LA v. NOKIA, INC.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ALDRICH, J.

INTRODUCTION

Henry La bought a Nokia cellular phone with an allegedly defective display screen that faded or went blank, making it difficult to read phone numbers or text messages. He brought a putative class action against Nokia based on its conduct in concealing the screen defect, which he alleges was a known defect at the time he bought the phone. La lost the allegedly defective phone but contends the phone is not necessary to pursue a class action for violation of the Consumer Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.); breach of express warranty; violation of the Song-Beverly Consumer Warranty Act (the Song-Beverly Act; Civ. Code, § 1790 et seq.); and violation of the Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq.). The trial court disagreed, sanctioned La for failure to preserve the defective phone, and terminated the CLRA, express warranty, and Song-Beverly Act causes of action. Since La lost his phone, the trial court also concluded he could not plead "injury in fact" to meet the UCL standing requirements post-Proposition 64 and granted judgment on the pleadings.

We delayed resolving this appeal while our Supreme Court clarified the requisite standing requirements for a UCL class action. (See In re Tobacco II Cases (2009) 46 Cal.4th 298 (Tobacco II).) Based upon Tobacco II, we conclude that La cannot allege an "injury in fact" to meet the standing requirements to pursue a UCL representative action because he lost the allegedly defective phone. The loss of the phone deprived Nokia of an opportunity to present a defense, and we find the trial court did not abuse its discretion in imposing the terminating discovery sanction, which led to the dismissal of the remaining causes of action. We affirm the judgment.

FACTS AND PROCEDURAL BACKGROUND

1. The Class Action Complaint Alleging A Defective Phone Screen

La filed this class action on behalf of all persons in the state of California who purchased a Nokia cellular phone with an allegedly defective "fading or disappearing screen." The operative complaint alleges Nokia designed the phones to enable users to view information on the display screen such as telephone numbers, text messages, news, e-mail, and other information transmitted via the Internet.

The display screens on the Nokia phones, including model 8290, allegedly faded, rendering the displayed information unreadable. According to the allegations in the complaint, Nokia was aware of this common design defect and concealed the defect from consumers.

La purchased the model 8290 Nokia phone in February 2001. Within the warranty period, the screen exhibited an allegedly defective display screen.

The complaint alleges the following causes of action: (1) CLRA violation; (2) breach of express warranty; (3) Song-Beverly Act violation; and (4) UCL violation. The CLRA cause of action alleged Nokia represented the cellular phone has characteristics and benefits that it does not have, and is of a particular standard, quality, or grade when it is not. The warranty causes of action are based upon Nokia's one-year warranty that "`this mobile phone . . . is free from defects in material and workmanship that result in . . . failure during normal usage.'" And, the UCL cause of action alleged an unlawful business practice with the predicate statutory violation of the CLRA and the Song-Beverly Act.

2. La's Discovery Responses Admit He Lost His Nokia Phone

Nokia propounded requests for production asking La to produce his Nokia phone. After a series of objections, La responded: "In October 2003, plaintiff attempted to locate the phone, which plaintiff long ago stopped using, but plaintiff could not locate it."

3. The Discovery Sanctions Motion Based On The Lost Phone

Nokia filed a motion for discovery sanctions, asking the trial court to dismiss plaintiffs' CLRA, express warranty, and Song-Beverly Act causes of action as a terminating sanction for losing the phone. Nokia contended that by losing the phone, La had deprived Nokia of an opportunity to present a defense that the phone did not malfunction, and if the phone did, to prove the malfunction was not caused by a design defect. Nokia presented evidence that of the approximately 1.2 million model 8290 phones Nokia sold in the United States, Nokia's records indicated that less than 10 percent were returned for screen-related complaints. There were a number of causes for the "fading" or "blanking" screen complaints, including product misuse, such as dropping the phone and breaking the glass, or exposing the phone to moisture.

La's declaration stated he had not abused the phone. He bought his first model 8290 Nokia phone in November 2000 and experienced problems with the display screen. He stated that he did not drop the phone or expose it to moisture. La received a replacement phone. The display screen on the second phone also faded and disappeared. La lost the second phone.

La opposed the motion arguing the putative class action did not depend upon the lost phone.1 Plaintiffs' theory is the putative class suffered an injury when they bought the phone, which Nokia knew was defective. Thus, the phone La purchased was irrelevant in this litigation.

The trial court rejected La's argument, characterizing it as a "defect without manifestation," theory in which La and the class sought to recover based upon the substantial certainty the phone would malfunction. Even if all the Nokia phones were substantially certain to malfunction over time, the trial court reasoned that but for the loss of the phone, Nokia could have attempted to prove that La's phone did not malfunction because of a design defect. Thus, Nokia could not present a defense that La received the benefit of his bargain and suffered no damages. Accordingly, as a sanction, the trial court dismissed the CLRA, express warranty, and Song-Beverly Act causes of action.

4. Dismissal Of The UCL Claim Based Upon The Lost Phone

Following the passage of Proposition 64, Nokia moved for judgment on the pleadings on the remaining UCL claim. Nokia's motion contended that without the phone, La could not allege he suffered an injury to meet the standing requirements. The trial court granted the motion without leave to amend. Judgment was entered in favor of Nokia, and La timely appealed.2

5. The UCL Standing Issue After Proposition 64

The operative complaint pre-dates Proposition 64. Even after the passage of Proposition 64, the UCL standing requirements in a representative action remained uncertain. We were among the first courts to address the requisite standing to certify a class action under the "fraud" prong of the UCL. (Pfizer Inc. v. Superior Court (2006) 141 Cal.App.4th 290, review granted Nov. 1, 2006, S145775.) The Supreme Court granted review and held Pfizer until 2009, when it decided Tobacco II, supra, 46 Cal.4th 298. Tobacco II clarified, among other things, the impact of Proposition 64 on the standing requirements in a UCL class action. (Id. at pp. 321, 324.) After deciding Tobacco II, the Supreme Court transferred Pfizer back to this court for reconsideration. Upon remand, we vacated our prior opinion, obtained supplemental briefs, and in Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622, 632-634, we held that our analysis of the procedural requirements to certify a class was consistent with the principles of Tobacco II. On June 17, 2010, the Supreme Court denied review. Thereafter, we gave the parties the opportunity to brief the impact of these cases on the UCL standing issue presented in this appeal. Both parties' positions turn on the significance each one attaches to the lost cellular phone.

DISCUSSION

We must determine two issues in this case that depend upon the importance of the lost phone. First, did the trial court abuse its discretion when it imposed a terminating discovery sanction that led to the dismissal of the CLRA, express warranty, and Song-Beverly Act causes of action? Second, did the trial court err in dismissing the UCL cause of action for failure to allege "injury in fact" to meet the standing requirements post-Proposition 64? We find no error and affirm the dismissal of this action.

1. Dismissal Of The Claims As A Discovery Sanction Was Not An Abuse Of Discretion

a. Applicable Standards

We review the court's imposition of discovery sanctions for abuse of discretion. (Karlsson v. Ford Motor Co. (2006) 140 Cal.App.4th 1202, 1231; R.S. Creative, Inc. v. Creative Cotton, Ltd. (1999) 75 Cal.App.4th 486, 496-497.) This broad discretion is subject to reversal only if the sanction order is "arbitrary, capricious, whimsical, or demonstrates a `"manifest abuse exceeding the bounds of reason. . . ."' [Citations.]" (In re Marriage of Chakko (2004) 115 Cal.App.4th 104, 108.)

Terminating sanctions for spoliation, or failure to preserve evidence, are among the sanctions available under our discovery laws for conduct that amounts to misuse of the discovery process. (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 12 citing Code Civ. Proc., former § 2023 repealed and reenacted as 2023.010 [Stats. 2004, ch. 182, § 23, eff. July 1, 2005].) Code of Civil Procedure former section 2023, subdivision (b), repealed and renumbered as 2023.030, authorizes a court to impose the specified types of sanctions, "[t]o the extent authorized by the chapter governing any particular discovery method or any other provision of this title . . . ." (See Code Civ. Proc., § 2023.030.) Thus, the statutes governing the particular discovery method limit the permissible sanctions. (London v. Dri-Honing Corp. (2004) 117 Cal.App.4th 999, 1005-1006.) Under the statute governing inspection demands, a court may impose an issue, evidence, or terminating sanction if a party fails to obey a court order compelling inspection. (Code Civ. Proc., former § 2031, subd. (m), repealed and reinstated as 2031.320, subd. (c).)

A sanction is appropriate without a prior court order if the misconduct in connection with the failure to produce evidence in discovery is sufficiently egregious, or if it is reasonably clear that obtaining such an order would be futile. (New Albertsons, Inc. v. Superior Court (2008) 168 Cal.App.4th 1403, 1424-1426 [citing cases].) A prior court order is futile where a party cannot provide the promised discovery (Do It Urself Moving & Storage, Inc. v. Brown, Leifer, Slatkin & Berns (1992) 7 Cal.App.4th 27, 36), or the requested discovery no longer exists (Williams v. Russ (2008) 167 Cal.App.4th 1215, 1218-1219, 1224). Under those circumstances, the court may exercise its discretion to impose the appropriate sanction. (See Williams v. Russ, supra, at pp. 1223-1225, 1227 [terminating sanction for destroyed legal files in malpractice action]; Vallbona v. Springer (1996) 43 Cal.App.4th 1525, 1548 [special instruction implementing issue sanction for allegedly stolen documents subsequently recovered before trial].) Upon review of the sanction order, the question is not whether the trial court should have imposed a lesser sanction, but whether the trial court abused its discretion by imposing the sanction that it chose. (Do It Urself Moving & Storage, Inc. v. Brown, Leifer, Slatkin & Berns, supra, at p. 37.)

To prevail on a motion seeking discovery sanctions for spoliation, the moving party must show the failure to preserve the evidence, and the loss of this evidence has a substantial probability of damaging the moving party's litigation position. (Williams v. Russ, supra, 167 Cal.App.4th at p. 1227.) Once this has been established, the burden shifts to the opposing party to show the lack of prejudice from the loss of the evidence. (Ibid.) Here, Nokia met its burden, and La did not.

b. Loss Of Phone Prevented Nokia From Presenting A Defense

Without La's cellular phone, Nokia could not present a causation defense. Causation is an essential element of a CLRA claim. (Civ. Code, § 1780, subd. (a) [relief limited to "[a]ny consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice" unlawful under the act]; see Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798, 809.) Likewise, causation is essential to the express warranty cause of action, which is premised upon a promise that the phone is free from defects in material and workmanship that result in failure. The Song-Beverly Act cause of action also requires proof of causation; the Act incorporates the implied warranty of merchantability and fitness set forth in Civil Code sections 2314 and 2315 by broadening a consumer's remedies to include costs, attorney's fees, and civil penalties. (Civ. Code, §§ 1792, 1792.1, 1793; American Suzuki Motor Corp. v. Superior Court (1995) 37 Cal.App.4th 1291, 1295, fn. 2.) These warranties are breached if the product manifests a defect that is so basic it renders the product unfit for its ordinary purpose. (American Suzuki Motor Corp. v. Superior Court, supra, at p. 1296.)

Nokia presented evidence that it needed to inspect La's phone to determine whether there was a defect, and whether the purported defect caused the screen to malfunction. Nokia's experts testified that of the 1.2 million model 8290 Nokia phones sold more than 90 percent did not fail. As for the remaining phones, there were multiple causes for the screen failure, including owner misuse. Thus, although La alleged a common design defect, the real-world performance data did not bear this out, and suggested other causes for screen complaints and failure. Even with a common design defect, the lost phone presented a mere possibility of a defect, which Nokia needed to inspect to show any purported defect had not manifested during the warranty period. Nokia could not defend these causes of action without inspecting the phone.

A lesser evidentiary or issue sanction prohibiting the introduction of La's statements, without the phone, would have led to jury speculation that a design defect caused the malfunction. (See Cedars-Sinai Medical Center v. Superior Court, supra, 18 Cal.4th at p. 14.)3 Thus, any other sanction short of dismissing these causes of action would have enabled La and the putative class to benefit from the lost phone.4 A terminating sanction is not an abuse of discretion, where, as here, the lost evidence leads to an unfair litigation advantage. (See Williams v. Russ, supra, 167 Cal.App.4th at pp. 1224, 1227.)

Appellants repeat in this court their position that the loss of the phone is "of no moment" because La's injury occurred when he purchased a defective product that Nokia knew would malfunction. (See Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 918.) Thus, causation was established at the time of purchase, not when the phone failed. Even under this theory, that is, the "purchase is the injury," the phone is essential to Nokia's defense.

Nokia needs to inspect La's phone to defend against the warranty claims because if the product performed, La and the putative class have no "purchase injury." Plaintiffs seek to recover economic damages arising from the purchase of the defective phone, a remedy that requires causation. (Osborne v. Subaru of America, Inc. (1988) 198 Cal.App.3d 646, 660.) Under warranty law, the possibility that a defect might cause a product to fail is not a basis for damages unless the product is substantially certain to fail from a design defect during the warranty period or during the product's useful life. (American Suzuki Motor Corp. v. Superior Court, supra, 37 Cal.App.4th at pp. 1298-1299; see also Hicks v. Kaufman & Broad Home Corp., supra, 89 Cal.App.4th at pp. 918, 923.) Nokia has presented evidence of real-world performance that the alleged product failure is not necessarily caused by any common design defect and performed for the vast majority of consumers as expected during the warranty period. Without the allegedly defective phone, Nokia would be in a position in which La and the putative class could recover for damages even though the product performed as warranted.5

Relying on Hicks v. Kaufman & Broad Home Corp., supra, 89 Cal.App.4th 908, plaintiffs contend they can recover economic damages from a breach of Nokia's warranty by establishing a common inherent defect in the phone. The Hicks homeowners sought repair and replacement costs for an inherently defective foundation that had not failed. The court concluded that if plaintiffs could show the existence of the defect which was substantially certain to malfunction during the useful life of the house foundation, they could establish a breach of express and implied warranties. (Id. at p. 923; see also Anthony v. General Motors Corp. (1973) 33 Cal.App.3d 699, 704-705 [injunctive remedy of recall and repair did not depend upon wheel failure but upon the existence of a defect, one that may not have caused actual harm].) But, the Hicks court would not reach the same conclusion in this case because here, unlike in Hicks, Nokia presented evidence of real-world performance that established the absence of an inherent defect, and the useful life of a house foundation differs significantly from the short life span of a cellular phone. Thus, Hicks does not hold that in all circumstances the purchase of an allegedly defective product is enough to pursue warranty claims.

Nokia also needed to inspect La's phone to defend the CLRA claim to show the phone performed as represented, and La suffered no "purchase injury." Appellants contend their "purchase injury" is inferred under the CLRA when a manufacturer conceals from consumers material facts about the characteristics of a product. (See Outboard Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30, 36-37; see also Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1292-1293.) Appellants overstate the cases, which require a causal nexus of conduct and harm. (See Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, at p. 1292.) La has suffered no harm from the purchase alone unless he can establish that his phone did not perform as represented. Nokia needs the phone to present a defense that the phone performed, and, if not, there is no nexus between the failure and the phone design. Thus, inspection of the phone is essential to establishing a defense even under the "purchase injury" theory of this case. Accordingly, the trial court did not abuse its discretion in dismissing these claims as a sanction for the failure to preserve the phone.

2. The Loss Of The Phone Prevents Plaintiffs From Pleading" Injury In Fact" To Meet The UCL Standing Requirements

Appellants contend that because La purchased a phone that had an inherent defect, even post-Proposition 64 and Tobacco II, he has alleged "injury in fact" to meet the standing requirements to pursue a representative action under the UCL. (Bus. & Prof. Code, §§ 17203, 17204.) We consider the sufficiency of these allegations in a motion for judgment on the pleadings under the same standard of review as a demurrer. (Pang v. Beverly Hospital, Inc. (2000) 79 Cal.App.4th 986, 989.) "[W]e accept as true the . . . factual allegations and construe them liberally. [Citation.]" (Stevenson Real Estate Services, Inc. v. CB Richard Ellis Real Estate Services, Inc. (2006) 138 Cal.App.4th 1215, 1220.) Where a deficiency exists and no leave to amend was granted, we determine whether plaintiffs have met their burden to demonstrate the deficiency may be cured by amendment. (Pang v. Beverly Hospital, Inc., supra, at p. 989.)6

Proposition 64 amended the UCL to provide that a private person has standing to bring a UCL action only if he or she "has suffered injury in fact and has lost money or property as a result of the unfair competition." (Bus. & Prof. Code, § 17204; see Buckland v. Threshold Enterprises, Ltd., supra, 155 Cal.App.4th at p. 812.) A plaintiff bringing a representative action must meet these standing requirements (Tobacco II, supra, 46 Cal.4th at p. 306), and to certify a class, the putative class must meet the procedural requirements in section 382 of the Code of Civil Procedure (Bus. & Prof. Code, § 17203). This putative class action falters on La's inability to plead the standing requirements.

La has suffered no cognizable injury without the phone. The "injury in fact" requirement in the UCL is the invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical. (Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 853.) The remedies for this injury are generally limited to injunctive relief and restitution. (Tobacco II, supra, 46 Cal.4th at p. 312.) "[A] plaintiff may obtain restitution . . . against unfair or unlawful practices in order to protect the public and restore to the parties in interest money or property taken by means of unfair competition." (Id. at p. 313.)

La and the putative class seek to recover under the "unlawful" prong of the UCL based upon the fraudulent and deceitful representations that led him to purchase an inherently defective phone. His alleged injury is an economic one, and he and the putative class seek to recover the price difference between the product as represented and purchased. This "economic injury" is conjectural unless La can establish that he bought a defective phone. Without the phone, it is pure speculation and conjecture that La did or did not get the benefit of the bargain. La does not have the requisite injury to establish the standing requirements to pursue a representative action under the UCL.

Because appellants are locked into a theory of the case that purchasing an allegedly defective phone is enough to establish UCL standing, they have failed to show how an amendment will cure these pleading defects. Thus, we agree with the trial court that the UCL claim is inadequately pleaded and cannot be amended.

DISPOSITION

The judgment is affirmed. Nokia is entitled to costs on appeal.

We concur:

KLEIN, P. J.

CROSKEY, J.