Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—NDCal: User States Unfair Competition Claim over Software’s Allegedly False Advertising, Error Reporting, (Mar 6, 2013)

By Tobias J. Gillett, J.D., LLM.

A putative class of purchasers of software that the seller claimed would repair, protect, and optimize a computer sufficiently alleged California Unfair Competition Law claims that the trial version of the software falsely reported nonexistent errors and security threats to induce users to purchase the registered version of the software, and that the software could not and did not perform as advertised, the federal district court in San Francisco has ruled (Robichaud v. Speedy PC Software, March 7, 2013, Beeler, L.).

SpeedyPC Software offers a computer security and optimization software product, called SpeedyPC Pro, that it advertises “as being capable of increasing computer speed and performance, removing harmful computer errors, and protecting users’ privacy and security.” SpeedyPC advertisements encourage consumers to download the software to protect, repair, and optimize their computers.

According to the class-action complaint, however, SpeedyPC’s claims do not accurately reflect the capabilities of the software. When installed and run, the trial version of SpeedyPC Pro performs a scan and claims that it uncovered numerous errors, malware, privacy and security threats, and other problems that the registered version of the software could resolve. However, SpeedyPC Pro allegedly only functions as a registry cleaner, by deleting unnecessary items from the database of configuration settings in Microsoft Windows, and as a remover of temporary files. Consumers would allegedly rely on the scan results and SpeedyPC’s advertising in purchasing the registered version of SpeedyPC Pro, even though the software could not have resolved the problems if they had existed.

A class of United States purchasers of SpeedyPC Pro, as well as a California subclass, filed suit against SpeedyPC, alleging that its conduct violated California’s Unfair Competition Law, among other claims. SpeedyPC filed a motion to dismiss.

The court explained that the UCL prohibits “unlawful, unfair or fraudulent business act[s] or practice[s].” The “lawful” prong incorporates violations of other federal, state, and local laws as the basis for a UCL claim. SpeedyPC contended that the complaint failed to satisfy the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) because it did not identify the specific advertisements upon which the plaintiff relied; it did not show why the statements were false or misleading; it did not identify the lead plaintiff’s computer, make, model, age, or operating system; and it did not identify what problem the lead plaintiff had been attempting to resolve with the SpeedyPC Pro software.

The court disagreed. Although the plaintiff did not identify the exact advertisements she viewed, she did provide screenshots of and quotes from advertisements she alleged were “substantially similar” to those she viewed. The plaintiff’s allegations that the software overstated the number of severity of errors in scan results, and that it could not “credibly protect a user’s privacy, remove serious security threats, nor prevent damaging PC errors” despite claiming that it could, sufficiently alleged what was misleading about SpeedyPC’s statements and why they were misleading. Speedy PC provided no support for its claim that Rule 9(b) required technical information about the plaintiff’s computer, and the court could not see how Rule 9(b) demanded it. Finally, the complaint sufficiently alleged the problems the plaintiff had attempted to resolve with her purchase of SpeedyPC Pro. Therefore, the court found the UCL claim had been sufficiently pled.

As the court also declined to dismiss a claim for breach of express warranty, a UCL claim under the “unlawful” prong based on that express warranty claim also survived. The court also declined to dismiss claims for fraudulent inducement, breach of contract, and breach of the covenant of good faith and fair dealing.

The court also rejected various challenges to the complaint’s class claims. The court concluded that it had jurisdiction under the Class Action Fairness Act (CAFA) because the complaint alleged that SpeedyPC had sold the software to “thousands of Class and California SubClass members,” and thus met the “100 putative class members” requirement, and because the complaint alleged an amount in controversy that exceeded $5 million and SpeedyPC did not demonstrate to a legal certainty that it was less than that amount.

The court also permitted the substitution of the lead plaintiff, finding that the new plaintiff satisfied the requirements that she have standing and be a real party in interest, that SpeedyPC would not be prejudiced, and that the complaint could be amended as of right to make the substitution. Even if the amendment had been procedurally improper, the court would have permitted the substitution under those circumstances rather than requiring the plaintiff to file a new lawsuit.

The court also declined to conduct an “individualized inquiry” into whether differences in state laws and the predominance of individual issues as to each putative class member would preclude certification, finding that “[a]t this stage, it is sufficient that the [first amended complaint] alleges common misrepresentations and that Speedy PC Pro could not perform as advertised.” SpeedyPC could bring its arguments at the class certification stage.

The case is No. C 12 04730 LB.

Attorneys: Sean Patrick Reis (Edelson McGuire, LLP) for Rose-Mai Robichaud. Richard Martin Williams (Gray Duffy LLP) for SpeedyPC Software.

Companies: SpeedyPC Software

Cases: : StateUnfairTradePractices ConsumerProtection Advertising CaliforniaNews