Gomelsky v. Apple, Inc.

Filing 48

MEMORANDUM in Opposition re 38 MOTION to Dismiss PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO APPLE INC.'S MOTION TO DISMISS filed byReuben Berenblat, Giorgio Gomelsky, Laura Miller, Andrew Personette, Earl Simpson, Deborah J. Vail. (Related document(s) 38 ) (Crowther, Robyn) (Filed on 7/10/2009)

Gomelsky v. Apple, Inc.

Doc. 48

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page1 of 27

1 MEISELMAN, DENLEA, PACKMAN, 2 Jeffrey I. Carton (pro hac vice) 3 Jerome Noll (pro hac vice) 4 Christine M. Ford (pro hac vice application to be submitted) 5 1311 Mamaroneck Avenue

CARTON & EBERZ P.C. [e-mail]

[e-mail] [e-mail]

6 Telephone: [phone]

White Plains, New York 10605 Facsimile: [phone]

8 CALDWELL LESLIE & PROCTOR, PC 9 [e-mail] 10 [e-mail]

ROBYN C. CROWTHER, SBN 193840 ERIC S. PETTIT, SBN 234657 1000 Wilshire Blvd., Suite 600 Telephone: [phone]

11 Los Angeles, California 90017-2463 12 Facsimile: [phone] 13 Attorneys for Plaintiffs 14 15 16

and all others similarly situated UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA REUBEN BERENBLAT, ANDREW LAURA MILLER, On behalf of Plaintiffs, v. Case No. C 08-4969 JF

17 PERSONETTE, EARL C. SIMPSON,

18 themselves and all others similarly situated, POINTS AND AUTHORITIES IN 19 20 21 22 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

PLAINTIFFS' MEMORANDUM OF OPPOSITION TO APPLE INC.'S MOTION TO DISMISS

APPLE INC., Defendants.

Date: Time: Courtroom:

August 14, 2009 9:00 a.m. 3

Dockets.Justia.com

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page2 of 27

1 2

TABLE OF CONTENTS

3 PRELIMINARY STATEMENT ............................................................................... 1 4 5

ISSUES TO BE DECIDED .......................................................................................2

6 FACTUAL BACKGROUND....................................................................................2 7 8 9 10 11 12 13 14 15 16 17 18 19 I. 20 21 22 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

A. B.

Apple Manufactures and Sells Defective PowerBook G4s ..................2 Plaintiffs Each Purchased a Defective Computer that Apple Refuses to Fix .......................................................................................4 1. 2. 3. 4. Reuben Berenblatt ......................................................................4 Andrew Personette .....................................................................5 Earl "Duke" Simpson .................................................................5 Laura Miller................................................................................6

C.

Apple Continued to Sell PowerBooks with Knowledge of the Defect....................................................................................................6

ARGUMENT .............................................................................................................7 THE APPLICABLE STANDARD FOR A MOTION TO DISMISS ............7 THE COMPLAINT STATES A CLAIM FOR BREACH OF THE IMPLIED WARRANTY OF MERCHANTABILITY ...................................7 A. B. California Courts Have Rejected Apple's Argument Limiting the Duration of Implied Warranties......................................................9 Apple's Reliance on Its Supposed Express Warranty Is Misplaced............................................................................................12 1. The Court Should Not Consider the Terms of Apple's Purported Express Warranty on a Motion to Dismiss .............13

II.

-i-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page3 of 27

1 2 3 4 5 6 7 8 9 10 11

2.

The Validity of the Supposed Disclaimer of Implied Warranties Raises Factual Questions that Cannot Be Resolved at the Pleading Stage ................................................14

III.

THE COMPLAINT STATES A CLAIM UNDER CALIFORNIA'S UNFAIR COMPETITION LAW..................................................................17 A. Apple's Manufacture and Sale of Defective PowerBooks Constitutes an Unfair Business Practice in Violation of the UCL.....................................................................................................17 Apple's Knowing Sale of a Defective Product Is Unlawful...............19

B. IV.

THE COMPLAINT ALLEGES A CAUSE OF ACTION FOR UNJUST ENRICHMENT.............................................................................19

12 CONCLUSION........................................................................................................21 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

-ii-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page4 of 27

1 2 CASES

TABLE OF AUTHORITIES Page(s)

3 AICCO, Inc. v. Ins. Co. of N. Am., 4

90 Cal.App.4th 579 (Cal. Ct. App. 2001)18, 20, 21

Alberti v. General Motors Corp., 600 F.Supp. 1026 (D.D.C. 1985) .................................................... 17, 18, 19 5
6 Oestricher v. Alienware Corp., 7 8

544 F.Supp. 964 (N.D. Cal. 2008)............................................................... 11

Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) ................................................................................. 12 142 Cal. App.4th 212, 48 Cal.Rptr. 247 (Cal. Ct. App. 2006).............. 11, 12

9 Atkinson v. Elk Corporation of Texas, 10

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007) ............................................................ 7 11
12 Blennis v. Hewlett-Packard Co., 13 14

2008 WL 818526 (N.D.Cal. Mar. 25, 2008) ......................................... 14, 19

Bowdoin v. Showell Growers, Inc., 817 F.2d 1543 (11th Cir. 1987)................................................................... 15 153 Cal.App.4th 17, 62 Cal.Rptr.3d 467 (Cal. Ct. App. 2007)........... 7, 8, 10

15 Brittalia Ventures v. Stuke Nursery Co., Inc., 16 17

Burr v. Sherwin Williams Co., 42 Cal.2d 682, 268 P.2d 1041 (Cal. 1954).................................................... 8 883 F.2d 287 (4th Cir. 1989)....................................................................... 15

18 Carlson v. General Motors Corporation, 19

Cartwright v. Viking Indus., Inc., 249 F.R.D. 351 (E.D. Cal. 2008)............................................................. 7, 14 20
21 Chamberlain v. Ford Motor Co., 22 23

369 F.Supp.2d 1138 (N.D. Cal. 2005) ........................................................ 19

Clemens v. DaimlerChrysler Corp., 534 F.3d 1017 (9th Cir. 2008)..................................................................... 12 2008 WL 5423859 (C.D. Cal. Dec. 30, 2008) ............................................ 13

24 Cole v. Asurion Corp., 25 26

Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1997)....................................................................... 13 23 Cal.4th 163 (Cal. 2000) .......................................................................... 19

27 Cortez v. Purolator Air Filtration Prod. Co., 28
CALDWELL LESLIE & PROCTOR

-iii-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page5 of 27

1 Daugherty v. American Honda Motors Co., Inc., 2 3

144 Cal.App.4th 824 (Cal. Ct. App. 2006) ........................................... 11, 12

Dorfman v. International Harvester Co., 46 Cal.App.3d 11 120 Cal.Rptr. 516 (Cal. Ct. App. 1975)......................... 14 167 Cal.App.4th 333, 84 Cal.Rptr.3d 38 (Cal. App. Ct. 2008)................... 19

4 Fed. Deposit Ins. Co. v. Dintino, 5 6

First Nationwide Savings v. Perry, 11 Cal.App.4th 1657 (Cal. Ct. App. 1992) ................................................. 20 148 Cal.App.4th 937, 56 Cal.Rptr.3d 177 (Cal. Ct. App. 2007)................... 8

7 Garlock Technologies, LLC v. Nak Sealing Technologies Corp., 8 9

Ghirardo v. Antonioli, 14 Cal.4th 39 (Cal. 1996) ............................................................................ 19 536 F.3d 1049 (9th Cir. 2008)....................................................................... 7

10 Gilead Sciences Sec. Litig., 11 12

Hauter v. Zogarts, 14 Cal.3d 104, 534 P.2d 377, 120 Cal. Rptr. 681 (1975)............................ 14 167 Cal.App.4th 87 (Cal. App. Ct. 2008).................................................... 12

13 Hewlett-Packard Co. v. Superior Court, 14 15

Hicks v. Kaufman and Broad Home Corp., 89 Cal.App.4th 908 (Cal. Ct. App. 2001).................................................... 11 107 Cal.App.4th 708 (Cal. Ct. App. 2003) ................................................. 20

16 Hirsch v. Bank of America, N.A., 17 18

Hoey v. Sony Electronics, 515 F.Supp.2d 1099 (N.D. Cal. 2007) ........................................................ 12 112 Cal.App.3d 194 (Cal. Ct. App. 1980)................................................... 14

19 Hughes Tool Co. v. Max Hinrichs Seed Co., 20 21

Kasky v. Nike, Inc., 27 Cal.4th 939 (Cal. 2002) .......................................................................... 17 234 Cal.App.3d 205, 285 Cal.Rptr. 717 (Cal. Ct. App. 1991)...................... 9

22 Krieger v. Nick Alexander Imports, Inc., 23 24

Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580 (9th Cir. 2008)......................................................................... 7 77 Cal.App.4th 723 (Cal. Ct. App. 2000).............................................. 18, 19

25 Lectrodryer v. Seoulbank, 26 27 28
CALDWELL LESLIE & PROCTOR

Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001)....................................................................... 13

-iv-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page6 of 27

1 Lennar Homes, Inc. v. Masonite Corp., 2 3

32 F.Supp.2d 396 (E.D.La. 1998) ............................................................... 15

Lindberg v. Coutches, 167 Cal.App.2d Supp. 828, 334 P.2d 701 (Cal. Ct. App. 1959) ................... 8 2007 WL 2994812 (N.D. Cal. July 27, 2007), aff'd, 585 Fed. Appx. 585 (9th Cir 2009) ............................................................. 12 504 F.3d 718 (9th Cir. 2007)....................................................................... 17

4 Long v. Hewlett-Packard Co., 5

6 Lozano v. AT&T Wireless Serv., Inc., 7 8

LWT, Inc. v. Childers, 19 F.3d 539 (10th Cir. 1994)....................................................................... 15 142 Cal. App.4th 1457 (Cal. Ct. App. 2006) ........................................ 17, 19

9 McKell v. Washington Mut., Inc., 10 11

Mexia v. Rinker Boat Co., ___Cal. Rptr. 3d___, 2009 WL 1651442 (June 15, 2009).................... 1, 8, 9 149 Cal.App.2d 236, 308 P.2d 794 (Cal. Ct. App. 1957) ............................. 8

12 Moore v. Hubbard & Johnson Lumber Co., 13 14

Payne v. Fujifilm U.S.A, Inc., Civ. A., No. 07-385, 2007 WL 4591281 (D.N.J. Dec. 28, 2007) ............................. 15 583 F.Supp.2d 1090 (N.D.Cal. 2008) ......................................................... 19

15 Plascensia v. Lending 1st Mortgage, 16 17

Pure Country Weavers, Inc. v. Bristar, Inc., 410 F.Supp.2d 439 (W.D.N.C. 2006).......................................................... 13 2009 WL 150950 (N.D. Cal. Jan. 21, 2009) ............................................... 19

18 Sanders v. Apple, Inc., 19 20

Schnall v. The Hertz Corp., 78 Cal.App.4th 1144 (Cal. Ct. App. 2000) ................................................. 18 552 F.3d 934 (9th Cir. 2008)....................................................................... 18

21 Williams v. Gerber Prods. Co., 22

23 STATUTES 24 15 U.S.C. § 2308.................................................................................................... 14 25 Cal. Bus. & Prof. Code § 17200 ............................................................................ 17 26 Cal Civ. Code § 1670.5.......................................................................................... 16 27 Cal. Comm. Code § 1201....................................................................................... 16
CALDWELL LESLIE & PROCTOR

28 Cal. Comm. Code § 2314............................................................................. 7, 16, 19 -v-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page7 of 27

1 2

PRELIMINARY STATEMENT When a consumer buys a computer from Defendant Apple, Inc. ("Apple"),

3 the consumer reasonably expects to receive a high quality product in exchange for 4 the significant financial consideration provided to Apple; here, over $1,200 for a 5 PowerBook G4 laptop computer. In exchange for their money, consumers expect 6 their computers to function properly throughout the computer's five-year useful 7 life. 8

Unfortunately for consumers like Plaintiffs herein, however, the PowerBook

9 G4 computer was sold with a latent defect. This latent defect ­ a defective 10 memory slot that significantly degrades the laptop's performance ­ was not and 11 could not have been known to consumers at the time of purchase. Although Apple 12 acknowledges the defect in the PowerBook G4 memory slots, it has left the vast 13 majority of consumers to fend for themselves and spend hundreds of dollars to 14 correct the defect. 15

In turning its back on its loyal customer base, Apple claims that the implied

16 warranty of merchantability's duration is limited to one-year by its express 17 warranty and California statute. Fortunately for consumers, however, Apple's 18 argument ­ which is based entirely on caselaw concerning express warranties ­ 19 ignores more than fifty years of California precedent and well-founded tenets of 20 public policy designed to protect purchasers of products with latent defects. 21

Indeed, within the last month, the California Court of Appeals rejected the

22 very arguments made by Apple in Mexia v. Rinker Boat Co., _____ Cal. Rptr. 3d 23 ___, 2009 WL 1651442 (June 15, 2009). The Mexia court reiterated longstanding 24 California precedent in concluding that "undisclosed latent defects . . . are the very 25 evil that the implied warranty of merchantability was designed to remedy." Id. at 26 *4. The Mexia decision leaves no room for doubt that implied warranties extend to 27 latent defects discovered after the expiration of an express warranty. Any attempt 28 by Apple to claim otherwise is squarely foreclosed by the Mexia decision.
CALDWELL LESLIE & PROCTOR

-1-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page8 of 27

1

Apple's sales of a defective product also run afoul of the Unfair Competition

2 Law, which prohibits fraudulent, unfair and unlawful business practices. Indeed, 3 Apple knew of the defect, yet continued to sell an inferior product at full price. 4 Moreover, through its sales of defective and inferior products, Apple also has been 5 unjustly enriched. Accordingly, Apple's motion to dismiss should be denied and 6 this case should be allowed to proceed to trial to provide consumers with the much 7 needed relief that Apple has refused to provide them. 8 9

ISSUES TO BE DECIDED 1. Whether Apple can shield itself from liability for breaches of implied

10 warranties when it has acknowledged a latent defect in the memory slots of its 11 laptop computers that existed at the time of manufacture and manifests itself after 12 the expiration of Apple's express warranty. 13

2.

Whether the Court should consider, on a motion to dismiss, the terms

14 of a warranty that are not pleaded in the First Amended Complaint ("FAC") when 15 the parties dispute the applicability of the warranty's supposed terms and the 16 validity of the warranty itself is a question of fact. 17

3.

Whether the FAC adequately alleges that Apple's manufacture and

18 sale of a product it knew to be defective constituted an unfair or unlawful business 19 practice under California's Unfair Competition Law ("UCL"). 20

4.

Whether the FAC's allegations that Apple received and retained

21 substantial profits from sales of a product that Apple knew to be defective state a 22 claim for unjust enrichment. 23 24 25

FACTUAL BACKGROUND A. Apple Manufactures and Sells Defective PowerBook G4s Defendant Apple is a publicly traded company engaged in the business of

26 designing, manufacturing, marketing, distributing and selling personal computers 27 and related products and services through its own retail stores, online, direct sales, 28 third-party wholesalers and resellers. FAC ¶16. In or about January 2001, Apple
CALDWELL LESLIE & PROCTOR

-2-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page9 of 27

1 began designing, manufacturing, warranting, advertising, marketing, selling and 2 providing PowerBook G4 laptop computer to consumers throughout the United 3 States. Id. ¶17. Between 2001 and 2003, Apple produced the Titanium 4 PowerBook G4; between 2003 and 2006, the Aluminum models were produced. 5 Id. 6

When the Aluminum PowerBook G4s were released in January 2003, Apple

7 marketed them as being designed to exacting standards and touted their many 8 features, including the fact that each Aluminum PowerBook G4 has two memory 9 slots. The memory slots are an essential feature of the computer, and are marketed 10 so as to give consumers the ability to expand the PowerBook's memory (RAM) at 11 any time, thereby increasing the computer's functionality. Id. ¶18. 12

Based on Apple's own admissions, however, certain of its PowerBook G4

13 computers were manufactured with defective memory slots. Indeed, usually the 14 lower ­ but sometimes the upper ­ memory slot does not work; it does not 15 recognize the additional memory added and is thus useless. As Apple has admitted 16 in an article posted on its website, affected PowerBook G4 computers exhibit at 17 least one of the following symptoms upon installation of RAM memory in the 18 memory slot: (1) the computer does not start up; or (2) the computer does not 19 recognize that the memory slot is filled, thus degrading system performance 20 because the memory in only one slot is recognized. Apple has also admitted that 21 these symptoms may only occur intermittently, and that an owner of a PowerBook 22 with a defective memory slot may not know or become aware of the defect until 23 months, or years, after installation of memory in the defective memory slot. Id. 24 ¶22. 25

Tens of thousands of people nationwide have purchased PowerBook

26 computers with defective memory slots. Aside from the limited number of 27 28
CALDWELL LESLIE & PROCTOR

-3-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page10 of 27

1 consumers covered by an extended warranty, Apple has informed Plaintiffs and 2 other customers with defective PowerBooks that they have no recourse other than 3 to repair the defective memory slots at their own expense. Apple has refused to 4 warrant, repair or pay for any repairs relating to the PowerBook's defective 5 memory slots, or to warrant any PowerBooks should the defect manifest itself 6 sometime in the future. Id. ¶28. 7 8 9 10

1

B.

Plaintiffs Each Purchased a Defective Computer that Apple Refuses to Fix 1. Reuben Berenblatt

On or about July 12, 2005, Mr. Berenblat purchased directly from Apple an

11 Aluminum PowerBook G4 15", serial number W85252RYRG4. In September 12 2008, Mr. Berenblat realized that his computer was not working well. Thinking 13 that additional memory might be required to optimize the performance of his 14 computer, Mr. Berenblat added memory to his computer. However, his computer's 15 performance only worsened. Mr. Berenblat brought his computer to an Apple store 16 in New York City and was told that his hard drive was defective. However, it was 17 later determined that there was no problem with the hard drive; rather, the lower 18 memory slot was defective and degraded his computer's performance. Mr. 19 20 21 22 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

After receiving thousands of complaints regarding defective memory slots, Apple extended the warranty available to PowerBook G4 customers by initiating, in or around 2006, the PowerBook G4 Memory Slot Repair Extension Program covering a limited number of PowerBook G4 models experiencing specific component issues and that were manufactured between January, 2005 and April, 2005 ("Extended Warranty"). Thus, the vast majority of PowerBooks were not covered by the Extended Warranty. Apple also did not give adequate notice of its Extended Warranty to its customers. Apple did not contact purchasers of PowerBook computers to inform them that they may be covered by the Extended Warranty, nor did Apple notify all PowerBook owners of the defective memory slot so that consumers could have their PowerBooks repaired during the one year warranty in effect from the date of purchase.
-4-

1

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page11 of 27

1 Berenblat again contacted Apple directly to have his computer repaired, and Apple 2 refused to repair or replace his defective computer. FAC ¶¶31-34. 3 4

2.

Andrew Personette

In 2005, Mr. Personette purchased a titanium PowerBook computer with an

5 AppleCare Protection Plan. However, Mr. Personette's titanium PowerBook was 6 defective. After returning his titanium computer to the Apple store in New York 7 City's Soho neighborhood several times for repair, Apple personnel determined 8 that the titanium PowerBook could not be fixed. Accordingly, in exchange for his 9 defective titanium PowerBook, in 2005, Mr. Personette received from the Apple 10 store an Aluminum PowerBook G4 15", serial number W84080FANRW. In 2007, 11 Mr. Personette added memory to his PowerBook to increase its functionality. 12 However, shortly thereafter, in September 2007, Mr. Personette noticed that his 13 PowerBook was functioning very slowly and determined that the computer did not 14 recognize one of the memory cards because the lower memory slot was defective. 15 Mr. Personette contacted Apple directly to have his computer repaired, and Apple 16 refused to repair or replace his defective computer. FAC ¶¶35-38. 17 18

3.

Earl "Duke" Simpson

On or about August 20, 2005, Dr. Simpson purchased an Aluminum

19 PowerBook G4 15", serial number W852545TRG4 from MacShop Northwest, an 20 Apple-authorized reseller and service provider. Dr. Simpson sought to increase the 21 RAM in his PowerBook to the maximum of 2 GB. However, on or about October 22 12, 2008, when Dr. Simpson attempted to add memory to his PowerBook, he 23 realized that the lower memory slot was defective and did not recognize the 24 memory. Dr. Simpson was advised by Apple-authorized reseller and service 25 provider, The Portland Mac Store, to increase the RAM in the upper memory slot 26 to the maximum in the single memory slot of 1 GB. Thus, Dr. Simpson was not 27 able to obtain the maximum amount of memory that his computer should have 28 been able to utilize had it not been defective. FAC ¶¶39-42.
CALDWELL LESLIE & PROCTOR

-5-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page12 of 27

1 2

4.

Laura Miller

In or around early 2006, Ms. Miller purchased an Aluminum PowerBook G4

3 15", serial number W8527057RG3 from a third-party internet vendor. Shortly 4 after purchasing her PowerBook, Ms. Miller experienced problems and returned 5 the computer to Apple. In June 2006, Apple replaced the motherboard of her 6 PowerBook. Because of her initial problems, Ms. Miller purchased an AppleCare 7 Protection Program to cover her PowerBook computer. Just after expiration of her 8 AppleCare extended protection, Ms. Miller's computer again failed. At this time, 9 Ms. Miller learned that the lower memory slot of her PowerBook G4 was defective 10 and did not recognize the memory that she attempted to load into the computer. 11 Thus, Ms. Miller was not able to obtain the maximum amount of memory that her 12 computer should have been able to utilize had it not been defective. FAC ¶¶43-47. 13

As a result of the inherent defect existing in each of their computers,

14 Plaintiffs cannot use their PowerBooks as intended, and have suffered damage. 15 Plaintiffs each purchased a computer which he or she now cannot use for its 16 intended purpose because of the defective memory slot; Plaintiffs' PowerBooks ­ 17 memory of which has been reduced by half ­ are not fully functional. And the 18 expense of repairing the memory slot ­ upwards of $500 ­ would constitute almost 19 half the original purchase price of the computer. 20 21

C.

Apple Continued to Sell PowerBooks with Knowledge of the Defect

Apple continued to manufacture and sell PowerBook computers with

22 defective memory slots even after receiving thousands of complaints informing it 23 of the defective memory slots. Thus, Apple profited enormously from sales of its 24 PowerBook G4 computers while Plaintiffs and the proposed Class incurred 25 significant damages, including but not limited to the expenses incurred in repairing 26 or replacing their defective PowerBook computers. FAC ¶50. 27
CALDWELL LESLIE & PROCTOR

Apple has, and continues to this day, refused to respond to the thousands of

28 customer complaints regarding the PowerBook's defective memory slot, and has -6-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page13 of 27

1 refused to repair at its own expense the defective memory slot or compensate 2 thousands of PowerBook purchasers who repaired the defective memory slot at 3 their own expense. Id. ¶51. 4 5 I. 6

ARGUMENT THE APPLICABLE STANDARD FOR A MOTION TO DISMISS
"To survive a motion to dismiss for failure to state a claim, the plaintiff must

7 allege `enough facts to state a claim to relief that is plausible on its face.'" Lazy Y 8 Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008) (quoting Bell Atlantic 9 Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974 (2007)); accord Ashcroft v. 10 Iqbal, 129 S.Ct. 1937, 1949 (2009). "In general, the inquiry is limited to the 11 allegations in the complaint, which are accepted as true and construed in the light 12 most favorable to the plaintiff." Id. "[A] district court ruling on a motion to 13 dismiss is not sitting as a trier of fact." Gilead Sciences Sec. Litig., 536 F.3d 1049, 14 1057 (9th Cir. 2008). "[S]o long as the plaintiff alleges facts to support a theory 15 that is not facially implausible," the motion to dismiss must be denied. Id. Indeed, 16 the "court is bound to give plaintiff the benefit of every reasonable inference to be 17 drawn from the `well-pleaded' allegations of the complaint." Cartwright v. Viking 18 Indus., Inc., 249 F.R.D. 351, 353 (E.D. Cal. 2008). 19 II. 20 21

THE COMPLAINT STATES A CLAIM FOR BREACH OF THE IMPLIED WARRANTY OF MERCHANTABILITY California has adopted the Uniform Commercial Code, which provides a

22 myriad of rights to the purchasers of consumer products. Pursuant to California 23 Commercial Code § 2314, implied in every contract for sale is a warranty of 24 merchantability. Cal. Comm. Code § 2314(1). For goods to be merchantable, they 25 must be "fit for the ordinary purpose for which such goods are used." Id. 26 §2314(2)(c); see also Brittalia Ventures v. Stuke Nursery Co., Inc., 153 27 Cal.App.4th 17, 27, 62 Cal.Rptr.3d 467, 475 (Cal. Ct. App. 2007). Indeed, the 28 implied warranty of merchantability imposes liability "if the goods contain an
CALDWELL LESLIE & PROCTOR

-7-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page14 of 27

1 impurity of such a nature as to render them unusable, and therefore unsalable, for 2 the general uses and purposes of goods of the kind described." Burr v. Sherwin 3 Williams Co., 42 Cal.2d 682, 694, 268 P.2d 1041, 1048 (1954). 4

For more than fifty years, California courts have held that the warranty of

5 merchantability applies "where the defect is a latent defect." Moore v. Hubbard & 6 Johnson Lumber Co., 149 Cal.App.2d 236, 240, 308 P.2d 794, 797 (Cal. Ct. App. 7 1957) (emphasis in original). As the appellate court in Moore explained: "The 8 mere fact that the defect was latent or hidden does not excuse the seller. Quite the 9 contrary." Id. at 241, 308 P.2d at 797. Indeed, the implied warranty of 10 merchantability "extends . . . to latent defects upon the seller whether they are 11 known to him or not." Lindberg v. Coutches, 167 Cal.App.2d Supp. 828, 834, 334 12 P.2d 701, 705 (Cal. Ct. App. 1959). These black-letter principles have been 13 consistently reiterated and reaffirmed by California appellate courts. See, e.g., 14 Mexia v. Rinker Boat Co., Inc., __ Cal.Rptr.3d ___, 2009 WL 1651442, at * 4 (Cal 15 Ct. App. June 15, 2009); Brittalia Ventures, 153 Cal.App.4th at 24, 62 Cal.Rptr.3d 16 at 473 ("Implied warranties extend to latent defects."); Garlock Technologies, LLC 17 v. Nak Sealing Technologies Corp., 148 Cal.App.4th 937, 950, 56 Cal.Rptr.3d 18 177,188 (Cal. Ct. App. 2007) (affirming judgment for breach of the warranty of 19 merchantability on the basis of latent defects). 20

Here, Plaintiffs each purchased a laptop computer with a latent defect that

21 existed at the time of manufacture. The implied warranty of merchantability 22 protects purchasers of defective products and provides them with recourse against 23 Apple. 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

-8-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page15 of 27

1 2 3

A.

California Courts Have Rejected Apple's Argument Limiting the Duration of Implied Warranties

Apple argues that the Song-Beverly Consumer Warranty Act2 (the "Song-

4 Beverly Act") and its express warranty limit the application of implied warranties 5 to defects that manifest themselves within one year of the date of purchase. 6 However, consistent with a half-century of California precedent, the California 7 Court of Appeals recently considered and rejected this same argument in Mexia v. 8 Rinker Boat Company, Inc., concluding that the reasoning offered by Apple was 9 "unsupported by the text of the [Song-Beverly] statute, legal authority, or sound 10 policy." 2009 WL 1651442, at *8. 11

In Mexia, the plaintiff commenced an action under the Song-Beverly Act

12 asserting that he purchased a boat from the defendants that was unmerchantable 13 due to a latent defect that manifested itself two years after the sale of the boat. Id. 14 at *1, 6. The defendants demurred, arguing that "the [one-year] duration provision 15 of the Song-Beverly Act should be interpreted as barring an action for breach of 16 the implied warranty of merchantability when the purchaser fails to discover and 17 report the defect to the seller within the time period specified in that provision." 18 Id. at *1. The defendants also contended that the plaintiff's claims were precluded 19 because the defendants' "limited warranty expressly limits `the duration of any 20 implied warranties of merchantability . . . to the [one-year] term of this limited 21 warranty' and `disclaims any implied warranties of merchantability . . . after 22 expiration of this limited warranty.'" Id. Responding to the defendants' 23 arguments, the Court of Appeal stated: 24 25

CALDWELL LESLIE & PROCTOR

The Song-Beverly Act was enacted by the California Legislature in 1970 and 26 regulates certain warranty terms. The Act "supplements, rather than supercedes the provisions of the California Uniform Commercial Code." Krieger v. Nick 27 Alexander Imports, Inc., 234 Cal.App.3d 205, 213, 285 Cal.Rptr. 717, 722 (Cal. Ct. 28 App. 1991).
-9-

2

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page16 of 27

1 2 3 4 5 6 7 8 9 10 11 12 13

We reject this argument because the plain language of the statute, particularly in light of the consumer protection policies supporting the Song-Beverly Act, make clear that the statute merely creates a limited, prospective duration for the implied warranty of merchantability; it does not create a deadline for discovering latent defects or for giving notice to the seller. Id. at *1 (emphasis added). The Mexia court further explained: The implied warranty of merchantability may be breached by a latent defect undiscoverable at the time of sale. Indeed, undisclosed latent defects . . . are the very evil that the implied warranty of merchantability was designed to remedy. In the case of a latent defect, a product is rendered unmerchantable, and the warranty of merchantability is breached, by the existence of the unseen defect, not by its subsequent discovery. Id. at *4 (internal citations omitted) (ellipsis in original) (emphasis added).

14 "Thus, although a defect may not be discovered for months or years after a sale, 15 merchantability is evaluated as if the defect were known." Id. Accordingly, the 16 court resoundingly rejected the defendants' argument that a latent defect must be 17 discovered within one year of purchase in order to state a claim for breach of the 18 implied warranty of merchantability. Id. at *8. 19

The Mexia court's rationale is consistent with California precedent. In

20 another recent case, Brittalia Ventures v. Stuke Nursery Co., 153 Cal.App.4th 17, 21 28, 62 Cal.Rptr.3d 467, 476 (Cal. Ct. App. 2007), the California Court of Appeal 22 similarly held that the implied warranty of merchantability provided a remedy to 23 the purchaser of trees with a latent defect that manifested itself more than two 24 years after the purchase. Reiterating the well-settled principle that "[i]mplied 25 warranties extend to latent defects," the Brittalia Ventures court affirmed a jury 26 verdict awarding the plaintiff damages for breach of the implied warranty of 27 merchantability. Id. at 24, 62 Cal. Rptr.3d at 473. 28
CALDWELL LESLIE & PROCTOR

-10-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page17 of 27

1

Similarly, in Hicks v. Kaufman and Broad Home Corp., 89 Cal.App.4th 908 [P]roof of breach of warranty does not require proof the product has malfunctioned but only that it contains an inherent defect which is substantially certain to result in malfunction during the useful life of the product. The question of whether an inherently defective product is presently functioning as warranted goes to the remedy for the breach, not proof of the breach itself. Id. at 918; see also Hewlett-Packard Co. v. Superior Court, 167 Cal.App.4th

2 (Cal. Ct. App. 2001), the California Court of Appeal explained: 3 4 5 6 7 8

9 87, 96 (Cal. App. Ct. 2008). In Hewlett-Packard, the court confronted claims 10 concerning the failure of a laptop computer and held that "an actual malfunction of 11 the notebook screens would not be necessary to establish a defect, if it could be 12 established that the notebook screens were substantially certain to fail 13 prematurely." Id. 14

In moving to dismiss the FAC, Apple relies almost exclusively on an

15 intermediate appellate court decision, Daugherty v. American Honda Motors Co., 16 Inc., 144 Cal.App.4th 824, 830 (Cal. Ct. App. 2006), which holds that failure of a 17 component part outside the express warranty period cannot form the basis of an 18 express warranty claim. However, the rationale of Daugherty applies only to 19 express warranty claims. Indeed, the Daugherty court emphasized that "Daugherty 20 makes no implied warranty claims." Id. at 831. Thus, the Daugherty court 21 distinguished Alberti v. General Motors Corp., 600 F.Supp. 1026, 1028 (D.D.C. 22 1985), a case which held that allegations of latent defects existing at the time of 23 sale were sufficient to state a case of action for breach of warranty, on the basis 24 that the Alberti decision "confused concepts of express and implied warranty." Id. 25 Accordingly, the Daugherty decision is inapplicable to this case in which Plaintiffs 26 allege breach of an implied warranty.3 27 28
CALDWELL LESLIE & PROCTOR

3

Apple's only citation to a case involving implied warranties is Atkinson v. Elk
-11-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page18 of 27

1

Apple's reliance on Clemens v. DaimlerChrysler Corp., 534 F.3d 1017 (9th

2 Cir. 2008) is similarly misplaced. In Clemens, the Ninth Circuit dismissed express 3 warranty claims because they arose outside the expiration of the warranty period. 4 Id. at 1023 (citing Daugherty, 144 Cal. App. 4th at 830). Although the Clemens 5 court dismissed the implied warranty claims, the court stated that the implied 6 warranty claim "also fails, but for a different reason" -- a lack of privity. Id. 7 Thus, the Clemens court's reasoning with respect to express warranties cannot be 8 extended to implied warranties. 9
4

Here, Plaintiffs allege that they purchased laptop computers with a latent

10 defect that rendered the computers substantially certain to malfunction during the 11 computer's useful life. FAC ¶20. The defective memory slots existed at the time 12 of manufacture. FAC ¶24. Accordingly, under the governing precedent applicable 13 to implied warranties, Plaintiffs have stated a claim for breach of the implied 14 warranty of merchantability. 15 16

B.

Apple's Reliance on Its Supposed Express Warranty Is Misplaced

Apple's argument that the duration of its implied warranty is limited based

17 on the terms of an express warranty (that is not alleged in the FAC) and caselaw 18 addressing express warranties is sorely misplaced. As set forth above, Apple 19 20 Corporation of Texas, 142 Cal. App.4th 212, 48 Cal.Rptr. 247 (Cal. Ct. App.

21 not filed within the applicable statute of limitations. Id. at 232, 48 Cal.Rptr. at 259. 22 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

2006). In Atkinson, the court dismissed the implied warranty claim because it was
4

Apple's citation to Long v. Hewlett-Packard Co., 2007 WL 2994812 (N.D. Cal. July 27, 2007), aff'd, 316 Fed.Appx. 585 (9th Cir. 2009), has no relevance to the implied warranty claims asserted here because that case involved express warranty claims only. Apple's reliance on Oestricher v. Alienware Corp., 544 F.Supp. 964 (N.D. Cal. 2008) is similarly puzzling because there are no warranty claims whatsoever asserted in that case. Accordingly, the Oestricher decision has no bearing on the present motion. Apple's reliance on Hoey v. Sony Electronics, 515 F.Supp.2d 1099 (N.D. Cal. 2007), is also misplaced as that case simply dismissed a claim without prejudice for a pleading defect.
-12-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page19 of 27

1 ignores the ample precedent concerning implied warranties which require rejection 2 of Apple's argument concerning the duration of the implied warranty at issue here. 3 Apple's arguments also fail for several additional reasons. 4 5 6

1.

The Court Should Not Consider the Terms of Apple's Purported Express Warranty on a Motion to Dismiss

Apple contends that the terms of its express warranty disclaim the

7 application of implied warranties beyond the period of its express warranty. 8 However, no claim for breach of express warranty is alleged and the terms of the 9 express warranty are not asserted in the FAC. It is black-letter law that when a 10 document is not alleged in the complaint and its authenticity is disputed, the Court 11 should not consider it on a motion to dismiss. Cooper v. Pickett, 137 F.3d 616, 12 622-23 (9th Cir. 1997) (on a motion to dismiss, courts should not consider 13 documents outside the pleading and cannot take judicial notice of documents the 14 authenticity of which is disputed); Lee v. City of Los Angeles, 250 F.3d 668, 688 15 (9th Cir. 2001) (same); Cole v. Asurion Corp., No. CV 06-6649, 2008 WL 16 5423859, at *3, 7 (C.D. Cal. Dec. 30, 2008) (same); Pure Country Weavers, Inc. v. 17 Bristar, Inc., 410 F.Supp.2d 439, 446 (W.D.N.C. 2006) (refusing to consider 18 warranty terms). 19

Moreover, the total lack of information concerning the purported express

20 warranty upon which Apple relies confirms the impropriety of considering the 21 document on a motion to dismiss. Apple has not asserted that the express warranty 22 was presented to Plaintiffs. Nor has Apple stated how, if at all, the supposed 23 warranty was provided to consumers. And, assuming it was provided to 24 consumers, it is not clear when the supposed warranty was provided to consumers 25 or whether that warranty is the one provided to all PowerBook purchasers within 26 the proposed class period. 27
CALDWELL LESLIE & PROCTOR

The multitude of unexplained facts concerning the purported express

28 warranty underscores the need for discovery to determine whether the supposed -13-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page20 of 27

1 warranty is applicable to Plaintiffs' claims at all. For example, in Blennis v. 2 Hewlett-Packard Co., 2008 WL 818526, at *2-3 (N.D.Cal. Mar. 25, 2008), this 3 Court refused to consider the terms of an express warranty that was not alleged in 4 the complaint. Similarly, in Cartwright v. Viking Industries, Inc., 249 F.R.D. 351, 5 356 (E.D. Cal. 2008), the court denied a motion to dismiss because "[u]ntil a 6 specific warranty is factually established as pertaining to this action, the court 7 cannot dismiss all implied warranty claims as a matter of law." 8 9 10 11

2.

The Validity of the Supposed Disclaimer of Implied Warranties Raises Factual Questions that Cannot Be Resolved at the Pleading Stage

Even if the Court were to consider the supposed warranty on a motion to

12 dismiss (which it should not), the validity of the limitations on implied warranties 13 raises questions of fact that cannot be resolved at this stage of the litigation. See, 14 e.g., Hughes Tool Co. v. Max Hinrichs Seed Co., 112 Cal.App.3d 194, 202 (Cal. 15 Ct. App. 1980) (exclusion of implied warranties is a question of fact). 16

To be effective, any limitation on implied warranties must be made available

17 to consumers prior to the sale of the product. 15 U.S.C. § 2308(c). Indeed, "[a] 18 disclaimer of warranties must be specifically bargained for so that a disclaimer in a 19 warranty given to the buyer after he signs the contract is not binding." Dorfman v. 20 International Harvester Co., 46 Cal.App.3d 11, 20 120 Cal.Rptr. 516, 522 (Cal. Ct. 21 App. 1975) (emphasis in original). As the California Supreme Court explained in 22 Hauter v. Zogarts, 14 Cal.3d 104, 534 P.2d 377, 120 Cal. Rptr. 681 (1975): 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

[A]ny disclaimer or modification [of implied warranties] must be strictly construed against the seller. Although the parties are free to write their own contract, the consumer must be placed on fair notice of any disclaimer or modification of a warranty and must freely agree to the seller's terms. A unilateral nonwarranty cannot be tacked onto a contract containing a warranty.

-14-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page21 of 27

1

See also Bowdoin v. Showell Growers, Inc., 817 F.2d 1543, 1545 (11th Cir.

2 1987) ("[i]f... the disclaimer was not presented to the purchaser before the sale, the 3 court will hold such a disclosure did not form a part of the basis of the bargain"); 4 LWT, Inc. v. Childers, 19 F.3d 539, 541 (10th Cir. 1994) (holding that 5 effectiveness of a limited warranty "is ordinarily [an issue] of fact for the jury"). 6 Here, there is no information in the pleadings regarding when the supposed 7 warranty was provided to consumers and thus the Plaintiffs should be permitted to 8 conduct discovery concerning the validity of any disclaimers contained in the 9 express warranty. 10

Even if a limit on the duration of an implied warranty is allowed, that limit

11 must be "conscionable." 15 U.S.C. § 2308(b). For example, in Carlson v. General 12 Motors Corporation, 883 F.2d 287, 293 (4th Cir. 1989), the plaintiffs experienced 13 problems with their vehicles after the expiration of the express warranties. 14 Reversing the district court's holding on a motion to dismiss that the limits on 15 implied warranties were coextensive with the express warranties, the court 16 explained: 17 18 19 20 21 22 23 24 25

We . . . hold that the district court erred by ruling, solely on the basis of the pleadings, that GM's durational limitations on any and all implied warranties were both `reasonable' and `conscionable' as a matter of law. The court will be equipped to address that question only after plaintiffs have had an opportunity ­ whether in connection with a motion for summary judgment or at trial ­ to present evidence that, for example, they had no `meaningful choice' but to accept the limited warranties, or that the durational limitations `unreasonably' favored the defendant. Id. (emphasis in original); see also Payne v. Fujifilm U.S.A, Inc., Civ. A. No.

26 07-385, 2007 WL 4591281, at *5 (D.N.J. Dec. 28, 2007) (denying motion to 27 dismiss because complaint sufficiently alleged that the durational limits on 28 warranties were unconscionable); Lennar Homes, Inc. v. Masonite Corp., 32
CALDWELL LESLIE & PROCTOR

-15-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page22 of 27

1 F.Supp.2d 396, 401 (E.D.La. 1998) ("shipping a product with a known latent 2 defect may infect a limitation with unconscionability"). California law similarly 3 provides that "[w]hen it is claimed or appears to the court that the contract or any 4 clause thereof may be unconscionable the parties shall be afforded a reasonable 5 opportunity to present evidence as to its commercial setting, purpose, and effect to 6 aid the court in making the determination." Cal Civ. Code § 1670.5. 7

Moreover, if Apple's warranty limitations were made in bad faith, they are

8 invalid. With respect to implied warranties, the comments to the Uniform 9 Commercial Code (as adopted by California) provide: "[A seller's] knowledge of 10 any defects not apparent on inspection would, however, without need for express 11 agreement and in keeping with the underlying reason of the present section and the 12 provisions on good faith, impose an obligation that known material but hidden 13 defects be fully disclosed." Cal. Comm. Code § 2314, UCC Comment 3 (emphasis 14 added). 15
5

Here, the FAC alleges that Apple was aware that its PowerBooks were

16 defective, yet continued to sell them regardless. FAC ¶¶50, 69. Thus, Apple was 17 in a position to know what consumers did not; that the product was likely to fail 18 during its useful life. Despite Apple's knowledge of the defect in the memory 19 slots, it did not adequately advise consumers of the defect and obtain their consent 20 to the purchase of a defective product. FAC ¶52. Consumers had no opportunity 21 to bargain with Apple over the terms of their PowerBook purchase. FAC ¶25. 22 These allegations are sufficient to plead that any durational limit on implied 23 warranties is unconscionable and violates basic principles of good faith. FAC ¶69. 24 Accordingly, Plaintiffs are entitled to discovery concerning whether any purported 25 26 27

CALDWELL LESLIE & PROCTOR

Pursuant to the Commercial Code, "good faith" means "honesty in fact and the observance of reasonable commercial standards of fair dealing." Cal. Comm. Code 28 § 1201(b)(20).
-16-

5

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page23 of 27

1 limitation on the duration of implied warranties is unconscionable or made in bad 2 faith and, therefore, void. 3 III. 4 5

THE COMPLAINT STATES A CLAIM UNDER CALIFORNIA'S UNFAIR COMPETITION LAW California's Unfair Competition Law ("UCL") prohibits "any unlawful,

6 unfair or fraudulent business act or practice. . . ." Cal. Bus. & Prof. Code § 17200. 7 "The scope of the UCL is quite broad." McKell v. Washington Mut., Inc., 142 Cal. 8 App.4th 1457, 1471 (Cal. Ct. App. 2006); see also Kasky v. Nike, Inc., 27 Cal.4th 9 939, 949 (2002) ("The UCL's scope is broad"). "Because Business and 10 Professions Code section 17200 is written in the disjunctive, it establishes three 11 varieties of unfair competition ­ acts or practice that are unlawful, or unfair, or 12 fraudulent." AICCO, Inc. v. Ins. Co. of N. Am., 90 Cal.App.4th 579, 587 (Cal. Ct. 13 App. 2001). 14 15 16

A.

Apple's Manufacture and Sale of Defective PowerBooks Constitutes an Unfair Business Practice in Violation of the UCL

"A business practice is unfair within the meaning of the UCL if it violates

17 established public policy or if it is immoral, unethical, oppressive or unscrupulous 18 and causes injury to consumers which outweighs its benefits." McKell, 142 19 Cal.App.4th at 1473.
6

As the California Supreme Court has explained, "[b]y

20 defining unfair competition to include also any `unfair or fraudulent business act 21 or practice,' the UCL sweeps within its scope acts and practices not specifically 22 proscribed by any other law." Kasky, 27 Cal.4th at 950 (quoting Bus. & Prof. 23 Code § 17200) (emphasis in original); see also Lozano v. AT&T Wireless Serv., 24 Inc., 504 F.3d 718, 731 (9th Cir. 2007) ("Each prong of the UCL is a separate and 25 26 27

CALDWELL LESLIE & PROCTOR

In Lozano v. AT&T Wireless Serv., Inc., 504 F.3d 718, 736 (9th Cir. 2007), the Ninth Circuit "endorse[d]" the application of the balancing test employed by the 28 McKell court.
-17-

6

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page24 of 27

1 distinct theory of liability; thus, the `unfair' practices prong offers an independent 2 basis for relief."). 3

The California courts have made clear that "the determination of whether [a

4 business act or practice] is unfair is one of fact which requires a review of the 5 evidence from both parties. . . . It thus cannot usually be made on demurrer." 6 McKell, 142 Cal.App.4th at 1473. Indeed, "`unfairness' is an equitable concept 7 that cannot be mechanistically determined under the relatively rigid legal rules 8 applicable to the sustaining or overruling of a demurrer." Schnall v. The Hertz 9 Corp., 78 Cal.App.4th 1144, 1167 (Cal. Ct. App. 2000). In reversing a district 10 court decision granting a motion to dismiss a UCL claim, the Ninth Circuit recently 11 stated that "whether a business practice is deceptive will usually be a question of 12 fact not appropriate for decision on demurrer." Williams v. Gerber Prods. Co., 552 13 F.3d 934 (9th Cir. 2008). 14

Here, the FAC alleges that Apple marketed the laptops by "tout[ing] their

15 many features, including the fact that each Aluminum PowerBook G4 has two 16 memory slots." FAC ¶18. Apple has since admitted that many PowerBook G4s 17 have defective memory slots, yet has refused to correct the defect for the vast 18 majority of PowerBook owners. FAC ¶¶19-20, 23. Indeed, Apple continued to 19 sell the product after it became aware of the defect. FAC ¶50. Apple thus reaped 20 substantial profits from sales of defective PowerBook computers at the expense of 21 consumers who were shortchanged by paying significant sums for a defective 22 product. Accordingly, Apple engaged in an unfair business practice and was 23 unjustly enriched. See Lectrodryer v. Seoulbank, 77 Cal.App.4th 723, 726 (Cal. 24 Ct. App. 2000); see also AICCO, 90 Cal.App.4th at 588, 109 Cal.Rptr. at 366 ("In 25 general, the unfairness prong has been used to enjoin deceptive or sharp business 26 practices."). These allegations state a claim under the UCL arising from an unfair 27 business practice. 28
CALDWELL LESLIE & PROCTOR

-18-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page25 of 27

1 2

B.

Apple's Knowing Sale of a Defective Product Is Unlawful

Although the finding of an unfair business practice is sufficient to sustain

3 Plaintiffs' UCL claims, Apple's actions in selling a defective product are also 4 unlawful. With respect to the unlawful prong of the UCL, courts have recognized 5 that "[t]he UCL incorporates other laws and treats violations of those laws as 6 unlawful business practices independently actionable under state law." Plascensia 7 v. Lending 1st Mortgage, 583 F.Supp.2d 1090, 1098 (N.D.Cal. 2008). "Violation 8 of almost any federal, state or local law may serve as the basis for a UCL claim." 9 Id.; see also AICCO, 90 Cal.App.4th at 587. Here, the FAC asserts that Apple 10 violated California Commercial Code § 2314 and was unjustly enriched by selling 11 computers with defective memory slots. FAC ¶41. These predicate violations are 12 sufficient to state a claim under the UCL. See Chamberlain v. Ford Motor Co., 13 369 F.Supp.2d 1138, 1147 (N.D. Cal. 2005). 14

Finally, even accepting Apple's argument concerning the duration of

15 implied warranties (which the Court should not), the passage of time limitations 16 under a predicate statute does not bar a claim under the UCL. See, e.g., Cortez v. 17 Purolator Air Filtration Prod. Co., 23 Cal.4th 163, 179 (Cal. 2000). 18 IV. 19 20

THE COMPLAINT ALLEGES A CAUSE OF ACTION FOR UNJUST ENRICHMENT State and federal courts throughout California, including this Court, have

21 recognized a cause of action for unjust enrichment. See, e.g., Blennis, 2008 WL 22 818526, at *4 ("Plaintiffs are entitled to plead an unjust enrichment claim in the 23 alternative.") (Fogel, J.); Sanders v. Apple, Inc., 2009 WL 150950 (N.D. Cal. 24 Jan. 21, 2009) (Fogel, J.); Fed. Deposit Ins. Co. v. Dintino, 167 Cal.App.4th 333, 25 346, 84 Cal.Rptr.3d 38, 49 (Cal. App. Ct. 2008). 26

To recover for unjust enrichment, a complaint must allege "receipt of a

27 benefit and unjust retention of the benefit at the expense of another." Lectrodryer 28 v. Seoulbank, 77 Cal.App.4th 723, 726 (Cal. Ct. App. 2000); see also Ghirardo v.
CALDWELL LESLIE & PROCTOR

-19-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page26 of 27

1 Antonioli, 14 Cal.4th 39, 51 (1996); Hirsch v. Bank of America, N.A., 107 2 Cal.App.4th 708, 722 (Cal. Ct. App. 2003). A claim for unjust enrichment is 3 synonymous with restitution. First Nationwide Savings v. Perry, 11 Cal.App.4th 4 1657, 1662 (Cal. Ct. App. 1992). Whether or not a plaintiff is entitled to recover 5 on a theory of unjust enrichment requires a determination of policy considerations 6 and the knowledge of the alleged wrongdoer. Id. 7

Plaintiffs allege that Apple manufactured computers with defective memory

8 slots. FAC ¶19. Despite its awareness of this defect, Apple refused to correct it 9 for the vast majority of consumers. FAC ¶¶20-23. Plaintiffs and other members of 10 the proposed Class expended substantial sums for a computer that Apple touted as 11 having features such as two memory slots. FAC ¶¶18, 50. Indeed, to correct the 12 defect on their own, consumers would have to pay almost one-half of the purchase 13 price of the computer. FAC ¶1. Under these circumstances, it would be unjust for 14 Apple to retain the enormous profits it received based on sales of computers that do 15 not operate as intended. Thus, Plaintiffs have stated a cause of action for unjust 16 enrichment. 17 18 19 20 21 22 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

-20-

Case5:08-cv-04969-JF Document48

Filed07/10/09 Page27 of 27

1 2

CONCLUSION For the foregoing reasons, the Court should deny Apple's motion to dismiss

3 in its entirety and should grant such other and further relief as it deems just and 4 proper. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CALDWELL LESLIE & PROCTOR

DATED: July 10, 2009

Respectfully submitted, CALDWELL LESLIE & PROCTOR, PC ROBYN C. CROWTHER ERIC S. PETTIT /s/ ROBYN C. CROWTHER Attorneys for Plaintiffs MEISELMAN, DENLEA, PACKMAN, CARTON & EBERZ P.C. Jeffrey I. Carton (pro hac vice) Jerome Noll (pro hac vice) Christine M. Ford (pro hac vice) Attorneys for Plaintiffs By

-21-