Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Round two: fraud claims stick against solar panel manufacturer, (Sep 10, 2014)

By Greg Hammond, J.D.

A solar panel manufacturer was unable to evade allegations that it violated California’s Unfair Competition law (UCL) and Consumers Legal Remedies Act (CLRA) with regard to representations made about its products. In denying the manufacturer’s motion to dismiss, the federal district court in San Francisco determined that the challenged representations were not non-actionable puffery; the consumers stated their claims with requisite particularity; and the consumers demonstrated injury under the UCL (Allagas v. BP Solar International Inc., September 8, 2014, Illston, S.).

Background. Michael Allagas and other consumers purchased solar panels manufactured by BP Solar International, Inc., or purchased properties in which BP’s solar panels were installed. They alleged that the solar panels’ junction boxes stop functioning, causing the solder joints to overheat to temperatures of 2000-3000 degrees, and resulting in the solar panels’ total loss of functionality. The consumers filed suit against BP, alleging—in part—violations of the CLRA and UCL, based on marketing materials and representations BP made regarding the solar panels. The court previously dismissed the complaint for failure to state UCL and CLRA claims, but the consumers filed an amended complaint. BP once again moved to dismiss.

Fraud claims. The consumers alleged that BP violated the CLRA and fraud prong of the UCL by making false representations and warranties about the solar panels, and failing to disclose required facts. The allegedly false representations included promotional materials and promises that stated: the solar panels will “drastically reduce or eliminate your electric bills…forever,” will “increase the value of your home,” and “[n]o other system can operate at a higher level of safety than those offered by BP Solar.” BP moved to dismiss these claims, arguing that the purportedly misleading statements are non-actionable puffery, and that the fraud-based claims were not pleaded with requisite particularity.

The court disagreed with both arguments. Specifically, it determined that—taken as a whole—the representations made by BP were not non-actionable puffery, as they are factual representations that could be “likely to deceive a reasonable consumer.” In addition, the fraud-based claims were pleaded with requisite particularity, as they alleged: BP’s marketing plan and relationship with distributors and sellers; the warranty statements and why they were misleading and false; where and when the statements were made; reliance on the statements; BP’s knowledge of the latent defect; its concealment of the defect; and instances where the defect could have been revealed.

Unfair prong of UCL. BP also argued to dismiss the consumers’ claim under the unfair prong of the UCL for failure to adequately allege injury. The court disagreed, finding that the consumers alleged concrete financial losses due to ascertainable out-of-pocket damages purportedly caused by BP’s unfair business practices. The financial losses included lost property, out-of-pocket inspection costs, and electricity bills associated with the defective solar panels. As the consumers stated adequate claims under both the CLRA and the UCL, BP’s motion to dismiss was denied.

The case number is C 14-00560 SI.

Attorneys: Mindy Monhai Wong (Birka White Law Offices) for Michael Allagas. Matthew T. Heartney (Arnold & Porter) for BP Solar International, Inc., and Home Depot U.S.A., Inc.

Companies: BP Solar International, Inc.; Home Depot U.S.A., Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews