Huf v. Apple, Inc.

Filing 36

ORDER by Judge Jeremy Fogel granting 27 Motion to Dismiss; denying 28 Motion to Strike (jflc1, COURT STAFF) (Filed on 8/21/2009)

1 **E-Filed 8/21/2009** 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION 10 11 12 13 14 15 16 17 18 ROMAN HUF, 19 Plaintiff, 20 v. 21 APPLE, INC., 22 Defendant. 23 24 25 26 27 28
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ARAM HOVSEPIAN, Plaintiff, v. APPLE, INC. and DOES 1-10 inclusive, Defendants.

Case Number 08-5788 JF (PVT) Case Number 09-1064 JF (PVT) ORDER1 (1) GRANTING MOTIONS TO DISMISS WITH LEAVE TO AMEND AND (2) DENYING WITHOUT PREJUDICE MOTIONS TO STRIKE [re: docket nos. 27 & 28; 36 & 36]

Plaintiffs Aram Hovsepian ("Hovsepian") and Roman Huf ("Huf") bring these putative class actions2 on behalf of all persons similarly situated who purchased iMAC G5 personal

This disposition is not designated for publication in the official reports. The instant actions were related by the Court on May 12, 2009.

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computers from Defendant Apple, Inc. ("Apple"). Apple moves to dismiss both complaints for failure to state a claim upon which relief may be granted. Apple also moves to strike Plaintiffs' class claims. For the reasons set forth below, the motions to dismiss will be granted, with leave to amend. The motions to strike will be denied, without prejudice to renewal after Plaintiffs file their amended pleadings.3 I. BACKGROUND A. Plaintiff Hovsepian Plaintiff Hovsepian, a Florida resident, purchased an iMac in October 2006. Hovsepian FAC ¶ 15. Hovsepian alleges that vertical lines began to appear on the display screen in March 2008, eventually causing a visual obstruction that rendered the display screen unusable. Id. ¶¶ 1, 15. He alleges that Apple knew of or recklessly ignored the existence of the defect that caused premature failure of the display screens, and that Apple failed to take remedial action or remove the defective computers from the marketplace. See id. ¶¶ 2-3. Hovsepian alleges that Apple has chosen not to take remedial action because the defect tends to arise after the expiration of the product's one-year express warranty. See id. ¶ 11. Hovsepian further alleges that "thousands" of purchasers have experienced this problem and that Apple is well aware of the issue. See id. ¶ 9. Hovsepian seeks to bring claims on behalf of a class comprised of all persons and entities in the United States who made original purchases of an iMac computer, see Hovsepian FAC ¶ 32. He asserts the following claims for relief under California law: (1) violation of the California Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1750; (2) unfair, unlawful, or fraudulent business practices in violation of the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200 et seq.; (3) fraudulent omission; (4) unjust enrichment; and (5) a judicial declaration that Apple's one-year limitation on warranty claims is void, invalid and unenforceable.

Apple's Request for Judicial Notice of the terms of the express warranty is granted, as both the Huf and Hovsepian complaints reference the warranty, and resolution of the claims for relief will depend at least in part on the enforceability of the express warranty. See Hoey v. Sony Elecs. Inc., 515 F. Supp. 2d 1099, 1103 (N.D. Cal. 2007). 2
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B. Plaintiff Huf Plaintiff Huf purchased an iMac in November 2006. Huf Compl. ¶ 26. Huf alleges that his "iMac display began exhibiting prominent vertical lines across its screen" in September 2008. Id. ¶ 27. In addition, Huf alleges that his display experienced "color degradation; the colors, text and border at the bottom of his screen appear[ed] faded and washed out." Id. The Huf Complaint alleges that the defect giving rise to the display degradation was "inherent" and that Apple was aware of the defect at the time of manufacture. Id. ¶¶ 1, 20, 42, 51. Huf brings the instant action on behalf of a nationwide class of all persons who purchased a iMAC G5 from January 1, 2005 to the present. Id. ¶ 5. Huf alleges three claims for relief, also under California law: (1) unfair and/or unlawful business practices in violation of the UCL; (2) breach of the implied warranty of merchantability in violation of Cal. Com. Code § 2314; and (3) unjust enrichment. II. LEGAL STANDARD A complaint may be dismissed for failure to state a claim upon which relief may be granted if a plaintiff fails to proffer "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Allegations of material fact must be taken as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1997). See also Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). However, the Court need not accept as true allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). See also Twombly, 550 U.S. at 561 ("a wholly conclusory statement of [a] claim" will not survive motion to dismiss). On a motion to dismiss, the Court's review is limited to the face of the complaint and matters judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986); N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). However, under the "incorporation by reference" doctrine, the Court also may consider documents which are referenced extensively in the complaint and which are accepted by all parties as authentic. In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999). Leave to amend should be 3
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granted unless it is clear that the complaint's deficiencies cannot be cured by amendment. Lucas v. Dep't of Corr., 66 F. 3d 245, 248 (9th Cir. 1995). III. DISCUSSION A. Hovsepian FAC As a threshold matter, the parties disagree with respect to whether Hovsepian's CLRA and UCL claims are subject to the heightened pleading requirements of Fed. R. Civ. P. 9(b). This issue recently was addressed by the Ninth Circuit in Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009), which reiterated that "Rule 9(b)'s heightened pleading standards apply to claims for violations of the CLRA and UCL" where such claims are based on a fraudulent course of conduct. Id. at 1124 (citing Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102-05 (9th Cir. 2003)). Because Hovsepian's CLRA and UCL claims are predicated on allegedly fraudulent omissions by Apple, those claims are subject to the pleading requirements of Rule 9(b). See Kearns, 567 F.3d at 1124; Vess, 317 F.3d at 1103-04 (if "the claim is said to be `grounded in fraud' or to `sound in fraud,' [then] the pleading of that claim as a whole must satisfy the particularity requirement of Rule 9(b)."). 1. CLRA Claim Hovsepian alleges that Apple actively concealed material facts with respect to the alleged defect in violation of Cal. Civ. Code § 1770 (a)(5) and § 1770 (a)(7). Hovsepian FAC ¶ 47. Apple contends that the facts as currently alleged fail to support a cognizable claim under the CLRA, citing Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824 (2006). In Daugherty, the plaintiff alleged that an auto manufacturer knowingly concealed a latent defect that arose only after the expiration of the express warranty, and that such allegations formed a cognizable claim under the same provisions of the CLRA at issue in the instant action. See id. at 833-34. However, the Court of Appeal concluded that "although a claim may be stated under the CLRA in terms constituting fraudulent omissions, to be actionable the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose." Id. at 835. See also Bardin v. DaimlerChrysler Corp., 136 Cal. App. 4th 1255, 1276 (2006) (CLRA claim requires allegations that manufacturer was "`bound to disclose' 4
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[the defect]...or allege[] facts showing [that the manufacturer] ever gave any information of other facts which could have the likely effect of misleading the public"). The Hovsepian FAC does not state with sufficient particularity when and where Apple made an affirmative representation, if any, that contradict its alleged omissions. The operative pleading makes vague references with respect to certain contradictory statements, see Hovsepian FAC ¶ 31 ("Apple has responded by uniformly denying, on its website and in its retail stores, customer complaints and has sought to "run out the clock" on the warranties that accompanied the iMac."), but such generalized allegations do not provide the "`the who, what, when, where, and how' of the misconduct charged." Vess, 317 F.3d at 1106 (citation omitted). Accordingly, Hovsepian has not stated a cognizable CLRA claim based upon statements made in contradiction to a fraudulent omission. Hovsepian nonetheless argues that the second theory of liability discussed in Daugherty--based upon an affirmative duty to disclose--is alleged adequately. A plaintiff may "successfully pursue a CLRA claim [based on a fraudulent omission], despite Daugherty and Bardin, if [the manufacturer] was `obliged to disclose' the potential for problems." Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 1094 (N.D. Cal. 2007). A duty to disclose exists if one of the following four circumstances is present: (1) the defendant is in a fiduciary relationship with the plaintiff; (2) the defendant has exclusive knowledge of material facts not known to the plaintiff; (3) the defendant actively conceals a material fact from the plaintiff, or (4) the defendant makes partial representations but also suppresses some material facts. LiMandri v. Judkins, 52 Cal. App. 4th 326, 337 (1997). Hovsepian argues that he has alleged adequately the second and third LiMandri factors, both of which "require the existence of a material fact." Falk, 496 F. Supp. 2d at 1095. Materiality exists if the omitted information would cause a reasonable consumer to behave differently if he or she were aware of the information. See Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964, 971 (N.D. Cal. 2008). See also Falk, 496 F. Supp. 2d at 1095 ("Materiality, for CLRA claims, is judged by the effect on a `reasonable consumer.'") (citation omitted). Again, the Hovsepian FAC fails to comply with Rule 9(b). The pleading contains only 5
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generalized allegations with respect to exclusive knowledge and active concealment. Furthermore, generalized allegations with respect to consumer expectations are insufficient to meet Rule 9(b)'s heightened pleading requirements, especially when the alleged defect manifested itself more than one year after the expiration of the express warranty. See Oestreicher, 544 F. Supp. 2d at 971 ("consumer expectations are...subjective and likely unreliable, and...usage will greatly vary from consumer to consumer."). While the weight of applicable case law casts doubt on the basic viability of Hovsepian's CLRA claim, see id. at 972, the Court will dismiss the claim with leave to amend.4 2. UCL Claim The UCL prohibits "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." Cal. Civ. Code § 17200. Accordingly, "[a]n act can be alleged to violate any or all of the three prongs of the UCL--unlawful, unfair, or fraudulent." Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554 (2007). For an action based upon an allegedly unlawful business practice, the UCL "borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable." Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). A UCL claim predicated on unfair business practices may be grounded upon a violation of a statute, see Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995), or be a "standalone" claim based on an alleged act that "violates established public policy or if it is immoral,

Hovsepian relies heavily on Falk for the proposition that an allegation of a disappointed consumer expectation will defeat a motion to dismiss a CLRA claim. However, as discussed by the Oestreicher court in some detail, knowledge that a product is likely to fail at some point cannot give rise by itself to an actionable claim because "[s]uch knowledge is easily demonstrated by the fact that manufacturers must predict rates of failure of particular parts in order to price warranties and thus can always be said to `know' that many parts will fail after the warranty period has expired. A rule that would make failure of a part actionable based on such `knowledge' would render meaningless time/mileage limitations in warranty coverage." Oestreicher, 544 F. Supp. 2d at 972 (quoting Abraham v. Volkswagen of Am., Inc., 795 F.2d 238, 250 (2d Cir.1986)). Falk involved the failure of vehicle speedometers, an essential safety feature that a manufacturer may have a duty to disclose. See id. ("policy reasons militate against following Falk in this situation--where a duty to disclose is being imposed on a manufacturer for a latent non-safety related defect in its product."). 6
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unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits." McKell v. Wash. Mut., Inc., 142 Cal. App. 4th 1457, 1473 (2006). See also Cel-Tech, 20 Cal. 4th at 180 ("[A] practice may be deemed unfair even if not specifically proscribed by some other law."). A claim based upon the fraud prong may be brought based upon conduct akin to common-law fraud or an alleged course of conduct that is likely to deceive the public. Bardin, 136 Cal. App. 4th at 1274 ("A violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that members of the public are likely to be deceived."). As discussed above, to the extent that Hovsepian's UCL claim is grounded on a course of fraudulent conduct, the pleading is subject to Rule 9(b). See Kearns, 567 F.3d at 1125. Moreover, Kearns held that a UCL claim based on an alleged omission is subject to Rule 9(b), and if a complaint alleges a fraudulent course of conduct, the plaintiff cannot avoid Rule 9(b) by attempting to allege consumer deception without pleading additional allegations. See id. at 112627. The same rule applies to any claim brought under the unfair prong of the UCL. See id. at 1127 ("Because Kearns's [complaint] alleges a unified fraudulent course of conduct, his claims against Ford are grounded in fraud. His entire complaint must therefore be pleaded with particularity. Thus, the [complaint] was properly dismissed and no error was committed by not separately analyzing his claims under the unfairness prong of the UCL."). Similarly, and for the reasons discussed above in Section III.A.1, a derivative UCL claim based on a CLRA violation has not been pled adequately here. Even assuming that Hovsepian may assert a claim under the unfair prong of the UCL without being subject to Rule 9(b) pleading requirements, the operative complaint fails to state a claim. A standalone claim under the unfair prong of the UCL requires that "the consumer injury is substantial, is not outweighed by any countervailing benefits to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided." Daugherty, 144 Cal. App. 4th at 839. However, "[t]he failure to disclose a defect that might, or might not, shorten the effective life span of [a product] that functions precisely as warranted throughout the term of its express warranty cannot be characterized as causing a substantial injury to consumers, 7
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and accordingly does not constitute an unfair practice under the UCL." Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1026-27 (9th Cir. 2008) (quoting Daugherty, 144 Cal. App. 4th at 839). In the instant action, the display screens did operate properly during the oneyear express warranty period. Generalized allegations with respect to consumer expectations, see Hovsepian FAC ¶ 21 ("Many current studies suggest that an average LCD screen should last at least 5 years of normal usage without significant screen degradation.") or a statement that Apple "knew" that the screens would fail at some point, see id. ¶ 23, are not sufficient. See Bardin, 136 Cal. App. 4th at 1273 ("the `right' upon which plaintiffs actually rely here--the right to have a vehicle containing an exhaust manifold that lasts as long as an `industry standard' cast-iron exhaust manifold--is one based on a contract such as a warranty, not on a legislatively declared policy. No law generally requires a manufacturer to use the most expensive or most durable materials in the manufacture of its products."). Accordingly, the UCL claim will be dismissed with leave to amend. 3. Fraudulent Omission Under California law, the elements of a common-law claim for fraudulent omission are: (1) the defendant concealed or suppressed a material fact; (2) the defendant was under a duty to disclose the fact to the plaintiff; (3) the defendant intentionally concealed or suppressed the fact with intent to defraud the plaintiff; (4) the plaintiff was unaware of the fact and would have acted differently if he had known of the concealed or suppressed fact; and (5) as a result of the concealment or suppression the plaintiff sustained damage. See Hahn v. Mirda, 147 Cal. App. 4th 740, 748 (2007). For the same reasons set forth above, the fraudulent omission claim will be dismissed, with leave to amend in order to comply with Rule 9 (b). 4. Unjust Enrichment Hovsepian's claim for unjust enrichment is premised on the same alleged course of conduct that underlies his CLRA, UCL, and fraudulent omission claims. See Hovsepian FAC ¶ 86 (incorporating by reference previous allegations); ¶ 90 ("Defendant has been unjustly enriched at the expense of and detriment to Plaintiff and the Class by wrongfully collecting money to which Defendant, in equity, is not entitled."). In other words, the claim for unjust enrichment 8
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cannot stand alone as an independent claim for relief. See Jogani v. Superior Court, 165 Cal. App. 4th 901, 911 (2008) ("unjust enrichment is not a cause of action. Rather, it is a general principle underlying various doctrines and remedies, including quasi-contract.") (citation omitted). See also Melchior v. New Line Prods., Inc., 106 Cal. App. 4th 779, 793 (2003) ("there is no cause of action in California for unjust enrichment. `The phrase "Unjust Enrichment" does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so.'") (quoting Lauriedale Assocs., Ltd. v. Wilson, 7 Cal. App. 4th 1439, 1448 (1992)). Because Hovsepian has failed to allege a substantive claim for relief, the claim for unjust enrichment also will be dismissed with leave to amend. See Oestreicher, 544 F. Supp. 2d at 975 ("since plaintiff's fraud-based claims have been dismissed, plaintiff has no basis for its unjust enrichment claim."). See also Sanders v. Apple Inc., No. C 08-1713, 2009 WL 150950, at *9 (N.D. Cal. Jan. 21, 2009) ("[unjust enrichment] claim will depend upon the viability of the Plaintiffs' other claims."). 5. Declaratory Relief An action for declaratory relief requires an actual case or controversy. See Williams v. Alioto, 549 F.2d 136, 141 n.4 (9th Cir. 1977). Because the Declaratory Judgment Act "merely provides an additional remedy in cases where jurisdiction is otherwise established," Staacke v. U.S. Secretary of Labor, 841 F.2d 278, 280 (9th Cir. 1988), and the Hovsepian FAC presently does not state an independent claim for relief, Apple's motion to dismiss the claim for declaratory relief will be granted with leave to amend. B. Huf Complaint 1. Breach of Implied Warranty of Merchantability "Merchantability" generally has been construed as a requirement that a product conform to its ordinary and intended use. See, e.g., Hauter v. Zogarts, 14 Cal. 3d 104, 117-18 (1975). Under Cal. Com. Code § 2314(2), products are merchantable if they: (a) Pass without objection in the trade under the contract description; and (b) In the case of fungible goods, are of fair average quality within the description; and 9
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (f) Conform to the promises or affirmations of fact made on the container or label if any. This implied warranty does not "impose a general requirement that goods precisely fulfill the expectation of the buyer. Instead, it provides for a minimum level of quality." Am. Suzuki Motor Corp. v. Super. Ct., 37 Cal. App. 4th 1291, 1295 (1995) (citation omitted). In other words, a defect must be sufficiently serious so as to render the product unfit for its ordinary purpose. See id. See also Isip v. Mercedes-Benz USA, LLC, 155 Cal. App. 4th 19, 26 (2007) ("We reject the notion that merely because a vehicle provides transportation from point A to point B, it necessarily does not violate the implied warranty of merchantability. A vehicle that smells, lurches, clanks, and emits smoke over an extended period of time is not fit for its intended purpose."). Under California's Song-Beverly Consumer Warranty Act (the "Song-Beverly Act"), the duration of the implied warranty of merchantability is "[no] 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). See also Tietsworth Sears, Roebuck and Co., No. C 09-00288, 2009 WL 1363548, at *3 (N.D. Cal. May 14, 2009) ("The duration of the implied warranty of merchantability [under § 1791.1(c)] is coextensive with an express warranty, but in no case is shorter than sixty days or longer than one year following sale of the goods."); Atkinson v. Elk Corp. of Texas, 142 Cal. App. 4th 212, 230 (2006) ("duration of the implied warranty of merchantability under California law is limited to one year."). In addition, the express warranty provided by Apple limited the duration of any implied warranty to one year after purchase. Huf argues that the one-year limitation imposed by law does not apply because the defect was "inherent" and Apple was aware of the defect when it sold the computers. "Implied 10
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(c) Are fit for the ordinary purposes for which such goods are used; and (d) Run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and (e) Are adequately contained, packaged, and labeled as the agreement may require; and

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warranties extend to latent defects." Brittalia Ventures v. Stuke Nursery Co., Inc., 153 Cal. App. 4th 17, 24 (2007). In addition, Huf asserts his implied warranty claim under the Commercial Code rather than the Song-Beverly Act. The applicable provision under the Song-Beverly Act states in relevant part as follows: The duration of the implied warranty of merchantability and where present the implied warranty of fitness 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. Where no duration for an express warranty is stated with respect to consumer goods, or parts thereof, the duration of the implied warranty shall be the maximum period prescribed above. Cal. Civ. Code § 1791.1(c). While the Song-Beverly Act limits the duration of the implied

11 warranty of merchantability to one year, a recent decision of the California Court of Appeal in 12 Mexia v. Rinker Boat Co., Inc., 174 Cal. App. 4th 1297 (2009) calls into question the 13 applicability of § 1791.1(c) as it applies to latent defects, as well as to the relevance of this 14 provision to an implied warranty claim brought under the Commercial Code. 15 In Mexia, the court stated that the Song-Beverly Act acts supplements the Commercial 16 Code, and that it was intended to "provide clarity" with respect to consumer rights. Mexia, 174 17 Cal. App. 4th at 1304. Nonetheless, the court found that the omission of a time limit from § 18 2314 should be interpreted as meaning that "there is no `duration' of the implied warranty under 19 the Uniform Commercial Code in any meaningful sense; the product is either merchantable or 20 not (and a breach of the implied warranty occurs or not) only at the time of delivery." Id. See 21 also Larsen v. Nissan N. Am., No. A121838, 2009 WL 1766797, at *5 n.6 (Cal. Ct. App. 1st 22 Dist. June 23, 2009) (unpublished) ("[§ 2314] also imposes a warranty of merchantability, but it 23 does not contain a time limit. In the absence of any indication in the statute that it is intended to 24 supersede or extend Civil Code section 1791.1, we assume that [§ 2314] does not extend the 25 implied warranty with respect to the durability of a product beyond the one year maximum 26 contained in Civil Code section 1791.1."). Huf thus argues that he may bring an implied 27 warranty claim more than a year after the time of sale. 28 11
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Apple contends that any defect that manifests itself after the expiration of an express warranty cannot be actionable, and cites several cases in support of a policy that would preclude indefinite extensions of warranty terms. Daugherty, generally considered to be a leading case on this subject, did not involve a claim for breach of an implied warranty. See 144 Cal. App. 4th at 831 ("Daugherty makes no implied warranty claims."). Instead, the plaintiff in Daugherty attempted to bring a claim for breach of an express warranty based on the proposition that because the allegedly latent defect was present during the term of the express warranty, then the warranty was breached even though the defect was not ascertainable until after the warranty expired. See id. at 831-32 ("At its core, Daugherty's claim is that because the language of Honda's express warranty did not state that the defect must be `found,' `discovered' or `manifest' during the warranty period, the warranty covers any defect that "exists" during the warranty period, no matter when or whether a malfunction occurs."). Such a theory clearly would eviscerate any limitations put in place by an express warranty. See id. at 832. See also Hoey, 515 F. Supp. 2d at 1105 (for claims brought under similar theory of liability with respect to an express warranty "plaintiffs must allege more than the existence of a warranty and a defect occurring outside the warranty period").5 In Oestreicher, which also did not involve any warranty claims, express or implied, the district court dismissed claims brought under the CLRA and UCL based upon the reasoning that a consumer's expectations with respect to a product's durability cannot be exceed the term of an express warranty. 544 F. Supp. 2d at 972 (quoting Abraham, 795 F.2d at 250). In the context of a UCL or CLRA claim, such reasoning may be correct. Public policy considerations also may weigh in favor a rule that imposes a time limitation on implied warranty claims.6 Yet the Court

The theory of liability propounded by plaintiffs in Daugherty and Hoey was rejected by the Ninth Circuit: "Under California law, time limits in express warranties are effective at limiting the coverage of the warranty to defects that manifest themselves during the specified time period." Long v. Hewlett-Packard Co., 316 Fed. Appx. 585, 585 (9th Cir. 2009). Apple contends that Mexia cannot be a correct statement of the law because it essentially would grant consumers an indefinite warranty in contravention of the holdings in Daugherty and Oestreicher. However, and as noted by the court in Mexia, any breach of contract 12
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need not reach this issue here because manufacturers may impose limitations on implied warranties. See Cal. Com. Code § 2316. Apple's express warranty clearly limits the duration of any implied warranty of merchantability to one year after the sale. Klestoff Decl. Ex. A at 2. Huf's allegations to the contrary, namely that the limitation is "unreasonable, unconscionable, and void," are conclusory and presently lack sufficient detail to overcome the presumption of validity. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (the bare "assertion of an unlawful agreement [is] a `legal conclusion' and, as such, [is] not entitled to the assumption of truth.") (citing Twombly, 550 U.S. at 555). Accordingly, the claim for breach of the implied warranty of merchantability will be dismissed, with leave to amend.7

claim brought under the Commercial Code must be brought within four years of when the cause of action accrued, which for a latent defect occurs at the time of sale. See 174 Cal. App. 4th at 1306. Accordingly, it appears that a claim for breach of the implied warranty of merchantability must be brought no later than four years after the date of sale, a requirement that is satisfied by the facts as alleged by Huf. To the extent that Mexia conflicts with this Court's orders in Tietsworth and Stearns v. Select Comfort Retail Corp., No. 08-2746, 2008 WL 4542967 (N.D. Cal. Oct. 1, 2008), the Court notes that Mexia issued after those decisions. In addition, all of the named plaintiffs in Stearns purchased their allegedly defective products more than four years prior to bringing suit, and thus their claims under Cal. Com. Code § 2314 or the analogous provision under the Uniform Commercial Code are barred even in light of Mexia. The Court agrees with Apple that the Mexia decision appears to be contrary to established California case law with respect to the duration of the implied warranty of merchantability as set forth in § 1791.1 of the Song-Beverly Act. See, e.g., Atkinson, 142 Cal. App. 4th at 230. Mexia mentions Atkinson but does not expressly overrule it. In addition, two weeks after Mexia, a separate appellate panel appeared to reaffirm the established rule. See Larsen, 2009 WL 1766797, at *5 ("the warranty of merchantability implied as a matter of law in California is limited to one year after purchase"). The Larsen decision does not mention Mexia. As noted above, any component failure could be characterized as having been caused by a latent defect, and thus if Mexia were read broadly the time limitation imposed by § 1791.1(c) would be meaningless. The import of Mexia also may be limited by the fact the court appeared to discuss latent defects that rendered the product unmerchantable from the outset. See 174 Cal. App. 4th at 1304-1305 ("The implied warranty of merchantability may be breached by a latent defect undiscoverable at the time of sale...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."). The plaintiff in Mexia purchased a boat that suffered premature corrosion, the cause of which may have been present from the outset (the record appears to have been rather sparse as to that issue). Mexia relied upon Moore v. Hubbard & Johnson Lumber Co., 149 Cal. App. 2d 236, 241 (1957), which involved the sale of lumber 13
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2. UCL Claim The basis for Huf's UCL claim appears to be a breach of an implied warranty or a claim under the unfair prong of the UCL. As discussed above, Huf has not yet alleged a cognizable implied warranty claim. With respect to a standalone claim under the unfair prong of the UCL, such a claim requires allegations that "the consumer injury is substantial, is not outweighed by any countervailing benefits to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided." Daugherty, 144 Cal. App. 4th at 839. However, as discussed above with respect to the Hovsepian complaint, the failure of a product after the expiration of the term of an express warranty does not constitute an unfair practice under the UCL. See Clemens, 534 F.3d at 1026-27. The defect in Huf's computer did not manifest itself until after the expiration of the express warranty. Accordingly, the UCL claim will be dismissed, with leave to amend.8 3. Unjust Enrichment Huf's claim for unjust enrichment is premised on the same factual allegations underlying the implied warranty and UCL claims. Because unjust enrichment is a remedy that cannot standalone apart from a substantive allegation of misconduct, see Jogani, 165 Cal. App. 4th at 911 (2008), the claim will be dismissed with leave to amend.

infested with beetles. Thus in Moore (and perhaps in Mexia), the product was unmerchantable from day one. In the instant case, Plaintiffs themselves allege that the display screens worked properly for more than a year. Accordingly, the display screen was merchantable at the point of sale, and Huf probably would be barred from bringing a claim under the Song-Beverly Act, even in light of Mexia, more than one year after the sale. See Larsen, 2009 WL 1766797, at *6 ("The implied warranty of merchantability applies primarily to the initial condition of a product, guaranteeing that it performs in a manner appropriate for the ordinary purposes for which such goods are used...As suggested by the limitation of the warranty to a single year in section 1791.1, the implied warranty of merchantability is not intended to guarantee extended durability."). To the extent that Huf's UCL claim is premised on allegations that Apple knew of the defect and deliberately misled consumers, the amended pleadings would be subject to the heightened pleading requirements of Fed. R. Civ. P. 9(b). See Kearns, 567 F.3d at 1124, Oestreicher, 544 F. Supp. 2d at 974-75. 14
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C. Motions to Strike Class Claims Apple seeks to strike the class allegations of both Plaintiffs pursuant to Fed. R. Civ. P. 12(f) because the class as currently defined fails to meet the requirements of Fed. R. Civ. P. 23. Because the Court has dismissed all of Plaintiffs' claims with leave to amend, the motions to strike will be denied without prejudice to renewal after Plaintiffs file their amended pleadings. IV. ORDER Good cause therefor appearing, the motions to dismiss the Hovsepian FAC and Huf Complaint are GRANTED, with leave to amend. Plaintiffs shall file their amended complaints within thirty (30) days of the date of this Order. The motions to strike the class allegations are DENIED without prejudice.

DATED: August 21, 2009

JEREMY FOGEL United States District Judge

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This Order has been served upon the following persons: Albert Quoc Giang [e-mail], [e-mail], [e-mail] Christine M. Ford [e-mail]

David Michael Walsh , Esq [e-mail], [e-mail] Eric Andrew Long Jeffrey I Carton Jerome Noll [e-mail], [e-mail] [e-mail]

[e-mail] [e-mail]

Robin Crowther

Robyn Carrico Crowther [e-mail], [e-mail], [e-mail], [e-mail], [e-mail] Thomas A. Counts [e-mail], [e-mail], [e-mail], [e-mail] Brian J. Devine [e-mail], [e-mail] [e-mail] [e-mail], [e-mail], [e-mail] [e-mail]

David R. Buchanan Eric David Freed George Kevin Lang Jonathan Shub

[e-mail], [e-mail] [e-mail] [e-mail]

Kenneth Mark Seeger Michael D. Donovan Michael J. Boni

[e-mail] [e-mail] [e-mail], [e-mail] [e-mail]

Michael John Lotus Tammy Lee Kissman Thomas A. Counts

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