Young v. Cree, Inc.

Filing 42

ORDER RE: MOTION TO DISMISS by Judge Yvonne Gonzalez Rogers granting in part and denying in part 31 Motion to Dismiss. (fs, COURT STAFF) (Filed on 4/9/2018)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 JEFF YOUNG, Plaintiff, 8 Re: Dkt. Nos. 31, 32 CREE, INC., Defendant. 11 United States District Court Northern District of California ORDER RE: MOTION TO DISMISS vs. 9 10 CASE NO. 17-cv-06252-YGR 12 13 Plaintiff Jeff Young brings this putative class action lawsuit against defendant Cree, Inc. 14 (“Cree”) alleging that defendant engaged in an “unfair and deceptive practice of . . . promising 15 consumers” that Cree’s light-emitting-diode bulbs (the “LED Bulbs”) “will last for particularly 16 long periods of time up to 35,000 hours” with a “100% Satisfaction Guarantee” and “yearly energy 17 cost savings ranging from around $0.60 to $2 per blub per year” in violation of California’s Unfair 18 Competition Law (“UCL”), Cal. Bus. Prof. Code §§ 17200, et seq. (Count I); (False Advertising 19 Law (“FAL”), Cal. Bus. Prof. Code §§ 17500, et seq. (Count II); Consumers Legal Remedies Act 20 (“CLRA”), Cal. Civ. Code §§ 1750, et seq. (Count III);1 fraudulent misrepresentation and 21 concealment (Count V); negligent misrepresentation (Count VI); unjust enrichment (Count VII); 22 breach of express and implied warranties (Count VIII);2 and negligent failure to test (Count IX). 23 (Dkt. No. 1, Class Action Compliant (“CAC”).) 24 25 26 27 28 1 Plaintiff has withdrawn his claim for breach of the covenant of good faith and fair dealing (Count IV). (Dkt. No. 37, Opposition at 1.) 2 Plaintiff’s complaint designates two separate causes of action as “Count VII,” namely claims for unjust enrichment and breach of express and implied warranties. In the interest of clarity, the Court has re-designated the breach of express and implied warranties claim as “Count VIII.” 1 Now before the Court is defendant’s motion to dismiss.3 (Dkt. No. 31, Motion to Dismiss 2 (“MTD”).) Having carefully considered the pleadings and fully-briefed motion, the hearing held 3 on April 3, 2018, and for the reasons set forth below, the Court GRANTS IN PART and DENIES IN 4 PART defendant’s motion as described below. 5 I. BACKGROUND 6 As relevant here, the complaint alleges as follows: 7 Defendant Cree “advertise[s], market[s], distribute[s], or s[ells]” LED Bulbs “to consumers 8 throughout the United States.” (CAC ¶ 12.) “[O]n or around April of 2015” Young purchased 9 three of defendant’s LED Bulbs at Walmart and paid “approximately $15-20 for each bulb.” (Id. ¶ 32.) “Within months, all three [LED Bulbs] burned out even though [plaintiff] used them 11 United States District Court Northern District of California 10 according to the instructions.” (Id. ¶ 32.) “Cree’s packaging offers a ‘100% Satisfaction Guarantee’ for LED Bulbs and an estimated 12 13 lifetime of between 15–32 years depending on the product. The packages further offer an 14 estimated yearly energy cost savings ranging from $0.60 to $2 per bulb per year. Cree packaging 15 also offers a ‘10 Year Warranty.’” (Id. ¶¶ 3, 27.) Moreover, Cree’s website “boast[s] . . . a 10 16 year 100% satisfaction guarantee.” (Id. ¶ 4.) Plaintiff alleges that these “marketing efforts are 17 made in order to—and do in fact—induce its customers to purchase the LED bulbs at a premium 18 because consumers believe the Lightbulbs will last for far longer than their actual life.” (Id. ¶ 5.) 19 Based thereon, plaintiff asserts “Cree’s claims regarding the longevity of the LED Lightbulbs are 20 false.” (Id. ¶ 6.) 21 II. LEGAL FRAMEWORK 22 A. 23 Pursuant to Rule 12(b)(6), a complaint may be dismissed for failure to state a claim upon 24 Motion to Dismiss which relief may be granted. Dismissal for failure to state a claim under Federal Rule of Civil 25 26 27 28 3 Also before the Court is defendant’s request for judicial notice of the front and back packaging for three types of Cree LED Blubs. (Dkt. No. 32.) In light of the lack of opposition, the Court GRANTS defendant’s request for judicial notice, but does not accept the truth of any matters asserted in the documents. The Court gives such documents their proper evidentiary weight. 2 1 Procedure 12(b)(6) is proper if there is a “lack of a cognizable legal theory or the absence of 2 sufficient facts alleged under a cognizable legal theory.” Conservation Force v. Salazar, 646 F.3d 3 1240, 1242 (9th Cir. 2011) (citing Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 4 1988)). The complaint must plead “enough facts to state a claim [for] relief that is plausible on its 5 face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face 6 “when the plaintiff pleads factual content that allows the court to draw the reasonable inference 7 that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 8 (2009). If the facts alleged do not support a reasonable inference of liability, stronger than a mere 9 possibility, the claim must be dismissed. Id. at 678–79. Mere “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 11 United States District Court Northern District of California 10 F.3d 1179, 1183 (9th Cir. 2004). In ruling on a motion to dismiss, “the court must presume all 12 factual allegations of the complaint to be true and draw all reasonable inferences in favor of the 13 nonmoving party.” Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 984 (9th Cir. 2000). 14 Additionally, claims sounding in fraud are subject to the heightened pleading requirements 15 of Federal Rule of Civil Procedure 9(b). Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1103–04 16 (9th Cir. 2003). “In alleging fraud or mistake, a party must state with particularity the 17 circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a 18 person’s mind may be alleged generally.” Fed. R. Civ. Proc. 9(b). “Averments of fraud must be 19 accompanied by the who, what, when, where, and how of the misconduct charged.” Kearns v. 20 Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). These requirements “ensure that 21 allegations of fraud are specific enough to give defendants notice of the particular misconduct 22 which is alleged to constitute the fraud charged so that they can defend against the charge and not 23 just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 24 1985). 25 B. Preemption 26 Preemption is fundamentally a question of congressional intent. Wyeth v. Levine, 555 27 U.S. 555, 565 (2009). “Federal preemption occurs when: (1) Congress enacts a statute that 28 explicitly pre-empts state law; (2) state law actually conflicts with federal law; or (3) federal law 3 1 occupies a legislative field to such an extent that it is reasonable to conclude that Congress left 2 no room for state regulation in that field.” Chae v. SLM Corp., 593 F.3d 936, 941 (9th Cir. 2010) 3 (internal quotation marks and citations omitted). While the Court’s interpretation of a preemption statute “must begin with its text,” that 5 interpretation “does not occur in a contextual vacuum.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 6 484–85 (1996); see Altria Group, Inc. v. Good, 555 U.S. 70, 76 (2008) (stating that, even “[i]f a 7 federal law contains an express pre-emption clause, it does not immediately end the inquiry 8 because the question of the substance and scope of Congress’ displacement of state law still 9 remains.”). In analyzing the issue, a court must begin with the presumption that unless a “clear 10 and manifest purpose of Congress” exists, federal acts should not supersede the historic police 11 United States District Court Northern District of California 4 powers of the states. Wyeth, 555 U.S. at 565; Lohr, 518 U.S. at 485. “Parties seeking to 12 invalidate a state law based on preemption ‘bear the considerable burden of overcoming the 13 starting presumption that Congress does not intend to supplant state law.’” Stengel v. Medtronic, 14 704 F.3d 1224, 1227–28 (9th Cir. 2013) (en banc) (quoting De Buono v. NYSA–ILA Med. & 15 Clinical Servs. Fund, 520 U.S. 806, 814 (1997)). 16 Preemption is express where Congress has considered the issue of preemption and 17 included in the enacted legislation a provision explicitly addressing that issue. Valentine v. 18 NebuAd, Inc., 804 F. Supp. 2d 1022, 1028 (N.D. Cal. 2011) (citing Cipollone v. Liggett Group, 19 505 U.S. 504, 517 (1992)). In the absence of explicit preemptive language, congressional intent 20 to preempt can be implied under two scenarios: field preemption and conflict preemption. First, 21 field preemption occurs “where the scheme of federal regulation is ‘so pervasive as to make 22 reasonable the inference that Congress left no room for the States to supplement it.’” Valentine, 23 804 F. Supp. 2d at 1028 (quoting Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98 24 (1992)). Field preemption should not be found in the absence of persuasive reasons—either that 25 the nature of the regulated subject matter permits no other conclusion, or that, without question, 26 Congress has so ordained. Valentine, 804 F. Supp. 2d at 1028–29 (such preemption arises in 27 only extraordinary circumstances). Second, conflict preemption arises when “compliance with 28 both federal and state regulations is a physical impossibility.” Id. (internal citations omitted). 4 1 Conflict preem mption may also exist wh “state la ‘stands as an obstacle to the a here aw s e 2 acc complishmen and execu nt ution of the full purposes and objecti f s ives of Cong gress.’” Id. ( (internal 3 cita ations omitte ed). Showin preemptio by imposs ng on sibility is a “ “demanding defense.” W Wyeth, 555 4 U.S at 573. S. 5 C. Energy Pol and Con licy nservation A Act 6 The En nergy Policy and Conserv vation Act (t “EPCA”) establishes a national e the s energy 7 con nservation pr rogram to re educe energy use in the U y United State by creating various req es g quirements 8 wit regard to (i) energy ef th fficiency, (ii) efficiency testing, (iii) operating co ) osts, and (iv labeling v) 9 req quirements. 42 U.S.C. §§ 6291-6309 see also S Rep. No. 9 9; S. 94-516, at 51 (1975), re 17 eprinted in 197 U.S.C.C.A 1956, 1957. Under the EPCA, LED bulb m 75 A.N. , manufacture must disc ers close certain 11 United States District Court Northern District of California 10 inf formation on their produc packaging 16 C.F.R. 305.15. Th product’s “principal d n ct g. . he display 12 pan must inc nel” clude the LE bulb’s es ED stimated annu energy c nual cost, “expres ssed as ‘Estim mated 13 Energy Cost’ in dollars and based on usage of 3 ho n d u ours per day and 11 cent ($0.11) per kWh.” 16 ts r 14 C.F 305.15(b F.R b)(1). The package’s “L p Lighting Fact label mu further inc ts” ust clude the est timated 15 life espan of each bulb. 16 C.F.R. 305.15(b)(3). h C 16 Illustrat example of the required disclos tive es sures are dep picted below w: 17 Princip Display Panel pal Ligh hting Facts L Label 18 19 20 21 22 23 24 The EPCA pro ovides that th hese required disclosures do not give rise to expr or impli d s e ress ied 25 wa arranties. Sp pecifically, Section 6297(g) of the EP S PCA provide es: 26 // 27 // 28 // 5 Any disclosure with respect to energy use, energy efficiency, or estimated annual operating cost which is required to be made under the provisions of this part shall not create an express or implied warranty under State or Federal law that such energy efficiency will be achieved or that such energy use or estimated annual operating cost will not be exceeded under conditions of actual use. 1 2 3 4 42 U.S.C. § 6297(g) (emphasis supplied). 5 III. 6 DISCUSSION Defendant argues that plaintiff’s claims fail because the claims are (i) preempted by the 7 EPCA and, in any event, (ii) not sufficiently pled. Defendant also claims that Young lacks 8 standing to bring claims for alleged misrepresentations regarding certain types of LED Bulbs 9 which he did not purchase. A. 11 United States District Court Northern District of California 10 As an initial matter, the Court must determine whether plaintiff’s claims are preempted by EPCA Preemption 12 the EPCA. As noted, the EPCA states that “[a]ny disclosure with respect to energy use, energy 13 efficiency, or estimated annual operating cost which is required to be made under the [EPCA] . . . 14 shall not create an express or implied warranty under State or Federal law.” 42 U.S.C. § 6297(g). 15 Several district courts interpreting Section 6297(g) have held that the EPCA preempts both 16 warranty and non-warranty claims which arise from defendant’s “disclosure[s] with respect to 17 energy use, energy efficiency, or estimated annual operating cost which [are] required to be made 18 under the [EPCA].” See Schwartz v. Vizio, Inc., 2017 WL 2335364, at *4 (C.D. Cal. 2017) (citing 19 42 U.S.C. § 6297(g)); Jurgensen v. Felix Storch, Inc., 2012 WL 2354247, at *7 (S.D.N.Y. 2012). 20 Stated differently, Section 6297(g) “expressly preempts all . . . claims [which] allege that 21 [consumer products] did not perform as promised on a federally-required label.” Id. 22 Schwartz is instructive. There, plaintiff brought warranty and non-warranty claims4 23 alleging that defendant’s representations regarding energy efficiency contained within a federally- 24 25 26 27 28 4 Plaintiff’s warranty claims included causes of action for breach of express warranty and implied warranty of merchantability. Schwartz, 2017 WL 2335364, at *1. Plaintiff’s non-warranty claims included causes of action for violations of Illinois’ Consumer Fraud and Deceptive Business Practices Act; Pennsylvania’s Unfair Trade Practices and Consumer Protection Law; negligent misrepresentation; fraudulent concealment; intentional misrepresentation; fraud; and unjust enrichment. Schwartz, 2017 WL 2335364, at *1. 6 1 req quired energy label were misleading. Id. at *1. I granting d y . In defendant’s motion to di ismiss, the 2 Sch hwartz court held that pl t laintiff’s war rranty claims were preem s mpted under the EPCA a the nonr and 3 wa arranty claim were simil ms larly preemp on the g pted ground that t non-warr the ranty claims were 4 “simply . . . bac ckdoor” atte empts to reca “a breach of warranty claim.” Id at *4 (inter ast h y d. rnal 5 quo otations omi itted); see als Jurgensen 2012 WL 2354247, at *1 (finding plaintiff’s u so n, t g unjust 6 enr richment cla preempte because it was merely a “backdoo to a warr aim ed t y or” ranty claim); Gee v. ; 7 Vik king Range Corp., WL 4416442, at *2 (N.D. Mi ss. 2008) (no C 4 * on-warranty claims barr because y red 8 the such claims were “inex e s xtricably inte ertwined with warranty c h claims which are barred by h 9 §62 297(g)”). 10 Here, plaintiff asser his claim do not aris from state p rts ms se ements which appear wit h thin the LED D United States District Court Northern District of California 11 Bu ulbs’ principa display pa al anels or Ligh hting Facts la abels but fro represent om tations which appear h 12 elsewhere on th product packaging or on the inter he p r rnet. (See Op pposition at 6.) Upon re eview, the 13 Court finds three categories of alleged misrepresen ntations, nam those w mely which (i) reite erate 14 dis sclosures req quired to be made on the product’s pr m rincipal disp panel or Lighting Fa label; play r acts 15 (ii) present info ) ormation reg garding comp parative ene ergy consum mption, energ savings, a lifespan; gy and 16 and (iii) state th Cree’s pr d hat roducts are “100% Satis “ sfaction Gua aranteed.” E Examples of e each 17 cat tegory are de epicted below w. 18 Fir Category rst y 19 20 21 22 23 Sec cond Catego ory 24 25 26 27 † At $.011 per kWh when compared to 60W incan A c o ndescent, 30,000 hour lif fetime. 28 7 1 Th hird Categor ry 2 3 4 5 6 7 * This product is guarantee to give 10 T ed 00% perform mance satisfa action and is covered by a limited wa arranty. If within 5 years from the da of purcha you are n complete satisfied with the w s ate ase not ely per rformance of this produc return the product to C . . . [an Cree will send you a replacement f ct, e Cree nd] l t or at Cree’s option refund the original purchase pri t p ice. Cree ma require a purchase receipt. ay 8 1. Firs Category: Reiteration of Federa st : ns ally-Requir Disclosu red ures Several courts have held that st l e tatements wh hich merely reiterate the content of f e federally- 10 req quired disclo osures are pre eempted. Se Cooper v. United Vac ee . ccines, Inc., 117 F. Supp 2d 864, p. 11 United States District Court Northern District of California 9 871 1–872 (E.D. Wis. 2000) (adopting a “sensible an practical approach” w nd which “focus the ses 12 pre eemption issu upon the content and language of the represe ue f entation at iss sue” rather t than the 13 phy ysical placem of the representatio see also Kuiper v. A ment r on); American Cyanamid Co., 913 F. , 14 Sup 1236, 12 (E.D. Wis. 1996) (fin pp. 244 nding the rei iteration of f federally-req quired label information 15 not actionable) Kanter v. Warner–Lam t ); W mbert Co., 99 Cal. App. 4th 780, 797 (2002) (sta 9 7 atements 16 wh are “sim hich mply alternati explanations” of thos contained in federally mandated l ive se d y labels are 17 pre eempted). 18 p aims are pree empted to th extent that such claims arise from the first he t Here, plaintiff’s cla 19 cat tegory of alle eged misrepr resentations, namely tho statemen which me ose nts erely reiterat the te 20 inf formation req quired to be disclosed on the LED B n Bulbs’ princip display p pal panel or Ligh hting Facts 21 lab pursuant to the EPCA 5 Such stat bel A. tements incl lude represen ntations rega arding the “e estimated 22 23 5 24 25 26 27 28 Plaint argues th the first category of re tiff hat c epresentatio goes beyond the fede ons erallyreq quired disclo osures and is not preempt because these repres ted sentations om or alter th mit he inf formation wh appears in the Light hich s ting Facts Pa anel. For ex xample, the L Lighting Fac Panel cts states that the lifespan of th LED Bulb is “27.4 ye l he b ears” based o “3 hrs/day of use wh on y” hereas the cha allenged repr resentation states that th LED Bulb is “27+ yea rated lifetime.” Plain s he b ars ntiff’s arg gument fails in light of th fact that the federally he y-required dis sclosure and challenged d rep presentation both address the “estima lifespan of the light bulb,” 16 C s ated n t C.F.R. § 305. .15(c), and we displayed in close pro ere d oximity on th LED Bulb packagin he b’s ng. 8 1 lifespan of the light bulb.”6 See 16 C.F.R. § 305.15(c), 16 C.F.R. § 305.2(w); (CAC ¶ 16). 2 Accordingly, defendant’s motion to dismiss is GRANTED to the extent that plaintiff’s claims arise 3 from statements which simply reiterate federally-required disclosures. 2. 4 Second Category: Comparative Performance 5 With regard the second category, and, by contrast to mere reiterations, statements which 6 are “substantially different” from the federally-required disclosures are not preempted. Cooper, 7 117 F. Supp. 2d at 871–72; see also Taylor AG Industries v. Pure–Gro, 54 F.3d 555, 563 (9th Cir. 8 1995) (finding claims based on oral statements made by a distributor preempted because there was 9 no evidence that the statements “were inconsistent with or went beyond the labels”). These include representations regarding energy consumption, lifetime energy savings, and lifespan as 11 United States District Court Northern District of California 10 compared to competing products. 12 In re Ford is instructive. There, plaintiffs alleged that Ford made misleading comparisons 13 between Ford’s Fusion cars and competing hybrid vehicles using figures derived from federally- 14 mandated fuel efficiency disclosures. In re Ford Fusion and C–Max Fuel Economy Litig., 2015 15 WL 7018369 at *2–3 (S.D.N.Y. 2015). The court held that plaintiffs’ claims were preempted to 16 the extent that such claims arose from Ford’s presentation of federally-mandated fuel efficiency 17 estimates. Id. at *27. However, the court also found that claims based on Ford’s representations 18 which compared the fuel efficiency of Ford’s Fusion cars to that of Ford’s competitors were not 19 preempted on the ground that such statements “go beyond merely reporting the EPA-estimated 20 MPG.” Id. at *26; see also Yung Kim v. General Motors, LLC, 99 F. Supp. 3d 1096, 1104 (C.D. 21 Cal. 2015) (finding representations based on federally-mandated EPA estimates not preempted by 22 the EPCA because the representations could lead reasonable consumers to believe the vehicles 23 would be “able to achieve real-world mileage and tank range derived from those figures”). In 24 denying defendant’s motion to dismiss, the court highlighted that plaintiffs’ consumer protection 25 26 27 28 6 To the extent that the complaint alleges misrepresentations which convey the LED Bulbs’ estimated lifespan in hours as opposed to years such statements are similarly preempted. See Cooper, 117 F. Supp. 2d at 871–72. The simple arithmetic conversation of years to hours does not change the content of the challenged representation. 9 1 claims “were not based on the disclosure of fuel economy or fuel operating costs, but rather [were] 2 based on the more general duty not to deceive,” which Ford violated by “portraying a false impression 3 about the ‘superior’ fuel economy of the [vehicles], beyond the mere disclosure of the EPA estimates.” 4 Id. at *24. 5 Here, plaintiff challenges several representations which tout the performance of Cree’s 6 LED Bulbs when compared to competing bulbs, including representations on Cree’s website that 7 its LED Bulbs will last “up to 3x as long as the cheap LED bulbs” and on the packaging which 8 indicates that customers will save $95-177 by using a Cree LED Bulb. (CAC ¶¶ 19–27.) Such 9 statements “go beyond merely reporting the EPA-estimated” bulb lifespan and convey an allegedly “false impression about the superior” longevity and cost savings of Cree’s LED Bulbs. 11 United States District Court Northern District of California 10 In re Ford Fusion, 2015 WL 7018369 at *24 (internal quotations omitted). These representations 12 give rise to a plausible inference that reasonable consumers would believe the Cree’s LED Bulbs 13 are “able to achieve real-world” lifespan and cost savings. See Yung Kim, 99 F. Supp. 3d at 1104. 14 Accordingly, defendant’s motion to dismiss is DENIED to the extent that such claims 15 challenge the second category of alleged misrepresentations, namely those that purport to compare 16 the longevity, energy consumption, and cost savings of defendant’s LED Bulbs to competitors’ 17 LED and incandescent bulbs. 3. 18 19 Third Category: 100% Satisfaction Guaranteed With regard to the third category, which includes representations that the LED Bulbs are 20 “100% Guaranteed[,]” such representations are not preempted. Such representations are not 21 required by EPCA and therefore fall outside the purview of Section 6297(g). See In re Ford, 2015 22 WL 7018369 at *1 (holding “any allegations that go beyond the mere disclosure . . . [of 23 information required by the statute], go beyond the scope of the EPCA”); see also True v. Honda 24 Motor Co., 520 F. Supp. 2d 1175, 1181 (C.D. Cal. 2007) (claims not preempted because the 25 challenged representations were not within the scope of a federally-mandated disclosure). 26 B. 27 Having determined that plaintiff’s claims are preempted only to the extent that such claims 28 Sufficiency of Allegations arise from the first category of representations, the Court now turns to whether plaintiff’s claims 10 1 arising from non-preempted representations are sufficiently pled as to each category of alleged 2 misrepresentations. 3 4 5 1. Second Category: Comparative Performance a. Claims Sounding in Fraud: UCL, FAL, CLRA, and Fraudulent Misrepresentation and Concealment Plaintiff alleges four causes of action involving allegations sounding in fraud, namely 6 claims under the UCL (Count I), FAL (Count II), and CLRA (Count III), and for fraudulent 7 misrepresentation and concealment (Count V). All four claims require plaintiff to allege a false or 8 misleading statement, scienter, intent, reasonable reliance, and damages. See Bank of the West v. 9 Valley Nat. Bank of Arizona, 41 F.3d 471, 477 (9th Cir. 1994) (citing Hackethal v. Nat Cas. Co., 189 Cal. App. 3d. 1102, 1111 (1987)). In a deceptive advertising case involving allegations of 11 United States District Court Northern District of California 10 fraud, “Rule 9(b) requires that the plaintiff(s) identify specific advertisements and promotional 12 materials; allege when the plaintiff(s) were exposed to the materials; and explain how such 13 materials were false or misleading.” Janney v. Mills, 944 F. Supp. 2d 806, 818 (N.D. Cal. 2013). 14 Defendant asserts that plaintiff fails to allege (i) Cree’s scienter and (ii) the circumstances 15 surrounding the alleged fraud including Young’s reliance. 16 With respect to defendant’s first argument, plaintiff alleges that defendant “designed, 17 formulated, tested, manufactured, inspected, distributed, marketed, supplied, and/or sold” the LED 18 Bulbs at issue. (CAC ¶ 125.) According to plaintiff, Cree claims on its website that it “designs 19 and tests its bulbs to last longer, with rated lifetimes equal to or exceeding Energy Star minimum 20 requirements.” (Id. ¶ 26.) These allegations, particularly those related to testing, are sufficient to 21 create a reasonable inference that Cree knew that the challenged representations were false. See 22 Kowalsky v. Hewlett–Packard Co., 2011 WL 3501714 (N.D. Cal. 2011) (finding plaintiff’s 23 allegation that defendant tested its products sufficient to create a plausible inference that defendant 24 had knowledge of a product defect); Avedisian v. Mercedes–Benz USA, LLC, 2013 WL 2285237, 25 at *7 (C.D. Cal. 2013) (same). 26 Turning to Cree’s second argument, plaintiff alleges that defendant knowingly made false 27 representations and concealed material facts regarding the “quality, durability, longevity and 28 benefits of [Cree’s] LED Lightbulbs.” (CAC ¶¶ 46–47, 48, 50, 57, 58, 66, 67, 70.) Plaintiff 11 1 identifies the specific advertisements and marketing materials which he claims are false and 2 misleading. (Id. ¶¶ 15, 16, 17, 19, 20, 21, 23, 24, 25, 27.) Next, plaintiff alleges that he was 3 exposed to the false representations when he purchased the LED Bulbs from Walmart in April of 4 2015. (Id. ¶ 32.) Further, he claims he would not have purchased the bulbs, or would not have 5 paid as much for them, absent the alleged misrepresentations. (Id. ¶¶ 50, 60, 68, 90, 97, 122.) 6 Plaintiff alleges that these representations are false and misleading because the LED Bulbs “do not 7 last nearly as long as advertised. (Id. ¶ 6.) However, plaintiff fails to plead his reliance and does 8 not identify the specific representations on which he relied. 9 Accordingly, defendant’s motion to dismiss is GRANTED with respect to plaintiff’s claims under the UCL (Count I), FAL (Count II), CLRA (Count III), and for fraudulent misrepresentation 11 United States District Court Northern District of California 10 and concealment (Count V) with leave to amend to plead plaintiff’s reliance and identify the 12 specific representations on which he relied. b. 13 14 Negligence Claims Plaintiff alleges two causes of action for negligence, namely negligent misrepresentation 15 (Count VI)7 and negligence in design based on Cree’s failure to test its LED Bulbs adequately 16 (Count IX). Defendant argues that both negligence claims are barred by the economic loss rule. 17 “The economic loss rule requires a purchaser to recover in contract for purely economic 18 loss due to disappointed expectations, unless he can demonstrate harm above and beyond a broken 19 contractual promise.” Ladore v. Sony Comput. Entm’t Am., 75 F. Supp. 3d 1065, 1074 (N.D. Cal. 20 2014) (quoting Tasion Communications v. Ubiquiti Networks, Inc., 2013 WL 4530470, at *3 21 (N.D. Cal. 2013)). “[T]he economic loss rule has been applied to bar a plaintiff's tort recovery of 22 economic damages unless such damages are accompanied by some form of physical harm (i.e., 23 personal injury or property damage).” Id. (emphasis in original) (citing North Am. Chem. Co. v. 24 25 26 27 28 7 “In California, the elements of negligent misrepresentation are ‘(1) a misrepresentation of a past or existing material fact, (2) made without reasonable ground for believing it to be true, (3) made with the intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’” Yamauchi v. Cotterman, 84 F. Supp. 3d 993, 1018 (N.D. Cal. 2015) (quoting Ragland v. U.S. Bank Nat. Assn., 209 Cal. App. 4th 182, 196 (2012)). 12 1 Superior Court, 59 Cal. App. 4th 764, 777 (1997)). “Put more precisely, in actions arising from 2 the sale or purchase of a defective product, plaintiffs seeking economic losses must be able to 3 demonstrate that either physical damage to property (other than the defective product itself) or 4 personal injury accompanied such losses; if they cannot, then they would be precluded from any 5 tort recovery in strict liability or negligence.” Id. (quoting North Am. Chem., 59 Cal. App. 4th at 6 780). The economic loss rule “prevents the law of contract and the law of tort from dissolving 7 into one another.” Robinson Helicopter Co., v. Dana Corp., 34 Cal. 4th 979, 988 (2004). 8 Several California courts and federal courts in this district have recognized an exception to the economic loss rule. See Robinson Helicopter, 34 Cal. 4th at 989–93; JMP Securities LLP, v. 10 Altair Nanotechnologies Inc., 880 F. Supp. 2d 1029, 1043–44 (N.D. Cal. 2012). Specifically, a 11 United States District Court Northern District of California 9 plaintiff seeking economic damages for a negligence claim “will [not] be barred by the economic 12 loss rule [where] the plaintiff alleges that the defendant made an affirmative representation, and 13 that the defendant’s representation exposed the plaintiff to independent personal liability.” Crystal 14 Springs Upland School v. Fieldturf USA, Inc., 219 F. Supp. 3d 962, 970 (N.D. Cal. 2016) 15 (dismissing negligent misrepresentation claim because plaintiff did not allege exposure to 16 independent personal liability); see also Westport Ins. Corp. v. Vasquez, Estrada and Conway 17 LLP, 2016 WL 1394360, at *5–7 (N.D. Cal. 2016) (claim for negligent misrepresentation barred 18 under the economic loss rule because the alleged tortious conduct was not separate from the 19 breach of contract); Nada Pac. Corp. v. Power Eng.g & Mfg., Ltd., 73 F. Supp. 3d 1206, 1224–25 20 (N.D. Cal. 2014) (same).8 21 22 23 24 25 26 27 28 8 Defendant raises two additional arguments in its motion regarding plaintiff’s negligence actions. First, defendant argues that plaintiff cannot bring a claim for “negligence—failure to test” because it is not a valid cause of action in California. This argument is without merit. California courts have held that the “duty to test is a subpart of the other three duties [to safely manufacture, adequately design, and appropriately warn].” Valentine v. Baxter Healthcare Corporation, 68 Cal. App. 4th 1467, 1486 (1999); see also Gordon v. Aztec Brewing Co., 33 Cal. 2d 514, 520 (1949) (finding “negligence in the defendant's failure to test”); Centeno v. Bayer HealthCare Pharm. Inc., 2014 U.S. Dist. LEXIS 136234, at *8-9 (S.D. Ill. 2014) (applying California law and denying dismissal of a negligence claim by finding that “failure to test” is a factual allegation supporting a claim that defendants were negligent and brings it “within the ambit of Valentine, which recognizes that testing and inspection duties may be tied to liability for manufacture, design, and failure to warn, even if they are not maintainable as an independent duty”). 13 1 Here, plaintiff does not allege that he suffered “physical harm” or that he was exposed to 2 personal liability as a result of defendant’s alleged misrepresentations. Accordingly, defendant’s 3 motion to dismiss plaintiff’s claims for negligent misrepresentation (Count VI) and negligent 4 failure to test (Count IX) is GRANTED on the ground that such claims are barred by the economic 5 loss rule. Plaintiff is granted leave to file an amended complaint which alleges, if possible, that he 6 was exposed to “independent personal liability.” c. 7 8 9 Unjust Enrichment Defendant argues that plaintiff’s cause of action for unjust enrichment (Count VII) should be dismissed because it is not a cause of action in California. Defendant’s argument fails as the California Supreme Court has clarified that unjust enrichment is a valid cause of action in 11 United States District Court Northern District of California 10 California. See Hartford Cas. Ins. Co. v. J.R. Mktg., L.L.C., 61 Cal. 4th 988, 1000 (2015) 12 (clarifying California law and allowing an independent claim for unjust enrichment). 13 14 15 16 Accordingly, defendant’s motion to dismiss plaintiff’s claim for unjust enrichment is DENIED. d. Breach of Express and Implied Warranties Defendant argues plaintiff’s warranty claim (Count VIII) should be dismissed on two 17 grounds. First, plaintiff fails to allege that he attempted to enforce the terms of the warranties at 18 issue. Second, Young lacks contractual privity because he purchased the LED Bulbs from a non- 19 party, namely Wal-Mart. The Court addresses each. 20 With respect to the first argument, Cree mischaracterizes plaintiff’s warranty claims. He 21 does not allege that defendant breached the express warranties included on Cree’s product 22 packaging. Rather, he alleges that Cree made representations concerning product life and energy 23 24 25 26 27 28 Second, defendant argues that plaintiff fails to allege detrimental reliance with respect to the negligent misrepresentation claims. Defendant does not persuade. Plaintiff alleges that he relied on defendant’s representations regarding the quality and longevity of defendant’s LED Bulbs. (See CAC ¶¶ 1, 5, 50, 59, 67, 68, 90, 96.) In any event, an inference of reliance is appropriate where the alleged misrepresentations are material. See Vasquez v. Superior Court, 4 Cal.3d 800, 814 (Cal. 1971). 14 1 2 savings which themselves give rise to express warranties regarding the same. (CAC ¶ 115).9 Turning to the second argument, “[u]nder California law, the general rule is that privity of 3 contract is required in an action for breach of either express or implied warranty and that there is 4 no privity between the original seller and a subsequent purchaser who is in no way a party to the 5 original sale.” In re Clorox Consumer Litig., 894 F. Supp. 2d 1224, 1236 (N.D. Cal. 2012) 6 (internal quotation marks omitted) (citing Burr v. Sherwin Williams Co., 42 Cal. 2d 682, 695 (Cal. 7 1954)). However, a “particularized exception[]” to the privity requirement exists as “when the 8 plaintiff relies on written labels or advertisements of a manufacturer.” Clemens v. 9 DaimlerChrysler Corp., 534 F.3d 1017, 1023 (9th Cir. 2008) (citing Burr, 42 Cal. 2d 682, 696 (1954); see also In re Ferrero Litig. 794 F. Supp. 2d 1107, 1118 (S.D. Cal. 2011). Here, plaintiff 11 United States District Court Northern District of California 10 alleges misrepresentations regarding defendant’s product packaging, written labels, and 12 advertisements. (CAC ¶ 2.) Accordingly, privity of contract is not required. See Clemens, 534 13 F.3d at 1023. Defendant’s motion to dismiss plaintiff’s express and implied warranty claims 14 (Count VIII) is DENIED. 2. 15 16 Third Category: 100% Satisfaction Guaranteed Plaintiff’s claims based on the third category of representations arise from allegations that 17 defendant’s LED Bulbs “are sold with packaging which indicates . . . ‘100% Satisfaction 18 Guaranteed.’” (CAC ¶ 15.) With respect to this category Punian illuminates. See Punian v. 19 Gillette Co., 2016 WL 1029607, at *6–8 (N.D. Cal. 2016). There, plaintiffs alleged that 20 defendant’s labels, which stated that Duralock Batteries were “GUARANTEED for 10 YEARS in 21 storage[,]” were misleading because they did not disclose possible leakage from the batteries 22 during that period. Id. at *3, 6. Plaintiff brought numerous claims but in granting defendant’s 23 motion to dismiss, the court found that “[i]n California the use of the term ‘guarantee’ generally 24 creates an express warranty . . . [which] is not a representation that a product has no defects, but 25 rather a promise to repair, replace or refund a failed product.” Id. (citing Cal. Civ. Code § 26 27 28 9 Pursuant to Cal. Com. Code § 2313(a), “[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.” 15 1 2 1791.2(b); Hoey v. Sony Elecs. Inc., 515 F. Supp. 2d 1099, 1104 (N.D. Cal. 2007)). Similarly, the “100% Satisfaction Guarantee[]” at issue here “is not a representation that a 3 product has no defects, but rather a promise to repair, replace or refund a failed product.” Id. 4 Young does not allege that Cree failed to “repair, replace or refund a failed product.” Id. Thus, 5 defendant’s motion to dismiss plaintiff’s claims based on the “100% Satisfaction Guarantee[]” is 6 GRANTED with leave to file an amended complaint to allege, if possible, defendant’s failure to 7 “repair, replace or refund a failed product.” 10 Id. 8 C. 9 Next, defendant argues that Young lacks standing to pursue claims arises from LED Bulbs 10 Standing that he did not purchase. The Court does not agree. United States District Court Northern District of California 11 “[A] Plaintiff may have standing to assert claims for unnamed class members based on 12 products he or she did not purchase so long as the products and alleged misrepresentations are 13 substantially similar.” Brown v. Hain Celestial Grp., Inc., 913 F. Supp. 2d 881, 890 (N.D. Cal. 14 2012); see also Astiana v. Dreyer's Grand Ice Cream, Inc., 2012 WL 2990766, at *11 (N.D. Cal. 15 2012) (“the critical inquiry seems to be whether there is sufficient similarity between the products 16 purchased and not purchased”). “The majority of the courts that have carefully analyzed the 17 question hold that a plaintiff may have standing to assert claims for unnamed class members based 18 on products he or she did not purchase so long as the products and alleged misrepresentations are 19 substantially similar.” Miller v. Ghirardelli Chocolate Co., 912 F. Supp. 2d 861, 869 (N.D. Cal. 20 2012) (noting that “substantial similarity” could be ascertained by examining “product 21 composition” and “whether the alleged misrepresentations are sufficiently similar across 22 product[s]”). 23 Here, plaintiff alleges that he purchased three “100 Watt Standard A-Type” LED Bulbs. 24 (CAC ¶ 32.) The Court finds that Young has standing to assert claims with regard to two other 25 types of LED Bulbs, namely “Reflector (Flood/Spot)” and “Specialty” Bulbs, because plaintiff 26 alleges substantially similar misrepresentations concerning longevity and cost savings. (See CAC 27 10 28 At oral argument, plaintiff’s counsel seemed to suggest that the representation may be circumstantial evidence of other claims. The court takes no position on that argument. 16 1 ¶ 17 (identifying the three types of LED light bulbs manufactured by Cree as “Standard A-Type, 2 Reflector (Flood/Spot), and Specialty; ¶¶ 19–21 (alleged misrepresentations for Standard A-Type); 3 ¶¶ 23–24 (alleged misrepresentations for Reflector); ¶ 25 (alleged misrepresentations for 4 Specialty).) Accordingly, defendant’s motion to dismiss on standing grounds is DENIED. 5 D. Punitive Damages 6 Cree argues that plaintiff’s request for punitive damages under the CLRA fails because he does not allege that “an officer, director, or managing agent of the corporation . . . consciously 8 disregarded, authorized, or ratified each act of oppression, fraud, or malice.” Cal. Civ. Code §§ 9 3294(b); see Kanfer v. Pharmacare U.S., Inc., 142 F. Supp. 3d 1091, 1108 (S.D. Cal. 2015). The 10 Court concurs and finds that dismissal of plaintiff’s request for punitive damages under the CLRA 11 United States District Court Northern District of California 7 is appropriate in this case. Accordingly, defendant’s motion is GRANTED with regard to plaintiff’s request for 12 13 punitive damages under the CLRA with leave to amend to allege, if possible, that “an officer, 14 director, or managing agent of the corporation . . . consciously disregarded, authorized, or ratified 15 each act of oppression, fraud, or malice” now in accordance with this order or 60 days before the 16 close of discovery with leave of the Court should evidence be discovered to support the allegation. 17 Id. 18 IV. 19 20 21 22 CONCLUSION For the reasons set forth above, the Court hereby GRANTS IN PART and DENIES IN PART defendant’s motion to dismiss as follows: 1. On the topic of preemption, the Court: A. GRANTS defendant’s motion to dismiss as to the first category of 23 representations, namely those that reiterate disclosures required to be 24 made on the product’s principal display panel or Lighting Facts label. 25 B. DENIES as to the second category of representations, namely those that 26 present information regarding comparative energy consumption, energy 27 cost savings, and lifespan. 28 C. DENIES as to the third category of representations, namely those that 17 1 present information regarding comparative energy consumption, energy 2 cost savings, and lifespan, namely those that state that Cree’s products 3 are “100% Satisfaction Guaranteed.” 4 2. With respect to the legal sufficiency of the complaint on the second and third 5 categories of representations, the Court: 6 A. GRANTS defendant’s motion on the fraud counts, namely Counts I, II, 7 III and V, with leave to amend to plead reliance and the specific 8 representations on which plaintiff relied. B. 9 GRANTS defendant’s motion on the negligence-based counts, namely Counts VI and IX, with leave to amend regarding whether plaintiff was 11 United States District Court Northern District of California 10 exposed to “independent personal liability.” 12 C. DENIES defendant’s motion as to Count VII for unjust enrichment. 13 D. DENIES defendant’s motion as to Count VIII for breach of express and 14 implied warranties with respect to comparative product life and energy 15 savings. However, the motion as to a claim based on “100% 16 Satisfaction Guaranteed” is GRANTED with leave to allege, if possible, 17 defendant’s failure to “repair, replace or refund a failed product.” 18 3. Defendant’s motion based on standing is DENIED. 19 4. Defendant’s motion with respect to punitive damages is GRANTED with leave to 20 amend now in accordance with this order or 60 days before the close of discovery 21 with leave of the Court should evidence support the allegation. 22 Plaintiff shall file an amended complaint within 21 days of this Order. Defendant shall file 23 its response within 21 after plaintiff’s filing. 24 This terminates Docket Nos. 31, 32. 25 IT IS SO ORDERED. 26 27 Dated: April 9, 2018 YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE 28 18

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