Antitrust Law Daily Wrap Up, ADVERTISING—C.D. Cal.: Consumers press forward with children’s electronic tablet false ad claims, (May 6, 2015)

By Greg Hammond, J.D.

Consumers of “Nabi tablets”—electronic tablets designed for children—stated sufficient false advertising claims against the electronic tablet manufacturer for misrepresenting that the tablets have a power adapter, are rechargeable, have rechargeable batteries, and can be used while connected to an external power source. In mostly denying the manufacturer’s motion to dismiss, the federal district court in Los Angeles determined that the California Unfair Competition Law (UCL), Consumers Legal Remedies Act (CLRA), and False Advertising Law (FAL) claims were pleaded with sufficient particularity (Miller v. Fuhu Inc., May 4, 2015, Snyder, C.).

Background. Scott Miller filed a putative class action against Fuhu, Inc. and Fuhu Holdings, Inc., claiming violations of California’s CLRA, UCL, and FAL, among other claims. Fuhu manufactures electronic tablets for children, including the Nabi XD, Nabi 2, Nabi 2 S, Nabi Jr., and Disney and Nickelodeon special edition Nabi 2 tablets. Despite advertising that the Nabi tablets include a power adapter, are rechargeable, have rechargeable batteries, and may be used while connected to an external power source, Miller alleges that these representations are false because of various recharging failures that occur during the first year of operation. Specifically, tablets failed to begin recharging, to power on after recharging, and/or to function while recharging, Miller asserted. Fuhu moved to dismiss the complaint.

Timely motion. Miller opposed the motion to dismiss, first arguing that the motion is untimely because Fuhu previously filed an answer to the original complaint in state court, prior to the action being removed to the federal district court. The court rejected this argument, finding that failure to state a claim is a “nonwaivable defect” that can be raised at any time.

Fraud-based claims. In support of its motion to dismiss, Fuhu argued that the fraud-based CLRA, FAL, and UCL claims were insufficient because Miller failed to allege misrepresentation with particularity, failed to allege facts demonstrating Fuhu’s representations were false, and failed to adequately allege reliance. The court first noted that Fuhu’s contention that it lacked notice of Miller’s charges, which Fuhu has been defending for over six months, “strains credulity.” Allegations that Miller viewed Fuhu’s statements about rechargeability on defendants’ website, that the defendants made the claims to retailers during the summer of 2012, and that the tablets are not actually rechargeable satisfied the who, what, when, where, and how particularity requirements of Rule 9(b).

The court additionally found that Miller adequately pleaded reliance on Fuhu’s alleged misrepresentations because he identified the specific representations concerning the ability to recharge the tablets, which he saw on Fuhu’s website, and expressly alleged that the representations were material to his purchase and that he relied upon them. Express allegations that Fuhu’s statements concerning the Nabi tablets’ ability to recharge were misleading because they were incomplete were also sufficient to indicate that Fuhu’s representations were false.

Fuhu’s argument that Miller failed to plead Fuhu’s duty to disclose, with regard to Fuhu’s alleged fraudulent omissions, was also unavailing. The court found that Miller’s allegations that Fuhu possessed exclusive knowledge of the material fact that the power adapters did not reliably recharge the Nabi tablets, which were contrary to Fuhu’s affirmative representations that the tablets were rechargeable, were adequate to allege the existence of Fuhu’s duty to disclose.

The motion to dismiss the CLRA, UCL, and FAL claims was therefore denied.

The case number is 2:14-cv-06119-CAS(ASx).

Attorneys: Adam Joshua Gutride (Gutride Safier LLP) for Scott Miller. Ivo M. Labar (Kerr and Wagstaffe LLP) for Fuhu Inc. and Fuhu Holdings Inc.

Companies: Fuhu Inc.; Fuhu Holdings Inc.

Cases: Advertising CaliforniaNews