Subject: Fraud and Misrepresentation

Ninth Circuit Adheres to Precedent and Finds That Subverting Express Warranties Simply Does Not Compute

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On May 19, 2022, in an unpublished decision, a Ninth Circuit panel reaffirmed that under California law manufacturers do not have a duty to disclose defects in their products that manifest after the expiration of the product’s warranty unless the defect poses an unreasonable safety risk.  Taleshpour v. Apple, Inc., 2022 WL 1577802 (9th Cir. May 19, 2022).  The court affirmed dismissal of a proposed class action against Apple Inc., holding that California consumer protection laws were not violated as a matter of law because the alleged defect in MacBook Pro laptop computers arose after the expiration of the warranty and the complaint did not allege any safety issue.  The court followed existing Circuit precedent, even though there is some conflicting authority in the California courts of appeal.

Plaintiffs alleged that in certain MacBook Pro models, the backlight ribbon cables used to connect the display screen to the display control tear because the cables do not provide enough slack when the laptops open and close.  Apple agreed to replace the display of all 13-inch MacBook Pros that suffer from the alleged defect, but not the 15-inch model or any model released after 2016.  Plaintiffs alleged on behalf of the class that the excluded models suffered from the same backlight defect as the pre-2016 13-inch version.  Plaintiffs conceded the backlight ribbon issues arose after the expiration of Apple’s one-year warranty.

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Tenth Circuit Affirms Dismissal of Pet Food False Ad Proposed Class Action

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The Tenth Circuit recently affirmed dismissal of a proposed class action against a dog food manufacturer, finding that the putative class claims were nonactionable puffery and overly subjective.

In Renfro, et al. v. Champion Petfoods USA, Inc., et al., No. 20-1274, pet owner plaintiffs brought a proposed class action against Champion Petfoods alleging that the packaging for some of its dog food brands were false and misleading. Specifically, plaintiffs asserted claims for violation of the Colorado Consumer Protection Act, breach of express and implied warranty, fraudulent misrepresentation, fraudulent concealment, unjust enrichment, and negligence.

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Eastern District of Virginia Denies Motion to Certify Class, Sheds Light on Rule 23(b)(3) Predominance and Superiority Requirements for Class Actions

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The U.S. District Court for the Eastern District of Virginia analyzed Federal Rule of Civil Procedure 23(b)(3)’s predominance and superiority requirements for class actions in a recent decision denying a motion to certify a purported class of motor vehicle purchasers.  The decision underscores that plaintiffs seeking to certify classes asserting claims that will render the process of identifying class members to be a mere series of individualized inquiries will not pass muster under Rule 23.

The Facts in Dispute

Garcia, et al. v. Volkswagen Group of America, Inc., et al. involved a purported class of plaintiffs residing in multiple states who purchased vehicles manufactured by defendants within the last 14 years.  The plaintiffs sued a group of auto manufacturers alleging damages resulting from defendants’ alleged fraudulent misrepresentations about the vehicles, and asserting claims for violations of the Federal Odometer Act, fraud, breach of contract, and unjust enrichment, in addition to state law claims under the laws of California, Colorado, Florida, Illinois, New Jersey, and Washington.

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Challenging Price Premium Allegations Can Pay Off for Defendants

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Motions to dismiss in consumer fraud cases often focus on the element of deception—whether a reasonable consumer would be deceived by the statement or practice at issue. But there is another element of statutory consumer fraud claims that deserves closer scrutiny at the pleading stage—injury. Where plaintiffs claim that they were injured because they paid a “price premium” but do not allege facts to support that claim, defendants should consider moving to dismiss for failure to adequately plead injury.

State consumer protection statutes typically include injury as a required element for a private cause of action. New York General Business Law Sections 349 and 350, for example, require a plaintiff to establish that she purchased a product because of the allegedly deceptive business practice and did not receive the full value of the purchase. Similarly, plaintiffs suing under California’s Unfair Competition Law, False Advertising Law, or Consumer Legal Remedies Act must establish that they suffered an “economic injury” caused by the practice or advertising at issue.

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Summary of HB1125: Deceptive Lead Generation

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Lawsuit advertisements—specifically ones that target prescription drugs and medical devices—can be dangerous.  Nationwide, dramatized and exaggerated legal ads have flooded both televisions and the internet, often masquerading as “medical alerts.”  Some estimates have total spending on legal advertisements at around $1 billion annually.  As a result, state legislatures are beginning to take action to combat deceptive advertising and come up with solutions, including in Indiana, which recently passed House Bill 1125.  House Bill 1125 places several limitations on the practice of lead generation – the use of commercial communications to initiate consumer interest or inquiry into legal services intended to redress an alleged injury from a medical device or legend drug – and provides a private right of action for manufacturers and sellers of medical devices and legend drugs against deceptive lead generators.

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A Cautionary Tale and a Wistful Remembrance About Settlement Security

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Our language around settlements connotes war and peace – in settling we are “buying our peace” or “ceasing hostilities.”  The old saw is that a good settlement leaves no one satisfied, but in truth, a good settlement leaves nothing significant left to do in the dispute.  In abandoning claims or defenses, we seek a measure of closure.  And in obtaining a durable settlement our client can live with, we necessarily rely, to some extent, on the regularity of the underlying proceedings, candor to the court, and some minimal level of good faith in the negotiations.

What happens when that reliance is upended and those expectations are dashed?  A recent unpublished California decision provides a cautionary tale.  It also stirred memories of a flawed settlement from three decades ago, inspiring this reverie.

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