Antitrust Law Daily Wrap Up, ADVERTISING—E.D.N.Y.: Consumer sufficiently alleged deceptive claims about hard drive speed, (Jul 1, 2014)

By Greg Hammond, J.D.

An amateur photographer, who purchased an external hard drive from a subsidiary of Seagate Technology (US) Holdings, Inc., sufficiently alleged that the product’s packaging made false and misleading claims regarding the hard drive’s data transfer speed, in violation of New York’s deceptive practices law. In denying Seagate’s motion to dismiss Dash’s putative consumer class action suit, with regard to his deceptive practices claim, the federal district court in Central Islip, New York, determined that Dash adequately pleaded materially misleading or deceptive practices, causation, and injury (Dash v Seagate Technology (US) Holdings, Inc., June 30, 2014, Wexler, L).

Background. LaCie S.A. is a wholly owned subsidiary of Seagate that manufactures computer hard drives, as well as devices used to transfer and store electronic data. Dash purchased LaCie’s “Rugged Thunderbolt Series” 1 TB Orange External Hard Drive with a Thunderbolt Interface for approximately $200. In his complaint, Dash asserted that transfer of data speed was “the crucial feature” in his decision to purchase the Thunderbolt Drive. He allegedly believed that he purchased the fastest possible external hard drive. However, according to Dash, the Thunderbolt Drive did not transfer data at the rate the product’s packaging claimed. Consequently, Dash filed a putative class action, alleging breach of New York’s deceptive practices law, among other claims. Seagate filed a motion to dismiss.

Deceptive practices. To adequately state a deceptive practices or false advertising claim, Dash was required to allege: (1) “the challenged act or practice was consumer-oriented”; (2) the act or practice “was misleading in a material way”; and (3) “the plaintiff suffered injury as result of the deceptive act.” According to the court, only the second and third elements were disputed in this case.

With regard to the alleged materially misleading or deceptive practices, Dash asserted that the Thunderbolt Drive’s packaging contained a bar chart comparison, a speedometer graphic, and specifications that claimed the drive was “twenty times the speed of” and “at least twice as fast” as various competing drives. In addition, the packaging represented “Shocking Speeds Up To 10 Gb/s.” Dash argued that such statements were false and misleading because the drive did not transfer data at the claimed rates. Conversely, Seagate argued that the claim should be dismissed because its website disclosed that the transfer rate was less than the advertised maximum speed, and that this was widely known. However, the court determined that it could not conclude as a matter of law, based on the allegations, that the packaging was not misleading to a reasonable consumer.

The court also found that causation and injury were adequately pleaded in this case, as (1) a reasonable inference could be drawn from Dash’s complaint that he purchased the drive as a result of the allegedly misleading statements and (2) Dash sufficiently claimed that he purchased the drive for a premium, based on Seagate’s purportedly inaccurate representations. Consequently, the court denied Seagate’s motion to dismiss Dash’s deceptive practices claim.

The case number is CV 13-6329.

Attorneys: Paul C. Whalen for Matt Dash. Eamon P. Joyce, T. Robert Scarborough, and Sean A. Siekkinen (Sidley Austin LLP) for Seagate Technology (US) Holdings, Inc.

Companies: Seagate Technology (US) Holdings, Inc.; LaCie S.A.

Cases: Advertising StateUnfairTradePractices NewYorkNews