Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—NDCal: HP Not Liable For Failure to Fix Computer Defect, (Oct 30, 2012)

By Jody Coultas, J.D.

Computer purchasers’ claims filed against Hewlett Packard Company were dismissed by the federal district court in San Francisco for failure to state a claim for breach of warranty or violation of the California Unfair Competition Law (Baba v. Hewlett Packard Company, October 26, 2012, Seeborg, R.).

A putative class of computer purchasers alleged that HP’s tx2000 touch-screen notebook computers developed a “crazy cursor” problem, where electromagnetic interference created by another part of the computer would cause its cursor to migrate to the lower right-hand corner of the screen. HP’s warranty stated that it would, at its discretion, repair or replace any component or hardware product that manifests a defect in materials or workmanship during the Limited Warranty Period. The warranty did not cover software issues. The purchasers filed breach of the implied warranty of merchantability, breach of express warranty, and California’s Unfair Competition Law (UCL) class action claims. The named purchasers were residents of Ohio, Massachusetts, and Arizona.

Because the Ohio purchaser did not give HP a second opportunity to repair or replace, the court dismissed the implied warranty claims under Ohio law. Under Ohio law, a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. The mere manifestation of a defect by itself does not constitute a breach of the implied warranty of merchantability. Instead, there must be a fundamental defect that renders the product unfit for its ordinary purpose. The Ohio resident failed to give HP a reasonable opportunity to cure the defect. The argument that an additional opportunity to repair would have been futile does not excuse the failure to meet the burden on this element.

The Massachusetts resident’s implied warranty of merchantability claim was also dismissed because HP’s disclaimer of the implied warranty of merchantability was enforceable. Massachusetts law prohibits sellers from disclaiming implied warranties on consumer goods. HP and the purchaser disagreed on whether the computer was work equipment or a consumer good. Based on a review of the purchaser’s use of the computer, the computer was work equipment.

HP was granted summary judgment of the express warranty claims because there was no genuine issue of material fact as to whether HP refused or failed to pay for a repair. After contacting HP service at least a half dozen times, getting a second opinion at HP’s request, and sending in the tx2000 for a repair, the computer was not fixed and its processing speed was actually reduced. However, when HP offered to attempt to repair the computer once more and even extended the warranty period for an additional year at no cost, the purchaser never took HP up on its offer and failed to send in the computer for a subsequent repair attempt. Therefore, HP was willing to fulfill its warranty and was unable to do so.

California Unfair Competition Law

Because HP did not breach the express warranty, the court dismissed the UCL claim premised on such an injury. The purchasers alleged that HP violated the UCL by discouraging consumers from pursuing their rights under the warranty; providing incorrect information to consumers about the cause of, and solutions to, the cursor malfunction; and intentionally failing to adequately repair the computers. The claims were also based on the breaches of its implied and express warranties. Even if the non-California residents could state a UCL claim despite the purchase not taking place in California, the claims would fail for failure to plead an injury. The purchaser could not show that HP breached its implied warranty of merchantability with respect to the computer, so she could not establish that she lost money or property as a result of the HP's unfair business practices.

The case is No. C 09-5946 RS.

Scott Richard Kaufman (Law Office of Scott Kaufman) for Tina Baba. Samuel G. Liversidge (Gibson Dunn & Crutcher LLP) for Hewlett Packard Company.

Cases: ConsumerProtection StateUnfairTradePractices CaliforniaNews