Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. N.J.: Samsung unable to avoid consumer fraud claims over washer design defect, (May 6, 2015)

By Linda O’Brien, J.D., LL.M.

Two consumers sufficiently pleaded facts to pursue false advertising and consumer fraud claims against an appliance manufacturer for fraudulently concealing a latent design defect in certain models of its washing machines, the federal district court in Newark, New Jersey has ruled in an unpublished decision. Thus, the manufacturer’s motion to dismiss was denied (Kennedy v. Samsung Electronics America, Inc., May 5, 2015, Martini, W.).

In December 2012, consumers Colleen Kennedy and David Foster purchased a new top load washer manufactured by Samsung Electronics, which came with a limited one-year warranty. Shortly after the expiration of the warranty, the plastic drain pump housing in the washing machine broke. While conducting Internet research, Kennedy discovered recurrent complaints about the drain pump housing breaking and causing flooding. She asked Samsung for a refund or replacement. Samsung refused the request, but agreed to replace the plastic drain pump housing.

Kennedy and Foster filed suit against Samsung, alleging violations of California’s Consumer Legal Remedies Act (CLRA), False Advertising Law (FAL), and Unfair Competition Law (UCL) for fraudulently concealing a design defect in certain models of washing machines. Samsung moved to dismiss the complaint.

CLRA. Under the CLRA, misconduct is actionable only if it would deceive a reasonable consumer. Samsung’s argument that its one-year warranty rendered it unreasonable for a consumer to hold Samsung responsible for latent design defects was rejected. While reasonable consumers would know that they might have to expend money for repairs after a year of owning the washer, the warranty would not put reasonable consumers on notice of a latent defect that would perpetually expose them to a high risk of recurrent flooding. Furthermore, Samsung’s advertising that the washer’s low noise level made it suitable for use on second floors of homes or near bedrooms would lull a reasonable consumer into thinking it would safe to keep the product in those places.

Moreover, the plaintiffs established a nexus between the alleged design defect and safety hazard. In the court’s view, Kennedy and Foster plausibly alleged that water flooding in a room where the washer was located could come in contact with wiring and pose a risk of electrocution, and the pump housing frayed internal wiring when it failed.

FAL. The plaintiffs also plausibly alleged a claim under the FAL. The FAL permits a cause of action based on advertising which is either actually misleading or has the capacity to deceive the public. According to the court, Samsung’s advertising regarding suitability of the washers for use on second floors of homes plausibly lulled consumers into believing that the washer would not leave homeowners subject to imminent and repeated flooding.

UCL. Finally, the plaintiffs sufficiently alleged an injury in fact to have standing under the UCL. Samsung’s argument that the plaintiffs suffered no injury in fact because the company replaced the plastic pump housing with another plastic pump housing was rejected. The court noted that the core of the complaint was the repeated risk of flooding and not that the washer broke on one occasion. The plaintiffs plausibly alleged that, if they had known that the washer caused imminent and repeated flooding, they would not have paid money for that machine.

The case is No. 14-4987.

Attorneys: Bruce Heller Nagel (Nagel Rice, LLP) for Colleen Kennedy. Paul Myung Han Kim (Squire Patton Boggs LLP) for Samsung Electronics America, Inc.

Companies: Samsung Electronics America, Inc.

Cases: Advertising StateUnfairTradePractices NewJerseyNews