Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES— N.D. Cal.: Consumers’ fraud-related claims involving HP wireless printers fail to connect with court, (Sep 11, 2015)

By Michael Menzhuber, J.D., LL.M.

A motion to dismiss a consumer class action against Hewlett-Packard Co. (HP), that alleged fraud-related claims for the sale of defective wireless printers, was granted by the federal district court in San Jose, California. In granting the motion to dismiss, the court determined that: (1) the California Consumer Legal Remedies Act (CLRA) claims, the Arizona Consumer Fraud Act (CFA) claim, and the New York General Business Law (GBL) claim were barred by the statute of limitations; and (2) the plaintiffs did not sufficiently plead California Unfair Competition Law (UCL) claims, a breach of express warranty claim, or a Magnuson-Moss Warranty Act (MMWA) claim (Ferranti v. Hewlett-Packard Company, September 10, 2015, Davila, E.).

Background. Vincent Ferranti and Carlos Martinho (collectively, “plaintiffs”) were each former owners of a HP Officejet Pro 8500 and 8600 Wireless All-in-One printer (collectively, “wireless printers”). The plaintiffs alleged that: (1) the printers contained a manufacturing defect which prevented continuous wireless communication with a computer; (2) HP knew of the defect but continued to market and sell the wireless printers; (3) HP failed to disclose the defect to its customers; and (4) HP refused to properly repair the wireless printers, replace the defective printer with a non-defective printer, or to refund the purchase price. After their initial complaint was dismissed, they filed a second amended class action complaint that alleged the following claims: (1) violation of California’s CLRA; (2) unlawful, unfair, and fraudulent business practices under California’s UCL; (3) breach of express warranty under the MMWA; (4) breach of express warranty; (5) in the alternative, by Ferranti on behalf on the Arizona subclass, violation of the Arizona (CFA); and (6) in the alternative, by Martinho on behalf of the New York subclass, violation of the New York GBL. In response, HP moved to dismiss the plaintiffs’ claims on the grounds that each of the claims was barred by the statute of limitations and was insufficiently pled.

Consumer Legal Remedies Act (CLRA). HP argued that the plaintiffs CLRA claims were time-barred under California’s three-year statute of limitations. The plaintiffs argued that their claims were timely under the discovery rule which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.

With respect to Ferranti’s claim, the court noted that he obtained a HP wireless printer as a warranty replacement on March 25, 2009. After noticing that wireless function did not work, he exchanged the printer for another printer of the same model on September 27, 2009. Ferranti alleged that it was not until August 20, 2010 that he discovered the problem was caused by a hardware defect that could not be resolved with troubleshooting procedures. The court, however, determined that the latest that the limitations period could have begun to run was September 2009, when he realized that his second printer had the same defect as his first printer. Since the action was filed in August 2013, Ferranti’s claim was filed more than three years after discovery and, therefore, was untimely.

Martinho alleged that, upon installation of a wireless printer that he purchased on December 22, 2009, he realized that he could not establish a wireless connection. He exchanged the wireless printer for another wireless printer of the same model on December 28, 2009. After realizing that this wireless printer was also defective, he purchased a third wireless computer in January of 2010. The court determined that the latest that the limitations period could have begun to run was January 2010 when he purchased the third wireless printer. Since this date was more three years before the August 2013 filing date, his claim was untimely.

In both cases, the court disagreed with the plaintiffs that the discovery rule required delaying accrual of the limitations period until the plaintiffs learned of the fraud. The court determined that plaintiffs failed to allege when and how they learned that HP was committing fraud.

California Unfair Competition Law (UCL). The statute of limitations concern was only an issue with respect to Ferranti’s UCL claim. However, construing the alleged facts in a light most favorable to Ferranti, the latest that the limitations period could have begun to run was September 2009, when he realized that his second wireless printer was defective. Since the UCL limitations period was four years and Ferranti’s action was filed in August 2013, the court determined his claim was timely.

The court determined, however, that the plaintiffs did not sufficiently plead a UCL claim because they did not provide sufficient allegations demonstrating that: (1) HP had knowledge of the defect at the time the plaintiffs purchased their wireless printers; (2) HP had a duty to disclose the alleged defect; or (3) that Ferranti participated in a sales transaction.

The court concluded that the plaintiffs did not allege facts establishing that HP had knowledge of the purported defect at the time of sale because: (1) the few consumer postings discussing the purported defect that were posted after the plaintiffs obtained their printers were not sufficient to impute HP with knowledge of the defect at the time of the sales; and (2) the alleged phone conversation between Ferranti and a HP tech support, in which the tech admitted that the malfunctions were created by a hardware issue, was presumed to have taken place after he obtained his wireless printer.

The court agreed with HP that it had no duty to disclose the alleged defect because the plaintiffs knew of the defect. Consequently, it could not be said that HP had exclusive knowledge of the defect. Furthermore, the purported defect did not raise a safety concern to consumers, and the plaintiffs did not allege as such. The court also determined that Ferranti did not participate in sales transaction giving rise to a UCL claim since he received his first printer as a warranty replacement

Breach of Express Warranty. As with the UCL claims, the statute of limitations was only an issue with respect to Ferranti’s breach-of-express warranty claim. The court determined that Ferranti’s claim was timely for the same reasons that it determined his UCL claim was timely.

The court, however, determined that the plaintiffs did not sufficiently plead a breach of warranty because they alleged that they were able to exchange their printers and Ferranti was offered a discount off the purchase price of a new printer. Furthermore, their allegations that they requested a refund or replacement was too conclusory because there were no factual allegations of when this occurred or that their requests were denied.

Magnuson-Moss Warranty Act (MMWA). As with the UCL and breach-of-express warranty claims, the statute of limitations was only an issue with respect to Ferranti’s MMWA claim. The court determined that Ferranti’s claim was timely for the same reasons that it’s UCL and breach-of-express warranty claims were determined to be timely. The court, however, determined that, since the plaintiffs failed to sufficiently plead a breach-of-express warranty claim and the MMWA requires a breach of warranty under state law, the plaintiffs’ MMWA claim was insufficiently pled.

Arizona Consumer Fraud Act (CFA) claim, and the New York General Business Law Claim (GBL). The court determined that Ferranti’s Arizona CFA claim and Martinho’s New York GBL claim were both time-barred. Ferranti’s claim was time-barred because: (1) the limitations period was one year; (2) the latest that the limitations period could have begun to run was September 2009; and (3) the claim was not filed until August 2013. Martinho’s claim was time-barred because: (1) the limitations period was three years; (2) the latest that the limitations period could have begun to run was January 2010; and (3) the claim was not filed until August 2013.

The case is No. 5:13-cv-03847-EJD.

Attorneys: Cynthia B. Chapman (Caddell & Chapman) for Vincent Ferranti. Aaron H. Bloom (Gibson Dunn) for Hewlett-Packard Co.

Companies: Hewlett-Packard Co.

Cases: StateUnfairTradePractices CaliforniaNews