Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: California consumer can proceed with claims against Graco over car seat defect, (Aug 28, 2013)

By Tobias J. Gillett, J.D., LL.M.

A purchaser of car seats from Graco Children’s Products Inc. sufficiently stated claims under California’s Consumers Legal Remedies Act (CLRA) and Unfair Competition Law (UCL) against Graco and its parent company, Newell Rubbermaid Inc., over their failure to disclose a defective buckle in the seats, the federal district court in San Francisco has ruled (Long v. Graco Children’s Products Inc., August 26, 2013, Orrick, W.). However, the purchaser did not adequately plead a claim for actual misrepresentation under the CLRA or a claim under California’s False Advertising Law (FAL).

In March 2010, Seth Long purchased a My Ride 65 car seat with a QT Buckle manufactured by Graco, and later purchased a second such seat following a car accident. He experienced problems unlatching the buckle on both seats.

On October 15, 2012, the Office of Defects Investigation of the National Highway Traffic Safety Administration (NHTSA) opened an investigation into Graco My Ride car seats. According to Long’s complaint, the NHTSA collected “hundreds, if not thousands,” of complaints about the unbuckling problems, as well as 85 reports of “widespread and dangerous defects” in them.

Long alleged that Graco advertised its seats as having a “5-point, front-adjust harness that helps you get baby in and out,” but that consumers struggled in practice to remove their children from the seats, a defect that could pose “an unreasonable safety hazard” in an emergency. Long alleged that Graco knew the car seats were defective, from complaints, testing data, failure rates, return data, and other sources, but failed to disclose the defect.

Long filed a putative class action lawsuit against Graco and Newell, asserting claims for violations of the FAL, CLRA, UCL, and other statutes. Graco and Newell filed a motion to dismiss.

Consumers Legal Remedies Act

Actual misrepresentation. Long failed to state a claim for actual misrepresentation under the CLRA, according to the court. The court explained that “to be actionable as an affirmative misrepresentation, a statement must make a specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact.”

Here, Long claimed that the defendants “warranted and promised the class car seats as free from defects and suitable for their intended use,” but only cited Graco’s statement that the seats had a “5-point, front-adjust harness that helps you get baby in and out.” The statement that the car seat “help[ed]” its user extract a baby did not make “a specific and measurable claim,” but rather was “non-actionable puffery,” in the court’s view.

Fraudulent omission. However, Long did state a claim under the CLRA based on Graco’s failure to disclose the alleged defect. The court observed that “[a] manufacturer’s duty to consumers is limited to its warranty obligations absent either an affirmative misrepresentation or a safety issue” that the manufacturer was obliged to disclose and that it was aware of at the time of sale.

Here, Long sufficiently alleged that the defects related to safety concerns, and that Graco knew or should have known of the defects at the time of sale. He alleged that five NHTSA complaints preceded his first purchase of the car seats, and 22 preceded his second purchase; that Graco would monitor the NHTSA’s website and other sources for such complaints; and that Graco had responded to two of the complaints. He also alleged the presence of additional complaints on Amazon.com and that Graco admitted to the NHTSA that it was “keenly aware” of the issues raised about its car seats. Although Long’s “vague allegations” about testing Graco had performed would not have adequately stated a basis for Graco’s knowledge of the defect, the court found Long’s allegations of complaints pre-dating his purchase by a year in a database that Graco tracked were sufficient to plead that the defendants knew or should have known about the alleged defects.

Unfair Competition Law

The court explained that the UCL prohibits “any unlawful, unfair or fraudulent business act or practice,” with “unlawful,” “unfair,” and “fraudulent” each establishing a separate theory of liability.

Fraudulent prong. The court found that Long adequately pled a claim under the “fraudulent” prong of the UCL. A plaintiff pleading a claim under the “fraudulent” prong based on a failure to disclose a fact must allege that the failure to disclose was “likely to deceive” members of the public because they “had an expectation or an assumption about the matter in question.”

The court observed the “the standard for deceptive practices under the fraudulent prong of the UCL applies equally to claims for misrepresentation under the CLRA,” and therefore Long adequately pled that Graco had a duty to disclose the defect but did not. Moreover, consumers would be “likely to be deceived” by the omission because they “have an expectation or an assumption that child car seats will work properly and not have safety flaws.”

Unfair prong. Long also sufficiently pled a claim under the “unfair” prong, according to the court. The court noted that the California appellate courts disagreed on the appropriate definition of an “unfair” act or practice, with some holding that the practice must offend “an established public policy” or be “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,” with the policy “tethered to specific constitutional, statutory or regulatory provisions,” and others holding that the court must “weigh the utility of the defendant’s conduct against the gravity of harm to the alleged victim.”

Here, Long did not state a claim under the first test because he did not tie his claim to any “specific constitutional, statutory or regulatory provision,” instead making only “a vague allusion to consumer protection and unfair competition laws.” However, he did state a claim under the second test because the gravity of the harm outweighed the utility of the defendants’ conduct. Long did not seem to have contributed to the harm, and the potential harm from the inability to remove children from the seats in an emergency was “great,” while “the defendants’ provision of a defective product or failure to notify consumers about the defect” had no utility and was not apparently justified.

Unlawful prong. Long stated a claim under the “unlawful” prong, which “borrows violations of other laws and treats them as independently actionable,” because he stated a claim under the CLRA.

False Advertising Law. The court determined that Long failed to state a claim under the FAL. As the court had previously concluded, Long did not “point to any statement or advertising that [was] false.” In addition, the statement that the seats had a “5-point, front-adjust harness that helps you get baby in and out” was “not likely to mislead an ordinary consumer acting reasonably under the circumstances and [was] not actionable.”

Pleading with particularity. The court rejected Graco’s argument that Long’s claims under the CLRA for fraudulent omission and under the UCL failed because he “refer[red] to Newell and Graco collectively as ‘Defendants’ without distinguishing which particular defendant is responsible for each alleged element of conduct.” The court found “Long’s explanation that conduct attributed to ‘Defendants’ refers to both Graco and Newell” to be “reasonable and plausible,” and the issue of “[w]hether Graco or Newell did or did not in fact engage in some act is not an issue for consideration on a motion to dismiss. Long’s complaint was sufficient to put each of the defendants on notice regarding the conduct of which they had been accused, according to the court.

The case is No. 13-cv-01257-WHO.

Attorneys: Arvin Ratanavongse (Capstone Law APC) for Seth Long. Rocky N. Unruh (Schiff Hardin LLP) for Graco Children’s Products Inc.

Companies: Graco Children’s Products Inc.; Newell Rubbermaid Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews