Wednesday, December 19, 2007

Pentium 4 Purchasers Cannot Pursue Illinois False Ad Class Action

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

A class of Illinois purchasers of Intel Pentium 4 computers cannot be certified on claims that Intel violated the Illinois Consumer Fraud Act, the Illinois Supreme Court has ruled. The suit was filed in Illinois as a nationwide class action, with alternative claims brought under Illinois and California consumer fraud laws.

The purchasers asserted deception by computer-chip manufacturer Intel in its massive advertising campaign touting the high performance of its Pentium 4 microprocessor. Intel allegedly conditioned consumers, through its marketing and naming practices, to believe that each generation of its high-performance processors was superior in speed and performance to the previous generation. The name “Pentium 4” was alleged to be an implicit representation of processor performance that deceived all consumers.

Choice of Law

Because the consumer fraud laws of California and Illinois conflicted, the choice of law was potentially outcome-determinative, the court found. While named plaintiffs were required to prove actual deception under the Illinois Consumer Fraud Act, individualized proof of deception and reliance had been held not to be required under the California Unfair Competition Law, according to the court. Although the suit implicated potential class members and consumer fraud laws of all 50 states and the District of Columbia, relief was sought only under Illinois or California law.

The Intel employees responsible for designing and marketing the microprocessor were primarily located in California, and Intel made its marketing decisions in California. Eight of the named purchaser-plaintiffs resided in Illinois, and three resided in Missouri.

The purchasers argued that Intel’s alleged injury-causing conduct occurred in California and also that the allegedly false representations emanated from California. Intel contended that Illinois possessed the more significant contacts—as the place where the majority of the named plaintiffs received the representations and where their alleged reliance and injury occurred.

Illinois law was held applicable based on court’s choice-of-law analysis favoring the place were the plaintiffs acted in reliance. While either Illinois or Missouri law could have been applicable, the purchasers did not seek relief under Missouri law. The case was limited to Illinois purchasers’ claims because the Illinois Consumer Fraud law applied to transactions that occurred primarily and substantially in Illinois.

The court noted that questions of whether California law could be applied to citizens of other states and to acts occurring outside its borders would likely be decided by California courts in a similar putative nationwide class action, Skold v. Intel Corp., Cases No. RG 04 145635 (Cal. Super. Ct. Alameda County).

Denial of Class Certification

In seeking class certification, the purchasers argued that the uniform representation implicit in the name “Pentium 4”—allegedly that this processor was the best and fastest on the market—was sufficient to afford recovery under the Consumer Fraud Act. However, this implicit representation was nothing more than mere sales “puffery” and therefore was not deceptive under the Act, in the court’s view.

The purchasers contended that Intel conditioned the market to believe that each generation of the “Pentium” processor would be better than the last. But the purchasers could only identify one statement that was communicated to the entire class—the name “Pentium 4”. This was viewed as indistinguishable from the use of the term “best,” which the court in 2005 had ruled to be nonactionable puffery (Avery v. State Farm Mutual Automobile Insurance Co, CCH Advertising Law Guide ¶61,875).

The November 29, 2007 decision in Barbara’s Sales, Inc. v. Intel Corp. will be reported at CCH Advertising Law Guide ¶62,756.

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