McKinney v. Google, Inc. et al

Filing 88

RESPONSE (re 83 MOTION to Dismiss SECOND AMENDED COMPLAINT ) Plaintiffs Memorandum of Points and Authorities in Opposition to Motion to Dismiss Second Amended Complaint filed byMary McKinney. (Attachments: # 1 Proposed Order Denying Defendants' Motion to Dismiss)(Avila, Sara) (Filed on 4/4/2011)

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MILSTEIN | ADELMAN, LLP
GILLIAN L. WADE, State Bar No. 229124
[e-mail]
SARA D. AVILA, State Bar No. 263213
[e-mail]
2800 Donald Douglas Loop North
Santa Monica, California 90405
Telephone [phone]
Facsimile [phone]
WHATLEY DRAKE & KALLAS, LLC
Joe R. Whatley, Jr. (pro hac vice, NY Bar No.4406088)
[e-mail]
Edith M. Kallas (pro hac vice, NY Bar No. 2200434)
[e-mail]
Patrick J. Sheehan (pro hac vice, NY Bar No. 3016060)
[e-mail]
1540 Broadway, 37th Floor
New York, New York 10036
Tel: [phone]
Fax: [phone]
Attorneys for Plaintiff
Additional Counsel Listed on Signature Page
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA – SAN JOSE DIVISION

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MARY MCKINNEY, Individually and on )
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behalf of all others similarly situated,
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Plaintiff,
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v.
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GOOGLE, INC., a Delaware corporation; )
HTC CORP., a Delaware corporation; and )
T-MOBILE USA, INC., a Delaware )
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corporation.
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Defendants
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5:10-cv-01177-JW
PLAINTIFF’S MEMORANDUM OF
POINTS AND AUTHORITIES IN
OPPOSITION TO MOTION TO
DISMISS SECOND AMENDED
COMPLAINT
Date:
April 25, 2011
Time:
9:00 A.M.
Courtroom: 8
Judge:
Hon. James Ware

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0
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

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TABLE OF CONTENTS
INTRODUCTION AND PROCEDURAL HISTORY........................................................1

II.

STATEMENT OF RELEVANT FACTS ............................................................................1

III.

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I.

STANDARDS FOR ANALYZING A MOTION TO DISMISS ........................................3

IV.

ARGUMENT.......................................................................................................................3

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A.

McKinney’s State Law Claims Are Not Preempted ...................................................4

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B.

McKinney has Pleaded All of Her Claims with the Requisite Specificity .................7

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1.

McKinney’s UCL, FAL and CLRA Claims Are Not Grounded in
Fraud And Are Therefore Not Subject to Rule 9(b) .......................................7

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2.

McKinney Satisfies Rule 9(b) to the Extent It Applies ..................................9

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3.

McKinney’s UCL And FAL Claims Are Well-Pleaded ...............................10

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C.

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McKinney’s Claims For Breach Of Warranty Are Adequately Pleaded..................12
1.
2.

McKinney’s express warranty claims are adequately pleaded .....................14

3.

McKinney’s implied warranty claims are adequately pleaded .....................15

4.

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Defendants had adequate notice....................................................................12

McKinney’s claims under the Magnuson-Moss Warranty Act
are adequately pleaded..................................................................................16

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D.

The Economic Loss Rule Does Not Bar McKinney’s Tort Claims..........................17

E.

McKinney’s Claims For Unjust Enrichment And Declaratory Relief
Are Well-Pleaded......................................................................................................20

F.

Defendants’ Failure To Provide Customer Support Is Actionable ...........................21

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V.

CONCLUSION..................................................................................................................22

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Error! Unknown document property name.

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TABLE OF AUTHORITIES

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FEDERAL CASES
Anunziato v. eMachines, Inc. (C.D. Cal. 2005)
402 F. Supp. 2d 1133 .........................................................................................................11

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Baggett v. Hewlett-Packard Co. (C.D. Cal. 2007)
582 F. Supp. 2d 1261 ...........................................................................................................8
Bastien v. AT&T Wireless Servs., Inc. (7th Cir.2000)
205 F.3d 983 ........................................................................................................................4
Bell v. Manhattan Motorcars, Inc. (S.D.N.Y. Aug. 4, 2008)
2008 U.S. Dist. LEXIS 58648 ...........................................................................................14
Bonfield v. AAMCO Transmissions, Inc. (N.D. Ill. 1989)
708 F. Supp. 867 ..................................................................................................................8

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Butcher v. DaimlerChrysler Co. (M.D.N.C. July 29, 2008)
2008 U.S. Dist. LEXIS 57679 ...........................................................................................14
David K. Lindemuth Co. v. Shannon Fin. Corp. (N.D. Cal. 1986)
637 F. Supp. 991 ..................................................................................................................8
DeFebo v. Andersen Windows, Inc. (E.D. Pa. Sept. 24, 2009)
2009 U.S. Dist. LEXIS 87889 ...........................................................................................14

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Falk v. General Motors Corp. (N.D. Cal. 2007)
496 F. Supp. 2d 1088 .......................................................................................................8, 9
First Interstate Bank of Arizona, N.A. v. Murphy, Weir & Butler (9th Cir. 2000)
210 F.3d 983 ......................................................................................................................21
Gonzalez v. Drew Indus. (C.D. Cal. May 10, 2007)
2007 U.S. Dist. LEXIS 35952 ...........................................................................................14
Gutierrez v. Givens (S.D. Cal. 1997)
989 F. Supp. 1033 ................................................................................................................9

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Hampton v. Gebhardt’s Chili Powder Co. (9th Cir. 1961)
294 F.2d 172 ......................................................................................................................13
Huber v. Howmedica Osteonics Corp. (D.N.J. Dec. 30, 2008)
2008 U.S. Dist. LEXIS 106479 .........................................................................................14
Iberia Credit Bureau, Inc. v. Cingular Wireless (W.D. La. 2009)
668 F. Supp. 2d 831 .............................................................................................................7
Error! Unknown document property name.

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In re HP Inkjet Printer Litig. (N.D. Cal. Mar. 7, 2006)
2006 U.S. Dist. LEXIS 12848 ...........................................................................................13
In re Mattel, Inc. (C.D. Cal. 2008)
588 F. Supp. 2d 1111 .........................................................................................................11
In re NVIDIA GPU Litig. (N.D. Cal. 2009)
2009 WL 4020104 .............................................................................................3, 16, 17, 20
In re Verisign, Inc. Deriv. Litig. (N.D. Cal. 2007)
531 F. Supp. 2d 1173 .........................................................................................................20
In re Wireless Consumers Alliance, Inc. (FCC 2000)
15 F.C.C.R. 17021 ...............................................................................................................7
Irwin v. Country Coach Inc. (E.D. Tex. Feb. 1, 2006)
2006 U.S. Dist. LEXIS 35463 ...........................................................................................14

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Ivory v. Pfizer Inc. (W.D. La. Sept. 30, 2009)
2009 U.S. Dist. LEXIS 90735 ...........................................................................................14
Kearns v. Ford Motor Co. (9th Cir. 2009)
567 F.3d 1120 ..........................................................................................................8, 10, 11
Marcus v. AT&T Corp. (2d Cir. 1998)
138 F.3d 46 ..........................................................................................................................7
Moore v. Kayport Package Exp., Inc. (9th Cir. 1989)
885 F.2d 531 ........................................................................................................................8

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Morongo Band of Mission Indians v. Rose (9th Cir. 1990)
893 F.2d 1074 ....................................................................................................................22
Multimedia Patent Trust v. Microsoft Corp. (S.D. Cal. 2007)
525 F. Supp. 2d 1200 .........................................................................................................11
Nordberg v. Trilegeant Corp. (N.D. Cal. 2006)
445 F. Supp. 2d 1082 .........................................................................................................11

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Oki America, Inc. v. Microtech Int’l, Inc. (9th Cir. 1989)
872 F.2d 312 ......................................................................................................................20
Oracle Corp. v. SAP AG (N.D. Cal. Dec. 15, 2008)
2008 U.S. Dist. LEXIS 103300 .........................................................................................20
Paracor Fin., Inc. v. General Elec. Cap. Corp. (9th Cir. 1996)
96 F.3d 1151 ......................................................................................................................20

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Phillips v. AT & T Wireless (S.D. Iowa July 29, 2004)
2004 WL 1737385 ...............................................................................................................7
Platte Anchor Bolt, Inc. v. IHI, Inc (2004)
352 F.Supp.2d 1048 ...........................................................................................................19
Pollard v. Saxe & Yolles Dev. Co.
12 Cal.3d 374 .....................................................................................................................13
Promuto v. Waste Mgmt., Inc. (S.D.N.Y. 1999)
44 F.Supp.2d 628 ...............................................................................................................14

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Qarbon.com, Inc. v. eHelp Corp. (N.D. Cal. 2004)
315 F. Supp. 2d 1046 .........................................................................................................11
Roberts v. USCC Payroll Corp. (N.D. Iowa 2009)
635 F. Supp. 2d 948 ...........................................................................................................21
Rhoades v. Powell (E.D. Cal. 1986)
644 F. Supp. 645 ..................................................................................................................8
Robinson Helicopter Co., Inc. v. Dana Corp. (2008)
102 P.3d 268 ......................................................................................................................18

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Rubio v. Capital One Bank (9th Cir. 2010)
613 F.3d 119 ......................................................................................................................10
Sanders v. Apple Inc.
672 F.Supp.2d 978 .............................................................................................................13
Shaw v. AT&T Wireless Servs. Inc. (N.D. Tex. 2001)
2001 WL 539650 .................................................................................................................7

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Semegen v. Weidner (9th Cir. 1985)
780 F.2d 727 ........................................................................................................................8
Seville Indus. Mach. Corp. v. Southmost Mach. Corp. (3d Cir. 1984)
742 F.2d 786 ........................................................................................................................8
Shin v. BMW of North America (N.D. Cal. July 16, 2009)
2009 WL 2163509 ...............................................................................................................8
Shroyer v. New Cingular Wireless Services, Inc. (9th Cir. Sept. 20, 2010)
2010 WL 3619936 ...........................................................................................................4, 7

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State of Minnesota v. Worldcom, Inc. (D. Minn 2000)
125 F.Supp.2d 365 ...............................................................................................................7

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Trans World Airlines v. Curtiss-Wright Corp. (1955)
1 Misc.2d 477.....................................................................................................................19
U.S. v. Hempfling (E.D. Cal. 2006)
431 F. Supp. 2d 1069 ...........................................................................................................8
Usher v. City of Los Angeles (9th Cir. 1987)
828 F.2d 556 ........................................................................................................................3
Vess v. Ciba-Geigy Corp. USA (9th Cir. 2003)
317 F.3d 1097 ..........................................................................................................7, 10, 11

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Von Saher v. Norton Simon Museum of Art at Pasadena (9th Cir. 2009)
578 F.3d 1016 ....................................................................................................................22
Walling v. Beverly Enterprises (9th Cir. 1973)
476 F.2d 393 ....................................................................................................................3, 9
Washington v. Baenziger (N.D. Cal. 1987)
673 F. Supp. 1478 ................................................................................................................8

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STATE CASES

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Aas v. Superior Court (2000)
24 Cal.4th 627..............................................................................................................18, 20

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Bank of the West v. Superior Court (1992)
2 Cal.4th 1254..............................................................................................................10, 12
Camacho v. Auto. Club of S. Cal. (2006)
142 Cal. App. 4th 1394 ....................................................................................................221
Committee on Children’s Tel., Inc. v. General Foods Corp. (1983)
35 Cal.3d 197 ...............................................................................................................10, 12
Cortez v. Purolator Air Filtration Prods. Co. (2000)
23 Cal. 4th 163.............................................................................................................10, 12

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DeWitt v. Eveready Battery Co. (N.C. 2002)
562 S.E.2d 140...................................................................................................................14
Greenman v. Yuba Power Prods. (1963)
59 Cal.2d 57 .......................................................................................................................13
In re Tobacco II Cases (2009)
46 Cal.4th 298....................................................................................................................12

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Jimenez v. Super. Ct. (2002)
29 Cal.4th 473..............................................................................................................17, 18
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KB Homes v. Superior Court (Consolidated Industries Corp.) (2003)
112 Cal.App.4th 1076 ........................................................................................................18
Kasky v. Nike, Inc. (Cal. 2002)
27 Cal.4th 939....................................................................................................................10
Kwikset Corp. v. Superior Court (Cal. Jan. 27, 2011)
Cal.Rptr.3d.........................................................................................................................10
McAnulty v. Lema (1962)
200 Cal.App.2d 126 ...........................................................................................................13
McBride v. Boughton (2004)
123 Cal.App.4th 379 ..........................................................................................................20
Metowski v. Traid Corp. (1972)
28 Cal.App.3d 332 .............................................................................................................13

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Mexia v. Rinker Boat Co., Inc. (2009)
174 Cal.App.4th 1297 ........................................................................................................13
Moraca v. Ford Motor Co. (N.J. Sup. Ct. App. Div. 1974)
332 A.2d 607......................................................................................................................14
People v. Superior Ct. (1973)
9 Cal.3d 283 .......................................................................................................................11
Seely v. White Motor Co. (1965)
63 Cal.2d 9 ...................................................................................................................18, 19

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Spielholz v. Superior Court (2001)
86 Cal.App.4th 1366 ............................................................................................................7
Williams v. Beechnut Nutrition Corp. (1986)
185 Cal.App.3d 135 ...........................................................................................................14
Wyatt v. Cadillac Motor Car Division (1956)
145 Cal.App.2d 423 ...........................................................................................................19

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FEDERAL STATUTES

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47 C.F.R. § 20.15(a).........................................................................................................................6

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47 C.F.R. §§ 21.1-.903.....................................................................................................................6

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47 C.F.R. §§ 22.900-.973.................................................................................................................6

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15 U.S.C. § 2301(7) .......................................................................................................................16
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47 U.S.C. § 332(c)(1)(A) .................................................................................................................6

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STATE STATUTES

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Cal. Bus. & Prof. Code

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§ 1780(a) ..............................................................................................................................8
§ 1792.................................................................................................................................16

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§ 1792.3..............................................................................................................................16

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§ 17200...............................................................................................................................10

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§ 17204.................................................................................................................................8

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I.

INTRODUCTION AND PROCEDURAL HISTORY

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On January 29, 2010, Plaintiff Mary McKinney, on behalf of herself and others similarly

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situated, filed suit in California state court against defendants Google, Inc.; T-Mobile USA, Inc;

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and HTC Corp. based on the reasonable belief that McKinney and others were purchasing a true

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3G device when they bought regarding the Google Nexus One smartphone (the “Google Phone”

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or “the device”). Defendants removed that case to this Court on March 22, 2010, and McKinney

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filed an amended Complaint on June 11, 2010. Docs. 24, 26. This Court related McKinney’s

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case to that of Nathan Nabors, which complains of similar conduct, on October 8, 2010. Doc. 60.

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On November 1, 2010, this Court held oral argument regarding the motions to dismiss and compel

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filed by Defendants. Docs. 30, 36, 39, 41. Although this Court dismissed certain causes of action

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and compelled arbitration against T-Mobile, at bottom, this Court recognized the valid causes of

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action that have been pleaded in McKinney’s Second Amended Complaint, which was filed on

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December 3, 2011. Doc. 75. McKinney has complied with this Court’s orders and pleaded state

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law causes of action that should be sustained at the pleading stage, especially considering the

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current status of this case.

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The basic theory of this case is simple: McKinney and members of the Class purchased the

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Google Phone under the impression that it was a true 3G device, based on the representations

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made by Google, HTC, and T-Mobile. After purchase, McKinney and the Class learned that the

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device did not provide consistent 3G access to their cellular provider’s networks. Purchasers

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revolted, but they were left holding the bag for a purchase they otherwise would not have made

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had the true facts regarding the Google Phone been disclosed. McKinney, in particular, was

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unable to use her Google Phone for any purpose for a significant amount of time. They were

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unable to get assistance from their cellular providers or HTC, and received only delayed and

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ineffective assistance from Google. The Class in this case did not get the full benefit of their

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bargain with Google and HTC.

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II.

STATEMENT OF RELEVANT FACTS

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The basic facts underlying McKinney’s claims on behalf of herself and the Class are

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simple: Google and HTC together designed and marketed the Google Phone, which is a 3G
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PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

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device that is designed to provide superior data transfer rates over earlier model devices. Compl.

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¶¶ 31-32, 38-40. T-Mobile was the “exclusive” provider of 3G wireless network connectivity for

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the device, but customers could pay a higher cost for an unlocked phone that would work on other

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networks. Compl. ¶ 27, 45. Google offered purchasers of the device incentives to subscribe to T-

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Mobile’s wireless service or, if—like McKinney—they were already T-Mobile customers,

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incentives to extend their contracts with T-Mobile when purchasing the Google Phone. Compl. ¶¶

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33-34, 37. Google offered the device for sale and promoted the device on its homepage, which is

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some of the most coveted real estate on the Internet. Compl. ¶¶ 30-32. Google, HTC, and T-

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Mobile also promoted the device in the media.

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“For consumers the appellation ‘3G’ is commonly understood to provide superior data

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transfer rates over older cell technology,” and “McKinney understood the ‘3G’ appellation to be

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consistent with the common understanding of other users. The Nexus One was the first 3G phone

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McKinney has owned, and a primary reason McKinney purchased this phone was its 3G

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capability.” Compl. ¶¶50-51.
Unfortunately for McKinney and the Class, the Google Phone did not operate as a true 3G

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device.

Despite T-Mobile’s representations to the contrary, see Compl. ¶ 51, its network

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connectivity did not offer the true 3G experience that customers reasonably believed that they

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were purchasing. Compl. ¶¶ 38, 40-44. They experience frequent problems with both calling and

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data transfer. Compl. ¶ 49. The lack of customer service and technical support provided to

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Google Phone purchasers added an additional layer of injury, because for substantial amounts of

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time McKinney and the Class were unable to use their Google Phones for any realistic purpose, let

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alone for the purpose of consistent 3G connectivity. Compl. ¶ 48. Now, Class members are

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locked into service agreements, unable to get refunds, and they face unreasonably high

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termination fees should they desire to sign up for another device or a service plan with another

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carrier. Compl. ¶¶ 46, 48, 52-55, 59, 62, 64. The monies expended by McKinney and the Class

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should have resulted in the purchase of a true 3G device that provided 3G connectivity. Instead,

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for $529 (setting aside additional monies paid to T-Mobile directly), McKinney is left with a

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device that does not offer the 3G connectivity that she believed she was purchasing, a used
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PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

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Google Phone that was passed off to her as equivalent to the new phone she purchased, and long

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stretches of time that she was totally without any use for the phone for which she had paid

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hundreds of dollars. And now, if McKinney or other Class members want to get away from their

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Google Phones and move to another device, they are faced with termination fees that are

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unreasonably high, especially in the light of the hundreds of dollars that McKinney and the Class

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have already spent on the phones with which they are stuck.

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III.

STANDARDS FOR ANALYZING A MOTION TO DISMISS.

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This Court is, without question, familiar with the standards for denying a motion to

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dismiss. “For purposes of evaluating a motion to dismiss, the court ‘must presume all factual

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allegations of the complaint to be true and draw all reasonable inferences in favor of the

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nonmoving party.’ Any existing ambiguities must be resolved in favor of the pleading.” In re

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NVIDIA GPU Litig., NO. C 08-04312 JW, 2009 U.S. Dist. LEXIS 108500, at *11-*12 (N.D. Cal.

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Nov. 19, 2009)) (citing and quoting Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir.

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1987); Walling v. Beverly Enters., 476 F.2d 393, 396 (9th Cir. 1973)).

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IV.

ARGUMENT.

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None of the Defendants’ several arguments regarding the Second Amended Complaint and

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its purported deficiencies have merit, regardless of their superficial appeal, and all of them should

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be rejected for the following reasons. First, Ninth Circuit law is clear that state law and breach of

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warranty claims like those in the Complaint are not preempted under the Federal Communications

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Act. Second, McKinney’s allegations satisfy all applicable pleading standards under the Federal

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Rules of Civil Procedure. Rule 8(a) is the governing rule, to be sure, but McKinney’s allegations

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satisfy even the heightened standards of Rule 9(b) should this Court apply those standards, and it

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should not. Third, McKinney has adequately pleaded every breach of warranty count in the

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Complaint. Fourth, the economic loss doctrine cannot bar McKinney’s claims where there is a

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disputed factual issue regarding what defects actually caused her Google Phone to be useless for

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long stretches of time, and worth less than a true 3G device the rest of the time she has owned it.

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Fifth, McKinney’s unjust enrichment and declaratory relief are viable stand-alone causes of action

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and theories of recovery.
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A.

McKinney’s State Law Claims Are Not Preempted.

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McKinney’s state law claims are not preempted under governing Ninth Circuit law.

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Shroyer v. New Cingular Wireless Services, Inc. presented facts and issues materially similar to

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those at issue in this case. 622 F.3d 1035, 1038 (9th Cir. 2010). In Shroyer, the plaintiff “filed a

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class action against . . . a corporation resulting from the merger of AT&T Wireless Services, Inc.,

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and Cingular Wireless Corporation. . . . Shroyer had a contract for wireless telephone services

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with AT&T. He alleged that, immediately following the merger, his cellular phone service was

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severely degraded.” Id. Shroyer alleged that (1) New Cingular breached the existing AT&T

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contract because it did not provide adequate service coverage; (2) New Cingular required him to

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sign a new contract if he wanted the service that AT&T contracted in his existing service

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agreement; (3) New Cingular misrepresented and omitted key facts to the Federal

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Communications Commission regarding the merger; and (4) the FCC would not have approved

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the New Cingular merger if it had known that breaches of contract like those Shroyer alleged

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would occur. Id. Shroyer pleaded the following claims: “1) breach of contract; 2) fraud and

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deceit; 3) unfair competition under Cal. Bus. & Prof. Code §§ 17200-210; and 4) a demand for a

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declaratory judgment.” Id.

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New Cingular made arguments similar to those that Defendants have made before this

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Court: “New Cingular would have this court rely on Bastien v. AT&T Wireless Servs., Inc., 205

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F.3d 983 (7th Cir.2000), to hold that the substance of Shroyer’s claims is really an attack on the

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post-merger service, and that deciding the case would necessarily involve regulating the modes

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and conditions under which New Cingular may begin offering service.” Id. at 1039. The Ninth

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Circuit, however, rejected that argument:

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[T]he FCC rejected this per se argument in In re Wireless Consumers Alliance, and
so do we. . . . New Cingular attempts to distinguish In re Wireless Consumers
Alliance by observing that there the FCC was deciding whether an award of
damages based on state law breach of contract and fraud claims was preempted by
§ 332. Here, New Cingular argues, we are confronted with whether the contract
and fraud claims themselves are preempted. This difference does not affect our
conclusion; if damages are not preempted, neither are the claims under which they
are awarded.
Id. at 1039 & n.3.

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PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
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In Shroyer, the only claims that the Court found preempted were based on whether the

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FCC had accurate facts and would have approved the merger “depend[ed] on the assessment of

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the public benefit of the merger. That determination has already been made by the FCC, and

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reexamination of that issue under state law is preempted either by § 332 or by the ordinary

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principles of conflict preemption.” Id. at 1041. This claim was not preempted because it was a

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UCL claim. It was preempted because it was inextricably intertwined with whether New Cingular

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and ATTM committed a fraud on the FCC during the merger approval process—a fact that does

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not exist in this case.

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This Court has concluded previously that if McKinney can allege that the problems or

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defects at issue are as a result of a defect in the phone itself, such claims would not be preempted

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under the FCA:

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For example, Plaintiff may be able to state claims against Google and HTC for
actual defects of the Google Phone or its applications. Such claims do not
challenge a carrier’s rates or market entry and hence would not be preempted.
Thus, the Court finds that leave to amend is warranted.

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Doc. 73 at 17. That is precisely the conduct that has been alleged here. McKinney has alleged

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that Defendants committed the following unfair acts and practices, among others:

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Sold her a product that they represented, and she believed, would act as a true 3G

18

device, based on representations of both T-Mobile and Defendants ; (Compl. ¶¶ 3,

19

13, 37-40, 44, 50-51, 53)

20



Took the full payment for a Google Phone even though McKinney should have

21

received a discount, because she was an existing T-Mobile customer when Google

22

completed the sale of her phone from its California headquarters; (Compl. ¶¶ 2, 4,

23

5, 7, 48-49, 68)

24



25
26

Sent McKinney a used Google Phone, even though she had paid full price for her
purchase of a “new” (non-working) Google Phone; (Compl. ¶¶ 7, 55, 67)



Left McKinney without any type of cellular device for weeks after her $529

27

purchase, because she refused to pay another $529 for a second Google Phone;

28

(Compl. ¶¶ 5-7);

5

PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1



Refused to provide McKinney with any reasonable customer service so she could

2

obtain cellular service, generally, or 3G service—the type of service for which

3

McKinney had paid a premium. (Compl. ¶¶ 1, 3, 8, 13, 57, 60-62, 73)

4

McKinney’s allegations regarding the failures of the phone marketed to her as “essential for web

5

surfing and email” (Compl. ¶ 39) very clear:

6
7
8
9

[McKinney’s Google Phone] never had 3G service at any point, and showed an
error message regarding the phone’s hardware that directed her to contact her
mobile service provider. When she contacted T-Mobile, she was told that T-Mobile
could not help her and that she should contact Google directly. There was no help
line to call Google, and she had to wait on an email reply. McKinney was unable to
obtain phone service or use any of the features of the Google Phone during this
time, but never received a rebate or other compensation for that time during which
her Google Phone was unable to be used for its intended purpose.

10
11

Compl. ¶ 4.

12

Absolutely none of those allegations and the claims on which they are based are

13

preempted. McKinney’s claims based on the Defendants’ false and misleading representations are

14

not preempted because neither the FCA, 47 U.S.C. § 151, et seq., nor any federal regulations

15

promulgated thereunder regulate advertising or the use of the 3G appellation. The portion of the

16

FCA governing mobile services, 47 U.S.C. § 332, does not regulate advertising or the 3G

17

appellation. Nor does the subchapter governing common carriers, 47 U.S.C. §§ 201-276. See 47

18

U.S.C. § 332(c)(1)(A) (stating persons engaged in commercial mobile services are to be treated as

19

common carriers subject to subchapter II). Despite the Google Phone being regulated by at least

20

three different parts of Title 47 of the Code of Federal Regulations, none of the regulations govern

21

advertising or the appellation 3G. Part 20 of Title 47 governing commercial mobile radio services

22

(“CMRS”) requires providers to abide by certain parts of subchapter II of the FCA and other

23

regulations, but it does not govern advertising or the 3G appellation. See 47 C.F.R. § 20.15(a).

24

Under Part 22 of Title 47, the licensing and operation of cellular radiotelephone service is

25

regulated, but conspicuously absent are any regulations governing advertising or the 3G

26

appellation. See 47 C.F.R. §§ 22.900-.973. To the extent the Google Phone operates on either

27

narrow or broadband frequencies, the regulations in Part 24 of Title 47 do not govern advertising

28

or the 3G appellation. See 47 C.F.R. §§ 21.1-.903.
6
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
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1

“It is well settled that state law claims stemming from state contract or consumer fraud

2

laws governing disclosure of rates and rate practices are not generally preempted under [47

3

U.S.C.] § 332.” Iberia Credit Bureau, Inc. v. Cingular Wireless, 668 F. Supp. 2d 831, 839 (W.D.

4

La. 2009); see also Phillips v. AT & T Wireless, 4:04-CV-40240, 2004 WL 1737385 (S.D. Iowa

5

July 29, 2004) (explaining that not all matters affecting wireless providers’ rates are preempted as

6

rate regulation under the FCA). Indeed, it is well established that the FCA does not govern

7

deceptive advertising, misrepresentations or unfair trade practices. Marcus v. AT&T Corp., 138

8

F.3d 46, 54 (2d Cir. 1998); Shaw v. AT&T Wireless Servs. Inc., No. 3:00-CV-1614, 2001 WL

9

539650, *4 (N.D. Tex. 2001); Spielholz v. Superior Court, 86 Cal.App.4th 1366, 1374 (2001);

10

State of Minnesota v. Worldcom, Inc., 125 F.Supp.2d 365, 372 (D. Minn 2000). Even the FCC

11

agrees with that proposition. In re Wireless Consumers Alliance, Inc., 15 F.C.C.R. 17021, 17035-

12

36 [¶¶ 25-27] (FCC 2000).

13

Under Shroyer, therefore, claims regarding representations of service are not preempted,

14

even though claims that require second-guessing the FCC’s approval of mergers are preempted.

15

622 F.3d at 1041. Claims that ask a Federal court to prevent a new cellular company from

16

entering a new market (which Defendants have not argued) may be preempted, whereas claims

17

that ask a Federal court to enforce state consumer-protection laws and seek restitution for money

18

paid for a product that did not work for the purpose for which it was intended are not preempted

19

under Shroyer. Id. at 1039-40.

20

B.

McKinney has Pleaded All of Her Claims with the Requisite Specificity.

21

McKinney’s claims are not grounded in fraud, and are subject only to the requirements of

22

Federal Rule of Civil Procedure 8(a). In the alternative, McKinney satisfies Rule 9(b) to the

23

extent it applies to the Complaint and, to be sure, it does not govern any of the allegations

24

McKinney has made.

25

1.

McKinney’s UCL, FAL and CLRA Claims Are Not Grounded In Fraud

26

And Are Therefore Not Subject to Rule 9(b)

27

Rule 9(b)’s heightened pleading requirements only apply to allegations describing

28

fraudulent conduct—meaning a cause of action where they underlying cause of action in its
7
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

entirety is fraud. See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003).

2

Accordingly, “Plaintiffs are not required to plead ‘reliance’ and ‘materiality’ with particularity,

3

because those elements are grounded in the UCL’s and CLRA’s ‘as a result’ of language and are

4

thus distinct from the common law fraud element of justifiable reliance.” Shin v. BMW of North

5

America, No. CV 09-00398 AHM (AJWx), 2009 WL 2163509, at *4 (N.D. Cal. July 16, 2009)

6

(citing Cal. Bus. & Prof. Code § 17204; Cal. Civ. Code § 1780(a); Kearns v. Ford Motor Co., 567

7

F.3d 1120, 1125 (9th Cir. 2009)).

8

As a general rule, a “pleading is sufficient under Rule 9(b) if it identifies “the

9

circumstances constituting fraud so that the defendant can prepare an adequate answer from the

10

allegations.” Semegen v. Weidner, 780 F.2d 727, 735 (9th Cir. 1985).1 Plaintiffs need not plead

11

the “date, place or time” of the fraud, so long as they use an “alternate means of injecting

12

precision and some measure of substantiation into their allegations of fraud.” Seville Indus. Mach.

13

Corp. v. Southmost Mach. Corp., 742 F.2d 786, 791 (3d Cir. 1984).

14

Moreover, UCL and CLRA claims based on an omission or concealment “can succeed

15

without the same level of specificity required by a normal fraud claim.” Baggett v. Hewlett-

16

Packard Co., 582 F. Supp. 2d 1261, 1267 (C.D. Cal. 2007). Indeed, as numerous courts recognize

17

“an actionable omission obviously cannot be particularized as to ‘the time, place and contents of

18

the false representations.’” Bonfield v. AAMCO Transmissions, Inc., 708 F. Supp. 867, 875 (N.D.

19

Ill. 1989); see also Washington v. Baenziger, 673 F. Supp. 1478, 1482 (N.D. Cal. 1987) (“Where

20

the fraud consists of omissions on the part of the defendants, the plaintiff may find alternative

21
22
23
24
25
26
27
28

1

See also David K. Lindemuth Co. v. Shannon Fin. Corp., 637 F. Supp. 991, 993 (N.D.
Cal. 1986) (“Rule 9 must be read in light of Rule 8(a) requiring averments to be simple, concise
and direct.”). Moreover, Rule 9(b)’s requirement is “relaxed “in cases of corporate fraud” where
“plaintiffs will not have personal knowledge of all of the underlying facts” such as the identities
of particular defendants.” Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir.
1989); see Compl. ¶¶ 37-38. The standard under Rule 9(b) is also less stringent when the plaintiff
alleges fraud by omission that occurred over a period of time. Falk v. General Motors Corp., 496
F. Supp. 2d 1088, 1098-99 (N.D. Cal. 2007); see also U.S. v. Hempfling, 431 F. Supp. 2d 1069,
1075 (E.D. Cal. 2006); Rhoades v. Powell, 644 F. Supp. 645, 666 (E.D. Cal. 1986) (noting that
when “the timeframe of the alleged wrongdoing is clear from the complaint,” Rule 9(b) requires
“less specificity” in pleading). Thus, McKinney’s omission and misrepresentation claims cannot
be dismissed for failure to precisely state the time and place of Defendants’ fraudulent conduct.
See Washington v. Baenziger, 673 F. Supp. 1478, 1482 (N.D. Cal. 1987).
8
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

ways to plead the particular circumstances of fraud. [F]or example, a plaintiff cannot plead either

2

the specific time of the omission or the place, as he is not alleging an act, but a failure to act.”).

3

2.

McKinney Satisfies Rule 9(b) to the Extent It Applies.

4

Although Defendants suggests otherwise, “Rule 9(b) does not require nor make legitimate

5

the pleading of detailed evidentiary matters.” Walling v. Beverly Enterprises, 476 F.2d 393, 397

6

(9th Cir. 1973); see also Gutierrez v. Givens, 989 F. Supp. 1033, 1044 (S.D. Cal. 1997)

7

(explaining that the Rule 9(b) standard is relaxed at the initial stages of litigation since “[b]efore

8

discovery, Plaintiffs cannot aspire to know all of the details of an alleged fraud against them”).

9

McKinney satisfies any applicable pleading standard.

McKinney has alleged in her

10

Complaint the circumstances that support her claim. McKinney has discussed adequately the

11

representations made by Defendants in and through the media, as well as their shortcomings in

12

meeting the advertised goals of the Google Phone. For Defendants to say they are unsure which

13

of their representations created the impression that they were selling a 3G device is disingenuous.

14

Google even offered up what was described as “the most valuable ad space on the entire Internet”

15

to see its phone. Compl. ¶¶ 29-30.

16

Moreover, the Complaint alleges the substance of the material omissions and

17

misrepresentations, the identity of the parties responsible for the material omissions and

18

misrepresentations, and the injuries resulting from the material omissions and misrepresentations.

19

The Complaint thoroughly identifies the “who,” “what,” “when,” “where,” and “how.” The

20

“who” are Defendants Google and HTC, McKinney and the proposed class members who were

21

misled and purchased the product. Compl. ¶¶ 2, 10-12. The “what” and “how” is the Google

22

Phone and Defendants” false and misleading representations and overall marketing scheme

23

implying that the phone would “maintain connectivity” to 3G networks, and would operate as a

24

true 3G device. Compl. ¶¶ 31-70. The “where” are Defendants’ headquarters and/or design,

25

manufacturing, packaging and/or marketing facilities. Compl. ¶¶ 11-12, 14. The “when” is at

26

least from January 2009 when the Google Phone was made available for sale. Compl. ¶ 32. Any

27

further specificity is solely within the control of the Defendants, and they have changed the point

28

from which McKinney made her purchase several times since she filed her lawsuit. Compl. ¶¶
9
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

37-38. Thus, McKinney’s allegations in the Complaint are sufficient to satisfy Rule 9(b). Falk,

2

496 F. Supp. 2d at 1099.

3

3.

McKinney’s UCL And FAL Claims Are Well-Pleaded.

4

“The UCL prohibits, and provides civil remedies for, unfair competition, which it defines

5

as ‘any unlawful, unfair or fraudulent business act or practice.’ Its purpose ‘is to protect both

6

consumers and competitors by promoting fair competition in commercial markets for goods and

7

services.’” Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 320 (Cal. 2011) (quoting Cal. Bus.

8

& Prof. Code § 17200; Kasky v. Nike, Inc. 27 Cal.4th 939, 949 (Cal. 2002)). The UCL prohibits

9

“any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive or untrue

10

advertising.” Cal. Bus. & Prof. Code § 17200. “Each of these three adjectives captures ‘a separate

11

and distinct theory of liability.’” Rubio v. Capital One Bank, 613 F.3d 119, 1203 (9th Cir. 2010)

12

(quoting Kearns, 567 F.3d at 1127). Here, McKinney alleges Defendants violated all three prongs.

13

Compl. ¶¶ 71-81.

14

First, the UCL requires no showing of scienter and unintentional conduct violates the

15

statute if shown to be fraudulent, unlawful or unfair. See Cortez v. Purolator Air Filtration Prods.

16

Co., 99 P.2d 706 (2000). “The text of Rule 9(b) requires only that in ‘all averments of fraud . . .

17

the circumstances constituting fraud . . . shall be stated with particularity.’ The rule does not

18

require that allegations supporting a claim be stated with particularity when those allegations

19

describe non-fraudulent conduct.” Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1104 (9th Cir.

20

2003) (emphasis added, reversing dismissal of UCL claims under Rule 9(b) because those claims

21

did not solely depend on averments of fraud).

22

The California Supreme Court has noted that in “drafting [the UCL], the Legislature

23

deliberately traded the attributes of tort law for speed and administrative simplicity. As a result,

24

to state a claim under the Act one need not plead and prove the elements of a tort. Instead, one

25

need only show that ‘members of the public are likely to be deceived.’” Bank of the West v.

26

Superior Court, 2 Cal.4th 1254, 1266-67 (1992) (internal citations omitted). The California

27

Supreme Court and numerous other courts have consistently interpreted the UCL broadly to

28

sustain consumer protection claims without requiring they be pleaded with Rule 9(b) particularity.
10
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

See Committee on Children’s Tel., Inc. v. General Foods Corp., 35 Cal.3d 197, 211-12 n.11

2

(1983) (“The requirement that fraud be pleaded with specificity . . . does not apply to causes of

3

action under the consumer protection statutes”); People v. Superior Ct., 9 Cal.3d 283, 287-88

4

(1973) (issues relating to when, where or whom constituted evidentiary facts that need not be

5

pleaded for UCL); In re Mattel, Inc., 588 F. Supp. 2d 1111, 1118 (C.D. Cal. 2008) (Rule 9(b) did

6

not apply to the plaintiff’s UCL claims where the plaintiffs “merely allege[d] that the

7

representations were likely to deceive and that [p]laintiffs were damaged by the deception; they

8

make no effort to allege common law fraud elements”); Anunziato v. eMachines, Inc., 402 F.

9

Supp. 2d 1133, 1138 (C.D. Cal. 2005) (UCL false advertising claims can be asserted without

10

implicating Rule 9(b)); Nordberg v. Trilegeant Corp., 445 F. Supp. 2d 1082, 1097 (N.D. Cal.

11

2006) (“Rule 9(b) is not strictly applicable to the current action as the CLRA is not a fraud statute.

12

. . . To require that plaintiffs prove more than the statute itself requires would undercut the intent

13

of the legislature in creating a remedy separate and apart from common-law fraud”); Multimedia

14

Patent Trust v. Microsoft Corp., 525 F. Supp. 2d 1200, 1217 (S.D. Cal. 2007) (“[T]o the extent

15

that a federal pleading is grounded in fraud, it must meet the requirements of Rule 9(b). . . .

16

[H]owever, the elements of common law fraud law are not essential to a claim under the

17

California unfair competition law.”).

18

In Vess v. Ciba-Geigy, the Ninth Circuit held Rule 9(b)’s particularity requirements apply

19

when a claim is entirely “grounded in fraud,” which only occurs when plaintiffs allege “a unified

20

course of fraudulent conduct and rely entirely on that course of conduct as the basis of a claim.”

21

Vess, 317 F.3d at 1103 (emphasis added).

22

warranty, and thus are not dependent—much less “entirely dependent”—on proving “fraudulent”

23

conduct. McKinney’s claims are thus not governed “entirely” by Rule 9(b). Vess, 317 F.3d at

24

1103; Qarbon.com, Inc. v. eHelp Corp., 315 F. Supp. 2d 1046, 1052 (N.D. Cal. 2004).

McKinney’s claims are based on the FCA and

25

Kearns v. Ford Motor Co., relied on by Google and HTC, is not to the contrary. Kearns v.

26

Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009). In Kearns, the Ninth Circuit merely held that

27

Rule 9(b) is applicable to UCL and CLRA claims when a claim based solely on fraud is alleged,

28

as the plaintiffs did in that case. Kearns, 567 F.3d at 1125 (“[r]eviewing the complaint, Kearns
11
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

alleges that Ford engaged in a fraudulent course of conduct”). Here, the claims at issue are not

2

based solely on a fraudulent course of conduct, as the elements for a fraud claim need to be shown

3

to establish Defendants” liability. No cause of action here asserts or relies on a fraudulent course

4

of conduct—and certainly none is solely “fraud based”.

5

That comports entirely with the current state of California law on the matter. In re

6

Tobacco II Cases, 207 P.3d 20, 35 & n.14 (Cal. 2009) (relying on Bank of the West and

7

Committee on Children’s Television). Under California law, a UCL “plaintiff need not show that

8

a UCL defendant intended to injure anyone through its unfair or unlawful conduct. The UCL

9

imposes strict liability when property or monetary losses are occasioned by conduct that

10

constitutes an unfair business practice.” Cortez v. Purolator Air Filtration Prods. Co., 23 Cal. 4th

11

163, 181 (Cal. 2000). Even under Defendants’ chosen framework, there still is no intent element,

12

and McKinney has no need to plead any of her claims—or the facts underlying them—beyond the

13

“short and plain statement” required by Rule 8(a).

14

C.

McKinney’s Claims For Breach Of Warranty Are Adequately Pleaded.

15

Setting aside, for a moment, the failed preemption arguments that Defendants contend

16

preempt every claim pleaded in the Complaint, there are several reasons for this Court to reject the

17

contentions that McKinney’s breach of warranty claims are insufficient. Each of those reasons is

18

addressed in turn.

19

1. Defendants had adequate notice.

20

McKinney specifically alleges that Defendants were given notice of their breach: “Under

21

Section 1782 of the CLRA, McKinney has notified Defendants in writing of the particular

22

violations of Section 1770 of the CLRA (the Notice) and demanded, among other things, that

23

Defendants cease engaging in the wrongful conduct alleged herein and that Defendants provide

24

restitution. McKinney is sending Notice by means of by certified mail, return-receipt requested, to

25

Defendants at their principal places of business concurrent with the service of this Complaint.”

26

Compl. ¶ 96; see also id. ¶ 99. Defendants are wrong in claiming McKinney did not allege

27

notification of her warranty claims, and cannot contradict these allegations through their Motion.

28
12
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

McKinney’s notice allegations are more than sufficient to comply with California law.

2

See In re HP Inkjet Printer Litig., 2006 U.S. Dist. LEXIS 12848, at *16 (N.D. Cal. Mar. 7, 2006).

3

California law requires only that notice be given before or in connection with the filing of the

4

pleading in which such claim is alleged. Therefore, notice otherwise given within a reasonable

5

period of time can under California law follow commencement of suit provided it is subsequently

6

and properly pleaded. Hampton v. Gebhardt’s Chili Powder Co., 294 F.2d 172, 173 (9th Cir.

7

1961). Moreover, in cases arising under the California Uniform Commercial Code, the question

8

of how, when and whether the buyer notified the seller of a breach within a reasonable time is a

9

question of fact that cannot be decided at the pleading stage. Mexia v. Rinker Boat Co., Inc., 174

10

Cal.App.4th 1297, 1307 (2009).

11

communications of the existence of a problem have been found to suffice. McAnulty v. Lema, 200

12

Cal.App.2d 126, 132-33 (1962).2 In any event, notice is not required to HTC because pre-suit

13

notice of breach of warranty is not required where the action is against a manufacturer, like HTC

14

here, and is brought by an injured consumer against a manufacturer with whom the consumer has

15

not dealt. Sanders v. Apple Inc., 672 F.Supp.2d 978, Greenman v. Yuba Power Prods., 59 Cal.2d

16

57, 61 (1963).

No formal written notice is required; indeed oral

17

Moreover, from complaints Defendants—especially Google—received and the responses

18

it provided consumers, Defendants were aware consumers were experiencing substantial

19

connectivity problems with their Google Phones and demanding a response. See Compl. ¶¶ 3-9,

20

54-59.

21

opportunities to cure the problems she experienced before she ever filed suit. Unfortunately, the

22

ultimate result of this notice and complaint process was for Google to stick McKinney with a

23

reconditioned phone, rather than a new phone (for which she paid the full $529 purchase price).

24
25
26
27
28

McKinney herself gave Google sufficient notice several times—including three

2

“The requirement of notice of breach is based on a sound commercial rule designed to
allow the defendant the opportunity for repairing the defective item, reducing damages, avoiding
defective products in the future, and negotiating settlements.” See Pollard v. Saxe & Yolles Dev.
Co., 12 Cal.3d 374, 380. That legislative purpose has been satisfied, because McKinney’s pre-suit
CLRA letter , original complaint and First Amended Complaint all included breach of warranty
claims. Defendants now raise the issue of notice for the first time in their second Motion to
Dismiss.
13
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

Under these circumstances, the statutory demand for notice is more than satisfied “by proof of

2

complaints from some but not all the buyers” of the Google Phone. See Metowski v. Traid Corp.,

3

28 Cal.App.3d 332, 339 (1972).

4

2. McKinney’s express warranty claims are adequately pleaded.

5

Numerous courts have held that pleading a breach of express warranty does not require a

6

plaintiff to provide precise detailed allegations concerning the warranty or its breach. See, e.g.,

7

Huber v. Howmedica Osteonics Corp., No. 07-2400, 2008 U.S. Dist. LEXIS 106479, at *12-14

8

(D.N.J. Dec. 30, 2008); Bell v. Manhattan Motorcars, Inc., No. 06-4972, 2008 U.S. Dist. LEXIS

9

58648, at *10-11 (S.D.N.Y. Aug. 4, 2008) (“Any affirmation of fact or promise which relates to

10

the goods, or any description of the goods at issue, which is made part of the basis of the bargain

11

creates an express warranty that the goods shall conform to the affirmation,

12

description.”); Gonzalez v. Drew Indus., No. 06-8233, 2007 U.S. Dist. LEXIS 35952, at *34-35

13

(C.D. Cal. May 10, 2007); Butcher v. DaimlerChrysler Co., No. 08-207, 2008 U.S. Dist. LEXIS

14

57679, at *6-8 (M.D.N.C. July 29, 2008); Irwin v. Country Coach Inc., No. 05-145, 2006 U.S.

15

Dist. LEXIS 35463, at *17 (E.D. Tex. Feb. 1, 2006) (plaintiffs alleged misrepresentation based on

16

promotional materials); see also DeFebo v. Andersen Windows, Inc., No. 09-2993, 2009 U.S.

17

Dist. LEXIS 87889, at *17-19 (E.D. Pa. Sept. 24, 2009); Ivory v. Pfizer Inc., No. 09-0072, 2009

18

U.S. Dist. LEXIS 90735, at *14-15 (W.D. La. Sept. 30, 2009). It is sufficient to allege that (1) the

19

offer and sale of the product to establish the warranties; (2) the product did not perform as

20

intended; (3) plaintiffs wanted the product for a specific purpose and relied on the seller’s superior

21

knowledge when purchasing; and (4) defendants were on notice of the defect. Promuto v. Waste

22

Mgmt., Inc., 44 F.Supp.2d 628, 642-46 (S.D.N.Y. 1999); Williams v. Beechnut Nutrition Corp.,

23

185 Cal.App.3d 135, 142-43 (1986); Moraca v. Ford Motor Co., 332 A.2d 607, 611 (N.J. Sup. Ct.

24

App. Div. 1974); DeWitt v. Eveready Battery Co., 562 S.E.2d 140, 151-53 (N.C. 2002).

promise or

25

McKinney meets that standard. First, “Defendants represented to McKinney before she

26

bought the Google Phone that the Google Phone was at least as fast as the iPhone 3G, the primary

27

competitor to the Google Phone.” Compl. ¶ 42. Second, McKinney has alleged adequately that

28

the device has not worked as intended. Compl. ¶¶ 3-9, 54-59. Third, McKinney has alleged that
14
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

the Google Phone was advertised widely and consistently as a true 3G device; “McKinney based

2

her purchasing decision on the facts Defendants promoted regarding the Google Phone: namely,

3

that it was a true ‘3G’ device; that it was very fast when uploading or downloading data from the

4

Internet; and that it would work in a manner that justified the premium price she paid for the

5

Google Phone.” Compl. ¶¶ 3, 35. Fourth, McKinney has pleaded “the infrastructure of T-

6

Mobile’s 3G wireless network and/or the Google Phone itself were defective and inadequate to

7

provide the represented performance and speed, resulting in injury to the McKinney and the

8

Class.” Compl. ¶ 70.

9

McKinney should not be penalized at the pleading stage for failing to provide further

10

specificity. As stated in the Complaint, McKinney’s initial transaction was all-electronic. She has

11

offered adequate specificity at this stage, and cannot be expected to have offered more.

12

McKinney does not own a printer. Compl. ¶ 38. She could not have reduced the information on

13

her computer screen to a format replicable in her Complaint, but she has recounted the

14

information she recalls.

15

discovery will bear out consistent representations from Google, HTC, T-Mobile, and other entities

16

regarding the speed and efficacy of the Google Phone as a true 3G device. At present all of that

17

information is solely within the control of Defendants and other third parties, and is unavailable to

18

McKinney or the class.”

19

McKinney made her purchase several times since this Complaint was filed.

20

McKinney presumes that those pages have been adequately archived by Defendants to prevent

21

further spoliation, even though they have tried to whitewash all publicly-available information.

22

The physical impossibility McKinney faces in reprinting here the representations she saw pre-

23

purchase should not doom her complaint, which has been adequately pleaded, because she has

24

alleged both what she saw and heard, as well as when she saw it.

25

Further, McKinney has alleged “[o]n information and belief . . .

Compl. ¶ 38.

Google itself has scrubbed the page from which
Compl. ¶ 37.

3. McKinney’s implied warranty claims are adequately pleaded.

26

The Defendants’ contention that McKinney cannot plead implied warranty claims are

27

erroneous. The Song-Beverly Act provides as follows: “[E]very sale of consumer goods that are

28

sold at retail in this state shall be accompanied by the manufacturer’s and the retail seller’s
15
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
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implied warranty that the goods are merchantable.” Cal. Civ. Code § 1792. So long as plaintiff

2

pleads they are the third party beneficiary of the relationship between the defendants (and since

3

the phones were designed for consumer use, there is no other conceivable beneficiary), no vertical

4

privity of contract between a manufacturer and consumer is required; nor is it required that the

5

manufacturer sell the product directly to the consumer. Nvidia, 2009 WL 4020104 at *4. Except

6

for consumer goods sold on “as is,” the consumer’s rights under the Song-Beverly Act expressly

7

cannot be waived. Cal. Civ. Code § 1792.3.

8

McKinney’s first Google Phone was not only unfit for its intended purpose—a device that

9

offered consistent 3G connectivity—it was unfit for any purpose more sophisticated than a

10

paperweight; her later phones have fared little better. Compl. ¶¶ 4-7, 55 (“McKinney never had

11

3G service on her first Google Phone, and has had 3G service on later Google Phones that can best

12

be described as sporadic and inconsistent. These defects caused McKinney to be unable to use her

13

phone for any purpose for a significant portion of the time she has owned the Google Phone.”)

14

(emphasis added).

15
16

4. McKinney’s claims under the Magnuson-Moss Warranty Act are adequately
pleaded.

17

To the extent Defendants argue that the implied warranty claims pleaded by McKinney

18

fail, they are wrong. “The Magnuson-Moss Warranty Act provides a federal cause of action for

19

state law implied warranty claims.” In re NVIDIA GPU Litig., 2009 WL 4020104, at *7 (N.D.

20

Cal. 2009) (citing 15 U.S.C. § 2301(7)). Insofar as Defendants contend that the facts pleaded do

21

not constitute an express warranty, they are wrong again.

22

characteristics of the Google Phone, including its speed and data transfer rates, and those

23

statements constitute a warranty that the Google Phone would operate as advertised during its

24

useful life, or at least through the two-year term of the required service agreement the majority of

25

the Class likely entered into. Compl. ¶¶ 1, 3, 5, 13, 33-40, 42-45, 50-52, 54, 55. McKinney’s

26

purchasing decision was based, in large part, on the concept that she was purchasing a true 3G

27

device that would work from the time of purchase. Compl. ¶¶ 3, 13, 39-40, 50-51. When

Defendants touted the 3G

28
16
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
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1

approached regarding the limitations of the Google Phone, McKinney and the Class were given a

2

short shrift of epic proportions:

3
4

Most people use the phone on T-Mobile’s network, which offers a subsidy if a
customer buys a contract, and the phone is made by HTC, a major Taiwanese
manufacturer. But it is sold exclusively by Google through a special Web-based
store.

5

7

Despite its central role in the process, Google does not appear to have built a
significant infrastructure to provide customer support. There is no phone number
for support, for example, and customers who send an e-mail message may wait for
days to hear back.

8

Compl. ¶ 60; see also id. ¶¶ 56-58. Because the Plaintiffs’ non-disclaimable warranty claims

9

under the Song-Beverly Act, among others, are properly pleaded, the motion to dismiss on this

6

10
11

issue should be denied.
D.

The Economic Loss Rule Does Not Bar McKinney’s Tort Claims.

12

Defendants not dispute McKinney properly asserts a claim for negligence. Instead, they

13

argue they are immune at the pleadings stage from tort liability for any negligent acts that lead to

14

the harm suffered by McKinney and the Class. It is well settled the “economic loss rule allows a

15

plaintiff to recover in strict products liability in tort when a product defect causes damages to

16

‘other property,’ that is, property other than the product itself.” Jimenez v. Super. Ct., 29 Cal.4th

17

473, 483 (2002) (emphasis in original). See also In re NVIDA GPU Litig., 2009 WL 4020104, *12

18

(2009) (denying motion to dismiss negligence claim where plaintiff alleged defective graphics

19

processing unit “caused consumers” computers to underperform…and ultimately result[ed] in

20

markedly degraded computers”).

21

Here, McKinney has alleged, among other things, that “the software is a mess” and

22

Defendants “breached their duty to properly manufacture, design, test, produce, assemble, inspect,

23

distribute, market, package, prepare for use, or sell the Google Phone to function as advertised.”

24

Compl. ¶¶ 61, 119. McKinney further alleges that the defects in the software may have caused the

25

Google Phone to “fail to receive reliable and sustained connectivity” to any 3G network” and

26

caused a “substantially lower data transfer rate than the 3G that was advertised.” Compl. ¶¶ 52,

27

117. In combination, this may have caused the Google Phone to underperform (relative to the

28

Defendants’ overpromising), as McKinney and Class members “experience[d] a significant
17
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
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number of dropped calls when the Google Phone cannot locate an available 3G network

2

connection.” Compl. ¶ 54. McKinney, therefore, has adequately alleged Defendants’ defective

3

product (the software) caused damage to other property such as inability to connect to 3G

4

network, which resulted in underperformance of telephone.

5

The economic loss doctrine does not apply when damages are caused to “other property.”

6

Aas v. Superior Court, 24 Cal.4th 627, 641 (2000) (collecting cases). The concept of “other

7

property” is broadly applied to include “damage to one part of a product caused by another

8

defective part.” Id. To constitute an integrated system the property must be “so integrated into

9

the overall unit that it loses its identity.” Jimenez v. Superior Ct., 29 Cal.4th 473, 486 (2002)

10

(Kennard, J., concurring). Because this case is in its nascent stages, and no discovery at all has

11

occurred, McKinney does not know exactly which component part(s) caused the software issues

12

and inability to consistently connect to 3G networks—or whether the substantive failures were

13

caused by software at all. This information is in the sole custody of Defendants, but is

14

discoverable and thus there exists a cognizable negligence theory. Although it is possible that the

15

cellular network was the cause of McKinney’s issues, it also is possible that her problems were

16

caused by failures of the Google Phone, a component of the Google Phone, separate software or

17

firmware, or another unknown cause that will only be known after discovery. Those potential

18

causes—including the software, firmware, cellular network, or service—are not so integrated into

19

the Google Phone that it loses its separate identity. Jimenez, 29 Cal.4th at 476. The extent to

20

which the Google Phone and any cause of the flaws McKinney experienced are distinct—whether

21

they constitute separate property or are a single integrated unit—is a question of fact to be

22

determined by a jury.

23

Cal.App.4th 1076, 1087 (2003) (holding determining the nature of a product at issue and whether

24

the injury for which recovery is sought is to the product itself or to property other than the

25

defective product, is the province of the trier of fact). Thus, this is not an issue that can be

26

properly resolved on a motion to dismiss.

KB Homes v. Superior Court (Consolidated Industries Corp.), 112

27

Further, Defendants rely upon cases involving inherently dangerous products. Seely v.

28

White Motor Co., 63 Cal.2d 9, 12 (1965) (alleging negligent manufacture of truck) and Robinson
18
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

Helicopter Co., Inc. v. Dana Corp., 102 P.3d 268 (2008) (negligent misrepresentation action

2

brought by a helicopter manufacturer against its part supplier). Indeed, Defendants” reference to

3

Seely v. White Motor Co., 63 Cal.2d 9, is inapposite because the issue on appeal there was

4

whether the trial court “erred in awarding damages for lost profits and for the money paid on a

5

purchase price of a truck” used by the plaintiff for his business of heavy-duty hauling. Seely at

6

63 Cal.2d 12. The Court reasoned “[a] consumer should not be charged at the will of the

7

manufacturer with bearing the risk of physical injury when he buys a product on the market”).

8

This reasoning was in reliance on Trans World Airlines v. Curtiss-Wright Corp. 1 Misc.2d 477

9

[148 N.Y.S.2d 284, 290] (1955). There, the New York Supreme Court held manufacturers of

10

articles of component parts thereof, which are inherently dangerous when negligently made are

11

liable for injury or property damage only. Id. at 480. The Court relied on another automobile case,

12

Wyatt v. Cadillac Motor Car Division, 145 Cal.App.2d 423, finding an automobile manufacturer’s

13

duty “was confined to the exercise of reasonable care to be free from defects might be reasonably

14

expected to produce bodily injury or damage to other property.” Wyatt v. Cadillac Motor Car

15

Division, 145 Cal.App.2d 423, 426 (1956).

16

In stark contrast, the instant case involves a cellular phone, not an automobile or

17

helicopter. There is no allegation the Google phone is an inherently dangerous product.

18

Defendants’ duty was more than merely manufacturing and selling a phone that didn’t cause

19

physically injury or damage to other products. Rather, as alleged in the Complaint, Defendants’

20

duty was “to properly manufacture, design, test, produce, assemble, inspect, distribute, market,

21

package, prepare for use and sell the Google Phone to function as advertised.” Compl. ¶¶ 116,

22

119. Indeed, if manufacturers of consumer products were only charged with the duty to making

23

products that don’t cause bodily harm or damage other products, they would never be liable for

24

making or selling products that fail to work as promised.

25

Defendants’ additional authority supporting its assertion of the economic loss doctrine is

26

unavailing. See Platte Anchor Bolt, Inc. v. IHI, Inc, 352 F.Supp.2d 1048, 1051 (2004) (alleging

27

negligence premised on alleged failure to perform contractual obligations where parties were in a

28

business relationship). The instant action involves a relationship between a consumer and the
19
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
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1

maker(s) and/or seller of the product; not a business relationship. Any reference to a

2

manufacturer’s liability for negligence is merely dicta and is not binding. See Aas v. Superior

3

Court (William Lyon Co.), 24 Cal.4th 627 (2000) (construction defect action). Accordingly,

4

McKinney should be permitted to proceed with her negligence claim.

5

E.

McKinney’s Claims For Unjust Enrichment And Declaratory Relief
Are Well-Pleaded.

6
7

Although Defendants cite the portion of Nvidia declaring “unjust enrichment is a theory of

8

recovery, not an independent legal claim,” they ignore the Court’s finding elsewhere in the same

9

paragraph that unjust enrichment “is synonymous with restitution.” See Nvidia, 2009 U.S. Dist.

10

LEXIS 108500, at *38. Restitution “may be awarded where the defendant obtained a benefit from

11

the plaintiff by fraud, duress, conversion, or similar conduct. In such cases, the plaintiff may

12

choose not to sue in tort, but instead to seek restitution on a quasi-contract theory (an election

13

referred to at common law as “waiving the tort and suing in assumpsit”).” McBride v. Boughton,

14

123 Cal.App.4th 379, 388 (2004); see also Paracor Fin., Inc. v. General Elec. Cap. Corp., 96

15

F.3d 1151, 1167 (9th Cir. 1996) (“Under California law … unjust enrichment is an action in

16

quasi-contract”).

17

McKinney seeks restitution of monies unjustly obtained from her by Defendants in

18

combination with the common counts claim. Compl. ¶¶ 140-43. McKinney has alleged that

19

“Defendants were unjustly enriched and have received. . . excessive revenue at the expense of

20

McKinney and the Class” and request “the return of any monies by which Defendants were

21

unjustly enriched.” Id. ¶¶ 142-43. Although the Complaint phrases the legal claim in terms of

22

unjust enrichment and common counts, because that is the proper term, the substance of the cause

23

of action is restitution. As in McBride, which this Court cited in Nvidia, Plaintiffs” “purported

24

cause of action for unjust enrichment” should be construed as an attempt to plead a cause of action

25

for restitution. See McBride, 123 Cal.App.4th at 388.

26

To the extent Defendants seek to have this cause of action dismissed because it is

27

derivative or pleaded alternatively, those attempts fail. A defendant “is not entitled to have a

28

cause of action dismissed for failure to state a claim simply because it conflicts with another cause
20
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

of action.” Oracle Corp. v. SAP AG, 2008 U.S. Dist. LEXIS 103300, at *24 (N.D. Cal. Dec. 15,

2

2008); accord In re Verisign, Inc. Deriv. Litig., 531 F. Supp. 2d 1173, 1217 (N.D. Cal. 2007).

3

Inconsistent pleading is permissible under Federal Rule of Civil Procedure 8(e)(2). Oki America,

4

Inc. v. Microtech Int’l, Inc., 872 F.2d 312, 314 (9th Cir. 1989).

5
6

F.

Defendants’ Failure To Provide Customer Support Is Actionable.

McKinney’s Complaint adequately pleads claims for relief that are able to withstand this

7

conclusory Motion to Dismiss.

Defendant erroneously relies upon First Interstate Bank of

8

Arizona, N.A. v. Murphy, Weir & Butler, 210 F.3d 983, 985–86 (9th Cir. 2000), which was a legal

9

malpractice case revolving around an incident of a judge’s recusal because his former law clerk

10

worked for the defendant’s attorney’s law firm. The court held the defendant had no legal duty to

11

disclose that his law clerk formerly worked for the presiding judge because it was not reasonably

12

foreseeable that the conduct would lead to impropriety. Id. However, in the present case, a duty

13

to act reasonably under the circumstances were attached to the sale of the Google Phone because a

14

company’s associated customer service is intrinsic in the purchase of a product, particularly with

15

cellular telephones or other electronic devices. See generally Roberts v. USCC Payroll Corp., 635

16

F. Supp. 2d 948, 951 (N.D. Iowa 2009) (“as [Retail Wireless Consultants] plaintiffs were

17

responsible for providing general customer service, including selling cellular telephones and

18

USCC cellular telephone services, answering questions and billing inquiries and accepting

19

payments. Plaintiffs were also responsible for completing accurate paperwork and transactions

20

according to company policies and procedures”).

21

Further, Defendants’ failure to provide adequate customer services supports McKinney’s

22

UCL and CLRA claims that Defendants’ conduct as alleged constitutes unfair methods of

23

competition and unfair or deceptive business acts or practices. Indeed, McKinney has alleged that

24

Defendants’ conduct constitutes “unfair methods of competition and unfair or deceptive business

25

practices” in violation of section 1770(a) of the CLRA. Compl. ¶ 95. McKinney also alleged

26

Defendants’ conduct violates the “unfair” prong of the UCL. Compl. ¶ 74. Therefore, in support

27

of McKinney’s allegations of unfairness, allegations regarding Defendants’ failure to provide

28

adequate customer service are actionable. Camacho v. Auto. Club of S. Cal., 142 Cal. App. 4th
21
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

1394, 1403 (2006) (in consumer cases, a business practice is unfair where the injury caused by the

2

allegedly unfair business practice: a) is substantial; b) is not outweighed by any countervailing

3

benefits to consumers or to competitors; and c) could not reasonably have been avoided). For

4

example, McKinney’s allegations for unfair competition are supported by Defendants’ lack of

5

infrastructure and preparedness at the time of the launch—not only did they fail to ensure the

6

Google Phone could maintain 3G connectivity but also failed to ensure there was adequate

7

assistance. Compl. ¶ 60. This was particularly egregious, because the Google Phone was a brand

8

new product and the Droid operating system was brand new. Compl. ¶¶ 41, 60. The harm to

9

McKinney and the Class is substantial, did not benefit the Defendants in any way, and could not

10

have been avoided by McKinney.

11

Defendants’ failure to provide adequate customer service exemplifies their disregard for

12

purchasers of the Google Phone; once Defendants took the money from McKinney and the Class,

13

they no longer cared whether the product worked. Additionally, Defendants’ failure to provide

14

adequate service further evidences the care McKinney took to remedy the situation and mitigate

15

her losses before filing this lawsuit. In sum, the lack of customer service deprived McKinney and

16

the Class of the bargain they believed they had struck—a brand new, true 3G device that would

17

operate properly when paired with Defendants’ a 3G compatible cellular network.

18

McKinney and the Class went for days on end with either sporadic or no 3G connectivity (or

19

connectivity of any kind, in McKinney’s case)—even in areas where the 3G coverage map

20

showed 3G coverage was available—while Defendants enjoyed the profits from their sale of the

21

Google Phone and the Class members were deprived of the monies they paid Defendants, as well

22

as the fees paid to their cellular service providers while unable to use their phones.

23

V.

24
25
26
27
28

Instead,

CONCLUSION
For all of the above reasons, the Defendants’ Motion should be denied and they should be

ordered to file an Answer to the Complaint.3
3

In the alternative, if the Court grants Apple’s Motion in any respect, McKinneys request
that the Court grant them leave to amend their Complaint to cure any deficiencies. See Fed. R.
Civ. P. 15(a)(2) (“The court should freely give leave when justice so requires.”). The Ninth
Circuit requires this policy favoring amendment be applied with “extreme liberality.” Morongo
Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). See also Von Saher v.
22
PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW

1

I, Sara D. Avila, am the ECF user whose ID and password are being used to file this Joint

2

Motion and accompanying papers. In compliance with General Order 45, section X.B., I hereby

3

attest that I have on file the concurrences for any signatures indicated by a “conformed” signature

4

(/S) within this e-filed document.

5

By:

/s/ Sara D. Avila___________

6
7
8

DATED: April 4, 2011

Attorneys for Plaintiff Mary McKinney and the
Proposed Class

9
10

By:

11
12

/s/ Sara D. Avila
MILSTEIN ADELMAN, LLP
Gillian L. Wade
Sara D. Avila
WHATLEY DRAKE & KALLAS, LLC
Joe R. Whatley, Jr.
Edith M. Kallas
Patrick J. Sheehan

13
14
15

LAW OFFICE OF HOWARD
RUBINSTEIN
Howard Rubinstein
[e-mail]
914 Waters Avenue, Suite 20
Aspen, Colorado 81611
Tel: [phone]

16
17
18
19

SMITH & VANTURE, LLP
Brian W. Smith
[e-mail]
1615 Forum Place, Suite 4C
West Palm Beach, Florida 33401
Tel: [phone]
Fax: [phone]

20
21
22
23
24
25
26
27
28

Norton Simon Museum of Art at Pasadena, 578 F.3d 1016, 1031 (9th Cir. 2009) (“Unless it is
clear that the complaint could not be saved by amendment, dismissal without prejudice and
without leave to amend is not appropriate”).
23

PLAINTIFF’S MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS SECOND AMENDED COMPLAINT
5:10-CV-01177-JW