Antitrust Law Daily Wrap Up, ADVERTISING—S.D.N.Y.: Deceptive practices claims based on Staples Protection Plan fail, (Jul 1, 2014)

By Greg Hammond, J.D.

A consumer’s claims that Staples, Inc. engaged in deceptive practices by failing to provide services advertised in its Protection Plan brochures and promises made by sales staff, as well as by failing to provide customers with the terms and conditions of the Protection Plan, were dismissed by the federal district court in New York City. The court determined that, although consumers could be confused by conflicting promises made by the company, the consumer failed to plead actual injury (Orlander v Staples, Inc., June 27, 2014, Buchwald, N.).

Background. Andrew Orlander purchased a Hewlett Packard (HP) desktop computer from Staples on March 3, 2012, which came with a one-year manufacturer’s warranty. According to his complaint, 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 Orlander: (1) the manufacturer’s warranty would not be sufficient for problems that might arise with the product; (2) he would have to ship his computer to HP in the event there were any issues; (3) he could simply bring the computer to a Staple’s store with the Staples Protection Plan; and (4) 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,” Orlander was not provided with a copy of the plan’s terms and conditions.

After his computer had trouble connecting to the Internet, 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. Staples moved to dismiss.

Motion granted. To state a sufficient claim under New York’s deceptive practices law, Orlander was 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.” The court first determined that there was no question that the Protection Plan constituted consumer-oriented conduct.

Second, the court determined that, although a reasonable consumer would understand from the fine print on the brochure that the Protection Plan did not replace the manufacturer’s warranty, the sales representative’s conflicting statements and the lack of access to the plan’s terms and conditions could be confusing, constituting materially misleading conduct. However, the court concluded that Orlander failed to allege actual injury because he did not contact HP to repair his computer. Had Orlander first been refused service from HP and then was refused service from Staples, he would have been able to allege actual injury. Consequently, the motion to dismiss Orlander’s deceptive practices claims was granted.

The case number is 13 Civ. 703 (NRB).

Attorneys: Jonathan Adler, Meagan A. Farmer, Mark C. Gardy, Orin Kurtz, and James S. Notis (Gardy & Notis, LLP) for Andrew Orlander. Barry M. Kazan (Thompson Hine LLP) for Staples, Inc.

Companies: Staples, Inc.

Cases: Advertising StateUnfairTradePractices NewYorkNews