Edwards v. Zenimax Media, Inc., et al
Filing
52
ORDER denying 36 Motion to Dismiss, by Judge Wiley Y. Daniel on 9/27/2013.(trlee, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior Judge Wiley Y. Daniel
Civil Action No. 12-cv-00411-WYD-KLM
LANDIS EDWARDS, individually and on behalf of all others similarly situated,
Plaintiff,
v.
ZENIMAX MEDIA INC., a Delaware Corporation, and BETHESDA SOFTWORKS LLC,
a Delaware Limited Liability Company,
Defendant.
ORDER
I.
INTRODUCTION
THIS MATTER is before the Court on Defendants’ Renewed Motion to Dismiss
and Incorporated Memorandum of Law. The motion is fully briefed. For the reasons
discussed below, Defendants’ Renewed Motion to Dismiss is denied.
By way of background, Plaintiff asserts claims for an alleged violation of the
Colorado Consumer Protection Act [“CCPA”], breach of implied warranty of
merchantability, fraud by omission, and restitution/unjust enrichment. Plaintiff seeks
damages and injunctive relief based on Defendants’ alleged deceptive and unlawful
conduct in designing, manufacturing, marketing, distributing and selling a defectively
designed video game to consumers. (Compl. ¶ 1.)
Plaintiff’s claims relate to an alleged inherent design defect in the form of “a
universal animation defect” [hereinafter “Animation Defect”] that is allegedly present in
Defendants’ video game, The Elder Scrolls IV: Oblivion [“Oblivion”]. (Compl. ¶¶ 21, 23.)
This alleged defect, “once manifested, effectively ends the player’s game and forces
him or her to restart Oblivion from scratch with an entirely new character.” (Id. ¶ 23.)
According to Plaintiff, “[t]he existence of the Animation Defect significantly decreases
the value of the Oblivion video game to consumers.” (Id. ¶ 39.) Instead of “open-ended
gameplay” that was the primary reason Plaintiff purchased the game (id. ¶ 43), it is
alleged that “the Animation Defect severely limits Oblivion’s gameplay after moderate
use, resulting in consumers receiving a less valuable product than they initially paid for
and expected.” (Id. ¶ 40.)
I note that the complaint sought to certify a class action of “[a]ll persons or
entities residing in the State of Colorado who purchased any version of the Elder Scrolls
IV: Oblivion video game. (Compl. ¶ 52.) The class allegations in the complaint were
stricken by Order of September 25, 2012. Further, by Order of May 28, 2013, I denied
Plaintiff’s Motion for Leave to File Amended Class Action Complaint. Accordingly, the
complaint is now limited to Plaintiff’s claims against the Defendants. I note, however,
that this case was removed to this Court from the state court pursuant to the Class
Action Fairness Act, 28 U.S.C. § 1332(d). (See Notice of Removal at 2, ECF No. 1.)
Since the class allegations have been stricken, I must determine at the outset whether
the Court retains subject matter jurisdiction over the case.
On that issue, Defendants state their belief that the Court retains subject matter
jurisdiction over the case. Thus, they do not seek dismissal on that basis. Defendants
are correct that this is apparently an issue of first impression in this Circuit. The Sixth,
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Seventh, Eighth, Ninth and Eleventh Circuits have, however, held that a federal district
court retains jurisdiction over a case filed or removed under the Class Action Fairness
Act, 28 U.S.C. § 1332(d), following the denial of class certification or the striking of class
allegations. Metz v. Unizan Bank, 649 F.3d 492, 500-501 (6th Cir. 2011); Buetow v.
A.L.S., Enters., Inc., 650 F.3d 1178, 1182 n. 2 (8th Cir. 2011); United Steel Workers Int’l
Union v. Shell Oil Co., 602 F.3d 1087, 1092 (9th Cir. 2010); Charter Corp. v. Learjet,
Inc., 592 F.3d 805, 806 (7th Cir. 2010); Vega v. T-Mobile USA, Inc., 564 F.3d 1256,
1268 n. 12 (11th Cir. 2009). Further, the court in Burdette v. Vigindustries, Inc., No. 101083-JAR, 2012 WL 5505095, at *2 (D. Kan. Nov. 13, 2012), predicted “that the Tenth
Circuit would follow the other courts of appeal that have considered whether the denial
of class certification divests the federal courts of jurisdiction in a case properly removed
under CAFA.” I agree, and therefore find that the Court retains subject matter
jurisdiction of this case. Thus, I turn to the merits of the motion to dismiss.
II.
ANALYSIS
A.
Standard of Review
Defendants seek to dismiss Plaintiff’s claims under Fed. R. Civ. P. 9(b) and/or
12(b)(6). In reviewing a motion filed pursuant to Rule 12(b)(6), the court must “accept
all well-pleaded facts as true and view them in the light most favorable to the plaintiff.”
Jordan-Arapahoe, LLP v. Bd. of County Comm’rs of Cnty. of Arapahoe, 633 F.3d 1022,
1025 (10th Cir. 2011). “[A] plaintiff must allege that ‘enough factual matter, taken as
true, [makes] his claim for relief ... plausible on its face.’” Id. (quotation and internal
quotation marks omitted). “A claim has facial plausibility when the [pleaded] factual
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content [ ] allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct.
1937, 1940 (2009)). Thus, a plaintiff “must include enough facts to ‘nudge[] his claims
across the line from conceivable to plausible.’” Dennis v. Watco Cos., Inc., 631 F.3d
1303, 1305 (10th Cir. 2011) (quotation omitted). Conclusory allegations are not
sufficient. Gallagher v. Shelton, 587 F.3d 1063, 1068 (10th Cir. 2009).
Alternatively, a claim may be dismissed for failure to plead fraud with particularity
under Rule 9(b) of the Federal Rules of Civil Procedure. Rule 9(b) requires that the
circumstances constituting fraud or mistake be stated with particularity. The Tenth
Circuit “requires a complaint alleging fraud to ‘set forth the time, place and contents of
the false representation, the identity of the party making the false statements and the
consequences thereof.’” Koch v. Koch Indus., Inc., 203 F.3d 1202, 1236 (10th Cir.
2000) (quotation omitted). The purpose of the rule is to afford a defendant fair notice of
the claims and the factual ground upon which they are based. Id.
B.
The Merits of Defendants’ Motion
1.
Whether the Complaint Should Be Dismissed for Lack of Personal
Jurisdiction
Defendants first argue that the complaint should be dismissed because it fails to
set forth any facts demonstrating that they are subject to personal jurisdiction in
Colorado. I note that Plaintiff bears the burden of establishing personal jurisdiction,
although at the preliminary stages of the litigation this burden is light. Intercon, Inc. v.
Bell Atlantic Internet Solutions, Inc., 205 F.3d 1244, 1247 (10th Cir. 2000). Plaintiff’s
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allegations must be taken as true, since Defendants did not file an affidavit contradicting
them. Wenz v. Memery Crystal, 55 F.3d 1503, 1508 (10th Cir. 1995).
Personal jurisdiction is established by the laws of the forum state, in this case
Colorado, and must comport with constitutional due process. Fireman’s Fund Ins. Co.
v. Thyssen Min. Constr. of Canada, Ltd., 703 F.3d 488, 492 (10th Cir. 2012).
Colorado’s long-arm statute is coextensive with constitutional limitations imposed by the
due process clause. Benton v. Cameco Corp., 375 F.3d 1070, 1075 (10th Cir. 2004).
Due process is satisfied as to a nonresident defendant for purposes of personal
jurisdiction “if there are sufficient ‘minimum contacts between the defendant and the
forum State.’” Fireman’s Fund Ins. Co., 703 F.3d at 493 (quotations omitted). The
minimum contacts may be shown either through specific or general jurisdiction. Id.
For specific jurisdiction to exist, “the defendant must have sufficient minimum
contacts with the forum state, and jurisdiction over the defendant cannot offend
‘traditional notions of fair play and substantial justice.’” Fireman’s Fund Ins. Co., 703
F.3d at 493 (quotation omitted). “The minimum contacts must show that ‘the defendant
purposefully avail[ed] itself of the privilege of conducting activities within the forum
State.’” Id. (quotations and internal quotation marks omitted). The contacts with the
forum must make being sued there foreseeable so that the defendant could ‘reasonably
anticipate’ the suit. Id. (quotation omitted). The litigation must also result from alleged
injuries that arise out of or relate to the defendant’s activities in the forum state. Id.
General jurisdiction requires that a defendant have contacts with the forum “‘so
continuous and systematic as to render [it] essentially at home in the forum State.’”
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Fireman’s Fund Ins. Co., 703 F.3d at 493 (quotation omitted). “Unlike for specific
jurisdiction, the litigation need not arise from the defendant's activities in the forum.” Id.
In the case at hand, Plaintiff does not address the issue of personal jurisdiction in
his response to the motion to dismiss, and Defendants did not pursue this argument in
their reply brief. I thus turn to the allegations in the complaint to determine whether
Plaintiff has established a prima facie case of jurisdiction.
Plaintiff alleges that Defendants are incorporated or organized and existing under
the laws of the state of Delaware with their principal place of business in Rockville,
Maryland. (Compl. at 2, ¶¶ 4, 5.) He also alleges that:
• “Defendant transacts business in Florida and throughout the country.” (Id. ¶ 5.)
• “Bethesda is a wholly owned subsidiary of Defendant ZeniMax.” (Id.)
• “Plaintiff purchased his copy of Defendants’ defective video game in Denver
County. . . .” (Id. ¶ 2.)
• The action seeks “damages and injunctive relief based on Defendants’
deceptive and unlawful conduct in designing, manufacturing, marketing,
distributing and selling a defectively designed video game to consumers in
Colorado and throughout the nation.” (Id. ¶ 1.) “Jurisdiction is proper in this
District Court, as it is a court of general jurisdiction.” (Id.)
I find from a review of the allegations that Plaintiff has not made out a prima facie
showing of general jurisdiction—he has not shown that Defendants have contacts with
Colorado “‘so continuous and systematic as to render [it] essentially at home’” in this
forum state. Fireman’s Fund Ins. Co., 703 F.3d at 493 (quotation omitted). Thus, I turn
to the issue of specific jurisdiction.
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The placement of goods into the stream of commerce “‘with the expectation that
they will be purchased by consumers within the forum State’ may indicate purposeful
availment’” for purposes of specific jurisdiction. J. McIntyre Machinery, Ltd. V. Nicastro,
___ U.S. ___, 131 S. Ct. 2780, 2788 (2011) (quotation omitted). In that circumstance,
however, the exercise of jurisdiction is permitted “only where the defendant can be said
to have targeted the forum; as a general rule, it is not enough that the defendant might
have predicted that its goods will reach the forum state.” Id. Purposeful availment can
be shown through allegations that the defendant expected that the product would go
into the forum state or was “‘aware that the final product is being marketed in the
forum.’” Monge v. R-G Petro-Machinery (Group) Co., Ltd., 701 F.3d 598, 620 (10th Cir.
2012) (quotation omitted).
Construing the evidence in the light most favorable to Plaintiff as I must for
purpose of the motion to dismiss, I find that Plaintiff’s allegations support a finding of
specific jurisdiction. He alleges that Defendants engaged in deceptive and unlawful
conduct by “designing, manufacturing, marketing, distributing and selling a defectively
designed video game to consumers in Colorado and throughout the nation.” (Compl.
¶ 1.) This can be construed to support an inference that Defendants expected that the
Oblivion video game would be sold and distributed in Colorado. Further, this supports
an inference that Defendants’ conduct was such that they should have reasonably
anticipated being haled into court in Colorado. Monge, 701 F.3d at 613. If Defendants
continue to maintain that personal jurisdiction is not proper, this should be dealt with
through discovery and the presentation of affidavits in a summary judgment motion.
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2.
The Fraud-Based CCPA Counts
Defendants next argue that Plaintiff’s first claim for violation of the CCPA, C.R.S.
§ 6-1-101, et seq., and third claim for fraudulent omission, fail to state a claim and
should be dismissed for at least the following three reasons: (i) the complaint fails to set
forth any alleged misrepresentation or omission by Defendants with the requisite
specificity under Fed.R.Civ.P. 9(b); (ii) the alleged misrepresentations and omissions do
not constitute a deceptive trade practice or actionable fraudulent statement or omission;
and (iii) the alleged defect in Plaintiff’s copy of Oblivion does not significantly impact the
public and does not violate the CCPA.
I first address whether Plaintiff’s allegations as to misrepresentations under the
CCPA meet the heightened particularity requirement of Rule 9(b). Defendants assert
that the complaint fails to attribute any allegedly deceptive statement to them, fails to
allege when any of the allegedly deceptive statements were made, and fails to identify
with particularity which of the allegedly deceptive statements, if any, Plaintiff actually
relied upon prior to purchasing Oblivion. They further assert that the complaint alleges
only that “someone from Defendants made a statement that was posted online at some
time.” Western Gas Processors, Ltd. v. Enron Gas Processing Co., No. 87-A-1472,
1988 WL 73307, at *5 (D. Colo. 1988). Plaintiff argues in response that he satisfies
Rule 9(b)’s particularity requirements by alleging in detail the “who, what, where, when,
and how” of Defendants’ alleged fraudulent conduct.
Specifically, Plaintiff alleges that Defendants failed to disclose to him (the who)
the Animation Defect and its effects on gameplay (the what) in advertisements, at
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the time Plaintiff purchased the product, or when Defendants became aware of these
facts (the where and when), and that he would not have purchased Oblivion, or would
have paid less for it, if such facts had been disclosed. He references paragraphs 42
through 51 of the Complaint. However, the referenced allegations do not support
Plaintiff’s argument. Instead, they describe Plaintiff’s purchase of and playing of the
game and the “technical defects” he experienced during play, including the Animation
Defect. The only allegations in those paragraphs that could reasonably be construed to
relate to the allegedly deceptive statements are that “Plaintiff viewed Defendants’ online
and print advertisements and representations regarding the scope, longevity and nature
of the gameplay purportedly featured in the Oblivion video game”, that “[t]he purportedly
open-ended gameplay of Oblivion was the primary reason that plaintiff purchased the
game”, and that “[a]s encouraged by Defendants, Plaintiff created and began to develop
a unique character within the game.” (Compl. ¶¶ 43, 46.) Those allegations do
not, however, describe the statements with specificity or allege in detail the “who, what,
where, when, and how” of Defendants’ alleged fraudulent conduct.
Plaintiff then points to alleged specific misrepresentations about Oblivion made
by Defendants. He alleges that Defendants: (1) published a widely-distributed online
description of Oblivion, which appeared on numerous websites including Amazon.com
and video game retailer Gamestop.com and which claimed that Oblivion offered “freeform” and “open-ended” gameplay in an “enormous world” that “allow[ed] players to
explore at their own pace[,]” (Compl. ¶ 12); (2) represented in the instruction manual of
Oblivion that the game “offers unlimited possibilities[,]” (id. ¶ 13); and (3) sponsored, on
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Bethesda’s official blog, an “Oblivion Iron Man“ contest that offered a prize to the player
with the longest single-character gameplay time, which Defendants presumed would
exceed 1000 hours” (id. ¶ 18).1 The complaint also alleges that “prior to purchasing the
Oblivion video game, Plaintiff viewed Defendants’ online and print advertisements and
representations regarding the scope, longevity and nature of the gameplay purportedly
featured in the Oblivion video game.” (Id. ¶ 43.)
I note that the above representations are relevant only to Plaintiff’s CCPA claim,
as he does not allege a fraud claim as to such representations. Even if I assume the
allegations stated in the previous paragraph accurately identify the type, content, and
location of each misrepresentation, I agree with Defendants that some of these are not
actionable. First, the fact that Defendants sponsored a contest involving the longest
single-character gameplay time, which Defendants presumed would exceed 1000
hours, is not a statement of fact at all.
Second, I find that the representations that Oblivion offered gameplay in an
“enormous world” that “allow[ed] players to explore at their own pace” are statements of
opinion, as they are “unquantifiable” or subjective representations that are not “subject
to measure or calibration.” Park Rise Homeowners Ass’n, Inc. v. Resource Constr. Co.,
155 P.3d 427, 436 (Colo. App. 2006). The meaning of these statements would depend
on the speaker’s frame of reference. Id. Statements of opinion are not actionable,
whether in a deceptive trade practice or CCPA claim. See Vitt v. Apple Computer, Inc.,
1
While Plaintiff asserts that the complaint alleged that Defendants represented on the official
blog that players could play over “1000 hours” with a single game character and save file, that is not what
was alleged in paragraph 19. Instead, I have cited to the actual words stated in that paragraph.
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469 F. App’x 605, 607 (9th Cir. 2012) (affirming district court’s finding that Apple’s
advertising wherein it “stated that the iBook G4 is “mobile,” “durable,” “portable,”
“rugged,” “built to withstand reasonable shock,” “reliable,” “high performance,” “high
value,” an “affordable choice,” and an “ideal student laptop” were “generalized, nonactionable puffery because they are ‘inherently vague and generalized terms’ and ‘not
factual representations that a given standard has been met’”); Wolfe v. Canyon Sudar
Partners, LLC, No. 07 Civ. 1189, 2008 WL 4752831 (D. Colo. Sept. 12, 2008) (holding
that “[w]ords such as ‘skilled’ or ‘experienced’ or ‘attractively presented’ are too
subjective” to qualify as deceptive trade practices); Koch v. Kaz USA, Inc., No. 09 Civ.
2976, 2011 WL 2610198, at *5 (D. Colo. July 1, 2011) (“the use of statements ‘Durable;’
and ‘Quality Construction for Long Last Performance’ … do not constitute unfair or
deceptive trade practices as a matter of law”); Park Rise, 155 P.3d at 435-36 (Colo.
App. 2006) (literature touting “quality construction” was mere puffery or a statement of
opinion).
It is a closer call as to the statements that Oblivion presents “free-form” or “openended” gameplay with “unlimited possibilities”. Plaintiff alleges that “[t]he terms “freeform,” “open-ended,” and “open-world” gameplay have a distinct and tangible meaning
in the video gaming community, including to Plaintiff and members of the Class.”
(Compl. ¶ 15.) He also alleges that “[g]amers generally understand that such terms
describe a game environment that allows players to play creatively, free of artificial
structural constraints, and with there being “no right way” to play the game, and that
“game developers such as Bethesda use these descriptors to induce gamers to
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purchase their video games.” (Id.) I find, construing all inferences in favor of Plaintiff,
that these represent actionable statements of fact for purposes of Plaintiff’s CCPA
claim.2 Thus, while some of the alleged misrepresentations Plaintiff claims are not
actionable, I will deny the motion to dismiss that seeks to dismiss the first claim in its
entirety as there are actionable representations.
Defendants also argue, however, that Plaintiff’s claim fails under Rule 9(b)
because he does not identify which advertisements he viewed. On that issue, Plaintiff
alleged that he “viewed Defendants’ online and print advertisements and
representations regarding the scope, longevity and nature of the gameplay purportedly
featured in the Oblivion video game” prior to purchasing the game and that “[t]he
purportedly open-ended gameplay of Oblivion was the primary reason” that he
purchased the game. (Compl. ¶ 43.) Plaintiff detailed the advertisements he was
relying on in the complaint and, construing all inferences in favor of Plaintiff, it must be
assumed that he viewed all the referenced allegations.
It is further contended by Defendants that the CCPA claims should be dismissed
because Plaintiff did not allege a significant impact to the public. Defendants are
correct that in order to assert a CCPA claim, it must be shown that the alleged unfair or
2
In so finding, I reject Defendants’ claim that Plaintiff does not meet Rule 9(b)’s standards
because he does not specifically attribute each misrepresentation. Plaintiff asserts that Defendants jointly
made and disseminated the misrepresentations at issue, and only Defendants possess the information
that would enable Plaintiff to delineate their roles more specifically. See Schwartz v. Celestial
Seasonings, Inc., 124 F.3d 1246, 1254 (10th Cir. 1997) (holding that “[i]dentifying the individual sources of
statements is unnecessary when the fraud allegations arise from misstatements or omissions” resulting
from “collective-actions” of related parties); see also U.S. ex rel. Doe v. Dow Chem. Co., 343 F.3d 325,
330 (5th Cir. 2003) (relaxing 9(b)’s standard where facts relating to fraud were within the perpetrator’s
knowledge); Hill v. Morehouse Med. Assoc. Inc., No. 02-14429, 2003 WL 22019936, at *3 (11th Cir. Aug.
15, 2003) (same).
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deceptive trade practice “significantly impacts the public as actual or potential
consumers of the defendant’s goods, services, or property.” Hall v. Walter, 969 P.2d
224, 235 (Colo. 1998). Here, however, I find that Plaintiff has shown a significant public
impact, even though his class allegations have been dismissed.
The complaint alleges that Defendants “engaged in an extensive advertising and
marketing campaign in support of the Oblivion game”. The representations at issue are
alleged to have occurred, among other places, on “an online advertisement” on
“numerous websites such as Amazon.com and Gamestop.com. (Compl. ¶¶ 11-14.) It
also alleges that “[a]s a result of Defendants’ advertisements and marketing efforts,
consumers purchased the Oblivion video game with the expectation that it would offer
expansive, open-ended gameplay with ‘unlimited opportunities’ for exploration and
character development.” (Id. ¶ 20.) I find from these allegations that Plaintiff is not
asserting merely a private wrong, as Defendants argue. See Predator Int’l, Inc. v. Gamo
Outdoor USA, Inc., No. 09-CV-00970, 2011 WL 3799030, at *3 (D. Colo. Aug. 26, 2011)
(finding that “significant public impact” existed where defendant “by directing its
advertising at the market generally, implicated not only [plaintiff], but the public as well”);
Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 150
(Colo.2003) (finding that a developer's widespread advertisements of untrue facts had a
significant public impact). I also find, and Defendants do not dispute, that the other
elements of a CCPA claim have been met. See Hall, 969 P.2d at 234.
I now turn to the omission claim, noting that although it is pled as a fraud claim,
Plaintiff states that he is alleging that Defendants’ omissions of material fact constitute a
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deceptive business practice under the CCPA. (Pl.’s Opp. to Defs.’ Renewed Mot. to
Dismiss [“Pl.’s Opp.”] at 8.) Defendants first argue that dismissal of this claim is
warranted as they did not have a duty as a matter of law to disclose the existence of the
alleged Animation Defect. I note that Judge Kane of this court held in a CCPA claim
that “[t]here can be no failure to disclose absent a duty to disclose”. Francis v. Mead
Johnson & Co., No. 10-cv-00701-JLK, 2010 WL 5313540, at *5 (D. Colo. Dec. 17,
2010). He further stated that “[g]enerally, ‘a defendant has a duty to disclose to a
plaintiff with whom he or she deals material facts that in equity or good conscience
should be disclosed.” Id. at *5 (quotation and internal quotation marks omitted).
In this case, I find that the Animation Defect is material, as Plaintiff alleges that its
existence “significantly decreases the value of the Oblivion game to consumers” and
that had Plaintiff known of this defect prior to purchase, he would not have purchased
the game or wold have paid less money for the game. (Compl. ¶¶ 39-40, 45, 66.) I
further find it is reasonable to assume that this defect should in equity or good
conscience have been disclosed. (See Compl. ¶ 75) (“Plaintiff. . . reasonably expected
that the Oblivion video game would be released without major undisclosed defects and
glitches” and “[t]his is a reasonable and objective consumer expectation for the Oblivion
video game given Defendants’ representations.”) As noted in Carideo v. Dell, Inc., 706
F. Supp. 2d 1122, 1133 (W.D. Wash. 2010), when “‘a manufacturer has superior
information regarding defects that are not readily ascertainable to customers, it has a
duty to disclose that information.’” (quotation omitted). “Plaintiffs have pleaded that Dell
was in a superior position to know the facts about the hidden defects in the computers
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. . ., and common sense dictates that the defects alleged by Plaintiffs are not of the sort
readily ascertainable to the average customer.” Id. (quotations omitted).
Defendants, however, point to rulings from California courts which have held in
the context of California state consumer protection statutes that there is no duty to
disclose a defect that manifests after the expiration of a warranty. As noted by the Ninth
Circuit, “[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 terms of its
express warranty cannot be characterized as causing a substantial injury to consumers,
and accordingly does not constitute an unfair practice under” state consumer protection
statutes. Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1026-27 (9th Cir. 2008)
(affirming grant of motion to dismiss deceptive business practices count based on
alleged failure to disclose allegedly defective automobile engine head gasket) (quoting
Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824, 839 (2006)); see
also Vitt v. Apple Computer, Inc., 469 F. App’x 605, 608-09 (9th Cir. 2012) (affirming
dismissal of claim relating to alleged defect in component of IBook G4 computer that
wore out or broke over time at a rate faster than consumers would reasonably expect,
as “the defect is not alleged to have any effect on the iBook G4's functionality until it
fails. . . .[a]dopting Vitt's theory would effectively extend Apple's term warranty . . .
based on subjective consumer expectations”).3
3
Defendants also rely on Abraham v. Volkswagen of Am., Inc., 795 F.2d 238, 250 (2d Cir.1986).
I find that case inapposite as its holding was made in the context of an express warranty claim which is not
asserted here.
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I first note that the case law cited by Defendants, even if applicable, clearly does
not warrant dismissal of the CCPA claims based on affirmative misrepresentations. The
Ninth Circuit in Vitt made clear that “there is no duty to disclose that a product may fail
beyond its warranty period absent an affirmative misrepresentation”. 469 Fed. App’x at
608 (emphasis added). I previously found for purposes of the motion to dismiss that
Plaintiff has alleged affirmative misrepresentations. I also note that the cases relied on
by Defendants dealt with situations where the defect had arisen only after the warranty
expired. The complaint in this case does not state when the defect first occurred and
whether it was within the 90 day warranty period. Without information about whether
the defect occurred outside the warranty period, dismissal also would not be appropriate
on that ground.
In any event, I do not find these cases persuasive as to the CCPA, and believe
that the Colorado Supreme Court would not follow them. The basis for the holding of
the above cases was the California state court’s opinion in Daugherty which discusses
the California Consumers Legal Remedies Act [“CLRA”]. The CCPA is not co-extensive
with the CLRA, which the Colorado Supreme Court has construed broadly. It stated
“that ‘in determining whether conduct falls within the purview of the CCPA, [the court]
should ordinarily be assumed that the CCPA applies to the conduct’” given “‘the strong
and sweeping remedial purposes of the CCPA.’” Crowe v. Tull, 126 P.3d 196, 202
(Colo. 2006) (quotation omitted).
Consistent with this broad construction of the CCPA, it has been held to apply to
subsequent purchasers of a home who complained of misrepresentations and omission
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of material information regarding the soundproofing of a condominium unit, even though
the implied warranty did not apply to that purchaser. Williams v. BCORP, Inc., No. 02
CV 3149, 2004 WL 3607958, at *2 (Colo. Dist. Ct. 2004). In so holding, there was no
discussion or inquiry as to whether there was an express warranty that covered the
alleged defects or whether it had expired. Thus, this issue did not appear to be relevant
to the court’s holding.
I also note that the United States District Court for the Western District of
Washington has declined to follow Dell and its progeny, stating that Dell did not show
“that the principle articulated in Daugherty and its progeny extends with equal force to
Washington law.” Carideo, 706 F. Supp. 2d at 1134. It noted that California’s and
Washington’s consumer protection statutes “are not co-extensive.” Id. It further held
that “[o]rdinarily, under [Washington’s consumer protection act], ‘[w]hat constitutes an
unfair and deceptive act or practice is a question for the fact finder,’ . . . and a party’s
failure to disclose material facts may give rise to a [consumer protection act] violation.”
Id. at 1134-35 (quotations omitted). The Colorado Court of Appeals has indicated that
Washington’s consumer protection legislation is similar to the CCPA. One Creative
Place, LLC v. Jet Center Partners, LLC, 259 P.2d 1287, 1289 (Colo. App. 2011).
Finally, I find persuasive the decision in Matthews v. American Honda Motor Co.,
Inc., No. 12-60630-CIV, 2012 WL 2520675, at * 3 (S.D. Fla. June 6, 2012). It stated
that “Florida courts have recognized that [a claim under the Florida Unfair and
Deceptive Trade Practice Act] is stated where the defendant knowingly fails to disclose
a material defect that diminishes a product’s value.” Id. It then found that the plaintiff
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had adequately alleged that the defendant had “committed an unfair and/or deceptive
trade practice” by alleging that it had knowingly failed to disclose a latent defect causing
pain discoloration and delamination in regard to his Honda vehicle, even though the
express warranty had expired. Id.
In so finding, Matthews rejected Honda’s argument that the claim “impermissibly
attempts to revive and recast a warranty claim”, noting that the plaintiff did not “allege
that Honda breached any warranty”, nor did he seek “to recover the costs required to
repair the defect, as a typical warranty claim would.” 2012 WL 2520675, at * 3. Rather,
the plaintiff alleged “that Honda committed an unfair and/or deceptive trade practice,
and her allegation that Honda knowingly failed to disclose the latent paint defect takes
this case outside of warranty law.” Id.
Based on the foregoing, I reject the argument that the omission claim should be
dismissed because Defendants had no duty to disclose the Animation Defect.
Finally, Defendants argue that the omission-based CCPA claim should be
dismissed under Rule 9(b) because the complaint only offers generalized allegations
and conclusions of law. I disagree. The complaint sets out in detail the Animation
Defect, how it impacts the ability to play the game, and the fact that despite its
knowledge of the Defect, Defendants “continue to sell the Oblivion video game” without
notifying past or future purchasers” of the Defect.” (Compl., ¶¶ 21-37, 77.) It also
alleges that “Plaintiff. . . reasonably expected that the Oblivion video game would be
released without major undisclosed defects and glitches” and “[t]his is a reasonable and
objective consumer expectation for the Oblivion video game given Defendants’
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representations.” (Id. ¶ 75.) Further, it alleges that “[t]he facts concealed or not
disclosed by defendants . . . are material in that a reasonable consumer would have
considered them to be important in deciding whether to purchase” the video game or
pay a lesser price for it. (Id., ¶ 79.) Finally, it alleges that “Defendants concealed or
failed to disclose the true nature of the Oblivion video game and the Animation Defect in
order to induce Plaintiff . . . to purchase” the game, that he “justifiably relied on the
omission to [his] detriment”, and that “Plaintiff . . . could not reasonably have been
expected to learn or discover the existence of the Animation Defect or its crippling effect
on the gameplay of the Oblivion video game prior to purchase.” (Id., ¶¶ 78, 80.) These
are not mere “generalized allegations with respect to consumer expectations” that would
require dismissal under Rule 9(b). See Hovsepian v. Apple, Inc., No. 08 Civ. 5788,
2009 WL 2591445, at *3 (N.D. Cal. Aug. 21, 2009).
In conclusion, Defendants’ motion to dismiss is denied as to Plaintiff’s first claim
for violation of the CCPA and third claim for fraudulent omission.
3.
Breach of Implied Warranty Claim
Defendants next argue that the Complaint fails to state a claim for breach of
implied warranty of merchantability (“Count III”) because Oblivion admittedly remains fit
for its ordinary purpose after the manifestation of the alleged Defect. Plaintiff contends,
on the other hand, that Oblivion is not fit for its “intended use” of open ended game play
as he was “forced to abandon his saved game” after 200 hours of gameplay using a
single game character. (See Compl. at ¶¶ 48-50, 72.)
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Turning to my analysis, Colo. Rev. Stat. § 4-2-314 provides that a warranty “that
goods shall be merchantable is implied in a contract for their sale.” In this context,
“merchantability means that the goods are fit for the ordinary purposes for which such
goods are used.” Elvig v. Nintendo of Am., Inc., No. 08–cv–02616, 2010 WL 3803814,
at *5 (D. Colo. Sept. 23, 2010).
Defendants argue that the implied warranty of merchantability does not “‘impose
a general requirement that goods fulfill the expectation of the buyer’” but instead
“‘provides for a minimum level of quality’” limited to “mere functionality.” Defendants cite
Hughes v. Panasonic Consumer Elec. Co., No. 10 Civ. 846, 2011 WL 2976839, at **2223 (D. N.J. July 21, 2011) (quoting Berenblat v. Apple, Inc., No. 08 Civ. 4969, 2009 WL
2591366, at *2 (N.D. Cal. Aug. 21, 2009)), and other cases. In Hughes, the Court
granted the defendant’s motion to dismiss the plaintiffs’ claim that defendant breached
its implied warranty of merchantability because its televisions contained a defect which
caused the picture quality to rapidly deteriorate. 2011 WL 2976839, at *23. Hughes
held that:
While plaintiffs allege that the Televisions are defective, plaintiffs do not
allege that the Televisions are inoperable or otherwise are not in working
condition. Indeed, the Amended Complaint does not contain any explicit
allegation that plaintiffs can no longer use their Televisions – in other words,
that they are no longer generally fit for their ordinary purpose. Although the
Televisions may not have fulfilled plaintiffs’ expectations, plaintiffs do not
allege that the Televisions fail to provide a minimum level of quality, which is
all that the law requires.
Id. (emphasis added) (internal citation omitted).
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I decline to follow Hughes and the cases cited by Defendants and instead find
the Francis case persuasive. Notably, while Defendant cited to and relied on Francis in
connection with other claims, it pointedly ignored the case in arguing that the implied
warranty claim should be dismissed. In Francis, Judge Kane noted that in addition to
being “fit for the ordinary purpose for which such good is used”, the Colorado statute
regarding implied warranty requires that the product “conform to the promises or
affirmations of fact made on the container or label.” 2010 WL 5313540, at 7 (citing
Colo. Rev. Stats. § 4-2-314(2)(c) and (f)). Thus, he found that even though the product
at issue there, baby formula, was probably fit for its ordinary purpose—to provide a
baby with a healthy substitute for breast milk—he found that “the question of implied
warranty in this case more accurately turns on whether the promises or affirmations on
the product’s label conforms with the product itself.” Id.
Applying that analysis here, Plaintiff alleges that the product description for the
Oblivion video game states that it features “free-form gameplay” in which players can
“explore the vast world in search of their own unique challenges.” (Compl. ¶ 13.) He
also alleges that “[a]t the time Defendants designed, manufactured, and sold” Oblivion,
they knew of the uses” for which “it was intended, and impliedly warranted that it would
be of merchantable quality and fit for its intended use.” (Id., ¶ 71.) Finally, it is alleged:
Defendants’ implied warranty included that the Oblivion video game would
offer free-form, open-ended, expansive gameplay, and be free of inherent
defects that prevent such gameplay. In actuality, the Oblivion video game
suffered from the Animation Defect” such that it “was not of merchantable
quality or fit for its intended use.
(Id., ¶ 72.)
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Construing the allegations in the light most favorable to the Plaintiff, I find that he
has shown that the promises or affirmations as to the Oblivion video game as to openended or free-form play did not conform with the video game itself. He has alleged that
he is unable to use Oblivion in its intended manner because of the Animation Defect.
Accordingly, I also deny Defendants’ motion to dismiss as to this claim.
4.
Unjust Enrichment Claim
Finally, Defendants argue that the unjust enrichment count (“Count IV”) is
duplicative of Count I and should be dismissed. It cites to the Francis decision by Judge
Kane which held that an unjust enrichment count should be dismissed as duplicative
when it seeks recovery for the same wrongful conduct and the same damages as in a
CCPA claim. 2010 WL 5313540, at *9.
Here, in contrast to Francis, Plaintiff asserts that the damages sought are
different. In his claim for unjust enrichment, Plaintiff “seeks the imposition of a
constructive trust on and restitution of the proceeds Defendants received as a result of
their [unlawful] conduct,” a form of relief not allowed under the CCPA. (Compl., ¶ 87.)
In contrast, Plaintiff seeks only actual damages and injunctive relief under his CCPA
claims. I find for purposes of the motion to dismiss that the “equitable remedy” sought
by his unjust enrichment claim appears to be separate from any available remedy at law
under the CCPA claim. See Colorado Found, Inc. v. Am. Cyanamid Co., 216 F. Supp.
2d 1188, 1200 (D. Colo. 2002) (upholding plaintiffs’ unjust enrichment remedy where it
“is separate and independent from [p]laintiffs’ remedy at law”); Harris Grp. v. Robinson,
209 P.3d 1188, 1205 (Colo. App. 2009) (unjust enrichment claim is appropriate where
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the objective of available legal remedies is different). Accordingly, the motion to dismiss
is also denied as to this claim.
III.
CONCLUSION
Based on the foregoing, it is
ORDERED that Defendants’ Motion to Dismiss (ECF No. 36) is DENIED.
Dated: September 27, 2013
BY THE COURT:
s/ Wiley Y. Daniel
Wiley Y. Daniel
Senior United States District Judge
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