Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: State law breach of warranty and consumer fraud claims involving roll-out rack on Whirlpool oven collapse, (Aug 7, 2015)

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

A motion to dismiss state law breach of warranty and consumer fraud claims against Whirlpool Corporation, brought by a consumer whose wife was injured while using an oven it manufactured, was granted by the federal district court in Oakland (Burdt v. Whirlpool Corporation, August 5, 2015, White, J.).

Background. William Burdt purchased a Jenn-Air double oven stock that was manufactured by Whirlpool. Eleven months after purchasing the stove, Burdt’s wife was injured when a roll-rack in the oven slipped off the rack guides and collapsed. Burdt brought a proposed class action suit against Whirlpool, for violations of the Consumer Legal Remedies Act (CLRA), Song-Beverly Consumer Warranty Act (S-BA), and California’s Unfair Competition Law (UCL). The basis for the suit was that: (1) other owners of Jenn-Air ovens had reported problems with the oven racks becoming dislodged; (2) Whirlpool tracked customer complaints and feedback from dealerships and other facilities; (3) Whirlpool tracked warranty requests and the sale of replacement parts; and (4) Whirlpool engaged in pre-release testing and has subsequently investigated the tendency of the Jenn-Air oven to have racks slip or become dislodged under normal conditions.

Consumer Legal Remedies Act. The court found that Burdt’s CLRA claims failed because it was not sufficiently alleged that Whirlpool was aware of a defect with the oven at the time of the sale. Burdt alleged that Whirlpool “actively concealed” the material fact that the oven was defective and the roll-out racks were prone to dislodge. The court noted, however, that to state a claim under CLRA, there also must be an allegation of knowledge of the defect at the time the sale was made. It further noted that, by themselves, customer complaints are insufficient to show that a manufacturer had knowledge of the defect.

Burdt cited a line of California district court cases that held that the totality of detailed allegations of a defendant’s access to sources such as pre-sale test data, consumer complaints, warranty data, dealer complaints, repair data, and data regarding the purchase of replacement parts are sufficient to show a defendant’s pre-sale knowledge of a defect and to survive a motion to dismiss. The court, however, distinguished these cases from the present case because Burdt did not allege Whirlpool’s awareness of the roll-out rack problem with the oven with specificity.

Song-Beverly Consumer Warranty Act. The S-BA provides a right of action for a buyer to recover damages and other relief when there has been a breach of the implied warranty of merchantability. The court noted that, in cases where a plaintiff purchases a car and subsequently claims a breach of implied warranty based on an alleged defect, it has generally been held that the implied warranty is simply a guarantee that the car will operate in a safe condition and be substantially free of defects. Consequently, even if a car’s navigation or entertainment system does not operate as promised, the car is generally considered merchantable if it can provide safe, reliable transportation.

In the present case, Burdt only alleged a single instance of impaired use. Also the oven could still be used for its intended ordinary purpose in a safe manner by using the two other racks. The court, therefore, determined that Burdt failed to state an S-BA claim because, according to the allegations in the complaint, the oven was fit for its ordinary purposes and the alleged defect did not pose an ongoing safety risk.

California Unfair Competition Law. Whirlpool argued that Burdt failed to adequately allege that it engaged in unlawful, unfair, and fraudulent conduct in violation of the UCL. The court agreed. With respect to the “unlawful” business practices prong of the UCL, the court noted this claim is based upon a violation of the CLRA or the S-BA. Because Burdt failed to state a claim under either of these laws, the court determined that he failed to state a claim for “unlawful” business practices under the UCL.

Burdt asserted that he sufficiently stated a claim for “unfair” business practices because he alleged that: (1) Whirlpool engaged in an ongoing practice of selling defect products with knowledge of the defect; and (2) knowledge that the defect could cause injury. The court noted that these were two competing claims for defining “unfair” under the UCL and neither has been adopted as a controlling in the context of consumer fraud. Further, Burdt did not explain how Whirlpool’s conduct would constitute unfair business practices in the absence of Whirlpool’s knowledge of the alleged defect at the time of the sale. Since Burdt did not adequately facts that indicated Whirlpool’s knowledge of the alleged defect and the Whirlpool’s duty to disclose the defect, the court determined that Burdt failed to state a claim under the “unfair” business practices prong of the UCL.

Burdt alleged that Whirlpool’s conduct was “fraudulent” because: (1) it omitted and/or failed to disclose material facts regarding the oven’s tendency to cause the roll-out racks to slip and dislodge; (2) that a safety hazard results from this omission; and (3) Whirlpool had a duty to disclose these facts. The court, however, determined that Burdt’s allegations did not suffice to create a legal duty to disclose because they did not adequately alleged that Whirlpool had knowledge of the alleged defect prior to the sale of the oven.

The case is No. 15-01563 JSW

Attorneys: Jonathan E. Gertler (Chavez & Gertler LLP) for William Burdt. Clement L. Glynn (Glynn & Finley LLP) for Whirlpool Corp.

Companies: Whirlpool Corp

Cases: StateUnfairTradePractices CaliforniaNews