Kelley v. Microsoft Corporation

Filing 20

Kelley v. Microsoft Corporation

Doc. 20

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 1 of 19

The Honorable Marsha J. Pechman 1 2 3 4 5 6 7 8 9 DIANNE KELLEY, 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689 Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE ) ) Plaintiff, ) v. ) ) MICROSOFT CORPORATION, a Washington ) corporation, ) ) Defendant. ) No. C 07-475 MJP MICROSOFT S REPLY IN SUPPORT OF MOTION TO DISMISS Note on Motion Calendar: June 22, 2007 Oral Argument Requested

[phone] Fax: [phone]

Dockets.Justia.com

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 2 of 19

TABLE OF CONTENTS 1 2 3 4 5 6 7 8 9 10 11 1. 12 2. 13 14 15 16 17 III. 18 19 20 21 22 23 24 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

Page I. II. A. B. 1. 2. C. INTRODUCTION AND SUMMARY...........................................................................1 ARGUMENT..................................................................................................................1 Because Ms. Kelley Has Not Alleged a Written Warranty, She Has Not Stated a Claim under the Magnuson-Moss Warranty Act............................................................1 Ms. Kelley Has Not Pled a Binding Contractual Bargain with Microsoft. ....................3 According to the Allegations in the Complaint, the Windows Vista Capable Sticker Did Not Create an Enforceable Contract........................................................4 Ms. Kelley Has Not Stated a Claim for Breach of the EULA. ................................... 6 Because Ms. Kelley Has Not Alleged That Unfair or Deceptive Conduct Caused Her Any Injury, She Has Not Stated a CPA Claim. ....................................................... 7 Ms. Kelley Has Not Alleged that She Suffered Any Injury. ......................................7 Ms. Kelley Has Not Alleged that Microsoft s Conduct Caused Her to Do Anything. ....................................................................................................................8 Ms. Kelley Has Not Alleged that Her Transaction with an OEM Enriched Microsoft Unjustly..........................................................................................................9 Ms. Kelley Does Not Have Standing to Assert Claims Challenging the Express Upgrade Program. ....................................................................................................... 11 CONCLUSION.............................................................................................................12

D. E.

i

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 3 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 FEDERAL CASES

TABLE OF AUTHORITIES

Alabama v. Blue Bird Body Co., 573 F.2d 309 (5th Cir. 1978) ...................................................................................................12 Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007)...............................................................................................................4 Davis v. Homecomings Financial, No. 05-1466RSL, 2006 U.S. Dist. LEXIS 77381 (W.D. Wash. Oct. 10, 2006)........................9 Goldin v. Local 55 of the Int l Ass n of Firefighters, 633 F.2d 817 (9th Cir. 1980) ...................................................................................................12 In re Hotel Tel Charges, 500 F.2d 86 (9th Cir. 1974) .....................................................................................................12 Milicevic v. Fletcher Jones Imports, Ltd., 402 F.3d 912 (9th Cir. 2005) .....................................................................................................2 Rolo v. City Investing Co., 155 F.3d 644 (3d Cir. 1998) ................................................................................................7, 12 Skelton v. General Motors Corp., 660 F.2d 311 (7th Cir. 1981) ................................................................................................. 2-3 United States ex rel. Walton Tech., Inc. v. Weststar Eng g, Inc., 290 F.3d 1199 (9th Cir. 2002)..................................................................................................11 STATE CASES Benoy v. Simons, 66 Wn. App. 56, 831 P.2d 167 (1992).......................................................................................7 Demopolis v. Galvin, 57 Wn. App. 47, 786 P.2d 804 (1990).......................................................................................7 Farwest Steel Corp. v. Mainline Metal Works, 48 Wn. App. 719, 741 P.2d 58 (1987).....................................................................................11 Johnston v. Beneficial Mgmt. Corp. of Am., 85 Wn. 2d 637, 538 P.2d 510 (1975)...................................................................................7, 11 Keystone Land & Dev. Co. v. Xerox Corp., 152 Wn.2d 171, 94 P.3d 945 (2004)..........................................................................................4

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

ii

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 4 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Lynch v. Deaconess Med. Ctr., 113 Wn.2d 162, 776 P. 2d 681 (1989).....................................................................................10 Mill & Logging Supply Co. v. West Tenino Lumber Co., Wn.2d 102, 265 P.2d 807 (1954).............................................................................................11 Mortenson Co. v. Timberline Software Co., 140 Wn.2d 568, 998 P.2d 305 (2000)........................................................................................6 Multicare Med. Ctr. v. State, 114 Wn.2d 572, 790 P.2d 124 (1990)........................................................................................4 Pickett v. Holland Am. Line-Westours, Inc., 145 Wn.2d 178, 35 P.3d 351 (2001)..........................................................................................8 Quinn v. Connelly, 63 Wn. App. 733, 821 P.2d 1256 (1992)...................................................................................7 Robinson v. Avis Rent-a-Car, 106 Wn. App. 104, 22 P.3d 818 (2001).....................................................................................9 Schnall v. AT&T Wireless Servs., Inc., ___ P.3d ___, 2007 WL 1733117 (Wn. App. June 18, 2007) ...................................................9 Vehicle/Vessel LLC v. Whitman County, 122 Wn. App. 770, 95 P.3d 394 (2004).....................................................................................5 FEDERAL STATUTES 15 U.S.C. § 2301(6) ..................................................................................................................... 1-2 15 U.S.C. § 2301(6)(A) ............................................................................................................... 2-3

18 19 20 21 22 23 24 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

STATE STATUTES RCW 19.86.090 ...............................................................................................................................9 RULES Civil Rule 11................................................................................................................................4, 6 Civil Rule 23(a)(3)................................................................................................................... 11-12 REGULATIONS 16 C.F.R. § 700.3.............................................................................................................................2

iii

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 5 of 19

OTHER AUTHORITIES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

E. Allan Farnsworth, CONTRACTS § 2.10, at 67 (3d ed. 1999) ........................................................5 RESTATEMENT (SECOND) OF CONTRACTS § 23 (1981).....................................................................4 25 DeWolf, et al., WASH. PRAC. § 2.23 (1998) ...............................................................................5 Sheila B. Scheuerman, The Consumer Fraud Class Action: Reining In Abuse By Requiring Plaintiffs To Allege Reliance As An Essential Element, 43 HARV. J. LEG. 1 (2006)......................................................................................................................................8

iv

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 6 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 A.

I.

INTRODUCTION AND SUMMARY Windows

As her Opposition makes clear, Ms. Kelley s claim turns on three words Vista Capable

that appeared on a sticker on a computer Ms. Kelley bought from an

undisclosed computer manufacturer ( OEM ). Ms. Kelley does not allege that she read those words. She does not allege that they would have meant anything to her if she had read them. And she does not allege that she took any action in response to them. Those three words cannot bear the burden of Ms. Kelley s claims, and this Court should dismiss, because: (1) The sticker did not promise a specified level of performance over a specified

period of time. Ms. Kelley therefore has no claim under the Magnuson-Moss Warranty Act. (2) Based on settled law, the sticker did not create an enforceable contract. Nor

has Ms. Kelley alleged a breach of the contract she did have her Windows XP End User License Agreement (which was between Ms. Kelley and her OEM, not with Microsoft). (3) The sticker did not give rise to a CPA claim, as Ms. Kelley has not alleged that

she suffered any injury to her business or property as a result of the words on the sticker. (4) Ms. Kelley has not alleged that she unjustly enriched Microsoft as a result of

the sticker. Although she says someone enriched Microsoft by buying a computer in response to the sticker, she does not allege that the sticker caused her to buy a computer. (5) Ms. Kelley s claim focuses entirely on the Windows Vista Capable sticker,

and she has not alleged that she bought a computer with an Express Upgrade. She therefore does not have standing to assert any claims with respect to the Express Upgrade program. II. ARGUMENT

Because Ms. Kelley Has Not Alleged a Written Warranty, She Has Not Stated a Claim under the Magnuson-Moss Warranty Act.

Ms. Kelley s Opposition persists in her misguided attempt to fit the square peg of the Windows Vista Capable sticker into the round hole of the Magnuson-Moss Act s definition of a written warranty. 15 U.S.C. § 2301(6). The Magnuson-Moss Act does not apply here

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

1

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 7 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

because the Windows Vista Capable sticker does not promise a specified level of performance over a specified period of time. 15 U.S.C. § 2301(6)(A) (emphasis added). Ms. Kelley suggests two possible times at which one might infer performance was promised (i.e., when she purchased her PC or when Microsoft released Windows Vista), Opp. at 21:3036, but in doing so ignores the text of the Act. Performance must be promised over a specified period of time not at some unspecified time. Here, the sticker does not specify any time period. The sticker merely says Windows Vista Capable. The FTC regulations point out that an appliance s energy efficiency rating is not a written warranty because it lacks a specified time period. 16 C.F.R. § 700.3. In this respect, a sticker stating that a refrigerator has an energy efficiency rating of 10.0 does not differ from one stating that a PC is Windows Vista Capable. Neither promises that the energy efficiency rating or Windows Vista capability will be maintained over 90 days, one year, ten years, or any other specified period of time, as the Act requires. Hence, neither is a written warranty. Because the Act applies only to a written warranty, the Court should dismiss Ms. Kelley s Magnuson-Moss Act claim. Ms. Kelley relies upon Milicevic v. Fletcher Jones Imports, Ltd., 402 F.3d 912 (9th Cir. 2005), for the proposition that context is crucial in analyzing the Act. Opp. at 22:2832. But Milicevic does not address the issue here whether Windows Vista Capable meets the definition of written warranty under Section 2301(6)(A). In Milicevic, a new Mercedes had spent 55 days in the repair shop by the end of seven months. Mercedes-Benz s warranty promised to make repairs to correct defects in materials or workmanship, which made it a written warranty under Section 2301(6)(B) ( undertaking in writing replace, or take other remedial action ) to refund, repair,

a different prong of the definition of written

warranty than at issue here. Id. at 917-19. In Skelton v. General Motors Corp., 660 F.2d 311 (7th Cir. 1981), the district court held that statements in brochures, manuals, and advertising were not written warranties but

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

2

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 8 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

that the Act nonetheless applied to them. No one appealed the holding that the statements (for example, that 1976 through 1979 GM automobiles contained THM 350 (M38) transmissions, or transmission of similar quality and performance ) were not written warranties, id. at 312 (internal quotations omitted), but GM did appeal the ruling that the Act applied to them anyway. In reversing, the Seventh Circuit discussed with approval and at length the district court s holding that the statements were not written warranties. The Seventh Circuit found that holding consistent with the FTC s interpretation of the definition that [a] product information disclosure without a specified time period to which the disclosure relates is not a written warranty. The court emphasized the need for a clear

definition of a written warranty because manufacturers and suppliers must know in advance exactly which representations are subject to obligations under the Act and it would be excessively cumbersome to impose the Act s disclosure rules on every advertisement containing a description of a product or its components. Id. at 316 n.7. In response, Ms. Kelley has not cited a single case holding a statement to be a written warranty where it promises a specified level of performance1 but not over a specified period of time. 15 U.S.C. § 2301(6)(A). A Windows Vista Capable sticker does not promise anything over a specified period of time. It is not a written warranty, the MagnusonMoss Warranty Act does not apply, and the Court should dismiss the claim under the Act. B. Ms. Kelley Has Not Pled a Binding Contractual Bargain with Microsoft.

Ms. Kelley alleges only one contract in her First Amended Complaint (the Complaint ): Microsoft contractually promised to provide to plaintiff services software and

that provided Vista at a price not exceeding any cost of any upgrade to Vista

Basic. Am. Compl. ¶ 7.2 (emphasis added). Despite her remarkable assertion that it does not matter whether that promise was made, but [only] whether Microsoft breached its
1

Microsoft stands on its original brief for its demonstration that Windows Vista Capable does not promise a specified level of performance either. The Court need not resolve that issue because the lack of any promise over a specified period of time is dispositive. 15 U.S.C. § 2301(6)(A). REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

3

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 9 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

promise, Opp. at 6:37-39, an action for breach of contract requires that an enforceable contract exist. Because parties enter into an enforceable contract only if they objectively manifest their mutual assent, Keystone Land & Dev. Co. v. Xerox Corp., 152 Wn.2d 171, 177, 94 P.3d 945 (2004), Ms. Kelley must allege that she and Microsoft did something to manifest their mutual assent to be bound in a contractual relationship. In her Opposition, Ms. Kelley still does not assert that she responded to (or even saw) the words Windows Vista Capable on her computer and the absence of that allegation

means that she has not pleaded a contract. Tacitly recognizing that deficiency, Ms. Kelley resorts to arguing that she and Microsoft had a different contract in the form of an End User License Agreement (or EULA ). But she does not allege a breach of the EULA, either in her Complaint or in her Opposition; she could not allege such a claim consistent with Rule 11; and, in any event, the EULA on which she relies would bar her claims. 1. According to the Allegations in the Complaint, the Windows Vista Capable Sticker Did Not Create an Enforceable Contract.

The mere existence of a marketing sticker combined with Ms. Kelley s purchase of a product upon which that sticker appeared do not amount to objective manifestations of mutual 16 assent sufficient to create a contract. At most, Ms. Kelley has pleaded two independent 17 actions: Microsoft authorized placement of a sticker on a computer, and Ms. Kelley bought 18 a computer with that sticker. She does not allege any connection between the sticker and her 19 purchase that would allow even a plausible inference of mutual assent to the supposed 20 contract she alleges. See Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1970-73 (2007) 21 (allegations of parallel conduct inadequate to plead a contract, combination or conspiracy 22 in violation of § 1 of the Sherman Act). 23 The absence of any alleged connection between the sticker and Ms. Kelley s purchase 24 means that she has not alleged a bargain between Microsoft and her. It is essential to a 25 bargain that each party manifest assent with reference to the manifestations of the other. 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

4

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 10 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

RESTATEMENT (SECOND) OF CONTRACTS § 23 (1981) (emphasis added); see also Multicare Med. Ctr. v. State, 114 Wn.2d 572, 586 n.24, 790 P.2d 124 (1990) ( Mutual assent or mutual intention are the modern expressions for the concept of meeting of the minds. ). Thus, to form a contract of the type alleged in her Complaint, Ms. Kelley must allege that Microsoft made an enforceable offer, which she met with knowing and intentional acceptance via performance in response to the offer. Vehicle/Vessel LLC v. Whitman County, 122 Wn. App. 770, 777, 95 P.3d 394 (2004) ( There is no contract until the bargained-for act is performed. ) (emphasis added). Settled law, however, establishes that advertisements and marketing campaigns, such as the sticker, do not rise to the level of binding offers that can give rise to a contract. Motion at 10:14-23. Ms. Kelley neither challenges that basic principle nor explains how the Court could construe the Windows Vista Capable sticker as a binding offer to contract. Indeed, Ms. Kelley virtually concedes that Microsoft s marketing could not be a binding offer, Opp. at 6:1-5 (disavowing allegations based on Microsoft s marketing campaign as irrelevant ), and she agrees that general, impersonal advertising cannot create a contract. Opp. at 6:7. Even if Microsoft s marketing campaign could rise to the level of a binding offer, Ms. Kelley still would have to allege that she accepted that offer with the purpose of taking Microsoft up on its proposal. Put another way, Ms. Kelley had to know of the offer and intend to accept it for a contract to be formed. See 25 DeWolf, et al., WASH. PRAC. § 2.23 (1998); see also E. Allan Farnsworth, CONTRACTS § 2.10, at 67 (3d ed. 1999) ( [T]he promisee s purpose must be to take advantage of the proposed exchange. ). Rather than make that allegation, Ms. Kelley relies on a series of bullet points, Opp. at 7:3-20, which boil down to the propositions that (a) Microsoft authorized OEMs to place Windows Vista Capable stickers on their computers, and (b) Ms. Kelley bought a computer from an OEM who used the sticker. She does not allege that she purchased her PC in response to the Windows Vista Capable sticker. That omission as well forecloses any contract claim based on the sticker.

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

5

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 11 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

2.

Ms. Kelley Has Not Stated a Claim for Breach of the EULA.

Because she cannot plead a contract based on the sticker, Ms. Kelley stakes her claim on a Windows XP End User License Agreement ( EULA ), which she did not mention in her Complaint but now attaches to her Opposition. Opp. at 3-5; Thomas Decl., Ex. A. But Ms. Kelley has not pleaded a breach of the Windows XP EULA. Neither the Complaint nor the Opposition points to a single obligation in the EULA that Microsoft allegedly breached. More precisely, the EULA for Windows XP on its face has no bearing on whether Microsoft contractually promised to provide Ms. Kelley with Vista at a price not

exceeding any cost of an upgrade to Vista Basic. Am. Compl. ¶ 7.2. The EULA does not mention Windows Vista, much less make a promise of the sort that Ms. Kelly alleges. For that reason, cases enforcing shrink-wrap licenses, such as Mortenson Co. v. Timberline Software Co., 140 Wn.2d 568, 998 P.2d 305 (2000), provide no guidance here. In any event, Rule 11 would preclude Ms. Kelley from pleading a contract claim against Microsoft based on the EULA attached to her Opposition: she alleges that she bought a computer, Am. Compl. ¶ 2.1, and acknowledges that it came with Windows XP preinstalled, Am. Compl. ¶ 1.2; Opp. at 3:21. Any reasonable investigation of her claims would involve looking at the EULA she received with her computer not downloading a different

EULA from Microsoft s Web site for Windows in retail boxes, see Thomas Dec. ¶ 2. Such a modest investigation would show that the EULA that came with her computer created a contract between her and the OEM, not between her and Microsoft, which is not a party to that EULA. Even if she did plead contrary to the EULA s terms that Microsoft was a

party, it would bar her claims: the EULA attached to the Thomas Declaration contains an integration clause, making the license supersede all prior or contemporaneous oral or written communications, proposals and representations with respect to the Software or any other subject matter covered by this EULA. Thomas Dec., Ex. A, ¶ 21. Thus, even if the EULA were the governing contract, Ms. Kelley would have no Windows Vista claim.

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

6

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 12 of 19

1 2 3

C.

Because Ms. Kelley Has Not Alleged That Unfair or Deceptive Conduct Caused Her Any Injury, She Has Not Stated a CPA Claim.

Ms. Kelley concedes that she must allege that Microsoft proximately caused injury to her property to state a CPA claim. Opp. at 10:17-34. But Ms. Kelley has not alleged that she 4 suffered injury. Nor has she alleged that Microsoft caused whatever injury she might claim. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

1.

Ms. Kelley Has Not Alleged that She Suffered Any Injury.

Ms. Kelley alleges only that she and Class members suffered unspecified injury, including having to purchase RAM and/or other hardware in order to run the real Vista Am. Comp. ¶ 8.5;

or being required to pay additional money to obtain the real Vista.

Opp. at 14:4-12. But Ms. Kelley steadfastly refuses to identify any injury that she herself has suffered. She alleges only that she bought a computer with the Windows Vista Capable sticker and that it could run Windows Vista just not the Windows Vista edition that she now

claims it should run. She does not allege that she purchased RAM or other hardware, or paid additional money for a premium Windows Vista edition. Thus, she does not allege that her purchase of a new computer injured her property. The most one can infer from her allegations is that some other putative class members may have bought RAM or other hardware, or an upgrade to a premium Windows Vista edition. But Ms. Kelley cannot allege an individual claim by relying on injuries to absent members of an uncertified class. Until the putative class is certified, the action is one between the [named plaintiff] and the defendant. Accordingly, the First Amended Complaint must be must be evaluated as to [this] particular plaintiff. Rolo v. City Investing Co., 155 F.3d 644, 659 (3d Cir. 1998). Washington courts routinely dismiss CPA claims where plaintiffs have not paid the charges they challenge. Johnston v. Beneficial Mgmt. Corp. of Am., 85 Wn. 2d 637, 644, 538 P.2d 510 (1975); see also Benoy v. Simons, 66 Wn. App. 56, 65, 831 P.2d 167 (1992); Quinn v. Connelly, 63 Wn. App. 733, 742-43, 821 P.2d 1256 (1992); Demopolis v. Galvin, 57 Wn. App. 47, 54-55, 786 P.2d 804 (1990). Because Ms.

7

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 13 of 19

1 2 3 4 5

Kelley has not alleged that she incurred any detriment as a result of Microsoft s actions, she has not alleged the injury required to state a claim under the CPA. 2. Ms. Kelley Has Not Alleged that Microsoft s Conduct Caused Her to Do Anything.

Leaving aside the issue of injury, Ms. Kelley s CPA claim should be dismissed because she has not alleged causation. Ms. Kelley alleges a bait and switch scheme to 6 which members of the putative class were subjected. Am. Compl. ¶ 1.2; Opp. at 14:18-43. 7 To state a claim of that nature, however, Ms. Kelley at least would have to allege that she took 8 the bait by responding to the Windows Vista Capable sticker and then suffered the 9 switch by buying an upgrade to Windows Vista so that she could experience the real 10 Vista that she allegedly expected to be able to buy and run. 11 Ms. Kelley, however, has not made any such allegations. Instead, she relies on 12 allegations that putative class members (not her) may have been reassured, 13 believe, or assured by the Windows Vista Capable sticker, Opp. at 14:26-39, and those 14 allegations have no bearing on this motion. Ms. Kelley must allege that she saw the 15 Windows Vista Capable sticker, that it meant something to her, and that she paid to 16 upgrade from Windows Vista Home Basic because it lacked features she expected to receive. 17 Lacking these allegations, Ms. Kelley s Complaint cannot satisfy even the most 18 indulgent view of the CPA s causation requirement. Her long discussion of reliance under 19 the CPA therefore has only academic interest 20 Court has declared that it remains debatable in Washington whether one can prove 21 22 Inc., 145 Wn.2d 178, 196-97, 35 P.3d 351 (2001). Indeed, Judge Lasnik recently refused to 23 certify a CPA class in part because each plaintiff must show that he or she relied on 24 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689
2

falsely led to

and it remains inconclusive, for the Supreme

causation under the CPA without showing reliance.2 Pickett v. Holland Am. Line-Westours,

While some jurisdictions have relaxed the requirement of alleging reliance, Opp. at 13, that development has received sharp criticism. See generally, Sheila B. Scheuerman, The Consumer Fraud Class Action: Reining In Abuse By Requiring Plaintiffs To Allege Reliance As An Essential Element, 43 HARV. J. LEG. 1 (2006).

8

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 14 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

[defendant s] allegedly unfair or deceptive acts. Davis v. Homecomings Financial, No. 051466RSL, 2006 U.S. Dist. LEXIS 77381 (W.D. Wash. Oct. 10, 2006) (citing Pickett, 145 Wn. 2d at 196). In any event, causation not reliance is at issue here.

Contrary to Ms. Kelley s implication, Division I s recent opinion in Schnall v. AT&T Wireless Servs., Inc., ___ P.3d ___, 2007 WL 1733117 (Wn. App. June 18, 2007), does not excuse her from alleging that she saw the Windows Vista Capable sticker and cared about what it meant. See Pl. Not. of Supp. Auth. (Dkt. No. 19). In Schnall, a seller allegedly contracted to sell services at one price, but added an unauthorized charge. On those facts, the court of appeals held that Mr. Schnall could prove causation by showing that he contracted for the service at a set price but paid more. Here, by contrast, Ms. Kelley s claims turn on whether readers of the Windows Vista Capable sticker were reassured, misled, or assured, Opp. at 14:26-39, by the Windows Vista Capable sticker at a time when information about the hardware needed to run all Windows Vista features was widely available. See Am. Compl. ¶ 4.6; Motion at 4:6-5:8. For that reason, this case has nothing in common with Schnall. Here, Ms. Kelley must allege that she was injured in a violation of the CPA. RCW 19.86.090. She has not done so. Simply put, Ms. Kelley s Complaint cannot survive this motion by pleading that she bought a computer and that a sticker on that computer misled someone else and caused someone else to buy more hardware or an upgrade to Windows Vista. Her failure to connect the sticker to her behavior and any damage to her requires dismissal. See Robinson v. Avis Rent-a-Car, 106 Wn. App. 104, 119, 22 P.3d 818 (2001).3 D. Ms. Kelley Has Not Alleged that Her Transaction with an OEM Enriched Microsoft Unjustly. her business or property by

Ms. Kelley s failure to allege that she took any action in response to the Windows Vista Capable sticker likewise requires dismissal of her unjust enrichment claim. 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689
3

Ms. Kelley has abandoned her ill-conceived theory that price inflation allegations can suffice to plead causation on a CPA claim. See Opp. at 15:42-16:14.

9

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 15 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Ms. Kelley admits that she must plead facts that, if proved, would show that Microsoft reaped an unjust benefit from her purchase of a computer with Windows XP pre-installed. In an unsuccessful effort to satisfy that obligation, Ms. Kelley claims that [t]hrough its misleading acts, Microsoft benefited by selling more XP licenses and additional upgrades than it would have without the Windows Vista Capable and Express Upgrade programs. Opp. at 19:3-17 (emphasis added); Am. Compl. ¶¶ 4.3-4.6. In other words, the supposed unjust enrichment arose from Microsoft s incremental additional sales. But Ms. Kelley does not allege that she was one of those additional sales, i.e., that her purchase of a computer equipped with Windows XP came about because of Microsoft s misleading acts. In particular, she does not allege that she bought a computer that she would not have purchased without the Windows Vista Capable and Express Upgrade programs. The gravamen of [her] Complaint, Opp. at 19:5 using the programs to sell

more Window XP licenses to computer manufacturers therefore does not address any action that Ms. Kelley alleges she took. It does not matter that she purchased a computer with Windows XP pre-installed. Unless the Windows Vista Capable sticker or Express Upgrade program caused her to buy a computer she otherwise would not, she has in no way unjustly enriched Microsoft. See Lynch v. Deaconess Med. Ctr., 113 Wn.2d 162, 165, 776 P. 2d 681 (1989) ( [T]he mere fact that a person benefits another is not sufficient to require the other to make restitution. ). Because Microsoft mentioned that she bought her computer from an OEM, Ms. Kelley argues about privity. Opp. at 17-18. But Microsoft has never argued that Ms. Kelley lacked a remedy because of an absence of privity. She paid an OEM for a computer with Microsoft Windows XP pre-installed, and Microsoft in turn received a payment from the OEM. See Opp. at 4:9-32. If that payment was unjust, then a lack of privity would not bar her claim. But Ms. Kelley has not alleged that whatever amount Microsoft received from her OEM as a result of her transaction was unjust : as far as the Complaint shows, the OEM provided Ms.

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

10

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 16 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Kelley with the computer she meant to buy, and Microsoft received from the OEM what the OEM owed. (Ms. Kelley has not alleged that she paid anything directly to Microsoft. Am. Compl. ¶ 9.2.) The two cases Ms. Kelley cites have nothing to do with the circumstances here. Both involved defendants who had profited by taking and using goods for which they did not pay. See, e.g., Mill & Logging Supply Co. v. West Tenino Lumber Co., Wn.2d 102, 265 P.2d 807 (1954). Indeed, in the second of these cases, on those facts, the court of appeals found that enrichment was not unjust where, among other things, the defendant did not mislead the plaintiff. See Farwest Steel Corp. v. Mainline Metal Works, 48 Wn. App. 719, 732, 741 P.2d 58 (1987). Far from alleging that Microsoft received something for nothing, Ms. Kelley alleges only that it received payment from an OEM for the Windows XP software that the OEM pre-installed on its machine and sold to Ms. Kelley.4 That was hardly unjust. E. Ms. Kelley Does Not Have Standing to Assert Claims Challenging the Express Upgrade Program.

Ms. Kelley s Complaint does not allege that the PC she bought in November 2006 included an Express Upgrade to Windows Vista. For that reason, she cannot assert claims 16 with respect to the Express Upgrade program, for a plaintiff who did not buy the product that 17 she claims was deficient or deceptively marketed has no standing to sue. Johnston, 85 Wn. 18 2d at 644-45 (where CPA plaintiff did not take loan at issue, court rejected claim as lacking 19 injury and held [a] party who lacks standing himself cannot represent a class of which he is 20 not a party ). 21 Ms. Kelley s argument to the contrary, see Opp. at 23-24, confuses the requirements 22 for stating a claim with the burden that a named plaintiff in a class action bears under Rule 23 24 25 26 27
REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689
4

Ms. Kelley chides Microsoft for supposedly not recognizing her right to plead in the alternative. Opp. at 16:18-36. But the Ninth Circuit gave no deference to pleading in the alternative when it dismissed a claim for unjust enrichment in the face of a valid contract in United States ex rel. Walton Tech., Inc. v. Weststar Eng g, Inc., 290 F.3d 1199, 1204 (9th Cir. 2002). For that reason, if Ms. Kelley s contract claim survives, she cannot maintain her claim for unjust enrichment.

11

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 17 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

23(a)(3) of demonstrating that her claim is typical of the claims of the class she wants to represent. The fact that Ms. Kelley filed this lawsuit as a proposed class action does not reduce her obligation of pleading and proving every element of each claim she is asserting including her standing to assert the claim. Alabama v. Blue Bird Body Co., 573 F.2d 309, 327 (5th Cir. 1978) ( [T]he fact that a case is proceeding as a class action does not in any way alter the substantive proof required to prove up a claim for relief ); In re Hotel Tel Charges, 500 F.2d 86, 89 (9th Cir. 1974) (court should not permit class action to wear away the substantive requirements to maintain a cause of action ). Having not bought a PC with an

Express Upgrade to Windows Vista, she has no standing to challenge the Express Upgrade program. Filing the case as a class action does not change this. See Rolo, 155 F.3d at 659 ( [u]ntil the putative class is certified be evaluated as to [this] particular plaintiff ). Rule 23(a)(3) s typicality requirement permits named plaintiffs with standing to the First Amended Complaint must be must

represent absent class members whose claims involve some different facts. It does not permit a plaintiff with standing to assert one claim (here, a claim challenging the Windows Vista Capable program) to add another claim that she has no standing to assert on behalf of herself or anyone else. See, e.g., Goldin v. Local 55 of the Int l Ass n of Firefighters, 633 F.2d 817, 824 (9th Cir. 1980) (trial court properly excluded future job applicants from class action brought by present employees). Accordingly, the Court should dismiss all claims in the Complaint that purport to challenge the Express Upgrade program. III. CONCLUSION

For these reasons, and for the reasons set forth in its Motion, Microsoft respectfully requests that the Court dismiss Ms. Kelley s First Amended Complaint with prejudice. DATED this 22nd day of June, 2007.

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

12

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 18 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Of Counsel: Charles B. Casper Patrick T. Ryan Montgomery, McCracken, Walker & Rhoads, LLP 123 S. Broad Street Philadelphia, PA 19109 [phone]

Davis Wright Tremaine LLP Attorneys for Microsoft Corporation By /s/ Stephen M. Rummage Stephen M. Rummage, WSBA #11168 Cassandra Kinkead, WSBA #22845 Charles S. Wright, WSBA #31940 1201 Third Avenue, Suite 2200 Seattle, WA 98101 Telephone: [phone] Fax: [phone] E-mail: [e-mail] [e-mail] [e-mail]

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

13

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]

Case 2:07-cv-00475-MJP

Document 20

Filed 06/22/2007

Page 19 of 19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

CERTIFICATE OF SERVICE

I hereby certify that on June 22, 2007, I electronically filed the foregoing Microsoft's Reply in Support of Motion to Dismiss with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following: Jeffrey I. Tilden: Jeffrey M. Thomas: Michael Rosenberger: Mark A. Wilner: William C. Smart: Mark A. Griffin: Ian S. Birk: DATED this 22nd day of June, 2007. Davis Wright Tremaine LLP Attorneys for Defendant By /s/ Stephen M. Rummage Stephen M. Rummage, WSBA #11168 Davis Wright Tremaine LLP 1201 Third Avenue, Suite 2200 Seattle, WA 98101 Telephone: [phone] Fax: [phone] E-mail: [e-mail] [e-mail] [e-mail] [e-mail] [e-mail] wsmart@[e-mail] mgriffin@[e-mail] ibirk@[e-mail]

REPLY ON MOTION TO DISMISS (NO. C07-475 MJP)
SEA 2000284v13 0025936-000689

14

Davis Wright Tremaine LLP
LAW OFFICES
1201 Third Avenue, Suite 2200 Seattle, Washington 98101 [phone] Fax: [phone]