Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Consumer’s unfair business practices claims against LG, Sears fail, (Mar 13, 2014)

By Linda O’Brien, J.D., LL.M.

In a putative class action against two appliance manufacturers for allegedly manufacturing washing machines with inherent design defects, a consumer failed to plead sufficient facts to support her unfair business practices claims under California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA), the federal district court in Oakland has ruled (Smith v. LG Electronics U.S.A., Inc., March 11, 2014, Hamilton, P.).

Laury Smith purchased a Kenmore brand washing machine from Sears that was labeled and advertised as “high efficiency,” and featured high spin speeds and a system that minimized vibrations during use. In 2012, the U.S. Consumer Products Safety Commission issued a recall for certain models of LG and Kenmore washing machines, stating that an unbalanced load could cause the machines to shake excessively which could cause internal parts to become loose. Smith filed a proposed class action suit against LG and Sears, alleging the companies engaged in unfair business practices and false advertising, in violation of the UCL, FAL, and CLRA, by manufacturing washing machines that had inherent design defects. She also claimed that the software upgrade implemented by the recall capped the spin speed of the machine, such that it was no longer capable of operating at the advertised high speed. The higher spin speed was a desirable feature and the upgrade rendered the machine unless for the purpose for which it was advertised. The defendants moved for dismissal.

The court determined that the consumer failed to allege facts to support her unfair business practices claim. Smith alleged no facts that the statements at issue - the washing machines were high efficiency and used high speed spin cycles - were false when made or that the manufacturers were aware of the alleged defects or misstatements at the time of sale.

Smith also failed to plead false or misleading advertising claims under UCL, FAL, and CLRA with particularity as required by Federal Rule of Civil Procedure 9(b). She claimed that the manufacturers’ descriptions of the features and performance of the washing machines was fraudulent, deceptive, and misleading. However, the court found that the statements were general statements of opinion or sales puffery upon which no reasonable consumer would rely. Moreover, Smith did not allege that, at the time of sale, the machine was not high efficiency or capable of operating high speed spin cycles or the manufacturers had any reason to know of the excessive vibration. Absent allegations that the defendants had prior knowledge of the defect to be remedied, there was no basis for a claim that the defendants’ conduct was unfair or unlawful, the court concluded.

The case is No. C 13-4361.

Attorneys: Lawrence Timothy Fisher (Bursor & Fisher, P.A.) for Laury Smith. Emily Victoria Griffen (Shearman & Sterling LLP) for LG Electronics U.S.A., Inc. and Sears Holdings Corp.

Companies: LG Electronics U.S.A., Inc.; Sears Holdings Corp.

Cases: Advertising StateUnfairTradePractices CaliforniaNews