In a recently published decision, Wilson v. Hewlett-Packard Co., 2012 WL 502442 (9th Cir. Feb. 16, 2012), the Ninth Circuit Court of Appeals rejected claims brought under California's Unfair Competition Lawi (UCL) and Consumer Legal Remedies Actii (CLRA) based on allegations of failure to disclose a design defect that manifested post-warranty.
The plaintiffs in Wilson alleged that certain Hewlett-Packard laptop computers have a “defect” in the design of their power jacks that causes them to fail after the expiration of the two-year limited warranty. Plaintiffs argued that the “useful life” of the computers is much longer than two years and that HP had a duty to disclose the fact that the power jacks had an increased tendency to fail within the computers’ useful life. By allegedly concealing that fact, plaintiffs argued, HP violated the UCL and the CLRA. Id. at *1-2.
In affirming the district court’s dismissal of the complaint, the Ninth Circuit, citing Daugherty v. American Honda Motor Co., 144 Cal. App. 4th 824 (2006), held that a manufacturer has no duty to disclose defects that may manifest post-warranty “absent either an affirmative misrepresentation or a safety issue.” Id. at *4.
The Ninth Circuit further noted the policy considerations favoring limitations on the duty to disclose, explaining that to broaden the duty beyond safety concerns “would eliminate term limits on warranties, effectively making them perpetual or at least for the ‘useful life’ of the product. Under a contrary rule … the failure of a product to last forever would become a ‘defect,’ a manufacturer would no longer be able to issue limited warranties, and product defect litigation would become as widespread as manufacturing itself.” Id. (citations omitted).
The plaintiffs, attempting to satisfy Daugherty, alleged that the purported design defect in the power jack caused the laptops to overheat and catch fire. Addressing this allegation, the Ninth Circuit held that plaintiffs failed to “plausibly” allege how the claimed power jack design defects could cause the laptops to ignite. The plaintiffs' complaint provided considerable detail about the alleged defect, arguing that the power jack, over time, would lose the solder on pins connecting it to the motherboard, to which the power jack would stop delivering power. The complaint also cited instances in which a user’s laptop ignited. Nonetheless, the Ninth Circuit wrote, “it is difficult to conceive (and the complaint does not explain) how the laptops could ignite if they are ‘unable to receive electrical charge.’” Id. (quoting the complaint).
Finally, the Ninth Circuit held that plaintiffs’ allegations that HP had knowledge of the alleged safety condition at the time of sale, as required by their UCL and CLRA claims, were insufficient. Plaintiffs’ allegation that HP “became familiar with” and was “on notice” of the defect as early as 2002 was deemed “merely conclusory,” a “generalized assertion.” Id. at *8.
Furthermore, the mere allegation that HP had access to aggregate information regarding alleged overheating did not, according to the Ninth Circuit, properly allege knowledge of the purported defect. These allegations, the Ninth Circuit wrote, were "speculative and [did] not show how any tests or information could have alerted HP" to the alleged defect. Id. Nor was the fact that some customers had registered complaints about overheating sufficient to establish knowledge of a defect. The complaints merely established that some customers were complaining, and "[b]y themselves [the complaints] are insufficient to show that [the manufacturer] had knowledge [of the defect]." Id. (citation omitted).
Following Wilson, consumers asserting post-warranty design defect claims in the Ninth Circuit under California’s UCL and CLRA can no longer plead a design defect claim based on omission or concealment. The consumer must plead sufficient facts plausibly alleging that the defect presents a safety issue or contradicts a manufacturer's affirmative misrepresentation. In addition, the consumer must establish that the defect was known to the manufacturer at the time of sale. Conclusory or speculative allegations of knowledge, or allegations based solely on consumer complaints, will not suffice.
For more information about this decision, please contact:
i Cal. Bus. & Prof. Code § 17200 et seq. As the Ninth Circuit explained, “[u]nder the UCL, any person or entity that has engaged, is engaging or threatens to engage “in unfair competition may be enjoined in any court of competent jurisdiction.” Cal. Bus. & Prof. Code §§ 17201, 17203. “Unfair competition” includes “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200.” Id. at *3
ii Cal. Civ. Code § 1750 et seq. “The CLRA prohibits ‘unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.’ Cal. Civ.Code § 1770(a). Conduct that is ‘likely to mislead a reasonable consumer’ violates the CLRA.” Id. at *3 (citation omitted)