepresentations through falsely reporting nonexistent errors.  The allegation was that RPC inevitably and uniformly reported high-risk errors no matter what was going on in the underlying system.  But the complaint failed to allege when the unidentified forensics expert examined RPC, what errors the software allegedly reported, or whether the expert found that RPC reported errors existing even after it performed its repair function.  Even if the allegation of overreporting error on new computers was sufficiently particular, Bilodeau failed to link it to her personal experience with RPC.  She simply alleged that the errors detected on her computer didn’t exist or didn’t pose any actual risk.  (I don’t really see why that wasn’t enough.  It might be that she can’t ultimately prove that.  But why doesn’t it identify with sufficient specificity what’s at issue for the defendant to prepare its defense?)  She didn’t allege which errors were reported or whether they were nonexistent or merely harmless.  It was an unwarranted logical leap to concluded that, just because RPC allegedly reported false positives on a new computer, the errors on her computer weren’t a problem.  But by her own admission, her computer was malfunctioning before she saw the ad, meaning her computer wasn’t error-free.  She didn’t allege that any expert ever examined her computer to determine whether the reported errors were real, or whether RPC fixed them or continued to provide false reports after performing its purported cleaning and repair functions.  This “cumulative” lack of specificity failed to give defendants sufficient notice.

In addition, this lack of specificity raised plausibility concerns; how could a plaintiff suffer from software deficiencies if her computer was already functioning poorly?  Plus, the court doubted that RPC’s false reports of errors could have induced Bilodeau to buy the software.  She had 30 days to test the software!  (I’m sure it was easy to tell what the software was doing.)  She needed to allege facts explaining why software that continuously reported critical errors would induce her to keep the program beyond the 30-day trial period.

Finally, the court addressed objections to specific causes of action.  McAfee argued that California law couldn’t apply because Bilodeau isn’t a California resident and misrepresentations within RPC itself occurred out of state, as RPC was developed in Massachusetts.  But McAfee’s website could be the source of California liability, if Bilodeau properly pled misrepresentations thereon that were developed by a California sales and marketing department.  There were other deficiencies in Bilodeau’s warranty and breach of contract claims that might be correctable by better pleading; the court dismissed the complaint with leave to amend.

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