Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Claims against software manufacturer too general, (Jun 26, 2013)

By Jody Coultas, J.D.

A software purchaser failed to state California Unfair Competition Law (UCL) claims against McAfee, Inc. for allegedly misrepresenting the capabilities of its software, according to the federal district court in San Jose (Bilodeau v. McAfee, Inc., June 24, 2013, Koh, L.). The purchaser was granted leave to amend.

The purchaser alleged that McAfee, which manufacturers antivirus and computer security software, misrepresented the capabilities of its Registry Power Cleaner (RPC) software, and that the software falsely reports errors in an attempt to scare consumers into using RPC.

Standing. McAfee argued that the court did not have jurisdiction over the claims at issue because the purchaser lacked Article III standing because she failed to allege particularized injury. To satisfy Article III standing, the purchaser needed to allege concrete and particularized injury-in-fact fairly traceable to the misrepresentations, and likely to be redressed by a favorable decision. Courts have split on similar claims concerning lost benefit of the bargain injuries. The purchaser argued that the software failed to perform the tasks advertised, and that the injury was economic. Because the purchaser alleged that the software was worth much less than what was reflected in the purchase price she paid as a result of the misrepresentations, the complaint sufficiently alleged an injury to confer standing.

Rule 9(b). The purchaser failed to state the claims with the required specificity, according to the court. To satisfy the heightened pleading standard of Federal Rule of Civil Procedure 9(b), the purchaser needed to present the claims in a way that gives McAfee notice of the particular misconduct alleged so it could defend against the charge and not just deny that it did nothing wrong. The claims based on alleged misrepresentations made on McAfee’s website failed to state who actually made the statements at issue, or what exactly was said. The complaint paraphrased the statements made on the website, rather than citing the exact statements. The allegations of false error reports also were too generalized to be actionable. The purchaser failed to allege when an expert examined RPC, whether the expert found that RPC reported errors existing even after it performed its repair function, or what errors the software allegedly reported.

Applicability of UCL. If the purchaser properly amends the claims, the court held that the purchaser may bring UCL claims despite not being a California resident. McAfee argued that the purchaser could not state a claim under the UCL because the purchaser was not a California resident and the conduct at issue occurred outside in the Boston area. The UCL may be available to non-California residents if those persons are harmed by wrongful conduct occurring in California. The purchaser’s claims were premised on McAfee’s alleged misrepresentations on its website, which McAfee concedes could be the source of California liability.

The case is No. 12-CV-04589-LHK.

Attorneys: Sean Patrick Reis (Edelson LLC) for Jennifer Bilodeau. Daniel Kirk Slaughter (Stein & Lubin LLP) for McAfee, Inc.

Companies: McAfee, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews