In Re Sony PS3 "Other OS" Litigation

Filing 168

MOTION to Dismiss filed by Sony Computer Entertainment America LLC. Motion Hearing set for 5/12/2011 01:30 PM before Hon. Richard Seeborg. (Sacks, Luanne) (Filed on 3/28/2011)

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DLA P IPER LLP (US)

LUANNE SACKS, Bar No. 120811 [e-mail] CARTER W. OTT, Bar No. 221660 [e-mail] DLA PIPER LLP (US) 555 Mission Street, Suite 2400 San Francisco, CA 94105 Tel: [phone] Fax: [phone] JOSEPH COLLINS (Pro Hac Vice, Ill. Bar No. 06238527) [e-mail] DLA PIPER LLP (US) 203 North LaSalle Street, Suite 1900 Chicago, IL 60601-1293 Tel: [phone] Fax: [phone] 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: May 12, 2011 1:30 p.m. Hon. Richard Seeborg 3

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TABLE OF CONTENTS Page NOTICE OF MOTION; MOTION................................................................................................. 1 MEMORANDUM OF POINTS AND AUTHORITIES ................................................................ 1 I. INTRODUCTION .............................................................................................................. 1 II. PLEADING STANDARDS................................................................................................ 3 III. PLAINTIFFS ONCE AGAIN FAIL TO ALLEGE ANY WRITTEN PROMISE REGARDING THE UNCONDITIONAL AND PERPETUAL AVAILABILITY OF THE OTHER OS FEATURE ....................................................................................... 4 IV. PLAINTIFFS' AMENDED IMPLIED WARRANTY CLAIMS CONTINUE TO LACK THE REQUISITE VERTICAL PRIVITY AT THE TIME OF SALE................... 6 V. PLAINTIFFS' FAILURE TO PLEAD AN EXPRESS OR IMPLIED WARRANTY CLAIM DOOMS THEIR MAGNUSON-MOSS WARRANTY ACT CLAIM....................................................................................................................... 8 VI. PLAINTIFFS CANNOT SUCCEED ON THEIR CLRA CLAIM..................................... 9 A. Plaintiffs Have Failed To Establish SCEA Made Any Misrepresentation At Or Before The Time Of Sale................................................................................... 9 B. Plaintiffs' "Unconscionability" Claim Also Fails................................................. 12 VII. PLAINTIFFS' AMENDED COMPUTER FRAUD AND ABUSE ACT CLAIM FAILS TO ESTABLISH AN "UNAUTHORIZED" ACT............................................... 13 VIII. PLAINTIFFS' UNJUST ENRICHMENT CLAIM FAILS AS A MATTER OF LAW AND FACT............................................................................................................. 16 IX. PLAINTIFFS CANNOT SUCCEED ON THEIR UCL AND FAA CLAIMS ................ 18 A. Plaintiffs Lack Standing to Assert Claims Under the UCL and FAA .................. 18 B. Plaintiffs Fail To Allege Any Unlawful Conduct ................................................. 19 C. Plaintiffs Fail To Satisfy Rule 9(b) ....................................................................... 19 X. MEMBERSHIP IN PLAINTIFFS' AMENDED CLASSES IS NOT ASCERTAINABLE.......................................................................................................... 20 XI. CONCLUSION ................................................................................................................. 21

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TABLE OF AUTHORITIES Page

Adashunas v. Negley, 626 F.2d 600 (7th Cir. 1980)................................................................................................... 21 Aiken v. Obledo, 442 F. Supp. 628 (E.D. Cal. 1977).......................................................................................... 21 Anunziato v. eMachines, 402 F. Supp. 2d 1133 (C.D. Cal. 2005) .................................................................................... 6 Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) ................................................................................................... 4, 12, 17 AtPac, Inc. v. Aptitude Solutions, Inc., 730 F. Supp. 2d 1174 (E.D. Cal. 2010)................................................................................... 16 Baba v. Hewlett-Packard Co., 2010 WL 2486353 (N.D. Cal. June 16, 2010) ........................................................................ 10 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ............................................................................................................ 4, 17 Benito v. Indymac Mortgage Servs., 2010 WL 2089297 (D. Nev. May 21, 2010) ........................................................................... 21 Berenblat v. Apple, Inc., 2009 WL 2591366 (N.D. Cal. Aug. 21, 2009)........................................................................ 11 Buckland v. Threshold Enterprises, Ltd, 155 Cal. App. 4th 798 (2007) ................................................................................................. 18 Burr v. Sherwin Williams Co., 42 Cal. 2d 682 (1954) ............................................................................................................... 6 Caro v. Procter & Gamble Co., 18 Cal. App. 4th 644 (1993) ................................................................................................... 12 Citizens of Humanity, LLC v. Costco Wholesale Corp., 171 Cal. App. 4th 1 (2009) ..................................................................................................... 18 Clemens v. DaimlerChrysler Corp., 534 F.3d 1017 (9th Cir. 2008)................................................................................................... 6 Committee on Children's Television v. General Foods Corp., 35 Cal. 3d 197 (1983) ............................................................................................................. 20
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TABLE OF AUTHORITIES (continued) Page Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351 ........................................................................................................... 10 Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1997)..................................................................................................... 4 Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824 (2006) ........................................................................................... 11, 18 DeBremaecker v. Short, 433 F.2d 733 (5th Cir. 1970)................................................................................................... 20 Deitz v. Comcast Corp., 2007 WL 2015440 (N.D. Cal. July 11, 2007)......................................................................... 20 Egilman v. Keller & Heckham, LLP, 401 F. Supp. 2d 105 (D.D.C. 2005) ........................................................................................ 13 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003)................................................................................................. 22 Foman v. Davis, 371 U.S. 178 (1962) ................................................................................................................ 22 Genna v. Digital Link Corp., 25 F. Supp. 2d 1038 (N.D. Cal. 1997) .................................................................................... 19 Hall v. Time, Inc., 158 Cal. App. 4th 847 (2008) ................................................................................................. 12 Haskell v. Time, Inc., 857 F. Supp. 1392 (E.D. Cal. 1994)........................................................................................ 10 Hoey v. Sony Electronics, Inc., 515 F. Supp. 2d 1099 (N.D. Cal. 2007) .................................................................................. 11 In re Apple and ATTM Antitrust Litig., 2010 WL 3521965 (N.D.Cal. Jul. 8, 2010)............................................................................. 14 In re Gilead Scis. Sec. Litig., 536 F.3d 1049 (9th Cir. 2008)................................................................................................... 3 In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493 (S.D.N.Y. 1996) ............................................................................................ 17

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TABLE OF AUTHORITIES (continued) Page In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection HDTV Television Litig., --- F. Supp. 2d ----, 2010 WL 4892114 (S.D. Cal. Nov. 30, 2010)................................... 11, 20 In re Sony PS3 Litig., No. C 09-4701 RS, 2010 WL 3324941 (N.D. Cal. Aug. 23, 2010).................................... 7, 18 Johnson v. Riverside Healthcare Sys., 534 F.3d 1116 (9th Cir. 2008)................................................................................................... 3 Kasky v. Nike, Inc., 27 Cal. 4th 939 (2002) ............................................................................................................ 20 Keith v. Buchanan, 173 Cal. App. 3d 13 (1985)................................................................................................... 4, 5 Korea Supply v. Lockheed Martin Corp., 29 Cal. 4th 1134 (2003) .................................................................................................... 18, 19 Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116 (2000) ............................................................................................................ 19 Leong v. Square Enix of Am. Holdings, Inc., 2010 WL 1641364 (C.D. Cal. Apr. 20, 2010) ........................................................................ 12 Long v. Hewlett-Packard Co., 2007 WL 2994812 (N.D. Cal. July 27, 2007)......................................................................... 11 LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (9th Cir. 2009)................................................................................................. 14 Marceau v. Blackfeet Hous. Auth., 540 F.3d 916 (9th Cir. 2008)..................................................................................................... 3 Mazur v. eBay, Inc., 257 F.R.D. 563 (N.D. Cal. 2009) ............................................................................................ 21 Meridian Project Systems, Inc. v. Hardin Const. Co. LLC., 426 F. Supp. 2d (E.D. Cal. 2006)...................................................................................... 12, 13 Navarro v. Block, 250 F.3d 729 (9th Cir. 2001)..................................................................................................... 3 Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964 (N.D. Cal. 2008) .................................................................................... 11

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TABLE OF AUTHORITIES (continued) Page One Beacon Ins. Co. v. Crowley Marine Servs.., 2010 WL 1463451, *5 (S.D. Tex. April 12, 2010) ................................................................. 15 Osborne v. Subaru of America, Inc., 198 Cal. App. 3d 646 (1988)..................................................................................................... 6 Outboard Marine Corp. v. Superior Court, 52 Cal. App. 3d 30 (1975)....................................................................................................... 12 Pence v. Andrus, 586 F.2d 733 (9th Cir. 1978)................................................................................................... 17 Pennsylvania R. Co. v. City of Girard, 210 F.2d 437, 440 (6th Cir. 1954)............................................................................................. 2 People v. Orange County Charitable Services, 73 Cal. App. 4th 1054 (1999) ................................................................................................. 20 Purdum v. Holmes, 2010 WL 2951617 (Cal. App. July 29, 2010)......................................................................... 13 Sabella v. Wisler, 59 Cal. 2d 21 (1963) ............................................................................................................... 11 Scott v. Aetna Services, Inc., 210 F.R.D. 261 (D. Conn. 2002)............................................................................................. 20 Seely v. White Motor Co., 63 Cal. 2d 9 (1965) ................................................................................................................. 11 Skelton v. General Motors Corp., 660 F.2d 311 (7th Cir. 1981)..................................................................................................... 8 Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001)..................................................................................................... 3 Stearns v. Select Comfort Retail Corp., 2009 WL 1635931 (N.D. Cal. 2009)......................................................................................... 8 Trans World Airlines v. Curtiss-Wright Corp., 148 N.Y.S. 2d 284 (1955) ....................................................................................................... 11 United States Roofing, Inc. v. Credit Alliance Corp., 228 Cal. App. 3d 1431 (1991)............................................................................................... 6, 7

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TABLE OF AUTHORITIES (continued) Page US Bioservices Corp. v. Lugo, 595 F. Supp. 2d 1189 (D. Kan. 2009) ..................................................................................... 13 Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097 (9th Cir. 2003)....................................................................................... 4, 10, 19 Vignolo v. Miller, 120 F.3d 1075,1077 (9th Cir. 1999).......................................................................................... 3 Walker v. GEICO Gen. Ins. Co., 558 F.3d 1025 (9th Cir. 2009)................................................................................................. 18 Walker v. USAA Casualty Ins. Co., 474 F. Supp. 2d 1168 (E.D. Cal. 2007)................................................................................... 18 Weinstat v. Dentsply Intern. Inc., 180 Cal. App. 4th 1213 (2010) ................................................................................................. 4 Wyatt v. Cadillac Motor Car Div., 145 Cal. App. 2d 423 (1956)................................................................................................... 11

18 U.S.C. § 1030(a)(5)(A)(1)........................................................................................................ 14 18 U.S.C. § 1030 et seq................................................................................................................. 13 18 U.S.C. § 2301(d)(1).................................................................................................................... 8 California Uniform Commercial Code § 2313................................................................................ 4 Civil Code Section 1770............................................................................................................................ 10 Section 1770(a)(5)..................................................................................................................... 9 Section 1770(a)(7)..................................................................................................................... 9 Section 1770(a)(9)..................................................................................................................... 9 Section 1770(a)(17)................................................................................................................. 12 Section 1780...................................................................................................................... 10, 12 Section 1783............................................................................................................................ 10 Magnuson-Moss Warranty Act, 15 U.S.C. section 2301 et seq...................................................... 8

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1 2 3 4 5 6 7 8 9 REGULATIONS 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 OTHER AUTHORITIES RULES

TABLE OF AUTHORITIES (continued) Page

Fed. R Civ. P 9(b) ......................................................................................................... 4, 10, 19, 20 Fed.R Civ. P 12(b)(6)...................................................................................................................... 3 Fed.R Civ. P 23(b)(3).................................................................................................................... 21 Fed.R Civ. P 23(c)(2) .................................................................................................................... 21

16 C.F.R. § 700.3 ............................................................................................................................ 8

B. Clark & C. Smith, The Law of Product Warranties (Thompson-West 2d ed.), § 14:1.............. 8

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NOTICE OF MOTION; MOTION TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on May 12, 2011 at 1:30 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 First Amended Consolidated Class Action Complaint (the "FAC") (Docket #165) in this matter. This motion is brought pursuant to Fed. R. Civ. P. ("Rule") 12(b)(6) and 23, and is based on this Notice of Motion and Motion; the Memorandum of Points and Authorities, infra; the FAC; 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 Stripped to its essence, Plaintiffs' eighty-four-page, 341-paragraph FAC fails to allege the one thing repeatedly demanded by this Court ­ an explicit promise by SCEA to Plaintiffs that the "Other OS" feature of the PlayStation®3 game console ("PS3") would be available unconditionally and in perpetuity. Absent such a promise, Plaintiffs' claims ­ no matter how prolix ­ remain legally and factually deficient. The undisputed facts remain unchanged. SCEA introduced the PS3 in 2006. At that time, the PS3 included Other OS functionality that allowed users to install Linux as an alternative operating system. It offered many other features and functions, including use of the PlayStation® Network ("PSN"), the ability to play music, games and movies, and view photos. Use of the PS3 and PSN were subject to the terms of SCEA's System Software License Agreement ("SSLA") and Terms Of Service And User Agreement ("Terms of Service"), both of which cautioned that SCEA may issue updates that disable certain functions of the PS3 due to security or other concerns.1 SCEA references without repeating the Factual and Procedural Background set forth in its Motion to Dismiss Plaintiffs' Initial Consolidated Complaint. See Docket #97, 3:3-9:10. -1DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC)

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Plaintiffs, through Mr. Ventura, have already explicitly conceded that SCEA was "concern[ed] that the Other OS feature might be used by `hackers" to copy and/or steal gaming and other content." As Mr. Ventura averred: Indeed it is no coincidence that the release of Update 3.21 came quickly on the heels of an announcement by a hobbyist named Geohot that he was able to use the Other OS feature along with a bit of soldering in a manner that gave him more control over the PS3 hardware than Sony had intended.2 In response to these publicized hacking efforts, SCEA issued Update 3.21 on April 1, 2010, which if installed, would disable the Other OS feature. Users had the choice to install Update 3.21 with full knowledge of the consequences. Some Plaintiffs installed it, some did not. While Plaintiffs are understandably disappointed by the introduction of Update 3.21, they are not entitled to relief. Plaintiffs' units were fully operable with the Other OS feature during the applicable one-year warranty and, based on the terms thereof, Plaintiffs had no reasonable expectation that they could enjoy all features of the PS3 in perpetuity. Certainly they have offered no express promise that the Other OS feature in particular would be available beyond the one-year-warranted term. At best, Plaintiffs offer a purported promise by another entity, not SCEA, that the Other OS feature would not be disabled. The referenced statement is alleged to have been made in the Fall of 2009, several years after Plaintiffs purchased their consoles and their warranties expired, months before the hacking efforts were discovered, and more than six months before Update 3.21. Plaintiffs also offer now, almost a year into this litigation, supposed promises by SCEA that the PS3 would last for ten years. Notably, only one such statement pre-dates the Plaintiffs' PS3 purchases, and the statement is a quote from an interview with Kaz Hirai, chairman of SCEA, in a CNET article, months before the PS3 was released for sale, speaking of his future intent for the market lifecycle of the PS3, not a promise to purchasers of how long any particular hardware or software feature or function would be supported. Such a generalized statement of puffery, were it even actionable, says nothing about the functionality of Plaintiffs' particular units Ventura Complaint (Docket #1), ¶ 25 (emphasis added); see Pennsylvania R. Co. v. City of Girard, 210 F.2d 437, 440 (6th Cir. 1954) ("[P]leadings withdrawn or superseded by amended pleadings are admissions against the pleader in the action in which they were filed")). -2WEST\223326997.1 2

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at the time they were purchased. It merely sets an expectation that SCEA will still be selling PS3s ­ as opposed to a PS4 or some replacement technology ­ in 2016, nothing more, nothing less. Significantly, it should not be lost on this Court that none of the Plaintiffs could recall such "promises" in their prior pleadings. Nor can Plaintiffs argue that such singular statement of future intent was seen and relied upon by all PS3 purchasers ­ to the contrary, Messrs. Baker and Stovell implicitly admit they did not see or rely on any such statement.3 The law does not require software to be accessible and functional forever, nor does the law ignore standard language existing in virtually every software license that the licensor may be required to alter the functionality due to security and intellectual property issues. Update 3.21 was released in response to serious hacking concerns, as Plaintiffs conceded in their prior pleadings. Plaintiffs now suggest that SCEA did so to save money, but offer only conjecture and speculation in support.4 In any event, those Plaintiffs who downloaded Update 3.21 did so knowingly and voluntarily and with full consent and no claim for relief exists based on the alleged facts. Finally, in addition to their new theories, Plaintiffs offer three new class definitions. However, Plaintiffs have made class certification even more impossible ­ the classes proposed all lack ascertainability as membership cannot be readily determined ­ but would require extensive fact finding and individualized inquiries. And, because of the admissions by Messrs. Ventura, Baker and Stovell, Plaintiffs lack a representative for two of the three new class definitions. The FAC should be dismissed with prejudice. II. PLEADING STANDARDS Under Rule 12(b)(6), a claim may be dismissed because of a "failure to state a claim upon which relief can be granted."5 A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal
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FAC (Docket #165), ¶¶ 21 and 23. In light of the Plaintiffs' prior judicial admissions that the Other OS feature was disabled for security reasons, all of the Plaintiffs (and, in particular, plaintiff Ventura) should be precluded from now alleging, based on nothing more than rank speculation, that Update 3.21 was released, not for security reasons, but to save money. 5 Fed. R. Civ. P. 12(b)(6). -34 WEST\223326997.1

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theory.6 In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party.7 The Court, however, is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences."8 Although they may provide the framework of a complaint, legal conclusions are not accepted as true and "[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements, do not suffice."9 Additionally, Rule 9(b) requires that "[i]n allegations of fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." To satisfy the rule, a plaintiff must allege the "who, what, where, when, and how" of the charged misconduct.10 In other words, "the circumstances constituting the alleged fraud must be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong."11 III. PLAINTIFFS ONCE AGAIN FAIL TO ALLEGE ANY WRITTEN PROMISE REGARDING THE UNCONDITIONAL AND PERPETUAL AVAILABILITY OF THE OTHER OS FEATURE Under California law, to plead a breach of express warranty claim a plaintiff must properly allege that (1) the seller's statements constitute an affirmation of fact or promise, or a description of the goods; (2) the statement was part of the basis of the bargain; and (3) the warranty was breached.12 In dismissing their initial express warranty claim, the Court concluded that none of the various representations Plaintiffs cited in marketing materials, interviews, and brochures "can reasonably be characterized as a `promise,' and it is difficult to discern exactly what `affirmation Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 7 Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075,1077 (9th Cir. 1999). 8 In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 9 Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). 10 Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). 11 Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097, 1106 (9th Cir. 2003). 12 Weinstat v. Dentsply Intern. Inc., 180 Cal. App. 4th 1213, 1227 (2010); California Uniform Commercial Code § 2313; Keith v. Buchanan, 173 Cal. App. 3d 13, 20 (1985)); -4WEST\223326997.1 6

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of fact' or `description of the goods' those statements comprise that plaintiffs contend constitutes the warranty."13 Furthermore, the Court recognized the fatal temporal flaw in Plaintiffs' claim in that the Other OS feature was available at the time of purchase. As such, the Court concluded that, to state a claim for express warranty, "Plaintiffs must ... allege that [SCEA] made some express representations as to the continued availability of [the Other OS] feature."14 In response, Plaintiffs' amended claim for breach of express warranty in Count I of the FAC lists only three statements that they purport to be express warranties: Defendant expressly warranted via its advertising, statements, brochures, website information, public statements, owner's manuals, console, and other representations that the PS3 would be able to operate as a computer and install Linux through the "Other OS" feature. that the PS3 would be able to access the PSN and play games online, as well as the newest DVDs and games. that the PS3 would be upgraded through Firmware Updates and last ten years or more. 15 None of these statements meet the Court's requirements. The first two statements say nothing about the continued availability of any feature, including the Other OS, and thus suffer from the same deficiencies as those statements previously rejected by the Court. Regarding the last statement, the Plaintiffs engage in an illogical leap. Plaintiffs manufacture a "promise" from the following quotes projecting the marketplace lifecycle of the PS3 ­ only one of which pre-dates their PS3 purchases ­ that their PS3s would "last 10 years or more": "We look at our products having a 10-year life cycle, which we've proven with the PlayStation. Therefore, the PlayStation 3 is going to be a console that's going to be with you again for 10 years." (August 2006 CNET News) "Last time I checked, [Microsoft] never had a console that's been on the market for more than four or five years and we've committed to a ten year life cycle, so you do the math." (2009 Official PlayStation Magazine)
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Order Granting Motion to Dismiss (Docket #161), 4:11-21. Id. The Court alternatively held that Plaintiffs "will have to show both that there were implied representations as to continued availability and that an express warranty claim may legally proceed even where it is based in part on such implied representations." Id. As set forth in Section IV, Plaintiffs have failed to allege any actionable claim for breach of implied warranty." 15 FAC (Docket #165), ¶¶ 212-214 (emphasis added). -514 WEST\223326997.1

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"[W]e firmly believe that the PS3 will not only be around in 10 years but it'll be driving the business ­ driving this industry. I don't know if our competitors' platforms will still be viable in 10 years; I do know that the PlayStation 3 will be." (Spring 2009, unidentified publication) ". . . Both the original PlayStation and PlayStation 2 had lifecycles of more than 10 years, and the PlayStation 3 will as well. The 10-year life cycle is a commitment we've made with every PlayStation consumer to date and is part of our philosophy that we provide hardware that will stand the test of time providing that fun experience you get from day one for the next decade...."16 (February 14, 2011, i.e., after Update 3.21 was issued). Notwithstanding Plaintiffs' specious assertions to the contrary, these statements of lifecycle expectations, i.e., how long SCEA will continue to sell PS3s, surely cannot be contorted into a promise that all PS3 features and functions will be supported, unconditionally and in the identical manner for ten years. Indeed, none of these statements says anything about any software feature, let alone the ability to run Linux as an alternative operating system. Only two of the four named Plaintiffs avers having seen any statement regarding a ten year lifecycle.17 Moreover, all but the first statement post-dated the Plaintiffs' purchase of the PS3 and therefore could not possibly be part of a basis for the Plaintiffs' bargain. And with respect to the remaining statement in 2006, the only way this statement could possibly be false would be if in fact SCEA ceases sale of the PS3 before year 2016. Any such claim has yet to accrue. Thus, Plaintiffs' amended express warranty claims fare no better than their previous attempt, and should be dismissed with prejudice. IV. PLAINTIFFS' AMENDED IMPLIED WARRANTY CLAIMS CONTINUE TO LACK THE REQUISITE VERTICAL PRIVITY AT THE TIME OF SALE Counts II and III of the FAC allege that SCEA breached the implied warranties of merchantability and fitness for a particular purpose.18 Under California law, 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."19 For example, the Ninth Circuit held that FAC (Docket #165), ¶¶ 122-125. Id., ¶¶ 21,23. 18 Id., ¶¶ 82-99. 19 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)). -617 WEST\223326997.1 16

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where an end-consumer buys a product from a retailer, the consumer has no claim for breach of implied warranty as against the product's manufacturer.20 Here, there is no dispute that Plaintiffs purchased their PS3s from independent retailers, not SCEA. Thus, the Plaintiffs have no vertical privity with SCEA, and cannot assert a breach of implied warranty claim against SCEA as a matter of law. It is for this precise reason that the Court dismissed the implied warranty claims in the prior pleading. Indeed, the Court, in permitting leave to replead, recognized that "it is not clear how plaintiffs may be able to cure the privity problem."21 In their FAC, Plaintiffs do not attempt to allege, and cannot credibly allege, that they made any direct payments to SCEA for the purchase of the PS3. Instead, they essentially restate the same "direct dealings" arguments that the Court already rejected, in both this and other firmware cases.22 Specifically, Plaintiffs allege that they have privity with SCEA because some class members ­ post-sale ­ had "direct financial and other dealings" with SCEA when they downloaded SCEA updates, accessed the PSN and purportedly paid money for access to the PlayStation® Store and Qore.23 The "direct dealings" exception to vertical privity has been recognized only where a consumer negotiates or pays consideration directly to the manufacturer pre-sale.24 No privity exception exists for post-sale dealings with a manufacturer, and the Court has already stated its refusal to create such an additional, temporally-flawed exception: Plaintiffs argue that at least in some cases they pay monies directly to [SCEA] in connection with using PSN. That would not, however, support a conclusion that [SCEA] was the seller in the transactions by which plaintiffs acquired their PS3 systems.25 Plaintiffs further allege that SCEA "is in direct privity with Plaintiffs and members of the Class by reasons of its express written warranty, TOS, and SSLA."26 This Court, however, has already rejected this allegation, recognizing "clear California precedent that privity remains a requirement 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). 21 See Docket #161, 7:13-14. 22 In re Sony PS3 Litig., 2010 WL 3324941, at *2-3 (N.D. Cal. Aug. 23, 2010). 23 FAC (Docket #165), ¶¶ 14, 225-227 24 See U.S. Roofing, Inc. v. Credit Alliance Corp., 228 Cal. App. 3d 1431 (1991). 25 Docket #161, p. 6, note 3 26 FAC (Docket #165), ¶ 211 -7WEST\223326997.1 20

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in implied warranty claims even though it has been eliminated in express warranty claims."27 Vertical privity must be established between the consumer and the manufacturer at the time of purchase, not afterwards, and the FAC, like its predecessor, fails to establish such privity. V. PLAINTIFFS' FAILURE TO PLEAD AN EXPRESS OR IMPLIED WARRANTY CLAIM DOOMS THEIR MAGNUSON-MOSS WARRANTY ACT CLAIM The Magnuson-Moss Warranty Act, 15 U.S.C. section 2301 et seq., provides a federal private right of action for state law warranty claims (18 U.S.C. § 2301(d)(1)), but does not expand those state law rights: "dismissal of the state law claims requires the same disposition with respect to any associated [Magnuson-Moss] claim."28 As in their Initial Complaint, the Magnuson-Moss Act claim Plaintiffs aver in their FAC is based entirely on their express and implied warranty claims.29 With regard to this claim alleged in the Initial Complaint, the Court concluded that, "[w]ith exceptions not implicated here, `disposition of the state law warranty claims determines the disposition of the Magnuson-Moss Act claims.' Accordingly, the Magnuson-Moss Act count will be dismissed, with leave to amend."30 The same reasoning compels dismissal of the Magnuson-Moss Act claim in the FAC. This claim also fails for another reason: for a written representation to constitute a "written warranty" under the Magnuson-Moss Act, it must relate for a specific period of time: Certain representations, such as energy efficient ratings for electrical appliances, care labeling of wearing apparel, and other product information disclosures may be express warranties under the Uniform Commercial Code. However, these disclosures alone are not written warranties under the Act. Section 101(6) provides that a written affirmation of fact or a written promise of a specified level of performance must relate to a specified period of time in order to be considered a "written warranty." A product information disclosure without a specified time period to which the disclosure relates is therefore not a written warranty.31 In their FAC, Plaintiffs fail to cite any written warranty regarding the promised duration of any software feature or function, including the Other OS, and the SSLA states precisely the
27 28

Docket #161, 6:17-22; see also Docket #162 (further addressing privity arguments). Stearns v. Select Comfort Retail Corp., 2009 WL 1635931, *9 (N.D. Cal. 2009); B. Clark & C. Smith, The Law of Product Warranties (Thompson-West 2d ed.), § 14:1. 29 FAC (Docket #165), ¶¶ 309 and 313. 30 Docket #161, 7:16-22. 31 16 C.F.R. § 700.3 (emphasis added); see also Skelton v. General Motors Corp., 660 F.2d 311, 316 fn. 7 (7th Cir. 1981) (same). -8WEST\223326997.1

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opposite.32 In fact, the only amended allegation Plaintiffs can offer is corporate puffery in the form of responses to interview questions that the PS3 is expected to have a ten-year presence in the marketplace ­ which is certainly not a written "product information disclosure." As set forth above, that is not a written warranty at all. See Section III, supra. On this additional basis, their Magnuson-Moss Act claim fails. VI. PLAINTIFFS CANNOT SUCCEED ON THEIR CLRA CLAIM A. Plaintiffs Have Failed To Establish SCEA Made Any Misrepresentation At Or Before The Time Of Sale Plaintiffs have retained their allegation that SCEA violated three provisions of the Consumer Legal Remedies Act ("CLRA") ­ Civil Code subsections 1770(a)(5), (7), and (9), which prohibit "representing" or "advertising" goods or services in ways that are false or misleading.33 In dismissing their prior CLRA claim, the Court concluded that they "must address the fact that none of the representations they have thus far identified include any express promise that the Other OS feature would be available indefinitely or of any particular period of time."34 Once again, in their FAC, Plaintiffs have failed to do this. They premise their CLRA claim on the allegation that "[SCEA] advertised, promoted, marketed, warranted, and represented that the PS3 operates like a computer through the ability to download operating systems such as Linux," "that the PS3 can play online games and access other features through the PSN," "that the PS3 has a lifespan of 10 years," and that "downloading and installing updates would update the PS3's operating system to include additional settings and features."35 However, all of the underlying statements were true when made. See Sections III, infra. And Plaintiffs' mischaracterization of the one pre-sale statement, in August 2006, regarding the intended "lifespan," i.e. the marketplace lifecycle of the PS3, is anything but an "express promise" regarding the Other OS feature. See Sections III and IV, infra. Stated differently, Plaintiffs' CLRA claim fails for the same reason as does their express warranty claim. /////
32

See Section III, supra. In fact, only the express written warranty ­ which is limited to the hardware ­ states a specified period. See Docket #97, Section II(B). 33 FAC (Docket #165), ¶ 285. 34 Docket #161, 8:4-6 (emphasis in original). 35 FAC (Docket #165), ¶¶ 269-272. -9WEST\223326997.1

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Moreover, the FAC fails to plead the requisite causal connection between a misstatement and acquisition of the goods at issue. The CLRA only provides a cause of action for a consumer who "suffers any damage as a result of the use or employment...of a method, act or practice declared to be unlawful by section 1770."36 The FAC asserts violations of the CLRA in connection with purchases of PS3s in 2006 and 2007.37 However, the basis for their claims, launch of Update 3.21, which if accepted by a user disabled the Other OS function, did not occur until April 1, 2010. Thus, there is not, nor can there be, any causal connection between the challenged act and Plaintiffs' PS3 purchases.38 Indeed, to the extent Plaintiffs are attempting to assert CLRA claims based on misrepresentations or omissions at the time of sale, those who purchased their PS3 on or before April 27, 2007, like Messrs. Huber and Baker, have no CLRA claims due to the application of the three year statute of limitations. Cal. Civil Code § 1783. And of course, neither Mr. Stovell nor Baker averred ever seeing a representation of a ten year life span, and for that further reason cannot state a CLRA claim. In addition, in dismissing Plaintiffs' initial CLRA claim, the Court concluded that Plaintiffs had failed to "clearly identify the particular representations on which they rely, and articulate why they are false or misleading. Such specificity is all the more important here, because the CLRA claims sound in fraud, thereby implicating Rule 9(b)."39 Numerous supposed misrepresentations are referenced, but in each instance the allegations are inadequate under Rule 9(b)'s heightened pleading requirement. See Section IX(C), infra. Furthermore, only detailed factual representations are actionable under the CLRA ­ not sales boasts or "puffery."40 "Advertising that amounts to `mere' puffery is not actionable because no reasonable consumer relies on puffery."41 Most of the representations cited by Plaintiffs ­ Civil Code § 1780 (emphasis added). FAC (Docket #165), ¶¶ 17-24. 38 This issue aside, Plaintiffs have admitted that their PS3s are "personal computers," as they purport the relevant representations state. 39 Order Granting Motion to Dismiss (Docket #161), 7:27-8:4 (citing Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1103-04 (9th Cir. 2003)). 40 See Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351, 1361 fn. 3 (2003). 41 Haskell v. Time, Inc., 857 F. Supp. 1392, 1399 (E.D. Cal. 1994); see also Consumer Advocates, -1037 WEST\223326997.1 36

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particularly the one pre-purchase comment ­ in August 2006 ­ regarding the intended ten-year lifecycle of the PS3, are just that ­ inactionable puffery. Finally, the FAC asserts SCEA violated the CLRA as well as the Unfair Competition Law ("UCL"), California Business & Professions Code section 17200 et seq., and the False Advertising Act ("FAA"), California Business & Professions Code section 17500 et seq., based on an omission theory. But nowhere in the FAC do Plaintiffs allege an "omission [] contrary to a representation actually made by [SCEA], or an omission of fact [SCEA] was obliged to disclose," which is the prerequisite for viable claims under the CLRA, as well as the UCL and FAA.42 Based on the representations presented to the Court, "the only expectations buyers could have had...was that [the PS3] would function properly for the length of" the one-year express warranty.43 Plaintiffs attempt to end-run this conclusion be averring that their "reasonable expectation" was that the Other OS feature would last for the "useful life" of the PS3.44 But numerous courts, at the pleading stage, have explicitly declined to accept the notion that a plaintiff's alleged expectation that a product would last longer than the express warranty can save an omission-based claim.45 In addition, not one of the Plaintiffs avers that he was unaware the 113 Cal. App. 4th at 1361 (representation that satellite television system provided "crystal clear" digital video or "CD quality" audio were "not factual representations that a given [industry] standard was met," but merely "boasts, all-but-meaningless superlatives," akin to "mere puffing," and "which no reasonable consumer would take as anything more weighty than an advertising slogan."); Baba v. Hewlett-Packard Co., 2010 WL 2486353, *4 (N.D. Cal. June 16, 2010) (ruling with regard to marketing of computers as "tablets": "[t]he word `tablet' merely describes the product being sold and does not constitute a representation of the quality of the product...."); Long v. Hewlett-Packard Co., 2007 WL 2994812, *7 (N.D. Cal. July 27, 2007) (same ruling with regard to "notebook" computers). 42 See Hoey v. Sony Electronics, Inc., 515 F. Supp. 2d 1099, 1103-04 (N.D. Cal. 2007) (quoting Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824, 835 (2006)); see also In re Sony Grand Wega KDF-E A10/A20 Series Rear Projection HDTV Television Litig., --- F. Supp. 2d ----, 2010 WL 4892114, **5 & 11 (S.D. Cal. Nov. 30, 2010) (dismissing CLRA claim based on omission theory, in part, because "[p]laintiffs have not sufficiently alleged that those representations were untrue or misleading at the time they were made."; "Plaintiffs have not alleged that Sony has made any representations contrary to omitted information...."); Berenblat v. Apple, Inc., 2009 WL 2591366, **6-7 (N.D. Cal. Aug. 21, 2009). 43 Daugherty, 144 Cal. App. 4th at 838; see also In re Sony Wega, 2010 WL 4892114, *5 & 11. 44 See, e.g., FAC (Docket #165), ¶¶ 119. 45 See In re Sony Grand WEGA, 2010 WL 4892114, at *15 ("While the Hicks exception may make sense for goods-such as the foundation of a home-that consumes may reasonably expect to last for decades, applying such an exception to consumer goods-such as televisions or other electronics-about which consumer-expectations will be highly subjective and will vary widely `would eliminate term limits on warranties, effectively making them perpetual or at least for the `useful life' of the product.'") (quoting Oestreicher, 544 F. Supp. 2d at 972); see also Hoey, 515 -11WEST\223326997.1

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Other OS feature would be disabled if he downloaded Update 3.21. To the contrary, they admit that they independently decided whether or not to download Update 3.21 depending on the associated known consequences, which were fully disclosed by SCEA at the time of issuing the Update.46 Thus, no injury has been alleged from this supposed nondisclosure.47 B. Plaintiffs' "Unconscionability" Claim Also Fails

Plaintiffs also allege SCEA violated Section 1770(a)(19) because the following term of the SSLA is supposedly unconscionable: Some services may change your current settings, cause a loss of data or content, or cause some loss of functionality. SCE, at its sole discretion, may modify the terms of this Agreement at any time, including any terms in the PS3TM systems documentation or manual, or at http://www.scei.co.jp/ps3-license/index.html. Please check back on this website from time to time for changes to this Agreement. Your continued access to or use of the System Software will signify your acceptance of any changes to this Agreement.48 The FAC alleges that this term is unconscionable because it was imposed by SCEA after purchase of the PS3, presenting buyers with no choice but to accept it, and because it unreasonably reallocated risk between SCEA and PS3 buyers.49 But Plaintiffs supposedly reviewed the SCEA website prior to purchase, and thus were informed of and had access to the terms of the SSLA at the time of their buying decision.50 ///// F. Supp. 2d at 1105 ("In fact, the California Supreme Court has stated the general public policy that a consumer can be `fairly charged with the risk that the product will not match his economic expectations unless the manufacturer agrees that it will.'" (quoting Seely v. White Motor Co., 63 Cal. 2d 9, 18 (1965) (citing Wyatt v. Cadillac Motor Car Div., 145 Cal. App. 2d 423, 426 (1956), disapproved on other grounds Sabella v. Wisler, 59 Cal. 2d 21, 31 (1963); Trans World Airlines v. Curtiss-Wright Corp., 148 N.Y.S. 2d 284, 290 (1955)); Daugherty, 144 Cal. App. 4th at 830-32. 46 Consolidated Complaint (Docket #76), ¶¶ 10-19; FAC (Docket #165), ¶¶ 17-24. 47 See Civil Code § 1780 ("suffers any damage as a result of the use or employment...of a method, act or practice declared to be unlawful by section 1770.") (emphasis added); see Outboard Marine Corp. v. Superior Court, 52 Cal. App. 3d 30, 37 (1975) (CLRA claim properly stated when plaintiff alleged reliance on alleged misrepresentations); Hall v. Time, Inc., 158 Cal. App. 4th 847, 855 (2008) ("The phrase 'as a result of in its plain and ordinary sense means 'caused by' and requires a showing of a causal connection or reliance on the alleged misrepresentation."); Caro v. Procter & Gamble Co., 18 Cal. App. 4th 644, 668 (1993) (holding no material misrepresentation was made to plaintiff suing under the CLRA because he did not believe or rely on the allegedly misleading statement). 48 FAC (Docket #165), ¶¶ 286-294 49 Id. 50 Id., ¶¶ 17-24. -12WEST\223326997.1

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51

Moreover, these allegations are truly inadequate as they are thinly-veiled conclusory recitations of the legal elements of an unconscionability theory, and thus inadequate under Iqbal. Indeed, California courts reviewing similar "clickwrap" licenses have approved of them, finding they are neither procedurally or substantively unconscionable.51 Thus, an end-user-license agreement is not invalid even if a consumer receives it for the first time after purchase of the software.52 Nor is it unconscionable merely because it affords the licensor the right to limit or revoke the license, and unconscionability claims based on facts Plaintiffs allege here have been dismissed at the pleading stage.53 Clauses allowing a software licensor to terminate or alter the scope of its services are not "sufficiently shocking;"54 indeed, as the Central District Court of California concluded when reviewing terms of a video game software license and subscription agreement, "[i]f such a clause were unconscionable, [defendant] and all of its competitors would be forced to make their games available in perpetuity or face class actions suits for loss of data."55 The FAC also avers that the allegedly unconscionable terms were written in "small-type, prolix form; disguised...under nebulous heading; and buried...among sundry other unrelated contractual terms."56 These conclusory allegations are contradicted by the actual terms of the SSLA: the challenged verbiage is in the same font size as the rest of the Agreement and appears under the headings "Services and Updates" and "General Legal." The SSLA is less than two and half pages (when printed) and, as such, it is hard to imagine any terms being "buried" or in "prolix form" in such a short document.57 Finally, the three year statute of limitations would also bar the unconscionability claim with regard to PS3 purchases prior to April 27, 2007.58 See e.g., Meridian Project Systems, Inc. v. Hardin Const. Co. LLC., 426 F. Supp. 2d 1101, 1107 (E.D. Cal. 2006) (shrinkwrap license not unconscionable); Leong v. Square Enix of Am. Holdings, Inc., 2010 WL 1641364 at *10 (C.D. Cal. Apr. 20, 2010) (clickwrap license not unconscionable). 52 426 F. Supp. 2d at 1107. 53 Id. at *1. 54 Id. *10. 55 Id. 56 FAC (Docket #165), ¶ 289. 57 Ott Decl. (Docket #98), ¶ 3, Ex. B. 58 Purdum v. Holmes, 2010 WL 2951617, *5 (Cal. App. July 29, 2010) (CLRA statute of limitations is "three years from commission of method, act or practice."). -13WEST\223326997.1

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VII.

PLAINTIFFS' AMENDED COMPUTER FRAUD AND ABUSE ACT CLAIM FAILS TO ESTABLISH AN "UNAUTHORIZED" ACT The Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030 et seq., was enacted to

address hacking, i.e., trespass into computers in the course of computer fraud. 59 Count V of the Amended Complaint alleges that SCEA, through Update 3.21, violated the CFAA by "knowingly caus[ing] the transmission of a program, information, code, or command, and as a result of such conduct, intentionally caus[ing] damage without authorization, to a protected computer." See 18 U.S.C. § 1030(a)(5). The Ninth Circuit has defined "without authorization" under the CFAA to mean "without permission."60 Thus, to plead a Section 1030(a)(5) CFAA claim, Plaintiffs must allege that Update 3.21 was downloaded without permission. Plaintiffs' CFAA claim fails for two reasons. First, Update 3.21 was not forcibly or automatically installed on a user's PS3 ­ it could be transmitted to a PS3 only by manual acceptance, i.e., with permission. This is indisputable, as some of the Plaintiffs elected not to manually download the update, and hence Update 3.21 was not installed on their PS3. Thus, it is implausible to allege that any individual manual download was "unauthorized" by the PS3 user. Indeed, "[v]oluntary installation runs counter to the notion that ... the alleged act was `without authorization.'"61 In the FAC, Plaintiffs begrudgingly concede that "SCEA told users that they would not have to download Update 3.21 if they did not wish to do so." As Mr. Ventura admitted: "PS3 ///// ///// /////

US Bioservices Corp. v. Lugo, 595 F. Supp. 2d 1189, 1193 (D. Kan. 2009); Egilman v. Keller & Heckham, LLP, 401 F. Supp. 2d 105, 110 (D.D.C. 2005). Plaintiffs' reliance on an antihacking statute is ironic in light of the fact that Update 3.21 was released to prevent an unauthorized hacking of the PS3. 60 LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1133-35 (9th Cir. 2009) 61 In re Apple and ATTM Antitrust Litig., 2010 WL 3521965 at *7 (N.D. Cal. Jul. 8, 2010). Plaintiffs also allege that they were "forced" to download Update 3.21 or lose certain functionality. Plaintiffs specifically refer to it as a "Hobson's Choice." For purposes of the CFAA, an alleged Hobson's choice is nevertheless a "choice." -14WEST\223326997.1

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owners are not technically required to install Update 3.21."62 Plaintiffs further concede that users "authorized" installation of Update 3.21 when they manually downloaded it: Although Plaintiffs and Class members may have authorized a firmware update for security reasons, they did not authorize the disabling of the "Install Other OS" feature to [sic] Defendant money.63 While SCEA disputes Plaintiffs' unsupported allegation that SCEA issued Update 3.21 to "save money," it does not matter for purposes of dismissal ­ SCEA's alleged business motivations are irrelevant for purposes of Section 1030(a)(5). Under the plain language of the CFAA, if a user "authorized" installation of Update 3.21, knowing that doing so would disable the Other OS feature, there can be no statutory violation as a matter of law, regardless of SCEA's intent in issuing the update. Second, as a condition to using the PS3, users gave advance permission to receiving updates that may disable a software feature. In fact, certain users gave this permission to SCEA on more than one occasion. For example, Plaintiffs acknowledge in the FAC that they accepted the SSLA.64 The SSLA makes clear that software updates may be made automatically by SCEA (which Update 3.21 was not) or for manual download, and whether automatic or available for manual download by users, may "cause some loss of functionality": Some services may change your current settings, cause a loss of data or content, or cause some loss of functionality. SCE, at its sole discretion may modify the terms of this Agreement at any time, including any terms in the PS3TM systems documentation or manual, or at http://www.scei.co.jp/ps3-license/index.html. Please check back on this website from time to time for changes to this Agreement. Your continued access to or use of the System Software will signify your acceptance of any changes to this Agreement.65 In addition, those who use the PSN which, according to the FAC, includes all of the Plaintiffs, must first agree to a Terms of Service.66 There have been several different versions of the Terms of Service, the most recent being version 7.0.67 Similar to the SSLA, the "Maintenance
62 63

Ventura Complaint (Docket #1), ¶ 26 (emphasis added). FAC (Docket #165), ¶ 304. 64 FAC (Docket #165), ¶¶ 17-24, 184-192, and 286-294; see also One Beacon Ins. Co. v. Crowley Marine Servs., 2010 WL 1463451, *5 (S.D. Tex. April 12, 2010) ("The fact that a party chooses not to review a contract, or terms and conditions, when they had the opportunity does not negate the fact that they are bound by those Terms and Conditions."). 65 See Ott Decl. (Docket #98), ¶ 3, Ex. B (SSLA Version 1.4). 66 See Ott Decl. (Docket #98), ¶ 6, Ex. E. 67 See Ott Decl. (Docket #98), Exs. E, F, and G. -15WEST\223326997.1

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and Upgrades" section of the Terms of Service reaffirms that updates may cause loss of functionality and, more importantly, change the current "operating system:" 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.68 By such language, SCEA contemplated that circumstances, like security breaches, may occur that require it to disable certain functions of the PS3 or change the operating system. Because Plaintiffs consented at least twice to SCEA updates that could change the functionality of the PS3, they cannot plausibly argue that any subsequent download by them of Update 3.21 was unauthorized. "Simply put, a person cannot access a computer `without authorization' if the gatekeeper has given them permission to use it."69 VIII. PLAINTIFFS' UNJUST ENRICHMENT CLAIM FAILS AS A MATTER OF LAW AND FACT In their prior pleading, Plaintiffs' unjust enrichment claim was based on a theory that SCEA somehow unjustly benefitted "from the sales of PS3s with the `Other OS' function which it then forced purchasers to either disable or forgo other important PS3 functions."70 The Court, in dismissing this claim, recognized that "California law does not recognize a separate claim for `unjust enrichment.'"71 Furthermore, the Court concluded that "[a]mong other things, plaintiffs have not adequately explained how [SCEA] has been wrongly `enriched' or what payments they made to [SCEA] that should now be returned."72 /////
68

See Ott Decl. (Docket #98), ¶ 6, Ex. E (emphasis added). Substantially similar language appears in versions 1.0, 2.0, 3.0, 4.0, 5.00, and 6.0. See Ott Decl. (Docket #98), ¶ 7, 8, 22-25, Ex. F, G, U-X. 69 AtPac, Inc. v. Aptitude Solutions, Inc., 730 F. Supp. 2d 1174, 1180 (E.D. Cal. 2010). 70 Initial Consolidated Complaint (Docket #76), ¶¶ 169-174. 71 Docket #161, 8:10-13. 72 Docket #161, 8:12-16. -16WEST\223326997.1

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In Count IX of the FAC, Plaintiffs tacitly acknowledge that they could not offer the allegations required by the Court on behalf of their entire class of PS3 purchasers. Consequently, they now assert that one singular plaintiff, Mr. Baker, and "some" members of a new "Class 3," paid money for PSN services that they can purportedly no longer use: Plaintiff Baker and the [sic] some members of Class 3 have directly conferred benefits on SCEA by paying money for PSN-related services, such as the PlayStation Store, PlayStation Plus, pre-paid money into the PSN Wallet, and Qore subscriptions. After failing to download Update 3.21, these individuals were no longer able to access these features and items for which they had directly paid sums to SCEA as SCEA prohibited them from accessing the PSN....73 Putting aside the unchanged fact that California does not recognize an independent cause of action for unjust enrichment, which alone ends the analysis, Mr. Baker fails to state any facts entitling him to relief. First, Mr. Baker does not allege the amount, if any, that he paid to SCEA; nor is there any explanation of what specific service or services Mr. Baker supposedly purchased. Rather, Mr. Baker simply bundles his claim with "some" phantom, absent members of "Class 3," which falls well short of applicable standing and pleading requirements. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009) (legal conclusions are not accepted as true and "[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements, do not suffice."); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); Pence v. Andrus, 586 F.2d 733, 736-37 (9th Cir. 1978) ("[I]n class actions, the named representatives must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent."); In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493, 504 (S.D.N.Y. 1996) ("[A] plaintiff may not use the procedural device of a class action to bootstrap himself into standing he lacks under the express terms of the substantive law."). Moreover, for a justiciable controversy to exist, Mr. Baker must allege that he was denied a refund for any pre-paid services. The pleading fails to state whether he even asked for a refund. Mr. Baker's claim for unjust enrichment fails as both a matter of law and fact.

73

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IX.

PLAINTIFFS CANNOT SUCCEED ON THEIR UCL AND FAA CLAIMS A. Plaintiffs Lack Standing to Assert Claims Under the UCL and FAA

Only individuals who suffer loss of money or property eligible for restitution have standing to bring claims under the UCL and FAA.74 In Korea Supply v. Lockheed Martin Corp., the California Supreme Court described the bounds of the restitutionary remedy available under the UCL, upholding a demurrer to a UCL claim because "[a]ny award that plaintiff would recover from defendants . . . would not replace any money or property that defendants took directly from plaintiff.75 Applying Korea Supply here, Plaintiffs do not have a claim because they do not allege that they gave any money to SCEA, let alone as a result of wrongful conduct. The gravamen of the FAC is that Plaintiffs were harmed by Update 3.21 a year or more after they purchased their PS3s from third party retailers.76 Plaintiffs therefore cannot seek restitution of their purchase price ­ it is temporally impossible for any causal connection to exist between Update 3.21 and Plaintiffs' purchase.77 As this Court stated with regard to claims alleged against SCEA related to the PS3 regarding other firmware updates: "plaintiffs have failed to allege sufficient facts showing how [SCEA] has been wrongfully `enriched,' or what they have paid to [SCEA] that it should be required to restore them. Accordingly, this claim for relief is also dismissed...."78 Plaintiffs' claim is a claim for damages ­ not restitution ­ and so they lack standing to bring any claim under the UCL or FAA.79 Citizens of Humanity, LLC v. Costco Wholesale Corp., 171 Cal. App. 4th 1, 22, (2009) (quoting Buckland, 155 Cal. App. 4th 798, 817 (2007) ("Because remedies for individuals under the [UCL and FAA] are restricted to injunctive relief and restitution, the import of the [loss of money or property] requirement is to limit standing to individuals who suffer losses of money or property that are eligible for restitution."); Walker v. GEICO Gen. Ins. Co., 558 F.3d 1025, 1027 (9th Cir. 2009) (upholding dismissal of UCL class action claims because the named plaintiff did not allege facts supporting restitution); Walker v. USAA Casualty Ins. Co., 474 F. Supp. 2d 1168, 1172 (E.D. Cal. 2007)). 75 Korea Supply, 29 Cal. 4th 1134, 1149 (2003). 76 Consolidated Complaint, ¶¶ 10-19, 52-61. 77 See Korea Supply, 29 Cal. 4th at 1146 ("Any award that plaintiff would recover from defendants would not be restitutionary as it would not replace any money or property that defendants took directly from plaintiff."); Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824, 837 fn. 6 (2006). 78 See In re Sony PS3 Litig., No. C 09-4701 RS, 2010 WL 3324941, *4 (N.D. Cal. Aug. 23, 2010). 79 Plaintiffs' request for "disgorgement" of profits received by SCEA (Consolidated Complaint, ¶ -18WEST\223326997.1 74

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Moreover, with respect to the injunctive relief they purport to seek, they have not and cannot demonstrate that monetary relief, should they succeed on any claim affording damages, is inadequate. Indeed, Plaintiffs seek monetary relief in other Counts based on alleged diminution in value to their PS3 units. Plaintiffs cannot have it both ways for purposes of circumventing the UCL and FAA standing requirements. B. Plaintiffs Fail To Allege Any Unlawful Conduct

To state a UCL claim under the UCL, Plaintiffs must properly allege that SCEA engaged in conduct that is (1) unlawful; (2) unfair; or (3) deceptive or fraudulent. Regarding the first prong, Plaintiffs allege in Count VIII that SCEA engaged in unlawful conduct to the extent it violated any statutes alleged in the FAC. As set forth herein, SCEA has not violated any such statutes and, therefore, it cannot be held liable under the UCL. C. Plaintiffs Fail To Satisfy Rule 9(b)

Regarding the second prong, the Consolidated Complaint fails to provide the specificity required by Rule 9(b).80 Additionally, courts have already concluded that "clickwrap" provisions that grant only a license for software are lawful when issued under circumstances comparable to those alleged in the Consolidated Complaint, and accordingly, the mere use of such a license is not inherently "unfair."81 On this additional basis, Plaintiffs' UCL claim fails. Regarding the third prong of Plaintiffs UCL claim ­ deceptive or fraudulent business practices or advertising, as well as their FAA claim, Plaintiffs have again run afoul of Rule 9(b) because these claims lack the requisite specific allegations of "the time, place and content of [any] alleged [misrepresentation]," the identity of the speaker, or "the manner in which [the] representations were false and misleading." Genna, 25 F. Supp. 2d at 1038.82 146) is similarly inappropriate. Kraus v. Trinity Management Services, Inc., 23 Cal. 4th 116, 12728 (2000), superseded on other grounds by statute; Korea Supply, 29 Cal. 4th at 1148-49 (under UCL, an individual may recover profits unfairly obtained to the extent that these profits represent monies given to the defendant or benefits in which the plaintiff has an ownership interest). 80 Genna, 25 F. Supp. 2d at 1039; see Section VIII(D), infra. 81 See Section VIII(B), infra. 82 See, e.g., FAC (Docket #165), ¶¶ 77 (no date or location provided for alleged statements), 145 (same), 73 (no location), 74 (same); Vess, 317 F.3d 1097, 1104-05 (9th Cir. 2003) (FAA subject to Rule 9(b)); In re Sony Grand Wega, 2010 WL 4892114, at *9 (S.D. Cal. Nov. 30, 2010) (same). A FAA violation is automatically a UCL violation. See Kasky v. Nike, Inc., 27 Cal. 4th 939, 950-51 (2002); see also People v. Orange County Charitable Services, 73 Cal. App. 4th -19WEST\223326997.1

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X.

MEMBERSHIP IN PLAINTIFFS' AMENDED CLASSES IS NOT ASCERTAINABLE The Court did not order Plaintiffs to amend their class definition and indeed denied

SCEA's motion to strike it. In re-casting their pleading, however, Plaintiffs apparently realized that their new theories and claims were not common to the individual representatives, let alone an entire class. In the FAC, Plaintiffs abandon their original class (as well as one of the named class representatives, Mr. Herz), and purport to offer three new classes: "Class 1 All persons in the United States who purchased a PS3 with the "Other OS" feature available (`Fat' model PS3s) and who accessed the PSN, and did not use the `Other OS' feature. "Class 2 All persons in the United States who purchased a PS3 with the "Other OS" feature available ("Fat" model PS3s) and who accessed the PSN, used the "Other OS" feature, and downloaded Firmware Update 3.21. "Class 3 All persons in the United States who purchased a PS3 with the "Other OS" feature available ("Fat" model PS3s) and who accessed the PSN, used the "Other OS" feature, and did not download Firmware Update 3.21.83 Mr. Stovell seeks to represent Class 1, Mr. Huber seeks to represent Class 2, and Messrs. Ventura and Baker seek to represent Class 3.84 These newly-minted class definitions are fatally flawed in that they each propose an unascertainable class. Courts recognize that a proposed class must be "ascertainable," i.e., it must be possible to readily identify class member, so that the parties and courts in the future can evaluate those bound by any judgment under res judicata principles.85 Thus, a proposed class definition must be precise, objective, and identifiable based on readily available criteria.86 1054, 1075 (1999); Committee on Children's Television, 35 Cal. 3d 197,211 (1983) (superseded on other grounds by California Proposition 64, voter approved in Nov. 2, 2004 General Election). Conversely, statements or acts that do not violate the UCL by necessity cannot support a claim under the FAA. 83 FAC (Docket #165), ¶ 202 (emphasis added). 84 Id. 85 See DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir. 1970); see also Deitz v. Comcast Corp., 2007 WL 2015440, *8 (N.D. Cal. July 11, 2007) ("The problem of ascertainability is the inability for future courts to ascertain who was and was not bound by the judgment."); Scott v. Aetna Services, Inc., 210 F.R.D. 261, 267 (D. Conn. 2002) ("[a]scertainability is required in order to give notice to putative class members as to whom the judgment in the action will be res judicata."). 86 Mazur v. eBay, Inc., 257 F.R.D. 563, 567 (N.D. Cal. 2009); Aiken v. Obledo, 442 F. Supp. 628, 658 (E.D. Cal. 1977) (class definition must be "sufficiently definite so that it is administratively feasible for the court to determine whether an individual is a member."). -20WEST\223326997.1

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Membership in the class may not turn on extensive fact-finding, a resolution of the merits of the claims, or the subjective belief of class members.87 Here, membership in each class is premised on whether individual PS3 purchasers engaged in certain conduct; specifically, whether they "accessed" the PSN and whether they "used" or did not "use" the Other OS feature.88 To add to the factual complexity, membership in Classes 2 and 3 is further premised on whether individual class members "did" or "did not" download Update 3.21.89 Notably, Plaintiffs do not aver the means by which membership will be objectively discerned and indeed, there is no ready, objective means for determining who "accessed" the PSN, who "used" or did not "use" the Other OS feature, or who "did" or "did not" download Update 3.21. Accordingly, membership in these classes is not readily ascertainable, and these classes are deficiently pleaded as a matter of law. Thus, in the event that any claim survives dismissal, which is highly unlikely, Plaintiffs' new class allegations must be dismissed. Specific flaws also exist with respect to Plaintiffs' unjust enrichment claim in Count IX. It is axiomatic that no proposed class containing members lacking standing may be certified. Here, Plaintiffs allege their unjust enrichment claim only on behalf of "some members of Class 3," thereby conceding that members of that class lack standing to prosecute this claim. On this basis, which is separate from those set forth more fully above, the Court should dismiss the class allegations from Count IX should it survive dismissal. XI. CONCLUSION It is clear from the FAC that Plaintiffs are unable to cure the glaring flaws in their overall theory. Because no amendment can save their claims, they should be dismissed with prejudice. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (per curiam) /////
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Adashunas v. Negley, 626 F.2d 600, 603 (7th Cir. 1980) (class certification denied because of extensive fact finding necessary to identify members of class); Benito v. Indymac Mortgage Servs., 2010 WL 2089297, *2 (D. Nev. May 21, 2010) ("Defining the class is `of critical importance because it identifies the persons (1) entitled to relief, (2) bound by a final judgment, and (3) entitled under Rule 23(c)(2) to the `best notice practicable' in a Rule 23(b)(3) action.'") (quoting Manual for Complex Litigation, § 21.222)). 88 FAC (Docket #165), 56:8-19. 89 Id., 56:13-19. -21WEST\223326997.1

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(dismissal without leave to amend appropriate where amendment would be futile) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

Dated: March 28, 2011 DLA PIPER LLP (US) By: /s/ Luanne Sacks LUANNE SACKS Attorneys for Defendant SONY COMPUTER ENTERTAINMENT AMERICA LLC

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DEF.'S NOTICE OF MOTION AND MOTION TO DISMISS; MEMO. PS & AS CASE NO. 3:10-CV-01811 RS (EMC)