Monday, September 28, 2009

Consumer Class Actions Against Apple Dismissed

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

Two class actions—claiming that Apple violated California Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) by manufacturing defective computers—were dismissed by the federal district court in San Jose.

One class action focused on a defect affecting the Apple PowerBook G4, while the other focused on a defect in the Apple iMac.

PowerBook G4 Claim

Apple designed, manufactured, and sold personal computers, including the PowerBook G4. After buying the PowerBook G4, a number of purchasers discovered that a memory slot was defective, affecting the computer’s performance. One purported class member alleged that Apple had deleted consumer complaints about the memory slots from its website and had refused to repair the defective slot for free.

The consumers brought a UCL action, based on both an alleged breach of implied warranty and a generalized claim of consumer harm, but failed to state a cognizable injury, according to the court.

A standalone claim under the unfair prong of the UCL required the consumers to allege a substantial consumer injury that could not have been avoided. The failure to disclose a defect that might shorten the effective life span of a product that functions precisely as warranted throughout the term of its express warranty cannot be the subject of a UCL claim. Because the defect in this case did not manifest itself until after the expiration of the express warranty, the UCL claim was dismissed.

The CLRA claim—based on Apple’s alleged affirmative misrepresentations—was also dismissed for failure to state a claim. The complaint charged that Apple had a duty to disclose a known defect and that failure resulted in an injury to customers. However, Apple was under only a duty to disclose a known defect if there was a safety concern associated with the defect, the court held. Accordingly, the CLRA claim was dismissed with leave to amend.

The decision is Berenblat v. Apple, Inc., CCH State Unfair Trade Practices Law ¶31,885.

iMac Claim

In the second action, two consumers who purchased the Apple iMac personal computer in 2006 alleged that Apple knowingly or recklessly ignored a defect that affected the display screen, in violation of the UCL and CLRA.

According to the court, the purchaser failed to state a CLRA class action claim against Apple. The CLRA required the purchaser to show that Apple was required to make the disclosure or that Apple gave the public misleading information. Because the purchaser did not sufficiently plead when and where the manufacturer made an affirmative representation that contradicted its alleged omission, the CLRA claim was dismissed.

The court noted that the alleged defect manifested itself more than a year after the expiration of the express warranty, casting doubt on the viability of the CLRA claim in general.

The purchasers did not state a UCL claim against Apple because the allegations did not meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b), according to the court. The purchaser’s claim was overly generalized. A generalized allegation with respect to consumer expectations was not sufficient to maintain a UCL claim based on the unfairness prong.

The decision is Hovsepian v. Apple, Inc., CCH State Unfair Trade Practices Law ¶31,893.

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