Marcus et al v. Apple Inc.

Filing 77

ORDER DENYING MOTION FOR LEAVE TO AMEND COMPLAINT AND GRANTING PARTIAL SUMMARY JUDGMENT by Judge William Alsup [denying 49 Motion for Leave to File]. (whasec, COURT STAFF) (Filed on 4/16/2015)

1
2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7
FOR THE NORTHERN DISTRICT OF CALIFORNIA
8
9

11
For the Northern District of California

United States District Court

10

URIEL MARCUS, BENEDICT
VERCELES, and Others Similarly
Situated,

12
13
14
15
16
17
18
19
20

No. C 14-03824 WHA

Plaintiffs,
ORDER DENYING
MOTION FOR LEAVE TO
AMEND COMPLAINT AND
GRANTING PARTIAL
SUMMARY JUDGMENT

v.
APPLE INC.,
Defendant.
/
INTRODUCTION

In this putative product-defect class action, plaintiffs seek leave to file a first amended
complaint. For the reasons stated below, plaintiffs’ motion is DENIED.
STATEMENT

21

The essence of this order is that an earlier order dismissed the complaint under

22

Rule 12(b)(6). Leave was granted to move to file a first amended complaint, now before the

23

Court. The main new allegation in the proposed pleading is a safety allegation concerning

24

overheating and risk of burns, an allegation that fails if Apple Inc. provided disclosures and

25

instructions dealing with the supposed hazard. Discovery and declarations were allowed on

26

this new issue to test it on partial summary judgment. Apple made a straightforward

27

demonstration that appropriate disclosures and instructions on use were included with the units

28

sold. Counsel for plaintiffs were given discovery into Apple’s showing and no Rule 56(d)

1

motion was made. By contrast, plaintiffs refused to sit for deposition to contradict Apple’s

2

showing (despite two orders to do so). Based on the sworn record, partial summary judgment

3

is now entered in Apple’s favor on the issue of the disclosures and instructions that came with

4

the units in question. That being the main new issue, and that issue now being resolved against

5

plaintiffs, no new basis exists to allow the proposed pleading. (A further miscellaneous new

6

allegation is insufficient under Rule 12.) Leave to amend will be denied. Now follow the

7

details.

8

*

9

*

*

Plaintiffs Uriel Marcus and Benedict Verceles commenced this proposed class action
against defendant Apple on behalf of persons who purchased certain Apple computers containing

11
For the Northern District of California

United States District Court

10

defective logic boards in the United States. Both Marcus and Verceles purchased Apple

12

MacBook Pros that failed after the expiration of Apple’s one-year express warranty. The logic

13

board in Marcus’s MacBook Pro failed eighteen months after purchase, and there are no

14

allegations that his MacBook Pro failed to work properly until then. Although the logic board

15

in Verceles’s MacBook Pro failed less than one month after purchase, it was replaced under

16

warranty, and did not fail again until “less than two years later” (Amd. Compl. ¶¶ 10–11).

17

Defendant moved to dismiss the action for failure to state a claim pursuant to

18

Rule 12(b)(6). An order dated January 8, 2015, granted this motion in full and invited plaintiffs

19

to seek leave to amend, which resulted in the instant motion (Dkt. No. 45).

20

The proposed amended complaint newly alleges that the logic board defect poses a safety

21

hazard because it causes the MacBooks to get hot and potentially burn consumers (Amd. Compl.

22

¶ 22).

23

Apple stated that it would be able to prove that hard copy manuals were enclosed with

24

each unit sold to plaintiffs and that these manuals warned of possible heat-related injuries

25

associated with using a MacBook on one’s lap — the precise safety issue raised in the proposed

26

pleading (Dkt. No. 63). Plaintiffs, on the other hand, asserted that “this information was not

27

contained in any hard copy manuals, paper work, or warning labels on laptops sold by Apple”

28

(Dkt. No. 66). These statements were not under oath.
2

1

In light of the parties’ conflicting positions, an order was issued requiring limited

2

discovery to enable partial summary judgment as to what warnings and manuals were supplied

3

with the paperwork for the units purchased by plaintiffs. The order warned that adverse

4

inferences might be drawn for failure to comply (Dkt. No. 67). Apple fully complied with this

5

order, supplied hard copies of the manuals and produced a declarant for deposition. All of this

6

was under oath.

7

For their part, plaintiffs were ordered to sit for ninety-minute depositions and to produce

plaintiffs’ counsel moved to delay the deposition, saying they were “unnecessary.” This was

10

denied and plaintiffs were ordered to appear for depositions and to produce the manuals by a

11
For the Northern District of California

the manuals that came with their units. When the time frame for the deposition was ending,

9

United States District Court

8

new deadline. They were warned that refusal to do so might result in an adverse inference being

12

drawn against them on the issue of what manuals they received. They refused, again, to attend

13

their depositions. Plaintiffs have refused to testify under oath as to the manuals received with

14

their units.

15

The record is thus uncontested that plaintiffs’ MacBook Pros were sold with hard-copy

16

user guides included in the packaging (Moriarty Decl. ¶ 4). Page 68 of the user guide that

17

accompanied plaintiffs’ MacBook Pros stated that, “The bottom of your MacBook Pro may

18

become very warm during normal use.” On page 69 the manual also instructed that: “to

19

operate the computer safely and reduce the possibility of heat-related injuries, follow these

20

guidelines . . . .” The accompanying guidelines informed consumers to set up the “MacBook Pro

21

on a stable work surface that allows for adequate air circulation under and around the computer,”

22

and warned that if the “MacBook Pro is on your lap and gets uncomfortably warm, remove it

23

from your lap and place it on a stable work surface.” These instructions and warnings

24

unambiguously disclosed the precise safety issue alleged in the proposed amended complaint.

25

Thus, Apple is entitled to partial summary judgment for satisfying its duty to disclose the alleged

26

safety hazard.

27
28
3

1

The remaining issues raised in the proposed amended complaint will be analyzed under

2

the normal Rule 12(b)(6) standard. This hybrid procedure is adopted pursuant to Rules 12 and

3

56 and case management authority under Rule 16.

4

ANALYSIS

5

A district court should freely grant leave to amend when justice so requires. Leave to

6

amend need not be granted where the amendment is futile. AmerisourceBergen Corp. v.

7

Dialysist West, Inc., 465 F.3d 946, 951 (9th Cir. 2006). To survive a motion to dismiss, a

8

complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that

9

is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Summary judgment is
appropriate under Rule 56(c) when “the pleadings, the discovery and disclosure materials on file,

11
For the Northern District of California

United States District Court

10

and any affidavits show that there is no genuine issue as to any material fact and that the movant

12

is entitled to judgment as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247

13

(1986).

14

This order holds that under the facts on the record, no reasonable jury could conclude

15

that Apple failed to adequately disclose the alleged MacBook Pro overheating safety hazard.

16

All issues raised in the proposed amended complaint fail to state a plausible claim.

17

1.

18

The proposed amended complaint alleges that Apple violated provisions of California’s

19

Consumers Legal Remedies Act and the Texas Deceptive Trade Practices Act. As explained in

20

the January 8 order, the heightened pleading standard of Rule 9(b) applies to these claims for

21

relief. Our court of appeals has interpreted Rule 9(b) to require that a plaintiff state the “who,

22

what, when, where, and how of the misconduct charged” as well as “what is false or misleading

23

about a statement, and why it is false.” Ebeid ex rel. United States v. Lungwitz, 616 F.3d 993,

24

998 (9th Cir. 2010) (citations and quotations omitted).

25

FRAUD-BASED CLAIMS FOR RELIEF.

A.

California’s Consumers Legal Remedies Act.

26

California’s Consumers Legal Remedies Act proscribes unfair methods of competition

27

and unfair or deceptive acts or practices. The proposed amended complaint alleges that Apple

28

violated three subsections of Section 1770(a) of California’s CLRA.
4

1

First, plaintiffs allege that Apple violated Section 1770(a)(5) by misrepresenting

2

characteristics, benefits, or uses of the computers in question. Second, plaintiffs allege that

3

Apple violated Section 1770(a)(7) by misrepresenting that the computers in question were

4

of a particular standard, quality, and/or grade, when they were of another. Third, plaintiffs

5

allege that Apple violated Section 1770(a)(9) by selling the computers in question with an

6

intentionally-concealed design defect that caused the logic boards to overheat, creating safety

7

issues.

8

(1)

There Were No Affirmative Misrepresentations
Made Regarding the Useful Life of MacBooks.

9
Like the original complaint, the proposed amended complaint fails to identify any
10
which merely states in general terms that one product is superior is not actionable. However,
For the Northern District of California

United States District Court

affirmative misrepresentations made by Apple that were in need of correction. “Advertising
11
12
misdescriptions of specific or absolute characteristics of a product are actionable.” Perkiss and
13
Liehe, Inc. v. Northern Cal. Collection Serv., Inc., 911 F.2d 242, 246 (9th Cir. 1990). Plaintiffs
14
fail to proffer specific statements made by Apple concerning the useful life of MacBooks. Vitt v.
15
Apple Computer, Inc., 469 Fed. Appx. 605, 607 (9th Cir. 2012) (dismissing CLRA claims
16
against Apple for alleged logic board defect with the iBook G4 laptop). Thus, plaintiffs still
17
state no claim under Sections 1770(a)(5) and (a)(7) of California’s CLRA. Leave to amend is
18
DENIED.
19
(2)
20
21

Apple Satisfied Its Duty to Disclose
The Overheating Safety Issue.

“[A] manufacturer’s duty to consumers is limited to its warranty obligations absent either

22

an affirmative misrepresentation or safety issues.” Wilson v. Hewlett-Packard Co., 668 F.3d

23

1136, 1141 (9th Cir. 2012). Pursuant to Section 1770(a)(9), the proposed amended complaint

24

raises an overheating safety issue with Apple MacBooks. Because Apple adequately disclosed

25

this hazard, the new safety allegation falls away. See Bird v. First Alert, Inc., No. C 14–3585

26

PJH, 2014 WL 7248734, at *6–7 (N.D. Cal. Dec. 19, 2014) (Judge Phyllis Hamilton) (dismissing

27

CLRA claims for alleged safety issue with smoke detectors because the packaging included

28

adequate warnings). Leave to amend is DENIED.
5

1
2

B.

Texas Deceptive Trade Practices Act.

The original complaint alleged that Apple violated Sections 17.46(b)(5), (7), (9), and (24)

3

of the Texas Deceptive Trade Practices Act. The proposed amended complaint only alleges a

4

violation of Section 17.46(b)(24) of the Texas DTPA.

5
6
7
8
9

failing to disclose information concerning goods or services which
was known at the time of the transaction if such failure to disclose
such information was intended to induce the consumer into a
transaction into which the consumer would not have entered had
the information been disclosed.
Plaintiffs contend that Apple had a duty to disclose the logic board defect under the
Texas DTPA because it was a material fact that only Apple knew (Amd. Compl. ¶ 74).

11
For the Northern District of California

United States District Court

10

Section 17.46(b)(24) proscribes:

Under the Texas DTPA, there is no duty to disclose if the defendant did not know the

12

material information at the time of the transaction. Demonstrating that the defendant should

13

have known the material information is insufficient. Doe v. Boys Clubs of Greater Dallas, Inc.,

14

907 S.W.2d 472, 479 (Tex. 1995). The January 8 order dismissed plaintiffs’ claims under

15

Section 17.46(b)(24) because plaintiffs failed to plausibly demonstrate that Apple knew about

16

the alleged logic board defect at the time of plaintiffs’ purchases.

17

The proposed amended complaint alleges that Apple has been aware of the logic board

18

defect for over six years. Plaintiff Marcus allegedly bought his MacBook Pro in May 2012, and

19

plaintiff Verceles bought his MacBook Pro in July 2011; both sales were therefore made after

20

Apple allegedly became aware of the logic board defect (Amd. Compl. ¶¶ 3, 10–11).

21
22
23
24
25
26
27
28

The new allegations regarding Apple’s knowledge of the alleged logic board defect are as
follows (Amd. Compl. ¶¶ 3, 19, 26, 34):
Apple’s computer engineers knew about this defect and mean
time failure that is 10 times faster than other industry products.
Apple’s warranty service department knew about this defect, due
to the extremely high levels of warranty claims for this component.
Apple’s repair department knew about this defect due to the high
numbers of replacement logic boards that were ordered by
consumers and repair facilities.
As the logic board designer and manufacturer, Apple possesses
specialized knowledge regarding the composition of its logic
board, and is in a superior position to know and learn about defects
in its logic board. Apple has access to all of the company data and
6

1

engineering reports regarding Mean Time To Failure rates, annual
warranty claims, testing regarding operating temperatures, testing
regarding breakdown rates of lead-free solder, and identification of
components that short-circuit under high heat.

2
3

Apple has been aware of the weakness and defects in its logic
board for years due to customer complaints . . . .

4
5

Plaintiffs’ experiences with the logic boards are typical of
thousands of other Apple purchasers who have registered their
complaints with Apple and even started a change.org petition.

6
7

There are no on point Texas decisions addressing similar allegations of a defendant’s

8

knowledge. There are, however, multiple decisions applying very similar allegations under

9

California’s CLRA, which also requires demonstration of a defendant’s knowledge at the time

11
For the Northern District of California

United States District Court

10

12
13
14
15

of sale.
In MacDonald v. Ford Motor Company, 37 F. Supp. 3d 1087, 1095 (N.D. Cal. Mar. 31,
2014) (Judge Jon Tigar), the allegations regarding knowledge were summed up as follows:
Ford had exclusive access to additional sources of information that
reveal the coolant pump defect, including pre-production testing,
pre-release testing data, early consumer complaints made
exclusively to Ford, high levels of repair orders and warranty
reimbursements, testing conducted in response to complaints,
replacement part sales data, and aggregate data from Ford dealers.

16
Judge Tigar analyzed two other decisions with nearly identical allegations regarding a
17
defendant’s exclusive knowledge of a defect. The dispositive factor in those decisions was
18
whether the plaintiffs provided additional information supporting their allegations, such as
19
“technical service bulletins” addressing the allegedly defective part. The plaintiffs in
20
MacDonald referenced three different internal technical service bulletins discussing problems
21
with the allegedly defective part, one of which pre-dated the plaintiffs’ purchases. Judge Tigar
22
therefore held that the plaintiffs plausibly demonstrated the defendant’s knowledge of the defect
23
at the time of sale. Id. at 1093, 1095–96.
24
Here, however, there are only general allegations of undated customer complaints,
25
engineering reports, different types of testing data, high numbers of replacement parts ordered
26
and warranty claims. Without more, courts have determined that such allegations fail to
27
plausibly demonstrate that the defendant knew about the defect at the time of sale because they
28
provide no sense of chronology. See, e.g., Herremans v. BMW of North America, LLC, CV
7

1

14–02363 MMM (PJWx), 2014 WL 5017843, at *16–18 (C.D. Cal. Oct. 3, 2014)

2

(Judge Margaret Morrow); Grodzitsky v. American Honda Motor Co., Inc., No.

3

2:12–cv–1142–SVW–PLA, 2013 WL 690822, at *6–7 (C.D. Cal. Feb. 19, 2013) (Judge Stephen

4

Wilson). Plaintiffs thus fail to plausibly demonstrate that Apple knew about the defect at the

5

time of plaintiffs’ computer purchases.

6

Plaintiffs’ claim under Section 17.46(b)(24) of the Texas DTPA fails. Leave to amend is

7

DENIED.

8

2.

9

Plaintiffs’ proposed amended complaint asserts claims for relief for violations of the

11
For the Northern District of California

United States District Court

10

12

WARRANTY-BASED CLAIMS FOR RELIEF.

Song-Beverly Consumer Warranty Act and the Magnuson-Moss Warranty Act.
A.

Song-Beverly Consumer Warranty Act.

The Song-Beverly Consumer Warranty Act only applies to goods sold in California.

13

It provides that “every sale of consumer goods that are sold at retail in [California] shall be

14

accompanied by the manufacturer’s and the retail seller’s implied warranty that the goods are

15

merchantable.” Cal. Civ. Code § 1792. Manufacturers cannot disclaim the implied warranty of

16

merchantability for goods sold in California unless the goods are sold “as is” or “with all faults.”

17

Mexia v. Rinker Boat Co., Inc., 174 Cal. App. 4th 1297, 1303 (Cal. Ct. App. 2009). Plaintiff

18

Marcus’s laptop allegedly was not sold with the “as is” or “with all faults” language. Therefore,

19

plaintiffs argue that his claim for breach of the implied warranty of merchantability under

20

Song-Beverly may proceed (Amd. Compl. ¶ 78).

21

The January 8 order dismissed plaintiffs’ claims under Song-Beverly because that Act

22

only applies to goods purchased in California, and it was not sufficiently alleged that either

23

plaintiff, Marcus or Verceles, purchased their MacBook Pros in California. The proposed

24

amended complaint still does not allege that Verceles purchased his MacBook Pro in California.

25

Therefore, Verceles does not make out a claim under Song-Beverly.

26

As to Marcus, his claim for breach of the implied warranty under Song-Beverly fails

27

because the alleged logic board design defect did not render his computer unmerchantable during

28

the implied warranty duration period.
8

1

The Song-Beverly Consumer Warranty Act imposes an implied warranty of

2

merchantability whose duration period “shall be coextensive in duration with an express

3

warranty which accompanies the consumer goods . . . but in no event shall such implied warranty

4

have a duration of . . . more than one year following the sale of new consumer goods to a retail

5

buyer.” Cal. Civ. Code § 1791.1(c). It is undisputed that the express warranty was one year.

6

Therefore, the duration of the implied warranty was also one year.

7

Section 1791 of the Song-Beverly Act does not create a one-year deadline for discovery

8

of the defect or for providing notice to the seller. It does, however, require a latent defect to

9

have existed within the duration period. Mexia, 174 Cal. App. 4th at 1308–10.
Mexia purchased a boat that allegedly contained a latent defect, which subsequently

11
For the Northern District of California

United States District Court

10

caused the boat’s engine to destructively corrode two years after purchase. The court determined

12

that it was possible for Mexia to present evidence that the corrosion was due to a defect that

13

existed at the time of sale or within the one year period but remained latent and undiscoverable

14

for two years. If the corrosion was indeed caused by a latent defect existing at the time of sale or

15

sometime within the duration period, the boat was unmerchantable. Mexia thus stated a valid

16

claim under Song-Beverly. Id. at 1300, 1308.

17

The test for merchantability requires a good to be fit for its ordinary purpose. Such

18

fitness is shown if the product is in a safe condition and substantially free of defects. Under

19

Mexia, merchantability is evaluated as if the alleged latent defect were known. Id. at 1303,

20

1305. Judges following Mexia’s rule have emphasized the potential safety risks of allegedly

21

defective automobile parts before concluding that the automobiles were unmerchantable. See

22

Sater v. Chrysler Group LLC, No. EDCV 14–00700–VAP (DTBx), 2015 WL 736273, at *9–10

23

(C.D. Cal. Feb. 20, 2015) (Judge Virginia Phillips) (emphasizing potential safety risks of

24

allegedly defective steering assembly); Cholakyan v. Mercedes-Benz USA, LLC, 796 F. Supp. 2d

25

1220, 1243–44 (C.D. Cal. June 30, 2011) (Judge Margaret Morrow) (emphasizing potential

26

safety risks of alleged water leak defect); Ehrlich v. BMW of North America, LLC, 801 F.Supp.

27

2d 908, 918, 923–24 (C.D. Cal. Aug. 11, 2010) (Judge Audrey Collins) (emphasizing potential

28

safety risks of allegedly defective windshield). Indeed, “an important consideration under the
9

1

implied warranty is consumer safety.” Brand v. Hyundai Motor America, 226 Cal. App. 4th

2

1538, 1547 (Cal. Ct. App. 2014) (emphasizing potential safety risks of allegedly defective

3

sunroof).

4

Unlike in Mexia, there was no corrosion here. At most, there was a safety risk within

5

the first year. The alleged overheating safety hazard, however, was adequately disclosed.

6

Marcus’s claim under Song-Beverly thus fails.

7

In sum, plaintiff Verceles does not make out a claim under Song-Beverly because his

8

MacBook Pro was not purchased in California. Plaintiff Marcus fails to state a plausible claim

9

for breach of the implied warranty of merchantability under Song-Beverly because the alleged
safety risk was adequately disclosed. Leave to amend is DENIED.

11
For the Northern District of California

United States District Court

10

B.

Magnuson-Moss Warranty Act.

12

“[D]isposition of the state law warranty claims determines the disposition of the

13

Magnuson-Moss [Warranty] Act claims.” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017,

14

1022 n.3 (9th Cir. 2008); see 15 U.S.C. 2310(d). As plaintiffs fail to plead any plausible state

15

law warranty claims, amendment under the Magnuson-Moss Warranty Act is DENIED.

16

3.

17

The proposed amended complaint alleges that Apple violated Section 17200 of

SECTION 17200 OF CALIFORNIA’S UNFAIR COMPETITION LAW.

18

California’s Unfair Competition Law, which proscribes unfair competition, including “any

19

unlawful, unfair or fraudulent business act or practice.” Section 17200 “borrows violations

20

of other laws and treats them as unlawful practices that the unfair competition law makes

21

independently actionable.” Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012)

22

(citation omitted).

23

The January 8 order dismissed plaintiffs’ claims under the “unlawful” prong because the

24

original complaint failed to establish an underlying violation of any of the remaining claims

25

alleged in the complaint. Likewise, the proposed amended complaint fails to establish an

26

underlying violation of Section 17200. Therefore, plaintiffs fail to state a claim under the

27

“unlawful” prong. Leave to amend is DENIED.

28
10

1

The proposed amended complaint also alleges a violation of the “unfair” prong of

2

Section 17200. The “unfair” prong provides an independent basis for relief. Our court of

3

appeals permits the use of a balancing test to determine what is “unfair” in the consumer action

4

context. Under the balancing test, a business practice is unfair if the harm to consumers

5

outweighs the utility of the defendant’s practice. Lozano v. AT&T Wireless Services, Inc.,

6

504 F.3d 718, 731, 735–36 (9th Cir. 2007).

7

The proposed amended complaint alleges that (Amd. Compl. ¶ 46):

8

Apple’s continued sale of its defective laptops violates that
“balancing test” where the gravity of Defendant’s alleged wrongful
conduct outweighs any purported benefits. Apple would rather sell
the consumers a defective laptop in order to save $10, thus costing
the consumer $300 in logic board replacement cost or $2000 in
laptop replacement cost.

9

11
Plaintiffs, however, were able to adequately use their units for several months after the
For the Northern District of California

United States District Court

10

12
expiration of the one-year express warranty. The repair or replacement costs of the MacBooks
13
are thus insufficient to show that the harm to consumers outweighs the utility of Apple’s
14
business practices. Amendment under the “unfair” prong is DENIED.
15
4.

REQUEST FOR JUDICIAL NOTICE.

16
Plaintiffs request judicial notice be taken of two lawsuits, seemingly for the purpose
17
of acknowledging that Apple has produced and sold defective laptops to consumers in the past:
18
(1) the Nvidia GPU lawsuit (08–cv–4312–JW); and (2) the Apple MagSafe power adapter
19
lawsuit (09–cv–1911). As those two lawsuits had no relevance to the alleged logic board defect,
20
plaintiffs’ request for judicial notice is DENIED.
21
CONCLUSION
22
For the foregoing reasons, plaintiffs’ motion for leave to file a first amended complaint is
23
DENIED. No more motions for amendment will be permitted. This case is ready for appeal.
24
25
IT IS SO ORDERED.
26
27
Dated: April 16, 2015.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

28
11