Shloss v. Joyce

Filing 66

Shloss v. Joyce

Doc. 66

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BRIA N R. STRANGE (SBN 103252) [e-mail] GRE T CH E N CARPENTER (SBN 180525) [e-mail] ST R A N G E & CARPENTER 12100 Wilshire Blvd., Suite 1900 Los Angeles, CA 90025 Telephone: [phone] Fax: [phone]

TO D D A. SCHARNHORST [e-mail] JE FFRE Y A. KENNARD [e-mail] CH R ISTO PH ER C. TILLERY [e-mail] SCH A RN H O RST AST & KENNARD, P.C. 1000 Walnut, Suite 1550 Kansas City, MO 64106 Telephone: [phone] Fax: [phone] admitted pro hac vice

MICH A EL L. HODGES [e-mail] HO D G ES LAW FIRM, CHARTERED 13420 Santa Fe Trail Drive Lenexa, KS 66215 Telephone: [phone] Fax: [phone] admitted pro hac vice Attorneys for Plaintiffs Monte Morgan and F. Jason Vasquez

12 UNITED STATES DISTRICT COURT 13 FOR THE NORTHERN DISTRICT OF CALIFORNIA 14 SAN FRANCISCO DIVISION 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
Dockets.Justia.com

MONTE MORGAN and F. JASON VASQUEZ, on behalf of themselves and all others similarly situated, Plaintiffs, vs. HARMONIX MUSIC SYSTEMS, INC., a corporation; MTV NETWORKS, a division of VIACOM INTERNATIONAL, INC., a corporation; ELECTRONIC ARTS, INC., a corporation; and DOES 1 Through 10, Defendants.

Case No. CV 08 5211 BZ PLAINTIFFS' OPPOSITION TO DEFENDANTS' MOTION TO DISMISS AND TO STRIKE CLASS ACTION Date: July 1, 2009 Time: 10:00 a.m. Ctrm.: G Assigned to the Honorable Bernard Zimmerman, Courtroom G Action Filed on November 18, 2008

1 2 3 4 5 6 7 B. 8 9 10 11 12 b. 13 14 15 3. 16 17 18 19 20 21 22 23 24 25 26 27 28 IV. D. C. 4. c. TABLE OF AUTHORITIES . I. II. III. INTRODUCTION .

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 7 7 9 10 . 10 iii 1 1 2 2

LEGAL STANDARD. ARGUMENT A. .

Plaintiffs State a Claim for Breach of Implied Warranty of Merchantability . . . . . . Plaintiffs Have Adequately Alleged Misrepresentations and Omissions Sufficient to State a CLRA Claim. . 1. 2. Plaintiffs Have Alleged Actionable Misrepresentations Plaintiffs Have Alleged Actionable Omissions a. .

The FAC Alleges that Defendants Had Exclusive Knowledge of Material Facts Not Known to Plaintiffs The FAC Alleges that Defendants Actively Concealed A Material Fact from Plaintiffs . . . The FAC Alleges that Defendants Made Partial Representations While Suppressing a Material Fact

Defendants' Arguments Regarding Deceptive Warranty Policy Are A Red Herring . . . .

Plaintiff Monte Morgan Has Standing to Pursue a CLRA Claim Because Defendants' Deceptive Conduct Emanated From California . . . . . . . . . . . . . .

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Plaintiffs Adequately State A Claim Under the UCL . 1. 2. 3. 4. 5. Fraudulent and Deceptive Business Practices. Unfair Business Practices . . . . . .

Unlawful Business Practices .

Plaintiffs Have Standing Under the UCL

The FAC Alleges Conduct That Occurred in California, So Morgan and Non-Resident Class Members Have Valid Claims Under the UCL . . . . . . . . . . . . .

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The Class Definition Is Appropriate . . . . .

CONCLUSION

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TABLE OF AUTHORITIES FEDERAL CASES Anunziato v. eMachines, Inc., 402 F. Supp. 2d 1133 (C.D. Cal. 2005).........................................................................................19 Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101 (6th Cir. 1995)...........................................................................................................1 Daghlian v. DeVry University, Inc., 461 F. Supp. 2d 1121 (C.D. Cal. 2006).........................................................................................18 Falk v. General Motors Corp., 496 F. Supp. 2d 1088 (N.D. Cal. 2007).................................................................7, 8, 9, 14, 15, 17 Freeman v. Time, Inc., 68 F.3d 285 (9th Cir. 1995)...........................................................................................................14 Glen Holly Entertainment, Inc. v. Tektronix, Inc., 352 F.3d 367 (9th Cir. 2003).......................................................................................................1, 3 Hynix Semiconductor Inc. v. Rambus Inc., 2009 WL 541321 (N.D. Cal. 2009)...............................................................................................16 Lozano v. AT & T Wireless Services, Inc., 504 F.3d 718 (9th Cir. 2007).........................................................................................................18 In re Mattel, Inc., 588 F. Supp. 2d 1111 (C.D. Cal. 2008).........................................................................................12 Ticknor v. Choice Hotels Intern., Inc., 265 F.3d 931 (9th Cir. 2001), cert. denied, 534 U.S. 1133 (2002)................................................15 Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008).......................................................................................................6, 8 Witriol v. LEXISNexis Group, 2006 WL 4735713 (N.D. Cal. 2006).............................................................................................18 STATE CASES

22 23 24 25 26 27 28 iii Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss Bardin v. Daimlerchrysler Corp., 136 Cal. App. 4th 1255 (2006)................................................................................................15, 16 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163 (1999).............................................................................................................15, 16 American Suzuki Motor Corp. v. Superior Court, 37 Cal. App. 4th 1291 (1994)..........................................................................................................2 Aron v. U-Haul Co. of Cal., 142 Cal. App. 4th 796 (2006)........................................................................................................17

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Clothesrigger, Inc. v. GTE Corporation, 191 Cal. App. 3d 605 (1987)...................................................................................................20, 21 Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351 (2003)....................................................................................................7, 8 DBJJJ, Inc. v. National City Bank, 123 Cal. App. 4th 530 (2004)..........................................................................................................5 Daugherty v. American Honda, 144 Cal. App. 4th 824 (2006)..............................................................................................7, 10, 15 Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal. 4th 1036 (1999)...........................................................................................................12, 21 Khoury v. Maly's of Cal., Inc., 17 Cal. Rptr. 2d 708 (Cal. App. 1993)...........................................................................................17 Klein v. Earth Elements, Inc., 59 Cal. App. 4th 965 (1997)..........................................................................................................17 Krotin v. Porsche Cars North America, Inc., 38 Cal. App. 4th 294 (1995)............................................................................................................5 Kwan v. Mercedes-Benz of North America, Inc., 23 Cal. App. 4th 174 (1994)............................................................................................................2 LiMandri v. Judkins, 52 Cal. App. 4th 326 (1997)..............................................................................................7, 8, 9, 10 Linear Technology Corp. v. Applied Materials, Inc., 152 Cal. App. 4th 115 (2007)................................................................................................7, 8, 13 McKell v. Washington Mutual, Inc., 142 Cal. App. 4th 1457 (2006)......................................................................................................13 Mirkin v. Wasserman, 5 Cal. 4th 1082 (1993).....................................................................................................................7 Mocek v. Alfa Leisure, Inc., 114 Cal. App. 4th 402 (2003)..........................................................................................................2 Music Acceptance Corp. v. Lofing, 32 Cal. App. 4th 610 (1995)............................................................................................................2 Norwest Mortgage, Inc. v. Superior Court, 72 Cal. App. 4th 214 (1999)....................................................................................................12, 21 Paduano v. American Honda Motor Co., 169 Cal. App. 4th 1453 (2009)........................................................................................................6 People v. Casa Blanca Convalescent Homes, Inc., 159 Cal. App. 3d 509 (1984)...................................................................................................15, 16

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Progressive West Insurance Co. v. Superior Court, 135 Cal. App. 4th 263 (2005)........................................................................................................16 Rosenbluth International, Inc. v. Superior Court, 101 Cal. App. 4th 1073 (2002)......................................................................................................16 Scripps Clinic v. Superior Court, 108 Cal. App. 4th 917 (2003)........................................................................................................16 In re Tobacco II Cases, 2009 WL 1362556 (Cal. 2009)..........................................................................................14, 15, 19 STATE STATUTES

8 Cal. Bus. & Prof. Code §§ 17200, et seq ......................................................................1, 13, 16, 17 9 Cal. Bus. & Prof. Code § 17204 ...................................................................................................17 10 Cal. Civ. Code §§ 1750, et seq.....................................................................................................1, 5 11 Cal. Civ. Code §§ 1790, et seq.........................................................................................................2 12 Cal. Civ. Code § 1791.1(a)..............................................................................................................2 13 Cal. Civ. Code § 1791.1(c) .........................................................................................................3, 4 14 Cal. Civ. Code § 1791.3...................................................................................................................2 15 Cal. Civ. Code § 1792......................................................................................................................2 16 Cal. Comm. Code § 1205.................................................................................................................4 17 18 19 20 21 22 23 24 25 26 27 28 v Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss STATE RULES OF COURT Cal. R. Ct. 8.1115(a)......................................................................................................................17

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I.

INTRODUCTION

Plaintiffs Monte Morgan ("Morgan") and F. Jason Vasquez ("Vasquez") bring this class action against Harmonix Music Systems, Inc., MTV Networks, Viacom International, Inc., and Electronic Arts, Inc. (collectively "Defendants") alleging breach of implied warranties of merchantability,1 violations of California's Consumers Legal Remedies Act, California Civil Code §§ 1750, et seq. ("CLRA") and violations of California's Unfair Competition Law, California Business & Professions Code §§ 17200, et seq. ("UCL"), in connection with Defendants' marketing and sale of the Rock Band video game. In their First Amended Complaint ("FAC"), Plaintiffs allege that Defendants marketed Rock Band as a multi-player video game in which players "simultaneously and cooperatively play together in a virtual rock band." FAC at ¶ 18. Players used "peripherals," including a guitar, a drum kit, and a microphone, to play the game. FAC at ¶ 19. However, part of the drum kit peripheral, the bass drum pedal, was defective, and would crack during its normal and expected use. FAC at ¶ 24. Despite their knowledge of this defect, Defendants continued to sell and market the Rock Band game, as well as selling the defective Rock Band drum kit separately. FAC at ¶ 26. On May 11, 2009, Defendants filed this Motion to Dismiss and Motion to Strike ("Motion"). Defendants' Motion should be denied for the reasons stated below.2 II. LEGAL STANDARD

On a motion to dismiss, "All allegations of material fact in the complaint are regarded as true and construed in the light most favorable to [Plaintiffs]." Glen Holly Entertainment, Inc. v. Tektronix, Inc., 352 F.3d 367, 368 (9th Cir. 2003). "When an allegation is capable of more than one inference, it must be construed in the plaintiff's favor." Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995).

Plaintiffs are no longer pursuing their Second Cause of Action for Breach of Implied Warranty of Fitness for a Particular Purpose. At the very least, to the extent this Court is inclined to grant any part of this Motion, Plaintiffs request leave to amend to file a second amended complaint to cure any perceived deficiencies. 1 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
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III.

ARGUMENT

Plaintiffs State a Claim for Breach of Implied Warranty of Merchantability In their FAC, Plaintiffs allege that by selling the Rock Band drum kit with a defective

pedal, Defendants breached the implied warranty of merchantability. (FAC at ¶¶ 51­55). In their Motion, Defendants argue that Plaintiffs fail to state a claim for breach of the implied warranty of merchantability, relying upon the 60-day durational limit set forth in Defendants' written express warranty for Rock Band and a specific provision of the Song Beverly Consumer Warranty Protection Act, Cal. Civ. Code. §§ 1790, et seq. Defendants' restriction of their implied warranty to just 60 days, on a product they knew was defective, is invalid under the very statute upon which Defendants rely. Plaintiffs therefore state a claim for breach of the implied warranty of merchantability. Defendants' Motion should be denied. The implied warranty of merchantability is independent of a merchant's express warranty. See Music Acceptance Corp. v. Lofing, 32 Cal.App.4th 610, 619 (1995) (comparing express vs. implied warranties). "Unlike express warranties, which are basically contractual in nature, the implied warranty of merchantability arises by operation of law," essentially promising consumers that the products they buy will be fit for the ordinary purposes for which such products are used. Mocek v. Alfa Leisure, Inc., 114 Cal.App.4th 402, 406 (2003) (quoting American Suzuki Motor Corp. v. Superior Court, 37 Cal.App.4th 1291, 1295-96 (1994)); see Cal. Civ. Code § 1791.1(a). Under the Song Beverly Consumer Warranty Act (the"Act"), the implied warranty of merchantability generally cannot be disclaimed, except with specific red-flag disclaimer language (i.e., "as is" and "with all faults"). Lofing, 32 Cal.App.4th at 619 & n.10; Cal. Civ. Code §§ 1791.3 & 1792 (providing that implied warranties cannot be disclaimed except as expressly set forth in Act; authorizing disclaimer of implied warranties using "red flag" language). "[T]he Act is manifestly a remedial measure, intended for the protection of the consumer; it should be given a construction calculated to bring its benefits into action." Kwan v. Mercedes-Benz of North America, Inc., 23 Cal.App.4th 174, 184 (1994); accord Lofing 32 Cal.App.4th at 619. In their Motion, Defendants attempt to distort this remedial, consumer-protection Act to favor merchants, not consumers. In their express written warranty, Defendants attempted to 2 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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completely disclaim the implied warranty of merchantability accompanying Rock Band altogether, but failed to use the "red flag" language required by the Act, such that an effective disclaimer did not occur. (See Rock Band express written warranty, attached as Exhibit A to the Declaration of Richard Simon accompanying Defendants' Motion) ("Disclaimer of Other Warranties/Remedies").3 Nevertheless, despite their failed attempt to disclaim, Defendants assert that Plaintiffs still cannot assert a claim for breach of the implied warranty of merchantability because: (1) under the terms of Rock Band's written warranty, the duration of Defendants' implied warranty of merchantability was the same as the duration of their express warranty; (2) therefore, Defendants' implied warranty expires just "60 days from the date of original purchase;" (3) Plaintiffs' drum pedals broke more than 60 days after purchase; and (4) finally, the Act ­ and specifically Cal. Civ. Code § 1791.1(c) ­ expressly permits Defendants to restrict the duration of their implied warranty to just 60 days. (Motion at 10:4-12:4). However, because Defendants' purported 60-day restriction is invalid under the very provision of the Act upon which Defendants rely (Cal. Civ. Code § 1791.1(c)), Plaintiffs state a claim for breach of the implied warranty of merchantability. Section 1791.1(c) states: The duration of the implied warranty of merchantability . . .shall be coextensive in duration with an express warranty which accompanies the consumer goods, provided the duration of the express warranty is reasonable; but in no event shall such implied warranty have a duration of less than 60 days nor more than one year following the sale of new consumer goods to a retail buyer. Cal. Civ. Code. § 1791.1(c) (emphasis added). In the instant case, the Act's requirement that the duration of any warranty be "reasonable" invalidates Defendants' purported 60-day restriction on their implied warranty of

Furthermore, Defendants' argument that they completely disclaimed the implied warranty of merchantability is inappropriate for decision on a motion to dismiss. As stated above, the Court is required to accept as true the allegations of the FAC. Glen Holly Entertainment, Inc., 352 F.3d at 368. The FAC alleges that "Defendants impliedly warranted that each of the components of the Rock Band drum kit, including the bass drum pedal, were of merchantable quality and would perform adequately under ordinary and expected usage." FAC at ¶ 52. Defendants' attempt to dispute this allegation of the FAC is inappropriate at this stage of the litigation. 3 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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merchantability. Defendants' 60-day restriction is decidedly "unreasonable," and therefore invalid under the Act, because: (1) 60 days is the bare minimum duration allowed by § 1791.1(c); (2) Defendants knew the pedals were defective, but continued to sell them to consumers anyway; (3) even the Defendants did not enforce the purported 60-day restriction, but instead replaced pedals that broke more than 60 days after original purchase, suggesting that Defendants themselves knew the purported 60-day restriction was unreasonable; (4) Plaintiffs Morgan's, and possibly Vasquez's, individual claims demonstrate that Defendants' drum pedals broke or tended to break just beyond the 60-day period ­ rendering Defendants' express written warranty and limited implied warranty basically illusory; and (5) as Defendants are aware, Rock Band is frequently given as a gift, and therefore might not even be opened, used and discovered defective by the gift recipient until well into or after 60 days from the original purchase. (See Cal Civ. Code § 1791.1(c) & FAC at ¶¶ 26, 28, 31, & 37-42). Defendants assert that Plaintiffs' claims for breach of implied warranty should be dismissed not because there is a record that Defendants' 60-day implied warranty is reasonable under the Act, but because "Plaintiffs do not [expressly] allege that a 60-day warranty period for the Rock Band drum kit is unreasonable." (Defs.' Motion at p. 11). Apparently, Defendants failed to read the FAC. Plaintiffs expressly complain that "Defendants' refusal to . . . replace defective Rock Band drum pedals more than 60 days after purchase is unfair, deceptive and damaging to consumers." (FAC at ¶¶ 28-31) (emphasis added). Moreover, Plaintiffs' FAC expressly asserts that it is "patently unfair and unreasonable" that Defendants' refusal to "make exceptions to [their] warranty program" would deprive a replacement pedal to consumers who purchased Rock Band on October 26 as a Christmas present, such that the product was not opened and discovered defective until 60 days later (i.e., Christmas Day). (FAC at ¶ 31) (emphasis added). Under California law, what is "reasonable" or whether a time for taking a particular action is "reasonable" (in this case, the discovery and return of a defective product) depends on the circumstances and therefore is a question of fact. See Cal. Comm. Code § 1205 ("Whether a time for taking an action . . . is reasonable depends on the nature, purpose and circumstances of 4 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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the action."); see also Krotin v. Porsche Cars North America, Inc., 38 Cal.App.4th 294, 304-05 (1995) (in action for breach of implied warranty under the Act, the issue of whether buyers had rejected or revoked acceptance of a vehicle within a reasonable time was submitted to the jury); DBJJJ, Inc. v. National City Bank, 123 Cal.App.4th 530 (2004) (in letter of credit case, reversing summary judgment because bank's notice of refusal to issue letter of credit within seven days was not necessarily reasonable, even though Uniform Customs and Practices for Documentary Credits that governed transaction expressly permitted "a reasonable time, not to exceed seven banking days" for bank to give notice of refusal). In the instant case, Defendants admit that Rock Band was not merchantable, at least for purposes of their Motion. (Motion at 10, n. 1). Yet Defendants ask the Court to dismiss Plaintiffs' implied warranty claims by finding ­ just on the pleadings ­ that a 60-day restriction on Defendants' implied warranty of merchantability was "reasonable," despite Plaintiffs' numerous allegations that Defendants' 60-day warranty was blatantly unreasonable, unfair and deceptive. (See FAC at ¶¶ 26, 28, 31, & 37-42). Given the remedial purposes of the Act and the necessarily factual inquiry of whether Defendants' 60-day restriction was "reasonable," Defendants' Motion should be denied. Plaintiffs state a claim for breach of the implied warranty of merchantability. The Court should deny Defendants' Motion to Dismiss. B. Plaintiffs Have Adequately Alleged Misrepresentations and Omissions Sufficient to State a CLRA Claim Defendants argue that Plaintiffs have failed to allege either affirmative misrepresentations

21 or sufficient omissions to support a claim under the CLRA, Cal. Civ. Code §§ 1750, et seq. This 22 argument misrepresents both the substance of the FAC and relevant case law. Plaintiffs have 23 alleged both misrepresentations and omissions sufficient to state a claim for violation of the 24 CLRA. 25 1. 26 While Defendants attempt to portray this case as one based on pure omissions, this 27 mischaracterizes Plaintiffs' allegations, which also clearly include allegations of actionable 28 affirmative misrepresentations ­ such as, for example, Defendants' representations and 5 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss Plaintiffs Have Alleged Actionable Misrepresentations

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advertising that the Rock Bank video game could be played with a full band, including drums. See Paduano v. American Honda Motor Co., 169 Cal.App.4th 1453, 1470­71 (2009) (holding that a fact finder could find the statement "Just drive the Hybrid like you would a conventional car, while saving on fuel bills," to be a misrepresentation when Hybrid could not save on fuel bills if driven exactly like a conventional car); Williams v. Gerber Products Co., 552 F.3d 934, 939 (9th Cir. 2008) (marketing of "fruit juice snack" was likely deceptive where, inter alia, packaging contained pictures of various fruits, but the only fruit juice contained in the snack was white grape juice from concentrate). In fact, the FAC includes numerous allegations of affirmative misrepresentations. See, e.g., FAC, ¶ 5 ("Without a functioning bass drum foot pedal, consumers are unable to use the Rock Band drum kit or play the Rock Band game in the manner marketed and advertised by Defendants, thus depriving them of the value and enjoyment of their purchases."); ¶ 9 ("As a result of Defendants= actions, Plaintiffs and members of the proposed class have been unable to play the Rock Band video game as advertised without incurring significant additional costs to repair their existing drum pedals and/or obtain replacement pedals from Defendants or other third parties."); ¶ 24 ("Unbeknownst to Plaintiffs and members of the proposed class, and contrary to Defendants= advertisements and representations, the bass drum pedal contained in the Rock Band drum kit is defective."); ¶ 71(A) and (C) ("In particular, the following acts, among others, constitute deceptive representations and/or unfair and deceptive business practices: A. Defendants= manufacturing, marketing, distributing, and selling defective products, while expressly and impliedly representing that such products are of a certain standard or quality . . . C. Defendants= advertising that the Rock Band drum kit is of a suitable quality to use while playing the Rock Band video game.")4 These allegations of affirmative misrepresentations are sufficient in and of themselves to state a claim for violation of the CLRA, and Defendants' Motion to dismiss this claim should be denied for this reason alone.

While some of these allegations follow the CLRA claim in the FAC, in paragraph 61 of the FAC, Plaintiffs expressly "repeat, reiterate, and reallege each and every allegation contained in the preceding and subsequent paragraphs, with the same force and effect as though the same were set forth at length herein." (emphasis added). 6 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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2.

Plaintiffs Have Alleged Actionable Omissions

In addition to their allegations of affirmative misrepresentations, Plaintiffs have alleged actionable omissions sufficient to state a claim under the CLRA. Defendants cite Daugherty v. American Honda, 144 Cal.App.4th 824, 835 (2006), for the proposition that an omission is only actionable under the CLRA if "the omission [is] contrary to a representation actually made by the defendants, or an omission of a fact the defendant was obliged to disclose." Id. Defendants, however, fail to cite case law further explaining when an omission is actionable. Had they done so, it would have been clear that Defendants' omissions are actionable under the CLRA as well. Under California law, There are four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. LiMandri v. Judkins, 52 Cal.App.4th 326, 336 (1997) (internal quotation marks and citations omitted). In Falk v. General Motors Corp., 496 F.Supp.2d 1088 (N.D. Cal. 2007), Judge Alsup of this Court relied on these so-called Judkins categories when determining that the defendant's omissions regarding its defective speedometers violated the CLRA. Id. at 1095. As discussed below, three of these factors are met here as well. a. The FAC Alleges that Defendants Had Exclusive Knowledge of Material Facts Not Known to Plaintiffs

An omission is actionable under the CLRA when "the defendant had exclusive 21 knowledge of material facts not known to the plaintiff." Falk, 496 F.Supp.2d at 1095 (quoting 22 Judkins, 52 Cal.App.4th at 337). Plaintiffs allege in the FAC both that Defendants omitted 23 material facts, and that Defendants had exclusive knowledge of these facts. 24 An omission is material for purposes of the CLRA if a reasonable consumer would have 25 behaved differently had the omitted information been disclosed. Falk, 496 F.Supp.2d at 1095 26 (citing Mirkin v. Wasserman, 5 Cal.4th 1082, 1093 (1993), and Consumer Advocates v. Echostar 27 Satellite Corp., 113 Cal.App.4th 1351, 1360 (2003)). As an initial matter, this inquiry is a 28 question of fact, not properly decided in connection with a motion to dismiss. Linear 7 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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Technology Corp. v. Applied Materials, Inc., 152 Cal.App.4th 115, 134-135 (2007) ("Whether a practice is deceptive, fraudulent, or unfair is generally a question of fact which requires `consideration and weighing of evidence from both sides' and which usually cannot be made on demurrer."); Echostar, 113 Cal.App.4th at 1361­62 (finding that a triable issue of fact existed regarding "whether... representations are likely to deceive a reasonable consumer"); Williams v. Gerber Products Co., 552 F.3d 934, 938 (9th Cir. 2008) ("California courts, however, have recognized that whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer."). Nevertheless, Plaintiffs have clearly alleged that the defective nature of the Rock Band drum pedal is material: Unlike other competitive music-based products on the market prior to October 2008, such as Guitar Hero® and Karaoke Revolution®, Rock Band enables up to four players to simultaneously and cooperatively play together in a virtual rock band. This first-of-its-kind multi-player feature of Rock Band has generated intense interest and consumer demand through the United States and the world. FAC at ¶ 18. The FAC refers to the ability to play the drum parts of the Rock Band game as "one

15 of the principal benefits that led consumers to purchase the Rock Band game over other 16 competitive products." Id. at ¶ 25. Consumer demand for Rock Band was driven in large part by 17 the promise that a player could play the game as a drummer. Plaintiffs have clearly alleged that 18 Defendants' omission was material. 19 Not only was the omission material, but Defendants also had exclusive knowledge of the 20 omitted fact. Judkins, 52 Cal.App.4th at 337. In Falk, this Court determined that GM had 21 exclusive knowledge of a defect because "only GM had access to the aggregate data from its 22 dealers, only GM had access to pre-release testing data, and only GM had access to the numerous 23 complaints from its customers." Falk, 496 F.Supp.2d at 1096 (internal quotation marks and 24 brackets omitted). The Court acknowledged that consumers could have gone online to read 25 customer complaints about GM's defective product, but rejected the argument that this would 26 defeat the claim that GM had "exclusive" knowledge." Id. at 1097 ("Many customers would not 27 have performed an Internet search before beginning a car search. Nor were they required to do 28 so."). 8 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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Plaintiffs allege in the FAC that Defendants had exclusive knowledge of the defect in the Rock Band drum pedals. The FAC explicitly alleges that consumers did not have knowledge of the defect in the drum pedal. FAC at ¶ 24. The FAC also alleges that "almost immediately after Defendants began marketing and selling their Rock Band game and peripherals to consumers in the United States, Defendants began receiving thousands of complaints from consumers whose bass drum pedals broke." FAC at ¶ 26. The only way the class members could have knowledge of the defect is by experiencing the problem for themselves, or by scouring the Internet for complaints about the drum pedal. In other words, Plaintiffs have pleaded the exact same circumstances as the situation in Falk, where this Court held that the defendants had exclusive knowledge of the product defect at issue for purposes of this Judkins inquiry. b. The FAC Alleges that Defendants Actively Concealed a Material Fact from Plaintiffs

Defendants' omissions with respect to the defective nature of their drum pedal is also 13 actionable under the CLRA because Defendants actively concealed a material fact. As discussed 14 above, the defective nature of the Rock Band drum pedal was a material fact for purposes of the 15 CLRA. All that remains to be determined is whether that material fact was actively concealed by 16 the Defendants. In Falk, this Court determined that plaintiffs adequately pled that GM actively 17 concealed defects in its speedometers by alleging that "various GM customers complained 18 between 2003 and 2007 yet GM never made any attempt to notify other customers or effect a 19 recall," and that "GM tried to gloss over the problems with its speedometers by replacing broken 20 ones with the exact same model of speedometer, thereby giving the impression that any defects 21 were unique cases." Falk, 496 F.Supp.2d at 1097. 22 Plaintiffs in this case have pled at least as much as the Falk plaintiffs to show active 23 concealment. Defendants received thousands of complaints about broken drum pedals as soon as 24 Rock Band was released. FAC at ¶ 26. Defendants' warranty offered to replace the broken drum 25 pedals with other, equally defective pedals. FAC at ¶ 27. Defendants continue to market and sell 26 the Rock Band drum kit with the defective pedal. FAC at ¶ 26. When the Defendants finally did 27 design a new drum kit with a sturdier metal drum pedal, they did not offer it as a replacement for 28 those consumers whose defective plastic pedals had broken, but instead used it as an incentive to 9 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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consumers to purchase Defendants' new Rock Band 2 video game. FAC at ¶¶ 32­36. Therefore, Plaintiffs have adequately alleged active concealment sufficient to state a claim for violation of the CLRA as well. c. The FAC Alleges that Defendants Made Partial Representations While Suppressing a Material Fact

In addition to satisfying the requirements of the Judkins categories discussed above, and 6 even if this Court does not view Defendants' affirmative misrepresentations as sufficient in 7 themselves to state a CLRA claim, the FAC also states an actionable CLRA claim because 8 Defendants made partial representations while also suppressing a material fact. As stated above, 9 Defendants marketed the Rock Band game as a multi-player game in which the players could play 10 the roles of an entire band, including a drummer. FAC at ¶ 18. The representations Defendants 11 made regarding the multi-player nature of the Rock Band game omitted the fact that consumers 12 would not be able to successfully play the game as intended with a drummer unless they 13 purchased a sturdier after-market drum kit or replacement drum pedal. This omitted fact is 14 contrary to Defendants' representations regarding the game, and thus is an actionable omission 15 (as well as an actionable affirmative misrepresentation). See Daugherty, 144 Cal.App.4th at 835 16 ("stating that an omission is actionable under the CLRA if "the omission [is] contrary to a 17 representation actually made by the defendants"). 18 3. 19 20 21 22 23 24 25 26 27 28 10 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss Defendants' Arguments Regarding Deceptive Warranty Policy Are A Red Herring

In their Motion, Defendants also claim that Plaintiffs' allegations of an unfair warranty policy are their "only" CLRA theory, and then argue that this theory is not actionable under the CLRA. Motion at 17:18­19:5. However, Defendants' argument is not directed at any of Plaintiffs' actual claims. It is a red herring which this Court should ignore. The FAC alleges that from November 2007 to September 2008, Defendants made an exception to their warranty policy, honoring customer requests to replace defective peripherals beyond the sixty day warranty period. FAC at ¶ 28. Then, shortly before announcing the release of Rock Band 2 (which included an "improved" drum kit with a sturdy, metal plate in the drum

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pedal), Defendants announced that they would strictly enforce the requirements of the warranty policy. Id. at ¶¶ 29­30. While Defendants' refusal to continue making exceptions to their warranty policy is certainly unfair, both in light of the defective nature of their product, and the fact that many consumers purchase Defendants' product as, for example, a Christmas present, months before it will ever be used, see FAC ¶ 31, not only is this not Plaintiffs' "only" CLRA claim, but, in fact, this is not even one underlying basis of the CLRA claim alleged in the FAC. As discussed throughout this opposition, at the heart of Plaintiffs' complaint is Defendants' marketing of Rock Band as a multi-player game including a drummer, when in reality Defendants' drum kit was so defective that the game could not be played as marketed, unless one invested in an after-market drum kit or drum pedal. In the end, Defendants' argument regarding the "deceptive warranty policy" allegations do nothing but distract from the more important role those allegations play in the FAC. The FAC alleges that Defendants were aware of the defective nature of their products, and exploited that defect to increase sales of their new video game, Rock Band 2. This knowledge of the defect, along with their decision to use it to their gain, contribute to the fraudulent, unlawful, and unfair conduct at issue in the FAC, but they do not alone provide an underlying basis for a claim under the CLRA. 4. Plaintiff Monte Morgan Has Standing to Pursue a CLRA Claim Because Defendants' Deceptive Conduct Emanated From California

Defendants argue that Plaintiff Monte Morgan lacks standing to bring a CLRA claim 21 because he is not a California resident and he does not allege that he purchased Rock Band in 22 California. Defendants' contention that "the CLRA is only available to California plaintiffs to 23 24 the contrary, CLRA claims are appropriately brought by non-California consumers based on 25 conduct emanating from California, as Plaintiffs have alleged here. 26 27 28 Defendants make this same argument in relation to Plaintiffs' UCL claims, as well as in relation to Plaintiffs' class definition. 11 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
5

regulate conduct in California" (Motion at 19:8-9) is a blatant misrepresentation of the law.5 On

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According to Defendants, "Morgan lacks standing to bring a CLRA claim as the CLRA is only available to California plaintiffs to regulate conduct in California." Motion at 19:8­9. This is blatantly false, as "state statutory remedies may be invoked by out-of-state parties when they are harmed by wrongful conduct occurring in California." Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214, 224-225 (1999). See also Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal.4th 1036, 1063 (1999) ("While petitioners and several amici curiae argue that California has no legitimate interest in protecting out-of-state investors, it has a clear and substantial interest in preventing fraudulent practices in this state which may have an effect both in California and throughout the country. . . . Even assuming arguendo that California had no interest in protecting investors in other states, the Legislature may reasonably conclude that California does have a legitimate interest in discouraging unlawful conduct that has a potential to harm California investors as well as persons in other states. . . ."). Even if Defendants meant to say that the CLRA is only available to California plaintiffs or to regulate conduct in California, they would still be incorrect in concluding that Plaintiff Morgan lacks standing. In In re Mattel, Inc., 588 F.Supp.2d 1111 (C.D. Cal. 2008), for example, the court held that "Plaintiffs have adequately alleged that [Defendants'] conduct occurred, if at all, in -- or had strong connections to -- California" where "Plaintiffs complain[ed] of misrepresentations made in reports, company statements, and advertising that are reasonably likely to have come from or been approved by Mattel corporate headquarters in California." Id. at 1119. Like in Mattel, the representations and omissions made by Defendants were likely to have come from or been approved by Defendant Electronic Arts, which is based in California. FAC at ¶ 15. Electronic Arts was not only the official "distributor" of Rock Band, id., but a press release alleged in the FAC describes Electronic Arts as a "marketing and distribution partner." Id. at Exh. 4. As a "marketing partner," it is clear that Electronic Arts played a major role in the misconduct alleged in the FAC, and Electronic Arts was playing that role from its headquarters in California. Even if Electronic Arts had only been involved as a distributor, this would still mean that the defective drum pedals were being shipped to retailers by a corporation headquartered in California, creating a strong tie between the sale of these defective products and the state of 12 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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California. See also FAC, ¶¶ 2 ("[Defendants'] acts or omissions giving rise to Plaintiffs' claims occurred and/or caused injury in the State of California.") (emphasis added). These allegations are sufficient to state a claim under the CLRA for Morgan and the nationwide class he seeks to represent.6 C. Plaintiffs Adequately State A Claim Under the UCL The FAC also adequately states a claim under California's UCL, Cal. Bus. & Prof. Code §§ 17200, et seq. Defendants' conduct as alleged in the FAC satisfies the requirements of unlawful, unfair, and fraudulent business practices for purposes of the UCL (although only one of the three prongs is even required in order to state a claim). Furthermore, "[w]hether a practice is deceptive, fraudulent, or unfair [for purposes of the UCL] is generally a question of fact which requires `consideration and weighing of evidence from both sides' and which usually cannot be made on demurrer." Linear Technologies Corp. v. Applied Materials, Inc., 152 Cal.App.4th 115, 134­35 (2007) (quoting McKell v. Washington Mutual, Inc., 142 Cal.App.4th 1457, 1473 (2006)). Additionally, Defendants' standing arguments lack merit, because both Plaintiffs meet the requirements of Proposition 64 (i.e., they have "suffered injury . . . as a result of" Defendants' conduct) and because Defendants' violations of the UCL occurred in California. /// /// /// /// /// /// /// ///
6

In fact, Defendants defeat their own argument by including a copy of the Rock Band "Limited Warranty" as Exhibit A to the Simon Declaration. The warranty itself purports to be from Electronic Arts, and provides a mailing address in Redwood City, California. Simon Decl., Exh. A. Defendants cannot claim that the alleged behavior is not sufficiently tied to California while simultaneously relying on documents showing that their representations to consumers originated in California. 13 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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1.

Fraudulent and Deceptive Business Practices

Plaintiffs have alleged false statements and advertising as well as omissions7 which qualify as fraudulent and deceptive business practices under the UCL. As discussed in more detail in the CLRA section of this brief, the FAC alleges numerous misrepresentations made by the Defendants ­ for example, Defendants' representations and advertising that the Rock Bank video game could be played with a full band, including drums. Additionally, as discussed in the CLRA section, Defendants' omissions regarding the defective nature of their product are considered fraudulent under California law because Defendants had exclusive knowledge of material facts, because they actively concealed material facts, and because they made partial representations while suppressing material facts. For misrepresentations or omissions to be actionable under the UCL, "it is necessary only to show that members of the public are likely to be deceived." In re Tobacco II, -- Cal. Rptr. 3d --, 2009 WL 1362556 at *5 (Cal. 2009) (internal quotation marks and citations omitted); Falk, 496 F.Supp.2d at 1098. In Falk, the plaintiffs satisfied this requirement by alleging that a reasonable consumer would expect a speedometer to last the life of the car. Id. Defendants seem to have seized on this aspect of Falk (although they do not mention the case anywhere in their motion), and argue that "Plaintiffs have not alleged any facts... that give rise to an implication that the drum kit controllers were guaranteed to be free of defects for life." Motion at 20:14­15. This argument ignores the actual theory of Plaintiffs' case. Plaintiffs do not allege that Defendants deceived consumers into believing that the Rock Band peripherals, including the drum kit, would last forever. Rather, Plaintiffs allege that consumers were deceived into believing that the Rock Band game could be played with one

Defendants claim that "[t]he `fraudulent' prong [of the UCL] requires a plaintiff to allege a false statement or advertising that is likely to deceive a reasonable consumer," citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995) for this proposition. Motion at 20:7­8. While the "reasonable consumer" standard does apply to this prong of the UCL, Freeman does not stand for the proposition that a claim under this prong of the UCL requires "a false statement or advertising" (although Plaintiffs have nevertheless alleged such statements and advertising). In fact, that phrase is nowhere to be found in Freeman, and the issue of whether an omission could be considered "fraudulent" for purposes of the UCL was not addressed in the opinion. 14 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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participant playing the drums (using the Rock Band drum kit), when in reality, the Rock Band drum kit would break when used for such purpose.8 In other words, this case is not analogous to cases such as Bardin, Daugherty, and Falk, in which a defective car part would wear out or become dislodged over time; this case is more like one in which a defective part causes a car to simply fall apart once it reaches 45 mph. A reasonable consumer who purchases a Rock Band drum kit will expect it to be strong enough to withstand the use required to successfully play the game. This is the basis of Plaintiffs' UCL claim. Defendants further misstate the law by arguing that "the UCL requires... that the Plaintiffs -- or any proposed class member -- actually saw" the misrepresentations made by the Defendants. Motion at 20:16­17. As an initial matter, the California Supreme Court has very recently made clear that the UCL does not require "individualized proof of deception, reliance and injury" for all proposed class members. In re Tobacco II Cases, 2009 WL 1362556 at *12. Rather, only the representative plaintiffs must allege that they relied. Furthermore, the California Supreme Court expressly ruled that plaintiffs asserting UCL claims based on fraud or deception are "not required to plead with an unrealistic degree of specificity that the plaintiffs relied on particular advertisements or statements" in order to state a claim under the UCL. Id. at *17. Plaintiffs' allegations of fraudulent/deceptive conduct are certainly sufficient under this very recent pronouncement of the California Supreme Court. 2. Unfair Business Practices

The FAC sufficiently states a claim under the "unfair" prong of the UCL as well. As Defendants correctly note, People v. Casa Blanca Convalescent Homes, Inc., 159 Cal.App.3d 509 (1984) defines unfair business practices as those which "offend[] an established public policy or [are] immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers." Id. at 530.9 The current form of the Casa Blanca test requires "the court [to] weigh

The FAC makes clear that this is not a case in which a product just tends to wear out over time; consumers began reporting broken drum pedals almost immediately after the game was released. FAC at ¶ 26. Although Casa Blanca has been abrogated in regard to non-consumer cases, see Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (1999), its holding, 15 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
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8

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the utility of the defendant's conduct against the gravity of the harm to the alleged victim." Progressive West Ins. Co. v. Superior Court, 135 Cal.App.4th 263, 285 (2005). What Defendants fail to mention is that "[t]he balancing test required by the unfair business practice prong of section 17200 is fact intensive and is not conducive to resolution at the demurrer stage." Id. at 287. Without a development of the factual record through discovery, it is impossible to determine whether the utility of Defendants' behavior outweighs the harm caused to consumers. However, significantly, the FAC does allege that Defendants knew about the defect in their product, were able to remedy that defect in the drum kit they designed for their Rock Band 2 game, but continued to market their defective pedal to players of the original Rock Band game anyway. FAC at ¶¶ 26­36. These allegations more than adequately plead a claim under the "unfair" prong of the UCL. 3. Unlawful Business Practices

The allegations of the FAC also satisfy the requirements of the "unlawful" prong of the UCL.10 As discussed above, Plaintiffs have adequately stated a claim under the CLRA, which

and those of the cases following it, is still applicable to consumer cases under the UCL. Defendants also cite an "alternate line" of cases, based on Scripps Clinic v. Superior Court, 108 Cal.App.4th 917 (2003), which "require that the public policy which is a predicate to the action must be `tethered' to specific constitutional, statutory or regulatory provisions." Scripps Clinic, 108 Cal.App.4th at 940. Scripps Clinic, however, is a rare consumer action under the UCL to follow the holding of Cel-Tech, which was itself limited to actions brought by competitors. See Cel-Tech, 20 Cal.4th at 187. Scripps Clinic itself has primarily been followed by courts in non-consumer cases, e.g. Hynix Semiconductor Inc. v. Rambus Inc., --- F.Supp.2d ----, 2009 WL 541321 (N.D. Cal. 2009), while courts have analyzed subsequent consumer class actions under both the Scripps and Casa Blanca tests, only dismissing the UCL claims when they fail under both tests, e.g. Bardin v. Daimlerchrysler Corp., 136 Cal.App.4th 1255 (2006). Regardless, Plaintiffs' claims would still survive under the Scripps Clinic test, because Plaintiffs alleged a violation of their rights under the CLRA. Defendants also make the confusing argument that an action under the "unlawful" prong of the UCL "cannot be bootstrapped to a breach of warranty, unless the breach is unlawful for some independent reason." Motion at 21:13­14. While Plaintiffs do allege that Defendants' conduct is "unlawful for some independent reason," because it violates the CLRA (and Plaintiffs do not purport to allege an "unlawful" practice based on Defendants' breaches of their warranties), it is nevertheless worth noting that the cases Defendants cite to support this argument are completely inapposite. In Rosenbluth Int'l, Inc. v. Superior Court, 101 Cal.App.4th 1073 (2002), the court was dealing with a representative action brought under the UCL on behalf of several large, sophisticated businesses, 16 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
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can form the basis of an "unlawful" business practice under the UCL as well. Falk, 496 F.Supp.2d at 1098 ("[P]laintiffs successfully plead that GM violated the CLRA.... Therefore, when taking all of plaintiffs' allegations as true, GM has committed an unlawful practice under the UCL.). 4. Plaintiffs Have Standing Under the UCL

Defendants next challenge the standing of both Plaintiffs to bring a UCL action, arguing that Plaintiff Vasquez "cannot have been damaged by anything Defendants did," Motion at 23:18­19, and Morgan lacks standing because he allegedly cannot show reliance. Motion at 23:23­24:2. Both of these arguments lack merit. California Businesses and Professions Code Section 17204 allows private individuals to bring UCL actions when the plaintiff "has suffered injury in fact and has lost money or property as a result of the unfair competition." The FAC specifically alleges the injuries in fact suffered by both Plaintiffs. FAC at ¶¶ 37­42. With respect to Plaintiff Vasquez, he alleges that his Rock Band drum pedal broke, resulting in a loss of property (the drum pedal) until Vasquez expended money (another loss) to repair it. FAC at ¶ 42. This is sufficient to state a claim under the UCL. See Aron v. U-Haul Co. of Cal., 142 Cal.App.4th 796, 802­03 (2006) (finding sufficient loss of money under Proposition 64 where plaintiff alleged that he purchased excess fuel to avoid refueling charge upon return of

not consumers. There, the court specifically acknowledged the "fitting distinction between actions brought to assert the claims of individual consumers under section 17200, which lend themselves well to representative UCL cases, and actions that involve sophisticated business finance issues, which do not." Id. at 1077. The unpublished decision in Khoury v. Maly's of Cal., Inc., 17 Cal. Rptr. 2d 708 (Cal. App. 1993), which is not even properly citeable, Cal. R. Ct. 8.1115(a) ("[A]n opinion of a California Court of Appeal or superior court appellate division that is not certified for publication or ordered published must not be cited or relied on by a court or a party in any other action."), involved an action by a retailer against a distributor, and thus is equally unhelpful when dealing with a consumer class action under the UCL. In Klein v. Earth Elements, Inc., 59 Cal.App.4th 965 (1997), the court held that "the unintentional distribution of a defective product is beyond the scope and policy of the "unlawful" prong of section 17200." Id. at 969. Here, however, Plaintiffs have alleged much more than the unintentional distribution of a defective product. The FAC alleges that Defendants knowingly marketed and sold a product they knew to be defective, FAC at ¶ 26, even going so far as exploiting that defect to encourage the purchase of their sequel to Rock Band. FAC at ¶¶ 30­36. Therefore, these cases are inapplicable. 17 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss

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rental truck); Witriol v. LexisNexis Group, 2006 WL 4735713 (N.D. Cal. 2006) ("costs associated with monitoring and repairing credit impaired by the unauthorized release of private information" were sufficient loss to state a claim under UCL); Daghlian v. DeVry University, Inc., 461 F.Supp.2d 1121, 1155­56 (C.D. Cal. 2006) (plaintiff who paid tuition believing that credits at defendant school would be transferable suffered sufficient loss to bring UCL claim, even though he never tried to transfer the credits he earned at defendant school). Defendants do not deny that Vasquez adequately alleged the loss of property; instead, they argue that he could have avoided the loss by submitting a warranty claim.11 Motion at 23:20­22. This argument fails for several reasons. As an initial matter, any requirement that Vasquez needed to seek a free replacement of his drum pedal prior to bringing suit is absurd considering that his replacement pedal would be just as defective as the one he already broke. Until the release of Rock Band 2 in September of 2008, the only way to acquire a drum pedal capable of withstanding the rigors of ordinary game play was to acquire an aftermarket part (either an entire drum kit, a drum pedal, or a replacement plate such as the one Vasquez purchased). Defendants also argue that, even if Vasquez's drum pedal broke after the warranty period ended, Vasquez still could have avoided injury because Defendants had a practice, at the time Vasquez's drum pedal broke, of replacing broken drum pedals without proof of warranty eligibility. In essence, Defendants are seeking to create a new element within the UCL, a requirement that plaintiffs contact the defendants and seek some sort of non-judicial remedy before bringing suit. This requirement is nowhere to be found in the UCL. Vasquez suffered an injury in fact the moment his drum pedal broke; regardless of whether Defendants now claim they would have remedied that injury free of charge.12

Plaintiff Vasquez purchased his Rock Band drum kit on or about December 15, 2007. FAC at ¶ 40. In February of 2008, the drum pedal broke while Vasquez was playing Rock Band. FAC at ¶ 41. Therefore, while Vasquez does not recall the exact date his pedal broke, Vasquez's warranty ended either shortly before or shortly after his drum pedal broke. In some respects, this case is analogous to Lozano v. AT & T Wireless Services, Inc., 504 F.3d 718 (9th Cir. 2007). There, the class representative had actually been reimbursed by defendant 18 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
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11

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Finally, Defendants argue that Plaintiff Morgan lacks standing because of a lack of reliance. This argument must fail in light of the relevant case law and the allegations of the FAC.13 Even with respect to the "fraud" prong of the UCL (which is the only prong requiring reliance), the FAC's allegations of reliance are sufficient under In re Tobacco II. Defendants argue that Morgan "could only show reliance if he could allege that Defendants represented to him that his warranty would be longer than 60 days." Motion at 23:23­24. As discussed above, this argument completely ignores the substance of the FAC. Plaintiff Morgan does not allege that he relied on an express representation that the warranty would extend beyond sixty days. Instead, Plaintiffs allege that Defendants marketed Rock Band as a multi-player game in which one player would participate as a drummer, when in reality, the Rock Band drum kit was defective and could not withstand use for that purpose. The FAC alleges that the characteristic that separated Rock Band from its competitors was this multi-player/multi-instrument feature, and that purchases of Rock Band were heavily influenced by this feature. FAC at ¶ 18. These allegations are sufficient to establish standing for a claim under the fraud prong of the UCL according to In re Tobacco II, 2009 WL 1362556 at *16 (noting that plaintiffs need not show that the alleged misrepresentation was the only cause of the injury-producing conduct, or demonstrate individualized reliance on any specific misrepresentation).

for its unfair billing practices, but still had standing under the UCL because the defendant was continuing the allegedly unfair billing practice. Id. at 733. At the time Vasquez's drum pedal broke, as now, Defendants contended that there was no defect in their drum pedal. Had Vasquez known that Defendants were willing to replace his broken drum pedal, and had taken them up on the offer, he would have been given another defective drum pedal, which would break just like the previous one. As an initial matter, it appears that "reliance" is only a requirement of the UCL's "fraud" prong. In re Tobacco II, -- Cal. Rptr. 3d --, 2009 WL 1362556 at *16 (Cal. 2009) ("[Proposition 64] imposes an actual reliance requirement on plaintiffs prosecuting a private enforcement action under the UCL's fraud prong."). In regard to the other prongs of the UCL, particularly the "unfair" prong, the decision in Anunziato v. eMachines, Inc., 402 F.Supp.2d 1133 (C.D. Cal. 2005), is still persuasive. Anunziato noted several situations in which the purposes of the UCL would be frustrated by imposing a reliance requirement. Id. at 1137­38. The court also noted that none of the ballot materials accompanying Proposition 64 mentioned creating a reliance requirement. Id. at 1138. Since In re Tobacco II limited its holding on reliance to cases under the fraud prong of the UCL, this Court should follow Anunziato's holding that there is no reliance requirement for the other prongs of the UCL. 19 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
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5.

The FAC Alleges Conduct That Occurred In California, So Morgan and Non-Resident Class Members Have Valid Claims Under the UCL

As they argued in connection with Plaintiffs' CLRA claim, Defendants also argue that the 3 UCL does not apply to actions occurring outside of California that injure non-residents. Motion 4 at 24:3­4. As discussed in more detail in relation to the CLRA, above, the FAC sufficiently 5 alleges that Defendants wrongful conduct occurred in, or had strong ties to, California. These 6 allegations are sufficient to defeat this motion to dismiss and strike. 7 Additionally, there is significant case law applying the UCL to nationwide classes such as 8 this one. The California Court of Appeal decision in Clothesrigger, Inc. v. GTE Corporation, 9 191 Cal.App.3d 605 (1987) is instructive. In that case, in reversing and remanding the trial 10 court's denial of certification of a nationwide class asserting claims for fraud, negligent 11 misrepresentation, and violation of the UCL, after holding that "[t]he facts asserted by 12 Clothesrigger at this stage of the proceeding, if true, would appear to constitute a sufficient 13 aggregation of contacts under Phillips [Petroleum Co. v. Shutts, 472 U.S. 797 (1985)] to permit 14 15 16 different and each has an interest in having its law applied (a `true' conflict), selection of which 17 state's law to apply by determining which state's interests would be more impaired if its policy 18 were subordinated to the policy of the other state." Id. at 614 (citation omitted). While the court 19 did not actually conduct the choice of law analysis, instead remanding to the trial court for the 20 analysis, it did note that "Clothesrigger asserted California's interest in deterring fraudulent 21 conduct by businesses headquartered within its borders and protecting consumers from 22 fraudulent misrepresentations emanating from California would override any possible interest of 23 any other state in application of its own laws to its residents' claims." Id. at 614. The court 24 25 26 27 28 Similarly here, there are a "sufficient aggregation of contacts" to support application of California law to non-resident class members. California choice of law principles apply in this diversity case. Ticknor v. Choice Hotels Intern., Inc., 265 F.3d 931, 937 (9th Cir. 2001), cert. denied, 534 U.S. 1133 (2002). 20 Case No. CV 08 5211 BZ ­ Opposition to Motion to Dismiss
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applying California law to the claims of nonresident plaintiffs" (Id. at 613),14 the court then set forth the applicable choice of law analysis,15 the relevant prong here being: "if the laws are

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further stated that "[u]nder certain facts California may have an important interest in applying its law to punish and deter the alleged wrongful conduct. Id. at 615. California has such an interest here. Defendants' conduct at issue in this case emanated from California, and California has an interest in preventing and punishing wrongful conduct occurring within its borders. While other states unquestionably have an interest in protecting their residents, this interest does not outweigh California's interest under the circumstances here, where the strong protections provided under California law will