Antitrust Law Daily Wrap Up, ADVERTISING—2d Cir: Staples unable to shred consumer’s deceptive practices claims over extended service plan coverage, (Sep 17, 2015)

By Linda O’Brien, J.D., LL.M.

A consumer adequately alleged a materially misleading practice and an injury in his action against office supply chain Staples, Inc. for alleging denying computer repair services that the consumer paid for in an extended warranty plan, the U.S. Court of Appeals in New York City has ruled. Thus, the district court’s judgment granting Staples’ motion to dismiss was vacated (Orlander v. Staples, Inc., September 16, 2015, Leval, P.).

Andrew Orlander purchased a Hewlett Packard (HP) desktop computer from Staples in March 2012, which came with a one-year manufacturer’s warranty. Orlander was also persuaded to purchase Staple’s two-year extended service plan—the Staples Protection Plan—for $99.99, after a sales representative told him that the Protection Plan would provide him with complete coverage, such that he would not need to contact HP for any repairs or replacements. Although Orlander was provided with a brochure containing fine print that the plan was “inclusive of manufacturer’s warranty” and “does not replace the manufacturer’s warranty,” he was not provided with a copy of the plan’s terms and conditions.

After his computer experienced Internet connection issues, Orlander contacted Staples, but was informed that he would need to contact HP pursuant to his one-year manufacturer’s warranty. Orlander never contacted HP, but filed a putative class action against Staples, claiming, in part, violations of New York’s deceptive practices law. In July 2014, the district court granted Staples’ motion to dismiss on the ground that Orlander failed to plead actual injury. Orlander timely appealed.

The appellate court found the plaintiff adequately alleged a materially misleading practice and an actual injury. To state a claim under New York’s deceptive practices law, a plaintiff is required to allege (1) consumer-oriented conduct that is (2) materially misleading and that (3) he suffered injury as a result of the allegedly deceptive act or practices. It was undisputed that the sale of the Staples Protection Plan constituted “consumer-oriented conduct,” in the court’s view.

Staples’ argument that Orlander failed to sufficiently allege any materially misleading practice was rejected. The court noted that it was undisputed that the Protection Plan promised a referral to the “nearest authorized service center” and the Staples sales representatives explicitly disclaimed responsibility for providing such referrals until after the one year manufacturer’s warranty expired. Thus, Orlander was reasonably misled into believing that Staples was responsible for services covered under the manufacturer’s warranty.

Orlander also sufficiently alleged an injury stemming from the misleading practice of payment for a two-year protection plan which he would not have purchased had he known Staples would decline to provide any services in the first year of the plan. According to the court, in this case, Orlander alleged both a monetary loss stemming from the deceptive practice and Staples’ failure to deliver a contracted-for service. Therefore, the district court erred in finding that the plaintiff did not state an actual injury under New York law.

The case is No. 14-2677-cv.

Attorneys: Meagan A. Farmer (Gardy & Notis, LLP) for Andrew Orlander. Barry M. Kazan (Thompson Hine LLP) for Staples, Inc.

Companies: Staples, Inc.

Cases: Advertising ConnecticutNews NewYorkNews VermontNews