SANDERS v. APPLE INC. Case No. C 08-1713 JF (PVT).
672 F.Supp.2d 978 (2009)
Chandra SANDERS, Keith Yonai, and Bonnier Corporation, a Florida corporation, on behalf of themselves and all others similarly situated, Plaintiffs, v. APPLE INC., a California Corporation; and Does 1-250, inclusive, Defendants.
United States District Court, N.D. California, San Jose Division.
January 21, 2009.
Gregory E. Keller, Chitwood Harley Harnes LLP, Atlanta, GA, Darren T. Kaplan, Chitwood Harley Harnes LLP, Great Neck, NY, Alfredo Torrijos, Brian S. Kabateck, Richard L. Kellner, Kabateck Brown Kellner, LLP, Los Angeles, CA, for Plaintiffs.
Luanne R. Sacks, DLA Piper LLP, San Francisco, CA, Mark H. Hamer, David A. Knotts, DLA Piper LLP, San Diego, CA, for Defendants.
2 GRANTING MOTION TO DISMISS AND TO STRIKE WITH LEAVE TO AMEND
JEREMY FOGEL, District Judge.
Plaintiffs Chandra Sanders ("Sanders"), Keith Yonai ("Yonai"), and Bonnier Corporation ("Bonnier") (collectively, "Plaintiffs") bring this putative class action on behalf of themselves and all persons who purchased a 2007 twenty-inch Aluminum iMac desktop computer designed, manufactured, and sold by Defendant Apple Inc. ("Apple"). Apple moves to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) and to strike all of the purported class claims. The Court has considered the briefing submitted by the parties as well as the oral arguments of counsel presented at the hearing on November 14, 2008. For the reasons set forth below, the motion will be granted, with leave to amend.
Apple is a leading manufacturer of personal computers and consumer electronics. One of Apple's most successful products is a personal desktop computer known as the iMac. Since its introduction in 1998, the iMac has undergone numerous revisions and updates. The most recent version of the iMac ("Aluminum iMac") was released in August 2007. Aluminum iMacs are available with a twenty-inch active-matrix liquid crystal display ("20-inch Aluminum iMac") or a twenty-four-inch active-matrix liquid crystal display ("24-inch Aluminum iMac").
The 20-inch Aluminum iMac and the 24inch Aluminum iMac utilize different technologies to display digital images. All digital images consist of pixels, the smallest components of a digitalized picture. Each pixel is comprised of three "channels," which correspond to the three main colors used to display digital images: red, blue, and green. Every channel contains a certain number of "bits"—the smallest measure of digital information. A bit can take the value of either zero or one, or "on" or "off." The particular combination of "on" and "off" bits in each channel results in the desired color of that pixel. The number of bits in each pixel determines the total number of colors a computer monitor is capable of displaying.
The 24-inch Aluminum iMac utilizes an "eight-bit" monitor, capable of displaying 16,777,216 colors.
Plaintiffs allege that Apple markets both its 20-inch and 24-inch Aluminum iMacs for editing movies and photos and describes the display of both Aluminum iMacs as though they were interchangeable. Plaintiffs assert that at a press conference announcing the new Aluminum Macs on August 7, 2007, Apple CEO Steve Jobs claimed that photos and movies "look way better on these glossy, beautiful, crisp displays." Compl. 1125. In a press release issued that same day, Apple stated that the new iMac line "featured gorgeous 20-and 24-inch widescreen displays" that provide "incredibly crisp images, ideal for photos and movies ...". Compl. 1126. Plaintiffs also assert that on its website, Apple states that: "[n]o matter what you like to do on your computer—watch movies, edit photos, play games, even just view a screen saver—it's going to look stunning on an iMac." Plaintiffs allege that Apple made each of these representations without revealing that a the 20-inch Aluminum iMac uses "a significantly inferior display" to the display found in both the 24-inch Aluminum iMac and the 20-inch prior generation iMac. Compl. 1126. Plaintiffs also allege that in the "Technical Specifications" for both the 20-inch and 24-inch Aluminum iMacs, the Apple website states: "[m]illions of colors at all resolutions" without disclosing that the 20-inch Aluminum iMac is actually capable of displaying only 262,144 true colors. Compl. ¶ 34.
Between January and March 2008, Plaintiff Bonnier purchased sixteen 20-inch Aluminum iMacs for various departments of its magazine publishing business. Bonnier asserts that it purchased these computers based on its "positive experience and satisfaction with the two previous generations of iMacs that it owned." Compl. ¶ 37. Yonai purchased his 20-inch Aluminum iMac in August 2007 for his graphics design business. Yonai alleges that he made his purchase based on "the information presented by ... Apple on its website" and recommendations by friends in the graphics arts industry who owned previous generation iMacs. Compl. ¶ 41. Bonnier and Yonai both allege that after purchasing their 20-inch Aluminum iMacs, they noticed color shifting on the screen. Yonai asserts that this color-shifting caused "problems with his graphics work." Compl. ¶ 42. Plaintiffs allege that they "would not have acted as they did if they had known of the concealed material facts." Compl. ¶ 57. Plaintiffs filed the instant action on March 31, 2008 on behalf of themselves and all persons or entities in the United States who own a 20-inch Aluminum iMac, alleging fraudulent concealment, breach of express warranty, violation under Unfair Competition Law ("UCL"), and unjust enrichment.
II. RULE 12(b)(1) MOTION TO DISMISS
A. Legal Standard
Because Article III standing "pertain[s] to a federal court's subjectmatter jurisdiction under Article III, [it is] properly raised in a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1)...". White v. Lee,
B. Standing Pursuant to Article III
"The party invoking federal jurisdiction bears the burden of establishing [the] requirements in order to meet `the irreducible constitutional minimum of standing.'" Salmon v. Pacific Lumber Co.,
Apple asserts that Plaintiffs' claims should be dismissed for failure to establish a causal connection between Apple's alleged conduct and injury to Plaintiffs. Apple points to allegations that Bonnier purchased the iMacs because of its "positive experience and satisfaction" with two previous generations of iMacs, Compl. ¶ 38, and that Yonai's purchase was "based on the information presented by  Apple on its website," Compl. 1140. Because Plaintiffs fail to allege specifically that they heard, saw, relied upon, or otherwise were exposed to the allegedly misleading advertising, Apple asserts that Plaintiffs lack standing.
Plaintiffs contend that they sufficiently allege a causal connection by stating that they "were unaware of the facts and would not have acted as they did if they had known of the concealed facts." Compl. ¶ 57. Plaintiffs note that in Trew v. Volvo Cars of North America, 2006 WL 306904 (E.D.Cal. Feb. 8, 2006), the plaintiffs allegation that she "would not have paid as much for her vehicle if she had known of the [undisclosed] defect," was held sufficient to impart Article III standing.
Bonnier's allegations state explicitly that its decision to purchase its 20-inch Aluminum iMac was based on customer loyalty rather than the disputed advertising. Accordingly, its claims will be dismissed for lack of standing under Rule 12(b)(1). However, because Yonai allegedly based his purchase of a 20-inch Aluminum iMac on information presented by Apple's website, the Court need not in engage in speculation as to whether there is a causal connection between his alleged injuries and Apple's allegedly fraudulent conduct. The more pertinent question is whether Yonai has pled sufficient facts to state a claim.
III. RULE 12(b)(6) MOTION TO DISMISS
A. Legal Standard
A motion to dismiss pursuant to Rule 12(b)(6) should be granted if the plaintiff
B. Claim for Fraudulent Concealment
To establish a claim for fraudulent concealment, a plaintiff must allege that: (1) the defendant concealed or suppressed a material fact, (2) the defendant was under a duty to disclose the fact to the plaintiff, (3) the defendant intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff was unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff sustained damage. Hahn v. Mirda,
1. Whether Concealed Fact was Material
A misrepresentation is judged to be "material if a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question ... and as such materiality is generally a question of fact unless the fact misrepresented is so obviously unimportant that the jury could not reasonably find that a reasonable man would have been influenced by it." Engalla v. Permanente Medical Group, Inc.,
2. Whether Apple had a Duty to Disclose
A duty to disclose exists if one of four circumstances exist: (1) the defendant is in a fiduciary relationship with the plaintiff; (2) the defendant has exclusive knowledge of material facts not known to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff, or (4) the defendant makes partial representations but also suppresses some material facts. LiMandri v. Judkins,
Yonai argues that his allegations satisfy the second and fourth conditions. First, he alleges that Apple had exclusive knowledge of the material fact that its 20-inch Aluminum iMac was designed with an inferior display, and that Apple was in a superior position of knowledge with regard to its own technology. Compl. 1155. Second, he claims that Apple made the partial representation that both the 20-inch and 24inch Aluminum iMac were capable of displaying "millions of colors," without revealing that the 20-inch iMac contained an inferior display. Compl. ¶¶ 22, 34, 55. Yonai also alleges that Apple made repeated statements about the displays in both the 20-inch and 24-inch Aluminum iMacs, deliberately implying that both computers had the same display. Pl.'s Opp. To Mot. To Dismiss 11. He contends that "[e]ven where no duty to disclose would otherwise exist, where one does speak he must speak the whole truth to the end that he does not conceal any facts which materially qualify those stated." Vega v. Jones, Day, Reavis & Pogue,
A court in this district faced a similar factual situation in Oestreicher v. Alienware Corp.,
In much the same way, Yonai fails to describe with specificity representations made by Apple with respect to the display's component parts that would give rise to a duty to disclose, how he relied on such partial disclosures, or the manner in which such representations or omissions were false and misleading. See Hoey v. Sony Elecs. Inc.,
C. Claim for Breach of Express Warranty
To plead an action for breach of express warranty under California law, a
Yonai contends that Apple's representation that the 20-inch Aluminum iMac was capable of displaying "millions of colors" constituted an express warranty between the manufacturer and the Plaintiffs. He alleges that the inability of the 20-inch Aluminum iMac to display "millions of colors" natively is a breach of this warranty, and that his reasonable reliance on this representation proximately caused damages. Compl. ¶¶ 70-72. At issue is whether the phrase "millions of colors" constitutes an express warranty, whether a breach occurred, and whether reliance and notice are required to state a claim.
1. Whether Apple's Representation that the 20-inch Aluminum iMac Displays "Millions of Colors" Constitutes an Express Warranty
Statements constituting "mere puffery" cannot support liability under a claim for breach of warranty. See, e.g. Pulvers v. Kaiser Foundation Health Plan, Inc.,
Apple contends that "millions of colors at all resolutions" is a vague superlative as opposed to a specific, detailed factual assertion. "[C]ourts have held that such comparative claims, often involving large numbers, are puffing because a consumer cannot reasonably believe that there is a test behind the claim." In re General Motors Corp. Anti-Lock Brake Products Liab. Litig.,
Yonai asserts that "puffery is distinguishable from misdescriptions or false representations of specific characteristics of a product," Castrol Inc. v. Pennzoil Co.,
Here, Apple states that its monitors display "millions" of colors in a list of other technical specifications on which the consumer is expected to rely. Although in an advertising context the phrase "millions of colors" might be considered a vague superlative, the fact that the phrase was used in the technical specifications section of Apple's website transforms it into an express warranty upon which a potential buyer might rely in deciding whether to purchase the computer.
2. Whether a Breach Occurred
A claim for breach of an express warranty requires an actual breach. See Williams, 185 Cal.App.3d at 142,
Apple argues that Yonai makes no factual allegation that he cannot perceive "millions of colors" on his 20-inch Aluminum iMacs and points to Yonai's concession that the purpose behind Apple's use of dithering is to approximate the number of colors appearing on the "eight-bit" display. Apple contends that it never represented that its monitors could "natively" display anything. Yonai alleges that Apple expressly warranted the capability of its 20-inch Aluminum iMac to display "millions of colors," Compl. ¶ 70-71, and that providing the emulation of millions of colors through dithering does not satisfy this warranty. Yonai must allege in greater detail why the emulation of "millions of colors" generated by the dithering process amounts to a breach of the express warranty that the computer displays "millions of colors."
3. Whether Reliance is Required
Yonai asserts that reliance is not required to support a claim for breach of express warranty, but rather that the statements become "part of the basis of the bargain" under California Commercial Code § 2313. See Keith v. Buchanan,
4. Whether Notice is Required
California Commercial Code § 2607(3)(A) states that a "buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy." See Fieldstone Co. v. Briggs Plumbing Products, Inc.,
D. Claim for Violation of Unfair Competition Laws
California Business and Professions Code § 17200 et seq., prohibits "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." California Business and Professions Code § 17200. This statute "was intentionally framed in its broad, sweeping language." Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.,
To state a claim under the "fraudulent" prong of the UCL, a plaintiff must allege that the challenged practice is likely to deceive members of the public. Bardin v. Daimlerchrysler Corp.,
E. Claim for Unjust Enrichment
To plead a claim for unjust enrichment, a plaintiff must allege a receipt of a benefit and unjust retention of the benefit at the expense of another. Lectrodryer v. SeoulBank,
IV. RULE 12(F) MOTION TO STRIKE
A. Legal Standard
Pursuant to Rule 12(f), a party may move to strike from a pleading "any
B. Class Allegations
Plaintiffs purport to represent a nationwide class of "[a]ll persons or entities located within the United States who own a 20-inch Aluminum iMac." Compl. ¶ 1. Apple urges the Court to dismiss all class claims in this action and to strike all allegations relating to such claims from the complaint. The parties dispute whether the motion to strike class claims is premature, whether the class is ascertainable, and whether individual issues of fact predominate.
1. Standard for Class Certification
To bring a class action, a plaintiff must satisfy both Rules 23(a) and 23(b) of the Federal Rules of Civil Procedure. Under Rule 23(a), a plaintiff must show that: (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties will fairly and adequately protect the interests of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a). In addition, the plaintiff must demonstrate that one of the requirements of Rule 23(b) is met. Since Yonai requests monetary damages, he must satisfy the requirements of Rule 23(b) (3), requiring a finding that questions of law or fact common to purported class members predominate over any questions affecting only individual members and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. See Fed.R.Civ.P. 23(b)(3). Facts pertinent to such findings include: (a) the class members' interest in individually controlling the prosecution or defense of separate actions; (b) the extent and nature of any litigation concerning the controversy already begun by or against class members; (c) the desirability or undesirability of concentrating the litigation of the claims in a particular forum; and (d) the likely difficulties in managing a class action. Id. Under Rule 23, Yonai bears the burden of making a prima facie showing that the requirements are met.
2. Whether a Motion to Strike is Premature
Rule 12(f) authorizes courts to strike "from any pleading any insufficient defense or any redundant, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). The Federal Rules provide a mechanism for exercising defective class allegations before discovery. Pursuant to Rule 23(c), "the court must—at an early practicable time—determine by order whether to certify the action as a class action." Fed. R.Civ.P. 23(c)(1)(A). Yonai argues that this Court should reject Apple's motion to strike his class action allegations as premature and that he is not required to demonstrate that he can satisfy all requirements under Rules 23(a) and 23(b) until the certification stage. However, the Supreme Court has noted that "[s]ometimes the issues are plain enough from the pleadings to determine whether the interests of absent parties are fairly encompassed within the named plaintiffs claim."
3. Whether the Class is Ascertainable
"[N]o class may be certified that contains members lacking Article III standing ... The class must therefore be defined in such a way that anyone within it would have standing." Denney v. Deutsche Bank AG,
4. Whether Plaintiffs Satisfy the Requirements of Rule 23(b) (3)
Apple contends that Yonai may not base a nationwide class action on fraud and warranty claims because individual issues with respect to reliance overwhelmingly will predominate the litigation. Yonai responds to this argument by asserting that reliance is not a required element of fraudulent concealment or breach of express warranty.
As discussed above, reliance is a necessary element of a claim for breach of express warranty, and an adequate pleading of fraudulent concealment requires specific allegations that the plaintiff would not have acted as he did if he had known of the concealed or suppressed fact. This requirement inquires into the specific facts surrounding each buyer's transaction, and is functionally equivalent to the "reliance element." If the proposed class were to be certified, the Court would be forced to engage in individual inquiries of each class member with respect to materiality of the statement, whether the member saw Apple's advertisements or visited Apple's website, and what caused the member to make the purchase. Moreover, since Yonai purports to bring a nationwide class action, these individual inquiries very likely would be subject to the differing state laws that may or may not apply.
Courts routinely hold that both fraud and warranty claims are difficult to maintain on a nationwide basis and rarely are certified. See Cole v. Gen. Motors Corp.,
Good cause therefore appearing, the motion to dismiss and to strike is GRANTED, WITH LEAVE TO AMEND. Any amended complaint shall be filed within thirty (30) days of the date of this order.
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