In Re Sony PS3 "Other OS" Litigation

Filing 97

MOTION to Dismiss [Memorandum of Points and Authorities] filed by Sony Computer Entertainment America Inc, Sony Computer Entertainment America LLC. Motion Hearing set for 11/4/2010 01:30 PM in Courtroom 3, 17th Floor, San Francisco. (Sacks, Luanne) (Filed on 9/10/2010)

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) LUANNE SACKS, Bar No. 120811 luanne.sacks@dlapiper.com CARTER W. OTT, Bar No. 221660 carter.ott@dlapiper.com DEBORAH E. MCCRIMMON, Bar No. 229769 deborah.mccrimmon@dlapiper.com DLA PIPER LLP (US) 555 Mission Street, Suite 2400 San Francisco, CA 94105 Tel: 415.836.2500 Fax: 415.836.2501 Attorneys for Defendant SONY COMPUTER ENTERTAINMENT AMERICA LLC (erroneously sued as "Sony Computer Entertainment America Inc.") UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION In re SONY PS3 "OTHER OS" LITIGATION CASE NO. 3:10-CV-01811 RS (EMC) DEFENDANT'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMORANDUM OF POINTS AND AUTHORITIES Date: Time: Judge: Courtroom: November 4, 2010 1:30 p.m. Hon. Richard Seeborg 3 WEST\222451370.1 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF CONTENTS Page NOTICE OF MOTION; MOTION................................................................................................. 1 MEMORANDUM OF POINTS AND AUTHORITIES ................................................................ 1 I. INTRODUCTION .............................................................................................................. 1 II. SUMMARY OF ALLEGATIONS ..................................................................................... 3 A. The PS3 And Other OS Feature .............................................................................. 3 B. The Applicable Warranty, License And Terms Of Use Agreements Authorized SCEA to Issue Firmware Update 3.21 ................................................. 3 1. Limited Hardware Warranty And Liability................................................. 3 2. System Software License Agreement ......................................................... 4 3. Terms Of Service And User Agreement ..................................................... 5 C. Firmware Update 3.21............................................................................................. 5 D. Commencement Of These Consolidated Class Actions ......................................... 6 1. Relevant Representations ............................................................................ 7 III. APPLICABLE LEGAL STANDARD................................................................................ 9 A. Standard For Dismissal Under Rule 12(b)(6) ......................................................... 9 B. Claims Based On Misrepresentation Or Deception Are Subject To The Heightened Pleading Standard Of Rule 9(b)......................................................... 10 IV. PLAINTIFFS CANNOT SUCCEED ON THEIR EXPRESS WARRANTY CLAIM.............................................................................................................................. 11 A. Consolidated Complaint Plaintiffs Have Failed To Identify The Warranty ......... 11 V. THE IMPLIED WARRANTY CLAIMS ALSO FAIL .................................................... 12 VI. PLAINTIFFS CANNOT SUCCEED ON THEIR MAGNUSON-MOSS WARRANTY ACT CLAIM............................................................................................. 15 VII. PLAINTIFFS CANNOT SUCCEED ON THEIR CLRA CLAIM................................... 16 A. Plaintiffs Have Failed To Establish SCEA Made Any Misrepresentation At Or Before The Time Of Sale And Thus their Claims Under Section 1770(a)(5), (7) and (9) are Fatally Deficient......................................................... 16 B. Plaintiffs' Unconscionability Claim Also Fails .................................................... 18 VIII. PLAINTIFFS CANNOT SUCCEED ON THEIR UCL CLAIM ..................................... 19 A. The Allegations In The Consolidated Complaint Do Not Support A Restitutionary Remedy.......................................................................................... 19 B. Plaintiffs' "Unlawful" Claim Should Be Dismissed............................................. 20 C. An "Unfair" Claim May Not Be Premised On A Practice Recognized By California Courts As Appropriate And Lawful..................................................... 21 D. Plaintiffs' Claim Of "Fraudulent" Practices Does Not Satisfy Rule 9(b)............. 21 IX. THE COMPUTER FRAUD AND ABUSE ACT CLAIM FAILS................................... 22 -i- DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF CONTENTS (continued) Page X. XI. XII. THE CONVERSION CLAIM FAILS BECAUSE PS3 USERS HAVE NO OWNERSHIP INTEREST IN THE ALLEGEDLY CONVERTED PROPERTY ......... 23 PLAINTIFFS LACK STANDING TO PROSECUTE AN UNJUST ENRICHMENT CLAIM................................................................................................... 23 CONCLUSION ................................................................................................................. 24 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -ii- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF AUTHORITIES Page CASES Ackerman v. Coca-Cola Co., 2010 WL 2925955 (E.D.N.Y. July 21, 2010) ......................................................................... 12 Am. Suzuki Motor Corp. v. Superior Court, 37 Cal. App. 4th 1291 (1995) ................................................................................................. 14 Anunziato v. eMachines, 402 F. Supp. 2d 1133 (C.D. Cal. 2005) .................................................................................. 13 Ashcroft v. Iqbal, 127 S. Ct. 1937 (2009) ........................................................................................................ 9, 18 Balistreri v. Pacifica Police Dept., 901 F.2d 696 (9th Cir. 1988)..................................................................................................... 9 Bell Atlantic Corp v. Twombly, 550 U.S. 544 (2007) ............................................................................................................ 9, 12 Blennis v. Hewlett-Packard Co., 2008 WL 818526 (N.D. Cal. Mar. 25, 2008).................................................................... 11, 12 Buckland v. Threshold Enterprises, Ltd, 155 Cal. App. 4th 798 (2007) ................................................................................................. 19 Burr v. Sherwin Williams Co., 42 Cal. 2d 682 (1954) ............................................................................................................. 13 Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 (9th Cir. 1996)....................................................................................................... 9 Cardonet, Inc. v. IBM Corp., 2008 WL 941707 (N.D. Cal. April 7, 2008) ........................................................................... 23 Carlson v. General Motors Corp., 883 F.2d 287 (4th Cir. 1989)................................................................................................... 14 Caro v. Procter & Gamble Co., 18 Cal. App. 4th 644 (1993) ................................................................................................... 17 Cel-Tech Comm., Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999) ............................................................................................................ 20 -iii- DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF AUTHORITIES (continued) Page CG Roxanne LLC v. Fiji Water Co. LLC, 569 F. Supp 2d 1019 (N.D. Cal. 2008) ................................................................................... 23 Citizens of Humanity, LLC v. Costco Wholesale Corp., 171 Cal. App. 4th 1 (2009) ..................................................................................................... 19 Clemens v. DaimlerChrysler Corp., 534 F.3d 1017 (9th Cir. 2008)........................................................................................... 12, 13 Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351 (2003) ............................................................................................... 17 Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1997)................................................................................................... 10 Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824 (2006) ................................................................................................. 20 DiLeo v. Ernst & Young, 901 F.2d 624 (7th Cir. 1990)................................................................................................... 10 Egilman v. Keller & Heckham, LLP, 401 F. Supp. 2d 105 (D.D.C. 2005) ........................................................................................ 21 Farmer's Ins. Exchange v. Superior Court, 2 Cal. 4th 377 (1992) .............................................................................................................. 20 Feinstein v. Firestone Tire & Rubber Co., 535 F. Supp. 595 (S.D.N.Y. 1982).......................................................................................... 14 FW/PBS, Inc. v. City of Dallas, 493 U.S. 215 (1990) ................................................................................................................ 23 Genna v. Digital Link Corp., 25 F. Supp. 2d 1032 (N.D. Cal. 1997) ........................................................................ 10, 16, 21 Glenn Holly Entm't, Inc. v. Tektronix, Inc., 100 F. Supp. 2d 1086 (C.D. Cal. 1999) .................................................................................. 10 Hall v. Time, Inc., 158 Cal. App. 4th 847 (2008) ................................................................................................. 17 Hargett v. Midas Int'l Corp., 508 So. 2d 663 (Miss. 1987) ................................................................................................... 13 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -iv- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF AUTHORITIES (continued) Page Haskell v. Time, Inc., 857 F. Supp. 1392 (E.D. Cal. 1994)........................................................................................ 17 Hobby Indus. Assn. of America, Inc. v. Younger, 101 Cal. App. 3d 358 (1980)................................................................................................... 21 Hovsepian v. Apple, Inc., 2009 WL 2591445 (Cal. 2009) ............................................................................................... 14 In re GlenFed Sec. Litig., 42 F.3d 1541 (9th Cir. 1994)................................................................................................... 10 In re Sony PS3 Litigation, 2010 WL 3324941 (N.D. Cal. Aug. 23, 2010)...................................................... 13, 14, 20, 23 In re Stac Elecs. Sec. Litig., 89 F.3d 1399 (9th Cir. 1996)................................................................................................... 10 Int'l Airport Centers, LLC v. Citrin, 440 F. 3d 418 (7th Cir. 2006).................................................................................................. 22 Jenkins v. Commonwealth Land Title Ins. Co., 95 F.3d 791 (9th Cir. 1996)..................................................................................................... 10 Jogani v. Superior Court, 165 Cal. App. 4th 901 (2008) ................................................................................................. 23 Kasky v. Nike, 27 Cal. 4th 939 (2002) ............................................................................................................ 21 Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 (2003) .................................................................................................... 19, 20 Kraus v. Trinity Management Services, Inc., 23 Cal.4th 116 (2000) ............................................................................................................. 20 Larsen v. Nissan N. Am., 2009 WL 1766797 (Cal. Ct. App. 2009)................................................................................. 14 Lauriedale Assocs., Ltd. v. Wilson, 7 Cal. App. 4th 1439 (1992) ................................................................................................... 23 Leong v. Square Enix of Am. Holdings, Inc., 2010 WL 1641364 (C.D. Cal. Apr. 20, 2010) ........................................................................ 18 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -v- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF AUTHORITIES (continued) Page Levine v. Diamanthuset, Inc., 950 F.3d 1478 (9th Cir. 1991)................................................................................................... 9 Makuc v. American Honda Motor Co., 835 F.2d 389 (1st Cir. 1987) ................................................................................................... 13 Melchior v. New Line Prods., Inc., 106 Cal. App. 4th 779 (2003) ................................................................................................. 23 Meridian Project Systems, Inc. v. Hardin Const. Co. LLC., 426 F. Supp. 2d (E.D. Cal. 2006)............................................................................................ 18 Moore v. Kayport Package Express, Inc., 885 F.2d 531 (9th Cir. 1989)................................................................................................... 10 Moss v. U.S. Secret Service, 572 F.3d 962 (9th Cir. 2009)................................................................................................... 10 Oakdale Village Group v. Fong, 43 Cal. App. 4th 539 (1996) ................................................................................................... 23 Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964 (N.D. Cal. 2008) .............................................................................. 10, 23 Osborne v. Subaru of America, Inc., 198 Cal. App. 3d 646 (1988)................................................................................................... 13 Outboard Marine Corp. v. Superior Court, 52 Cal. App. 3d 30 (1975)....................................................................................................... 17 Ove v. Gwinn, 264 F.3d 817 (9th Cir. 2001)..................................................................................................... 9 Purdum v. Holmes, 2010 WL 2951617 (Cal. App. July 29, 2010)......................................................................... 19 SecureInfo Corp. v. Telos Corp., 387 F. Supp. 2d 593 (E.D. Va. 2005)...................................................................................... 22 Simmons v. Stryker Corp., 2008 WL 4936982 (D.N.J. Nov. 17, 2008)............................................................................. 12 Skelton v. General Motors Corp., 500 F. Supp. 1181 (N.D. Ill. 1980), rev'd on other grounds, 660 F.2d 311 (7th Cir. 1981) ................................................................................................................................. 14, 16 -vi- DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF AUTHORITIES (continued) Page SmileCare Dental Group v. Delta Dental Plan of California, Inc., 88 F.3d 780 (9th Cir. 1996)....................................................................................................... 9 Specht v. Netscape Comm. Corp., 306 F.3d 17 (2d Cir. 2002)........................................................................................................ 4 Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001)..................................................................................................... 9 Stearns v. Select Comfort Retail Corp. 2009 WL 1635931 (N.D. Cal 2009)........................................................................................ 15 Taterka v. Ford Motor Co., 86 Wis. 2d 140, 271 N.W.2d 653 (1978) ................................................................................ 14 United States Roofing, Inc. v. Credit Alliance Corp., 228 Cal. App. 3d 1431 (1991)................................................................................................. 13 US Bioservices Corp. v. Lugo, 595 F. Supp. 2d 1189 (D. Kan. 2009) ..................................................................................... 21 Vess v. Ciba-Geigy Corp., 317 F.3d 1097 (9th Cir. 2003)........................................................................................... 10, 16 Walker v. GEICO Gen. Ins. Co., 558 F.3d 1025 (2009).............................................................................................................. 19 Walker v. USAA Casualty Ins. Co., 474 F. Supp. 2d 1168 (E.D. Cal. 2007)................................................................................... 19 Walsh v. Restoration Hardware, Inc., 122 Fed. Appx. 28 (4th Cir. 2005) .......................................................................................... 13 Warth v. Seldon, 422 U.S. 490 (1975) ................................................................................................................ 23 Western Mining Council v. Watt, 643 F.2d 618 (9th Cir. 1981)..................................................................................................... 9 Williams v. Beechnut Nutrition Corp., 185 Cal. App. 3d 135 (1986)................................................................................................... 11 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -vii- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF AUTHORITIES (continued) Page STATUTES Business and Professions Code Section 17500.......................................................................................................................... 21 Civil Code Section 1770............................................................................................................................ 16 Section 1770(a)(5)................................................................................................................... 16 Section 1770(a)(7)................................................................................................................... 16 Section 1770(a)(9)................................................................................................................... 16 Section 1770(a)(17)................................................................................................................. 17 Section 1780...................................................................................................................... 16, 17 Section 1783............................................................................................................................ 17 Section 1790 et seq. ................................................................................................................ 13 Commercial Code Section 2314............................................................................................................................ 13 Section 2315...................................................................................................................... 13, 15 Private Securities Reform Act of 1995, 15 U.S.C. § 78u-4.................................................................................................................... 10 Uniform Commercial Code Section 2725(2) ....................................................................................................................... 14 United States Code Title 15, Section 2301(6) (1976)............................................................................................. 16 Title 15 Section 2301(d)(1)..................................................................................................... 15 Title 15 Section 2301 et seq. ................................................................................................... 15 Title 18, section 1030(a)(5)..................................................................................................... 22 Title 18 Section 1030 et seq. ................................................................................................... 21 Title 18 Section 1032(a)(5) ..................................................................................................... 22 RULES Federal Rules of Civil Procedure Rule 12(b)(6)............................................................................................................................. 9 Rule 9(B)................................................................................................................. 2, 10, 16, 21 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -viii- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\222451370.1 TABLE OF AUTHORITIES (continued) Page REGULATIONS Code of Federal Regulations Title 16, section 700.3............................................................................................................. 16 OTHER AUTHORITIES 1 White & Summers, Uniform Commercial Code (5th ed. 2006) ................................................ 13 B. Clark & C. Smith, The Law Of Product Warranties (2d ed. 2007), § 6.6................................ 15 B. Clark & C. Smith, The Law Of Product Warranties (Thompson-West 2d ed.), § 14:1 ........... 15 Class Action Fairness Act of 2005.................................................................................................. 7 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -ix- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) NOTICE OF MOTION; MOTION TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on November 4, 2010 at 1:00 p.m. or as soon thereafter as counsel may be heard in Courtroom 3 of the above-entitled Court, located at 450 Golden Gate Avenue, San Francisco, California, defendant Sony Computer Entertainment America LLC ("SCEA") will, and hereby does, move for dismissal of Plaintiffs' claims for relief asserted in the Consolidated Class Action Complaint ("Consolidated Complaint") (Docket #76) in this matter. This motion is brought pursuant to Fed. R. Civ. P. ("Rule") 12(b)(6) and is based on this Notice of Motion and Motion; the Memorandum of Points and Authorities, infra; the Declaration of Carter Ott and Request for Judicial Notice, submitted herewith; the Consolidated Complaint; the complete file and record in this action; the argument of counsel; and such other and further evidence and argument as the Court may choose to entertain. MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiffs' problem in this case is simple: the facts they have averred do not, and cannot as a matter of law, support any of the causes of action they have pled. The Consolidated Complaint alleges that SCEA sold millions of PlayStation®3 ("PS3") "advanced video gaming and computer entertainment systems" between 2006 and 2009. SCEA advertised a wide array of features and functions of the PS3, including the ability to play games and movies, view photographs, access the "unified online gaming service called the PlayStation Network" ("PSN"), and utilize alternative operating systems, like Linux ("Other OS"). The Consolidated Complaint asserts eight causes of action against SCEA premised on the notion that SCEA misrepresented or failed to disclose that it "might" alter or disable features or functions in the future. On April 1, 2010, SCEA issued Firmware Update 3.21. If a user downloaded Update 3.21, he would be able to use all currently available PS3 functions except the Other OS. If the user chose not to download, then the Other OS feature would remain uninterrupted; however, access to the PSN and to certain future games and features would be negatively impacted. ///// WEST\222451370.1 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -1- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) According to the Consolidated Complaint, Update 3.21 injured all PS3 owners because it deprived them of advertised PS3 features and functions. In truth, however, and as the Consolidated Complaint concedes, there was nothing wrong with SCEA's firmware update. As the Consolidated Complaint concedes, the update was issued to protect "the intellectual property of the content offered on the PS3 system"1 and was issued consistent with the very terms of the System Software License Agreement that Plaintiffs conceded implicitly they accepted. This is precisely the reason why Plaintiffs have not and cannot aver facts that support any viable claim for relief under federal or California law. As an initial matter, Plaintiffs' primary theory of liability underlying the Consolidated Complaint ­ that SCEA advertised and later improperly deprived PS3 users of software features ­ is contradicted by the explicit terms of all applicable contracts between SCEA and Plaintiffs., i.e., SCEA's written express warranty, the System Software License Agreement and the PSN Terms of Service. These contracts specifically provide PS3 purchasers with a license, not an ownership interest, in the software and in the use of the PSN, and provide that SCEA has the right to disable or alter software features or terminate or limit access to the PSN, including by issuing firmware updates. Plaintiffs therefore cannot succeed in any of their claims because SCEA's alleged alteration/disablement of PS3 features, including the Other OS, was entirely proper and authorized. In addition, the Consolidated Complaint is devoid of the requisite specificity regarding SCEA's supposed misrepresentations mandated by Fed. R. Civ. P. 9(b) ­ i.e., the "who, what where, when and how" ­ and this failure to plead with specificity pervades all of the asserted claims for relief. Similarly, the required allegation of privity for Plaintiffs' implied warranty claim is also lacking. Moreover, the inherent admission throughout the Consolidated Complaint that SCEA's alleged representations regarding PS3 features and functions were absolutely true and correct at the time of sale is fatal to Plaintiffs' warranty, UCL and CLRA claims. Indeed, the vast majority of the supposed representations of fact are nonactionable puffery. In sum, Plaintiffs' kitchen sink approach to averring claims cannot obscure the fact that 1 Consolidated Complaint, ¶ 63. DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) -2- WEST\222451370.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) Plaintiffs' allegations fail, as a matter of law, to establish liability under any asserted theory. Accordingly, SCEA respectfully requests the Court enter an order dismissing Plaintiffs' claims. II. SUMMARY OF ALLEGATIONS A. The PS3 And Other OS Feature The PS3 is an advanced video gaming and computing system.2 At the time of its launch on November 17, 2006, the PS3 was sold with a number of features, including the ability play video games, movies, music, Blu-ray discs; view photographs; and use SCEA's online gaming service, the PlayStation®Network ("PSN").3 In addition, unlike many other video game consoles, the PS3's software is updated via periodic software updates called "firmware."4 The PS3's features also included an "Other OS" feature which enabled users to install and run the Linux operating system in addition to the PS3 native operating system.5 Plaintiffs assert that the Other OS feature "provide[d] users with an excellent platform to develop applications for the PS3 or as a jumping off point for deployments to other products, including those from IBM, Sony, or Mercury"6; "allowed Cell programming7 and the operation of supercomputer clusters.... [it] essentially allowed users to operate the PS3 like a computer rather than simply a gaming console."8 B. The Applicable Warranty, License And Terms Of Use Agreements Authorized SCEA to Issue Firmware Update 3.21 1. Limited Hardware Warranty And Liability SCEA issues a Limited Hardware Warranty And Liability (the "Warranty") with every PS3 sold new at retail, which states: [SCEA] warrants to the original purchaser that the PS3TM hardware shall be free from material defects in material and workmanship for a period of one (1) year from the original date of purchase (the "Warranty Period")..... This warranty does not apply to any system software that is pre-installed in the PS3TM hardware, or is subsequently provided via update or upgrade releases. Such system 2 3 Consolidated Complaint, ¶ 30. Consolidated Complaint, ¶ 36. 4 Consolidated Complaint, ¶ 33. 5 Consolidated Complaint, ¶ 36. 6 Consolidated Complaint, ¶ 49. 7 Plaintiffs explain that "Cell is a microprocessor which facilitates software development." Consolidated Complaint, fn. 5. 8 Consolidated Complaint, ¶ 37. -3WEST\222451370.1 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) software is licensed to you under the terms and conditions of a separate end user license agreement....9 A separate section of the Warranty titled "Service Policy" underscores that modifications or enhancements to PS3's software or firmware may be required and that such changes may alter the settings of the PS3 after purchase: You understand and acknowledge that any time SCEA services your PS3TM system (either within the Warranty Period or under a separate service arrangement), it may become necessary for SCEA to provide certain services to your PS3TM system to ensure it is functioning properly in accordance with SCEA guidelines. Such services may include the installation of the latest software or firmware updates, or service or replacement of the PS3TM hard disk or the PS3TM system with a new or refurbished product. You acknowledge and agree that some services may change your current settings, cause a removal of cosmetic stickers or system skins, cause a loss of data or content, or cause some loss of functionality.10 2. System Software License Agreement The PS3 System Software License Agreement (the "SSLA") is made available to PS3 users electronically. Plaintiffs acknowledge in their Consolidated Complaint that they accepted the SSLA.11 An agreement like the SSLA is commonly referred to in the industry as a "clickwrap" license. Under California law, a "clickwrap" license presents the user with a message on his or her computer screen, requiring that the user manifest his or her assent to the terms of the license agreement by clicking on an icon. The product cannot be obtained or used unless and until the icon is clicked.12 The SSLA unequivocally confirms that the PS3's system software is merely licensed to purchasers: "You do not have any ownership rights or interests in the System Software."13 The SSLA also makes clear that software updates may be made automatically by SCEA and whether automatic or available for download by users, may disengage or alter some functions: From time to time, SCE may provide updates, upgrades or services to your PS3TM system to ensure it is functioning properly in accordance with SCE guidelines or See Ott Decl., ¶ 2, Ex. A (Warranty). Judicial notice of these documents is appropriate. See Request for Judicia Notice; Caldwell v. Caldwell, 2006 WL 618511, **3-4 (N.D. Cal. Mar. 13, 2006). 10 See Ott Decl., ¶ 2, Ex. A (Warranty), at 2. 11 See Ott Decl., ¶ 3, Ex. B (SSLA Version 1.4). 12 Specht v. Netscape Comm. Corp., 306 F.3d 17, 22 n4 (2d Cir. 2002) (applying California law). 13 See Ott Decl., ¶ 3, Ex. B (SSLA Version 1.4), at 1. -4WEST\222451370.1 9 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) provide you with new offerings. Some services may be provided automatically without notice when you are online, and others may be available to you through SCE's online network or authorized channels. Without limitation, services may include the provision of the latest update or download of new release that may include security patches, new technology or revised settings and feature which may prevent access to unauthorized or pirated content, or use of unauthorized hardware or software in connection with the PS3TM system. Additionally, you may not be able to view your own content if it includes or displays content that is protected by authentication technology. Some services may change your current settings, cause a loss of data or content, or cause some loss of functionality. It is recommended that you regularly back up any data on the hard disk that is of a type that can be backed up. 14 3. Terms Of Service And User Agreement Those that access and use the PSN (which the Consolidated Complaint Plaintiffs all allege they did) do so subject to a separate Terms of Service And User Agreement (the "Terms of Service").15 If the user clicks the "Do Not Accept" dialogue box, the user will not be able to access the PSN. There have been several different versions of the Terms of Service, the most recent being version 7.0.16 The "General License Restrictions and Terms" section provides in relevant part: Except as stated in this Agreement, all content and software provided through Sony Online Services are licensed non-exclusively and revocably to you17 In addition, similar to the Warranty and SSLA, the "Maintenance and Upgrades" section of the Terms of Service reaffirms that, From time to time, it may become necessary for SCEA to provide certain content to you to ensure that Sony Online Services and content offered through Sony Online Services, your PlayStation3TM computer entertainment system, the PSPTM (PlayStation Portable) system or other SCEA-authorized hardware is functioning properly in accordance with SCEA guidelines. Some content may be provided automatically without notice when you sign in. Such content may include automatic updates or upgrades which may change your current operating system, cause a loss of data or content or cause a loss of functionalities or utilities. Such upgrades or updates may be provided for system software for your PlayStation3TM computer entertainment system, the PSPTM (PlayStation Portable) system, or other SCEA-authorized hardware.18 14 See Ott Decl., ¶ 3, Ex. B. Substantially similar language appears in versions 1.0, 1.1, 1.2 and 1.3. See Ott Decl., ¶¶ 4, 5, 20 & 21, Exs. C, D, S & T. 15 See Ott Decl., ¶ 6, Ex. E. 16 See Ott Decl., ¶ 6, Ex. E. 17 See Ott Decl., ¶ 6, Ex. E. Substantially similar language appears in versions 1.0, 2.0, 3.0, 4.0, 5.00, and 6.0. See Ott Decl., ¶ 7, 8, 22-25, Ex. F, G, U-X. 18 See Ott Decl., ¶ 6, Ex. E. Substantially similar language appears in versions 1.0, 2.0, 3.0, 4.0, -5WEST\222451370.1 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) C. Firmware Update 3.21 On March 28, 2010, SCEA announced that it would soon release Update 3.21, which if downloaded by a PS3 user, "would disable the [Other OS] feature."19 As the Consolidated Complaint and complaints in the underlying consolidated actions concede, SCEA released Update 3.21 for "security reasons" i.e., to protect its intellectual property from unauthorized access by hackers.20 PS3 owners were not required to install Update 3.21.21 But according to Plaintiffs, "if a user failed to download Update 3.21, he or she would lose the following features: (1) the ability to sign in to the PSN; (2) the ability to use online features that require a user to sign in to the PSN, such as chat; (3) the ability to use the online features of PS3 format software; (4) playback of new PS3 software or Blu-ray discs that require Update 3.21 or later; (5) playback of copyrightprotected videos that are stored on a media server; (6) use of new features and improvements that are available on PS3 Update 3.21 or later."22 Those that installed Update 3.21 lost use of the Other OS feature.23 D. Commencement Of These Consolidated Class Actions This case is the result of the consolidation of seven class actions prosecuted by 14 individuals: Anthony Ventura, Jonathan Huber, Antal Herz, Jason Baker, and Elton Stovell ­ the named plaintiffs in the Consolidated Complaint(collectively, the "Consolidated Complaint Plaintiffs") and Sean Bosquett, Frank Backman, Paul Graham, Paul Vannatta, Todd Densmore, Keith Wright, Jeffrey Harper, Zachary Kummer, and Rick Benavides (collectively, the "Underlying Complaint Plaintiffs").24 5.00, and 6.0. See Ott Decl., ¶ 7, 8, 22-25, Ex. F, G, U-X. 19 Consolidated Complaint, ¶ 52. 20 Consolidated Complaint, ¶¶ 4 & 53. Plaintiffs specifically allege that SCEA stated that this "update was released in order to `protect the intellectual property of the content offered on the PS3 system.'" Consolidated Complaint, ¶ 63. In fact, SCEA explained: "To protect the intellectual property of the content offered on the PS3 system as well as to provide a more secure system for those users who are enjoying games and other entertainment content on the PS3 system, we have decided to delete the feature to address security vulnerability of the system." Ott Decl., ¶ 19, Ex. R. 21 Consolidated Complaint, ¶ 53. 22 Consolidated Complaint, ¶ 53. 23 Consolidated Complaint, ¶ 54. 24 Consolidated Complaint, ¶¶ 10-19; Docket #1; Ott Decl., ¶¶ 10-15, Exs. I-N. -6WEST\222451370.1 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) The Consolidated Complaint Plaintiffs assert claims for (1) Breach of Express Warranty; (2) Breach of Implied Warranty of Merchantability; (3) Breach of Implied Warranty of Fitness for a Particular Purpose; (4) Violation of the California Consumer Legal Remedies Act; (5) Violation of the Computer Fraud and Abuse Act; (6) Violation of the Magnuson-Moss Warranty Act; (7) Violation of California's False Advertising Law; (8) Violation of California's Unfair Competition Law; (9) Conversion; and (10) Unjust Enrichment for themselves and a class defined as "[a]ll persons who purchased, in the United States and its territories, a new PS3 with the Open Platform feature for personal use and not for resale and continued to own the PS3 on March 27, 2010."25 Based on these claims, they seek injunctive relief; compensatory, consequential, punitive, and statutory damages; restitution and restitutionary disgorgement; interest; and attorney's fees and costs.26 1. Relevant Representations The Consolidated Complaint does not point to any statements made by SCEA on the PS3 packaging or in any mass media advertising campaign that it alleges was untrue. Instead, it includes a mix of quotes drawn from obscure articles and unrelated third party publications, and a smattering of out of context and incomplete references to a few pages of SCEA's website and user manual. However, a review of those statements readily demonstrates that none of them is or was untrue and that indeed most if not all of them are inactionable puffery.27 "We believe that the PS3 will be the place where our users play games, watch films, browse the Web, and use other computer functions. The PlayStation 3 is a computer. We do not need the PC."28 Consolidated Complaint, ¶ 70. Before consolidating this action, all of the named plaintiffs but Huber and Stovell alleged claims for Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing, and Messrs. Densmore and Herz alleged a claim for Trespass. Ventura Complaint (Docket #1), ¶¶ 35-45; Ott Decl., ¶ 10, Ex. I (Baker Complaint), ¶¶ 36-46; Ott Decl., ¶ 11, Ex. J (Densmore Complaint), ¶¶ 41-54; Ott Decl., ¶ 12, Ex. K (Wright Complaint), ¶¶ 24-31; Ott Decl., ¶ 13, Ex. L (Harper Complaint), ¶¶ 76-81; Ott Decl., ¶ 15, Ex. N (Benavides Complaint), ¶¶ 29-33 and 44-47. But they dropped these claims in the Consolidated Complaint. 26 Consolidated Complaint, Prayer for Relief. On or about July 28, 2010, an action based on similar allegations was commenced in a Wisconsin state court on behalf of a class of Wisconsin PS3 owners. See Motion to Strike, Section III(A). On August 27, 2010, SCEA removed that action to the United States District Court for the Eastern District of Wisconsin pursuant to the Class Action Fairness of 2005. 27 Consolidated Complaint, ¶ 45. 28 Plaintiffs attribute this quote to Phil Harrison some time in "May 2006" and cite an Internet story purportedly quoting him at -7WEST\222451370.1 25 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) ***** "Because we have plans for having Linux on board [the PS3], we also recognize Linux programming activities ... Other than game studios tied to official developer licenses, we'd like to see various individuals participate in content creation for the PS3."29 ***** "One of the most powerful things about the PS3 is the `install other OS' option."30 ***** "Speaking about the PS3, we never said we will release a game console. It is radically different from the previous PlayStation. It is clearly a computer.... [the PS3] is radically different from the previous PlayStation. It is clearly a computer. Indeed, with a game console, you need to take out any unnecessary elements inside the console in order to decrease its cost... This will of course apply to the PS3 as well..... lowering costs is important but more important is its capacity to evolve.... Everything has been planned and designed so it will become a computer. The previous PlayStation had a memory slot as its unique interface. In contrast, the PS3 features PC standard interfaces. Because they are standard, they are open.31 ***** "In addition to playing games, watching movies, listening to music, and viewing photos, you can use the PS3TM system to run the Linux operating system. By installing the Linux operating system, you can use the PS3TM system not only as an entry-level personal computer with hundreds of familiar applications for home and office use, but also as a complete development environment for the Cell Broadband EngineTM (Cell/B.E.)."32 ***** "Install other system software on the hard disk. For information on types of http://ww.gamasutra.com/view/news/9547/Harrison_We_Do_Not_Need_The_PC.php. Consolidated Complaint, ¶ 45, sixth bullet point. 29 Plaintiffs contend that Izumi Kawanishi, then head of Sony's Network System Development Section, said this some time in "May 2006" and cite an Internet story purportedly quoting him at http://www.gamasutra.com/php-bin/news_index.php?story=9290. Consolidated Complaint, ¶ 45. 30 Plaintiffs contend that Phil Harrison, then President of Sony Computer Entertainment Worldwide Studios, said this some time in "February 2007" and cite an Internet story purportedly quoting him at http://kotaku.com/235049/20-questions-with-phil-harrison-at-dice. Consolidated Complaint, ¶ 39. 31 Plaintiffs contend that Ken Kutaragi, CEO and President of Sony Computer Entertainment, said this some time in "June 2006" and cite an Internet story purportedly quoting him at http://www.edge-online.com/news/kutaragi-details-ps3-computer-claim. Consolidated Complaint, ¶¶ 38 & 45, fifth bullet point. Plaintiffs also contend that a Sony Corporation software engineer named Geoffrey Levand stated, sometime in "August 2009," (i.e., after all Plaintiffs had purchased their PS3s) "[p]lease be assured that SCE is committed to continue the support for previously sold models that have the `Install Other OS' feature and that this feature will not be disabled in future firmware releases." Consolidated Complaint, ¶ 45, tenth bullet point. 32 Plaintiffs attribute this to the "PS3 Open Platform" from "2006-2010" and cite http://www.playstation.com/ps3-openplatforrn/index.html. Consolidated Complaint, ¶ 45, first bullet point. -8WEST\222451370.1 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) compatible system software and obtaining the installer, visit Open Platform for Play Station®3."33 ***** "The PlayStation 3 provides an option for third-party system software to be installed on the PS3TM system instead of the system software provided by Sony Computer Entertainment Inc. Such third-party system software is referred to as an `Other OS'."34 ***** "The Linux Distributor's Starter Kit provides information, binary and source codes to Linux Distribution developers who wants to make their distro (sic) support PS3."35 ***** [o]n the PS3's product packaging, [SCEA] also touted the PS3's features through affirmative representations and symbols. [SCEA] represented that the PS3 had a built-in Blu-ray Disk drive for high-definition games and entertainment, and broadband connectivity with access to the PSN, among other things.36 III. APPLICABLE LEGAL STANDARD A. Standard For Dismissal Under Rule 12(b)(6) Rule 12(b)(6) requires dismissal if a complaint lacks sufficient facts to support a claim or fails to assert a cognizable legal theory.37 The Court's review is limited to the face of the complaint, documents referenced in it, and matters subject to judicial notice.38 The Court is not required to accept unwarranted or unreasonable inferences, legal conclusions cast in the form of factual averments, or allegations contradicted by judicially noticed facts.39 The complaint must plead "enough facts to state a claim to relief that is plausible on its face."40 "[B]are Plaintiffs attribute this to the "PS3 Manual" from "2006-2010" and cite http://manuals.playstation.net/document/de/ps3/current/settings/osinstall. Consolidated Complaint, ¶ 45, second bullet point. 34 Plaintiffs attribute this to the "PS3 Knowledge Center" from "2006-2010" and cite http://us.playstation.com/support/answer/index.htm?a_id=469. Consolidated Complaint, ¶ 45, third bullet point. 35 Plaintiffs attribute this to the "PS3 Linux Distributor's Starter Kit" from "2006-2009" and cite http://www.kernel.org/pub/linux/kernel/people/geoff/cell/ps3-linux-docs/ps3-linux-docs08.06.09. Consolidated Complaint, ¶ 45, eight bullet point. 36 Consolidated Complaint, ¶ 45, fourth bullet point. 37 SmileCare Dental Group v. Delta Dental Plan of California, Inc., 88 F.3d 780, 783 (9th Cir. 1996); Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). 38 Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir. 1991). 39 Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996); Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981); Sprewell v. Golden State Warriors, 266 F.3d 979, 98889 (9th Cir. 2001); Ove v. Gwinn, 264 F.3d 817, 821 (9th Cir. 2001). 40 Bell Atlantic Corp v. Twombly, 550 U.S. 544, 570 (2007). -9WEST\222451370.1 33 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) assertions...amount[ing] to nothing more than a `formulaic recitation of the elements'" are not entitled to an assumption of truth on a motion to dismiss.41 Instead, "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."42 Thus, "for a complaint to survive a motion to dismiss, the non-conclusory `factual content,' and reasonable inferences to be drawn from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief."43 B. Claims Based On Misrepresentation Or Deception Are Subject To The Heightened Pleading Standard Of Rule 9(b) Rule 9(b) provides that in "alleging fraud..., a party must state with particularity the circumstances constituting fraud."44 A complaint meets this standard if it alleges "the time, place and content of the alleged fraudulent representation or omission, the identity of the person engaged in the fraud; and `the circumstances indicating falseness' of `the manner in which [the] representations [or omissions] were false and misleading.'"45 Mere conclusory allegations of fraud are insufficient.46 Rule 9(b) requires "an explanation as to why the statement or omission complained of was false or misleading" when made.47 Put simply, Rule 9(b) demands that averments of fraud must be accompanied by "the who, what, when, where, and how" of the misconduct charged.48 Rule 9(b) applies to all claims for relief sounding in fraud and to all allegations that "necessarily describe fraudulent conduct."49 This is true whether the claims are grounded in federal or state law. As this Court previously held, in Oestreicher v. Alienware, "[i]t is well established that Rule 9(b)'s requirement that allegations of fraud be pled with particularity applies Ashcroft v. Iqbal, 129 S. Ct. 1937, 1951 (2009). Id. at 1949. 43 Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009). 44 Fed. R. Civ. P. 9(b). 45 Genna v. Digital Link Corp., 25 F. Supp. 2d 1032, 1038 (N.D. Cal. 1997) (brackets in original); see also In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1404 (9th Cir. 1996); DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). 46 Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989). 47 In re Stac Elecs. Sec. Litig., 89 F.3d at 1404. 48 Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1106 (9th Cir. 2003); Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). 49 Vess, 317 F.3d at 1103-04 & 1108. -1042 WEST\222451370.1 41 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) to state-law causes of action before a federal court."50 Rule 9(b) also governs claims based on misrepresentation that are not intentional, such as claims for negligent misrepresentation or claims that do not require a showing of scienter at all.51 IV. PLAINTIFFS CANNOT SUCCEED ON THEIR EXPRESS WARRANTY CLAIM In their first claim for relief, Consolidated Complaint Plaintiffs contend that SCEA violated the express warranty that came with their PS3s.52 Specifically, they contend that "[SCEA] expressly warranted via its advertising, statements, brochures, website information, public statements, owner's manuals, and other representations that the functionality of the PS3 would include both the `Other OS' and the various other advertised functions."53 This claim, however, fails on several grounds. A. Consolidated Complaint Plaintiffs Have Failed To Identify The Warranty "An express warranty is a contractual term relating to the title, character, quality, identity or condition of the sold goods."54 "To make out a breach of express warranty claim, a plaintiff must show that the seller: `(1) made an affirmation of fact or promise or provided a description of its goods; (2) the promise or description formed part of the basis of the bargain; (3) the express warranty was breached; and (4) the breach caused injury to the plaintiff.'"55 In addition, to plead a claim for breach of express warranty, "`one must allege the exact terms of the warranty, plaintiff's reasonable reliance thereon, and a breach of that warranty which proximately causes plaintiff injury.'"56 Consolidated Complaint Plaintiffs have failed to adequately plead this claim. They "have not identified [one] specific warranty provision [or representation] upon which they allegedly Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964, 968 (N.D. Cal. 2008) (citing Vess, 317 F.3d at 1103 and Jenkins v. Commonwealth Land Title Ins. Co., 95 F.3d 791, 796 (9th Cir. 1996)). 51 Glenn Holly Entm't, Inc. v. Tektronix, Inc., 100 F. Supp. 2d 1086, 1093-95 (C.D. Cal. 1999) (citing In re GlenFed Inc. Sec. Litig., 42 F.3d at 1547-48). 52 Consolidated Complaint, ¶¶ 78-81. 53 Consolidated Complaint, ¶ 79. 54 Blennis v. Hewlett-Packard Co., 2008 WL 818526, *2 (N.D. Cal. Mar. 25, 2008). 55 Blennis, 2008 WL 818526, *2. 56 Blennis, 2008 WL 818526, *2 (quoting Williams v. Beechnut Nutrition Corp., 185 Cal. App. 3d 135, 142 (1986)). -11WEST\222451370.1 50 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) relied"57 that was breached. Their generic assertions that SCEA "disseminated information to the general public, including Plaintiffs and the Class, that the PS3 could be used as a personal computer using the `Other OS' function"58 and "represent[ed] that [the PS3] was capable of performing both specified gaming and `Other OS functions'" are woefully inadequate as statements of the "exact terms" of an express warranty.59 Similarly, they have not adequately alleged reliance on an express promise by SCEA regarding the OS feature "that formed the basis of the bargain" and that has been breached ­ instead they claim only that "[SCEA]'s representations about the PS3's features, including the `Other OS' feature, played a substantial factor in influencing [their] decision to purchase a PS3."60 Finally, SCEA's reference to the PS3 as a "personal computer" does not constitute an express warranty that has been breached.61 Plaintiffs concede that those who downloaded Update 3.21 (and thereby disabled the Other OS) continue to use their PS3s to play video games, movies, music, Blu-ray discs; browse the Internet; view photographs; and access the PSN. And those that did not download Update 3.21 continue to utilize the Other OS function on their PS3s to develop software applications, to create "supercomputer clusters," and run "more than 1,000 applications." In both circumstances, the subject PS3s are functioning as "personal computers." Blennis, 2008 WL 818526, *2. Consolidated Complaint, ¶ 79. 59 See Blennis, 2008 WL 818526, *2 (dismissing express warranty claim where plaintiff did not identify source of warranty); see also Ackerman v. Coca-Cola Co., 2010 WL 2925955, *24 (E.D.N.Y. July 21, 2010) ("[P]laintiffs have failed to plead a claim for violation of an express warranty. The Second Amended Complaint states that `Defendants provided Plaintiffs and other members of the Class with written and express warranties, including, but not limited to, warranties that their vitamin water beverages were beneficial and had particular beneficial characteristics as set forth above.' Plaintiffs do not allege that any bottle of vitamin water contains the word `beneficial,' do not state which words they allege to have created an express warranty, and do not clarify what is referred to by the words `as set forth above.' Such conclusory language ... does not adequately plead a claim for breach of an express warranty under state law.") (quoting Twombly, 550 U.S. at 555; and citing Blennis, 2008 WL 818526 and Simmons v. Stryker Corp., 2008 WL 4936982, *2 (D.N.J. Nov. 17, 2008) (dismissing express warranty claim where plaintiff did not identify source of warranty)); Clemens v. DaimlerChrysler, 530 F.3d 852, 861-62 (9th Cir. 2008) (plaintiff "cannot proceed on his express warranty claim because he has not alleged that [the product] failed to perform as expressly warranted"), amended on other grounds. 60 Consolidated Complaint, ¶¶ 10, 12, 14, 16, & 18. 61 Consolidated Complaint, ¶ 79. -1258 WEST\222451370.1 57 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) V. THE IMPLIED WARRANTY CLAIMS ALSO FAIL The Consolidated Complaint also asserts that SCEA breached the implied warranties of merchantability and fitness for a particular purpose.62 Specifically, in support of both of these claims, Plaintiffs contend that [SCEA] impliedly warranted that the PS3 could utilize other operating systems (such as Linux) and be used as [a] personal computer.... [SCEA]'s Update 3.21 breached the implied warranty of merchantability because it eliminated the `Other OS' feature and the ability to use the PS3 as a personal computer. In addition, without Update 3.21, Plaintiffs and the Class lose access to the PSN which includes playing online games and access to other online features.63 Under California law, the implied warranties of merchantability and fitness for a particular purpose arise from two statutory sources ­ the Song-Beverly Consumer Warranty Act and the Uniform Commercial Code (the "UCC").64 Here, Plaintiffs identify the UCC as the basis for this claim,65 but fail to plead facts supporting its requisite elements. A plaintiff may assert breach of an implied warranty only against the party from whom he or she directly purchased ­ "[v]ertical privity is a prerequisite in California."66 Thus, in Clemens v. DaimlerChrysler Corp., the Ninth Circuit Court of Appeals held that an "end consumer" who "buys from a retailer" has no claim for breach of implied warranty as against the manufacturer of a product.67 Here, none of the Plaintiffs allege that they purchased their PS3s directly from SCEA.68 In fact, several of the Underlying Complaint Plaintiffs admitted that they did not.69 As a result, they have no claim against SCEA under the UCC.70 Consolidated Complaint, ¶¶ 82-99. Consolidated Complaint, ¶¶ 84, 86, 94, & 95. 64 Cal. Civil Code § 1790 et seq.; Cal. Commercial Code §§ 2314 & 2315. 65 Consolidated Complaint, ¶¶ 83 & 92. 66 United States Roofing, Inc. v. Credit Alliance Corp., 228 Cal. App. 3d 1431, 1441 (1991) (citing Burr v. Sherwin Williams Co., 42 Cal. 2d 682, 695-96 (1954); Osborne v. Subaru of America, Inc., 198 Cal. App. 3d 646, 656 (1988)). 67 Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1023 (9th Cir. 2008) (citing Anunziato v. eMachines, Inc., 402 F. Supp. 2d 1133, 1141 (C.D. Cal. Nov. 10, 2005); Osborne, 198 Cal. App. 3d at 656 fn. 6). 68 Consolidated Complaint, ¶¶ 10-19, 85 & 94. 69 Ott Decl., ¶ 12, Ex. K (Wright Complaint), ¶ 4 ("[Wright] purchased a PS3 from Fry's Electronics...."); Ott Decl., ¶ 15, Ex. N (Benavides Complaint), ¶ 5 ("[Benavides] purchased a PS3 from Game Stop...."). 70 In re Sony PS3 Litigation, No. C 09-4701 RS, 2010 WL 3324941, **1-2 (N.D. Cal. Aug. 23, 2010) (denying implied warranty claim against SCEA based in part on lack of privity; "Here, there is no dispute that plaintiffs purchased their PS3 systems from retailers, and that at no point did they make any direct payments to Sony. Accordingly, [U.S. Roofing, Inc. v. Credit Alliance Corp., 228 Cal. App. 3d 1431 (1991)] aids them little."); see also Clemens, 534 F.3d at 1023-24 -1363 WEST\222451370.1 62 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) Additionally, the warranties implied by the UCC are breached only if a defect existed at the time the product was sold or delivered ­ the product is either merchantable and/or fit for a particular purpose or it is not (and a breach of the implied warranty occurs or not) only at the time of delivery.71 Here, Plaintiffs do not complain of any problem at the time of sale. Instead, they assert that problems began much later when SCEA released Update 3.21 ­ an independent event occurring at least a year after the purchases at issue. Because Plaintiffs' PS3s were merchantable and fit for the particular purpose at the time of delivery, they have no claim for breach of implied warranty.72 Furthermore, the UCC implied warranty of merchantability only "provides for a minimum level of quality."73 In other words, "the implied warranty of merchantability can be breached only if the [product] manifests a defect that is so basic it renders the [product] unfit for its ordinary purpose."74 If a product works, but just not as well as the purchaser hoped, no claim arises ­ the implied warranty "does not impose a general requirement that goods precisely fulfill the expectation of the buyer."75 Consequently, the implied warranty "[does] not encompass... `loss of resale value claims.'"76 In this case, Plaintiffs do not allege that their PS3s failed completely, but rather that they cannot use some subset of software features depending on whether or not they downloaded (upholding 12(b)(6) dismissal of implied warranty claim under California law). 71 1 White & Summers, Uniform Commercial Code (5th ed. 2006), section 9-12, pp. 657-658; Makuc v. American Honda Motor Co., 835 F.2d 389, 392-93 (1st Cir. 1987); Walsh v. Restoration Hardware, Inc., 122 Fed. Appx. 28, 31 (4th Cir. 2005); Hargett v. Midas Int'l Corp., 508 So. 2d 663, 665 (Miss. 1987); U.C.C. § 2725(2)). 72 See Hovsepian v. Apple, Inc., 2009 WL 2591445, at *8 fn. 7 (N.D. Cal. 2009) (citing Larsen v. Nissan N. Am., 2009 WL 1766797, at *5 fn. 6 (Cal. Ct. App. 2009) (unpublished)). 73 Am. Suzuki Motor Corp. v. Superior Court, 37 Cal. App. 4th 1291, 1295 (1995) (quoting Skelton v. General Motors Corp., 500 F. Supp. 1181, 1191 (N.D. Ill. 1980), rev'd on other grounds, 660 F.2d 311 (7th Cir. 1981)). 74 Id. (citing Feinstein v. Firestone Tire & Rubber Co., 535 F. Supp. 595, 603 (S.D.N.Y. 1982); Carlson v. General Motors Corp., 883 F.2d 287, 297-298 (4th Cir. 1989); Taterka v. Ford Motor Co., 86 Wis. 2d 140, 271 N.W.2d 653 (1978); Skelton, 500 F. Supp. at 1191)). 75 Id. (internal quotation and citation omitted). 76 Id. at 1297 (citing Carlson, 883 F.2d at 297-298); see also In re Sony PS3 Litigation, No. C 094701 RS, 2010 WL 3324941, *2 (N.D. Cal. Aug. 23, 2010) ("While it seems likely that something less than a `total inoperable' system could give rise to an implied warranty claim (assuming the other elements are satisfied), [SCEA] is correct that not every performance issue would necessarily constitute a breach of implied warranties, any more than similar problems would give rise to such a claim were a consumer to encounter them straight out of the box."). -14WEST\222451370.1 DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DLA PIPER LLP (US) Update 3.21. Thus, they admit that their consoles are still operative and merchantable. For this further reason, they have no claim for breach of implied warranty.77 Finally, Plaintiffs' claim for implied warranty of fitness for a particular purpose also fails because they have not established the basic elements of that claim. To establish the implied warranty of fitness existed, Plaintiffs must allege that SCEA had "reason to know" of their special purpose, i.e., to use the PS3 in perpetuity for all advertised features and functions including the Other OS; that Plaintiffs relied on SCEA's expertise; and that SCEA had "reason to know" of their reliance on the continued availability of all features and functions.78 Plaintiffs have not only failed to allege these requisite facts, they indeed cannot due to the explicit language of SCEA's Warranty, SSLA, and Terms of Service. Specifically, because SCEA had the right to terminate or alter any feature or function, it had no reason to believe that Plaintiffs purchased their PS3s particularly with the expectation and belief that all features, including the Other OS, would be available for the "life" of the PS3. Stated differently, Plaintiffs could not have relied on SCEA with regard to perpetual availability of features and functions -- SCEA had expressly reserved the right to alter or discontinue features and functions, particularly in the instance of "unauthorized or pirated content, or use of unauthorized hardware or software", i.e., to protect its intellectual property. VI. PLAINTIFFS CANNOT SUCCEED ON THEIR MAGNUSON-MOSS WARRANTY ACT CLAIM In their seventh claim for relief, Plaintiffs contend that SCEA violated the MagnusonMoss Warranty Act ( "Magnuson-Moss"), 15 U.S.C. section 2301 et seq.79 Magnuson-Moss provides a federal private right of action for state law warranty claims,80