Martin, Scott v. LG Electronics USA, Inc. et al
Filing
80
ORDER granting 22 Motion to Dismiss; denying 44 Motion for Leave to File Declaration in Support of Personal Jurisdiction; granting in part and denying in part 34 Motion to Dismiss; granting in part and denying in part 68 Motion to Dism iss; denying without prejudice 3 Motion to Certify Class under Rule 23. Defendants Cyberlink Corp., Cyberlink.com Corp. and Hitachi-LG Data Storage, Inc. are dismissed from this case. The court will hold a telephone scheduling conference on April 8 at 2:00 PM before Magistrate Judge Stephen L. Crocker to calendar the remainder of the case. Signed by District Judge James D. Peterson on 3/31/2015. (arw)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
SCOTT MARTIN,
v.
Plaintiff,
OPINION & ORDER
14-cv-83-jdp
LG ELECTRONICS USA, INC.,
LG ELECTRONICS, INC.,
HITACHI-LG DATA STORAGE, INC.,
CYBERLINK.COM CORP., and
CYBERLINK CORP.,
Defendants.
In 2011, plaintiff Scott Martin purchased an LG “Super Multi Blue” Blu-ray disc drive
(BD player) that he installed in his computer. The BD Player came with PowerDVD software
for the playback of prerecorded Blu-ray discs. But when he tried to use his BD player to watch a
rented Blu-ray disc, the BD player could not play the movie unless he purchased a software
upgrade. Defendants LG Electronics USA, Inc. (LGUS); LG Electronics, Inc. (LG); and HitachiLG Data Storage, Inc. (HLDS) made, designed, packaged, marketed, distributed, and sold
Martin’s BD player. Defendants Cyberlink.com and Cyberlink (collectively Cyberlink) marketed
the PowerDVD software. Martin alleges that defendants conspired to sell a product bundled
with obsolete software, which rendered the player useless without an upgrade. He brings this
class action to enforce his own rights and the rights of those who are similarly situated.
All five defendants have moved to dismiss on various grounds. Dkt. 22, Dkt. 34, and
Dkt. 68. The court will grant Cyberlink’s motion to dismiss for lack of personal jurisdiction. The
court will grant much of LGUS, LG, and HLDS’s motions to dismiss for failure to state a claim
and lack of subject matter jurisdiction. Martin may proceed only on his claim that defendants
LG and LGUS violated the Wisconsin Deceptive Trade Practices Act (WDTPA). Cyberlink and
HLDS will be dismissed from this case.
Also before the court are Martin’s motions to certify the following proposed classes: (1)
all persons in Wisconsin who purchased LG, LGUS, or HLDS BD players bundled with
discontinued Cyberlink software at any time between February 8, 2008, and the date of an
order granting class certification (Wisconsin Class); (2) all persons in Wisconsin who purchased
LG, LGUS, or HLDS Super Multi Blue Blu-ray Disc players bundled with discontinued
Cyberlink software at any time between February 8, 2008, and the date of an order granting
class certification (Wisconsin Super Multi Blue Class); (3) all persons in the United States who
purchased LG, LGUS, or HLDS Blu-ray Disc players bundled with discontinued Cyberlink
software at any time between February 8, 2008, and the date of an order granting class
certification (National Class); and (4) all persons in the United States who purchased LG,
LGUS, or HLDS Super Multi Blue Blu-ray Disc players bundled with discontinued Cyberlink
software at any time between February 8, 2008, and the date of an order granting class
certification (National Super Multi Blue Class). Dkt. 3. The court will not certify Martin’s
proposed National Class or National Super Multi Blue Class, and defer Martin’s motion for
class certification of the proposed Wisconsin Class and Wisconsin Super Multi Blue Class.
ALLEGATIONS OF FACT
The court recounts the facts as alleged by Martin because on a motion to dismiss, the
“court must accept the complaint’s well-pleaded factual allegations as true and draw reasonable
inferences from those allegations in the plaintiff’s favor.” Transit Exp., Inc. v. Ettinger, 246 F.3d
1018, 1023 (7th Cir. 2001). The court will also consider affidavit evidence supplied by the
parties in connection with Cyberlink’s motion to dismiss for lack of personal jurisdiction. Nelson
2
by Carson v. Park Indus., Inc., 717 F.2d 1120, 1123 (7th Cir. 1983).
In February 2011, Martin purchased a “Super Multi Blue” BD player from Newegg, Inc.
(a non-party) to insert as an internal drive into his computer. HLDS, LG, and LGUS were
responsible for designing, providing, packaging, marketing, distributing, and selling the BD
player. The Cyberlink defendants were responsible for the PowerDVD 8 software, which was
bundled with the BD player. By the time Martin bought the player, the Cyberlink defendants
had discontinued the software and were no longer providing free updates. But Martin had no
knowledge that his PowerDVD 8 software was obsolete and that he would need to purchase an
upgrade to fully operate his BD player.
Approximately eight months after Martin purchased the BD Player, he tried to watch a
rented Blu-ray movie. But his screen displayed a message indicating that he would have to
purchase a software upgrade. He had the same experience when he attempted to watch certain
other movies on his BD player. Martin contacted each defendant regarding the problem. HLDS
advised Martin to contact LG and LGUS. LG and LGUS did not respond. The Cyberlink
defendants claimed that Martin could install free updates that would allow him to play the
movies. However, Cyberlink had stopped issuing free updates compatible with PowerDVD 8
long before Martin had purchased his BD player, and so Martin would have to purchase any
upgrade he wanted to install.
Martin, assuming that other consumers in Wisconsin and the United States had
experienced similar problems with their BD players, filed this case as a purported class action.
The court has jurisdiction under 28 U.S.C. § 1332 because the parties are diverse and the
amount in controversy exceeds $75,000.
3
ANALYSIS
Martin brought this action against LGUS, LG, HLDS, Cyberlink. 1 He asserts five causes
of action: (1) tortious interference with contract; (2) common law fraudulent misrepresentation;
(3) violation of the Wisconsin Deceptive Trade Practices Act (WDTPA), Wis. Stat. § 100.18 et
seq.; (4) unjust enrichment; and (5) civil conspiracy. Martin alleges that defendants’ actions
interfered with his contract with non-party Newegg to sell him a functional BD player. He
further alleges that the packaging and marketing of the BD player fraudulently misrepresented
that it could play all BDs regardless of format. Similarly, the false statements violated WDTPA.
Because his player was less valuable than advertised, Martin alleges that defendants were
unjustly enriched. Finally, Martin alleges that defendants knowingly conspired to violate the law
by selling BD players with obsolete software. He claims that if he and other class members had
known that the PowerDVD 8 software was obsolete, they would have returned the BD player,
paid less for it, or simply not purchased it. Martin seeks to represent a class and be awarded
damages and restitution. He proposes that the court establish a constructive trust that would
consist of a portion of money defendants received from BD player sales and software upgrades.
Defendants LGUS, LG, HLDS, and Cyberlink have moved to dismiss on numerous
grounds. First, the Cyberlink defendants assert that this court lacks personal jurisdiction over
them. Further, defendants all contend that Martin fails to state a claim for tortious interference
with contract, fraudulent misrepresentation, and civil conspiracy. LGUS and LG argue that
Martin has not pled his WDTPA claim with sufficient particularity. Finally, defendants LGUS,
LG, and HLDS assert that Martin fails to state a claim for unjust enrichment. Based on these
1
Martin names various officers, employees, and agents of defendants and other entities as John
Does 1-20 in his complaint. Martin offers these as placeholders in the event discovery reveals
identifying information; there is no need to address claims against the Doe defendants at this
point.
4
alleged deficiencies, defendants argue that Martin’s motion to certify the proposed classes is
moot and should be denied. They also assert that even if he has a claim, Martin lacks standing
to assert claims on behalf of BD player purchasers outside of Wisconsin.
A. Personal jurisdiction over the Cyberlink defendants
The Cyberlink defendants assert that this court lacks personal jurisdiction over
Cyberlink.com, a California corporation, and Cyberlink, a Taiwanese company. They first
contend that neither Cyberlink.com nor Cyberlink are registered to do business, have offices, or
pay taxes in Wisconsin. Neither had employees in Wisconsin at the time the suit was filed or at
the time the alleged conduct took place. They also do not advertise in Wisconsin, and did not
manufacture, import, market, or sell Martin’s BD player to him. Finally, they assert that Martin
does not allege that any of Cyberlink’s conduct specifically targeted or exploited Wisconsin, or
that his claims arise from any alleged conduct between Cyberlink and Wisconsin. 2 The court
agrees that it lacks personal jurisdiction over Cyberlink and will grant its motion to dismiss.
On a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil
Procedure 12(b)(2), the burden of proof rests on the party asserting jurisdiction. Hy Cite Corp. v.
Badbusinessbureau.com, L.L.C., 297 F. Supp. 2d 1154, 1157 (W.D. Wis. 2004). Wisconsin courts
require the party asserting personal jurisdiction to satisfy the requirements of the state’s longarm statute, Wis. Stat. § 801.05, and the Due Process Clause of the United States Constitution.
See Logan Prod.s, Inc. v. Optibase, Inc., 103 F.3d 49, 52 (7th Cir. 1996). Wisconsin’s long-arm
statute is liberally construed in favor of jurisdiction. See Marsh v. Farm Bureau Mut. Ins. Co., 179
2
Martin moved for leave to belatedly file a declaration in support of personal jurisdiction over
Cyberlink. Dkt. 44. The proposed declaration fails to state that it was made under penalty of
perjury as required by 28 U.S.C. § 1746. It also describes Cyberlink products that are not at
issue in this case, offered for sale at retailers that are irrelevant to this case. Further, the
declaration fails to present information from the relevant time period. Even if the court allowed
the belated declaration, it is unpersuasive on the issue of personal jurisdiction.
5
Wis. 2d 42, 52, 505 N.W.2d 162 (Ct. App. 1993). The Cyberlink defendants are covered by
the Wisconsin long-arm statute, but personal jurisdiction over them would not satisfy the due
process requirements of the Constitution.
When a plaintiff suffers an injury within this state arising out of a defendant’s out-ofstate act or omission, the plaintiff must establish that at the time of the injury, the defendant’s
products, materials, or things processed, serviced, or manufactured were consumed in Wisconsin
in the ordinary course of trade. Wis. Stat. § 801.05(4)(b). Here, Martin purchased a BD player
that included PowerDVD 8 software and he attempted to use it in Wisconsin. Martin’s injury—
the result of his nonfunctional BD player—also occurred in Wisconsin. Cyberlink’s PowerDVD
software comes with continuing upgrades that extend well past purchase and Cybrlink’s software
was consumed in Wisconsin in the ordinary course of trade. Based on these considerations,
Cyberlink falls within Wisconsin’s long arm statute. Id.
Next, to establish personal jurisdiction under the Due Process Clause, Martin must show
that the Cyberlink defendants purposefully established minimum contacts in Wisconsin, and
the court considers those contacts in light of other factors to determine whether personal
jurisdiction comports with “fair play and substantial justice.” Int’l Shoe Co. v. State of Wash.,
Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945). The minimum contacts
must be the result of the Cyberlink defendants purposefully availing themselves of the privilege
of conducting business in Wisconsin, thereby invoking the benefits and protections of
Wisconsin’s law. Hanson v. Denckla, 357 U.S. 235, 253 (1958). The purposeful availment
requirement ensures that a defendant is not “haled into court” solely as a result of attenuated
contacts, or of the unilateral activity of another party. See Burger King Corp. v. Rudzewicz, 471
U.S. 462, 475 (1985). Although Cyberlink falls within Wisconsin’s long-arm statute, exercising
personal jurisdiction over Cyberlink would not comport with due process requirements.
6
Martin alleges that the court may exercise personal jurisdiction because his claims arise
from the sales and services that Cyberlink solicited in Wisconsin, and that Cyberlink directly
contacted him to solicit him to purchase a software upgrade. However, Martin’s argument falls
short of establishing minimum contacts through purposeful availment for two reasons. First,
Martin did not directly purchase his PowerDVD software from Cyberlink. Rather, he made his
purchase from Newegg, a separate vendor that is not a party to this case and is completely
separate from Cyberlink. Perhaps Newegg has somehow targeted Wisconsin, but Newegg’s sale
of the BD Player to Martin says nothing about whether Cyberlink has purposefully directed
activities toward this forum. Second, Martin’s illustration of Cyberlink’s direct contact is in the
form of a pop-up screen presenting a message that he had to buy a software upgrade to watch
his movie, and providing Internet links to those upgrades.
However, as Cyberlink correctly contends, a pop-up screen that is likely an automatic
function of the PowerDVD software is hardly equivalent to purposeful contact between
Cyberlink and Wisconsin. See Hy Cite Corp., 297 F. Supp. 2d at 1164 (“[D]efendant’s website is
akin to an advertisement in a magazine with a national circulation; the defendant does not
control who views it or responds to it.”). When Martin reached out to Cyberlink with a phone
call about his problem, Cyberlink did not offer him any new information. Martin does not allege
that their conversation changed the nature of his claim or the propriety of exercising personal
jurisdiction over Cyberlink. Therefore, the contacts between Cyberlink and Wisconsin are far
too attenuated to establish this court’s personal jurisdiction over Cyberlink, and Cyberlink will
be dismissed from this action.
B. The economic loss doctrine
Martin alleges that defendants LG, LGUS, and HLDS fraudulently misrepresented that
the BD player was “compatible with all BD/DVD/CD formats.” Dkt. 1, ¶ 147. He claims that
7
the statement is false because his player contained obsolete software and was not “compatible
with all” BDs. Id. ¶ 148. Similarly, Martin alleges that defendants’ statements promising
automatic updates to the software were also false because the updates had been discontinued by
the time he purchased the player. Id. ¶ 150. At its heart, Martin’s claim is really a breach of
warranty claim, but he has pled multiple tort theories, presumably because tort damages would
be more attractive. But Martin’s tort claims are barred by Wisconsin’s version of the economic
loss doctrine.
The economic loss doctrine generally prevents a plaintiff from claiming tort damages for
purely economic losses when the underlying wrongful conduct is a breach of a contract between
the parties. Tietsworth v. Harley-Davidson, Inc., 2004 WI 32, ¶ 24, 270 Wis. 2d 146, 677 N.W.2d
233 (“[T]he economic loss doctrine precludes recovery in tort for economic losses resulting from
the failure of a product to live up to a contracting party’s expectations.”) (citations omitted).
Martin’s core claim appears to be the prototype of one barred by the economic loss doctrine.
The economic loss doctrine precludes recovery for “the diminution in the value of the product
because it is inferior in quality and does not work for the general purposes for which it was
manufactured and sold.” Northridge Co. v. W.R. Grace & Co., 162 Wis. 2d 918, 471 N.W.2d
179, 182 (1991).
But the doctrine has three principle exceptions. First, the “fraudulent inducement”
exception exists when a party suffers loss “extraneous” to the contract. Kaloti Enters., Inc. v.
Kellogg Sales Co., 2005 WI 111, ¶ 42, 283 Wis. 2d 555, 699 N.W.2d 205. Second, the “services”
exception states that if a service is the predominant purpose of a mixed contract encompassing
the sale of goods and services, then the contract is not subject to the economic loss doctrine. See
Linden v. Cascade Stone Co., 2005 WI 113, ¶ 8, 283 Wis. 2d 606, 699 N.W.2d 189. Third, the
economic loss doctrine does not bar any claims for noneconomic loss, such as personal injury or
8
damage to property. See Daanen & Jansen, Inc. v. Cedarapids, Inc., 216 Wis. 2d 395, 573 N.W.2d
842, 845 (1998).
However, because Martin’s claim does not meet any exceptions to the
economic loss doctrine, his tort claims will be dismissed.
1. The fraudulent inducement exception
The fraudulent inducement exception applies in situations where parties to a contract
appear to negotiate freely, but one party’s fraudulent behavior results in the other party’s
inability to negotiate fair terms and make an informed decision. See Van Lare v. Vogt, Inc., 2004
WI 110, ¶ 30, 274 Wis. 2d 631, 683 N.W.2d 46. For the fraudulent inducement exception to
apply, the alleged fraud must not be interwoven with the contract; it must be extraneous to the
agreement. Digicorp, Inc. v. Ameritech Corp., 2003 WI 54, ¶ 3, 262 Wis. 2d 32, 662 N.W.2d 652.
Stated another way, the fraud must concern a risk that does not relate to the quality or
characteristics of the goods for which the parties contracted. Kaloti, 2005 WI 111, at ¶ 42.
In this case, the fraud that Martin alleges—that defendants induced him to purchase
malfunctioning BD players—is wholly interwoven with the warranty offered on the BD player.
That warranty promised a functioning BD player. Martin alleges that promoting the BD Player
and offering the warranty was a fraudulent misrepresentation. Because the alleged
misrepresentation is at the heart of the parties’ contract, and not extraneous to it, the fraudulent
inducement exception does not apply.
2. The services exception
The services exception to the economic loss doctrine requires that the contract be for the
sale of services rather than goods. Schreiber Foods v. Lei Wang, 651 F.3d 678, 683 (7th Cir.
2011). In Wisconsin, the purpose of this exception stems from the inapplicability of the
Uniform Commercial Code (U.C.C.) to contracts for services. See Ins. Co. of N. Am. v. Cease Elec.
Inc., 2004 WI 139, ¶ 29-32, 276 Wis. 2d 361, 688 N.W.2d 462. While the U.C.C.’s built-in
9
warranty provisions provide adequate remedies for breach of contract for the sale of goods, it
does not contain similar provisions for service contracts. Id. ¶¶ 31, 35. Because Martin’s contract
with defendants LGUS, LG, and HLDS was exclusively for the sale of his BD player, rather than
for any services, this exception does not apply.
Throughout his complaint, Martin refers to LGUS, LG, and HLDS as BD player
manufacturers and providers of consumer electronic products. See e.g. Dkt. 1, ¶ 6. Martin’s tort
claims against the remaining defendants do not fit within Wisconsin’s narrow exception because
defendants exclusively provided goods rather than services. 3
3. The noneconomic loss exception
Economic loss is recognized as damage to a product itself or monetary loss caused by a
defective product. Wausau Tile, Inc. v. Cnty. Concrete Corp., 226 Wis. 2d 235, 593 N.W.2d 445,
451 (1999). Therefore, the economic loss doctrine does not bar noneconomic claims of personal
injury or damage to other property. Id. Martin claims that he suffered noneconomic loss in the
form of money spent on a product and associated services that did not work as promised,
including purchasing software upgrades and renting BDs. 4 He also states that he and other
putative class members wasted time and effort in determining the problem with their BD players
and software. Dkt. 1. However, these complaints are economic and do not fall within the
3
Martin contends that Cyberlink was a provider of services to BD player customers in the
United States. See Dkt. 1, ¶ 46. Because Cyberlink will be dismissed for lack of personal
jurisdiction, the court need not decide whether software provider Cyberlink would fall within
the services exception.
4
Martin’s claim that the player damaged his computer lacks particularity. He does not explain
what the damage was, or how any of the remaining defendants caused it. The complaint
mentions only a pop-up screen about a software upgrade, which Martin does not contend
caused any damage. See Dkt. 1, ¶¶ 130 and 131. A conclusory assertion of damage to property is
not enough. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“Threadbare recitals of the elements of
a cause of action, supported by mere conclusory statements, do not suffice.”) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Lastly, Martin’s reference to another consumer’s
trouble uninstalling the software does not support his own claim of computer damage.
10
noneconomic loss exception.
The exception is a narrow one, intended to allow redress for injuries that “presented
unreasonable danger to persons and property.” See Digicorp, Inc., 2003 WI 54, ¶ 41. Martin’s
alleged injuries are not of this type; they are merely consequential economic losses. Spending
money on a BD player that did not work as promised, on software upgrades, and on unwatched
movies unmistakably constitutes economic loss. Martin is simply attempting to recover
“damages for inadequate value, because the product [did] not work for the general purpose for
which it was manufactured or sold.” Northridge Co., 471 N.W.2d at 185. Martin also asserts that
he and other class members wasted time and energy in determining the problem with the BD
player and its software. But this is not a personal injury. Martin has failed to plead a fraudulent
misrepresentation claim that meets any exception to the economic loss doctrine.
Martin’s claim that defendants tortuously interfered with his contract with Newegg is
also barred by the economic loss doctrine, but merits further explanation. The prototypical
tortious interference claim would not necessarily be barred by the economic loss doctrine. For
example, if a competitor solicited another company’s key employee and knowingly induced her
to breach her employment contract, the former employer’s claim would not likely be barred by
the economic loss doctrine because the underlying wrongful conduct is not a breach of the
contract between the competing companies. But here, the underlying wrongful conduct that
Martin alleges is defendants’ breach of warranty. Because Martin is alleging interference based
on conduct that is wholly interwoven with his breach of contract claim, the economic loss
doctrine does apply and bars his claim. See Diamond Ctr., Inc. v. Leslie’s Jewelry Mfg. Corp., 562 F.
Supp. 2d 1009, 1016 (W.D. Wis. 2008). The court will therefore dismiss his claims for tortious
11
interference with contract. 5
C. Unjust enrichment
Defendants LGUS, LG, and HLDS contend that the court must dismiss Martin’s claim
for unjust enrichment because Wisconsin does not recognize a claim in quasi-contract where an
express contract exists. Dkt. 35. Martin acknowledges that point as generally true, but responds
that his claim should survive because: (1) his contract with defendants is not relevant to the
subject matter of his complaint; (2) the contract pleaded in his complaint is between Martin and
Newegg, not the defendants; and (3) he is allowed to plead in the alternative, so dismissing his
claim at this stage would be premature. Dkt. 42. These arguments are unpersuasive and the
court will dismiss Martin’s unjust enrichment claim.
To state a claim for unjust enrichment in Wisconsin, a plaintiff must show that: (1)
plaintiff conferred a benefit on the defendant, (2) the defendant appreciated or knew of the
benefit, and (3) the defendant accepted or retained the benefit under circumstances making
retention of the benefit inequitable without payment. Puttkammer v. Minth, 83 Wis. 2d 686, 266
N.W.2d 361, 363 (1978). However, a plaintiff may bring a claim for unjust enrichment only in
the absence of an enforceable contract. Carroll v. Stryker Corp., 658 F.3d 675, 682 (7th Cir.
2011). Therefore, plaintiffs in Wisconsin cannot recover under the quasi-contractual doctrine of
unjust enrichment if an express contract exists. Id. at 684. Holding a party liable on an unjust
enrichment claim would be inequitable when an express contract exists between the parties.
Here, an express contract undoubtedly exists between Martin and defendants LG, LGUS,
and HLDS. The parties agree that the BD player included a warranty. Dkt. 1 and Dkt. 35. But
5
Defendants offer additional persuasive arguments for why Martin fails to state a claim for
tortious interference with contract. The court need not decide these issues in light of its decision
on the economic loss doctrine.
12
Martin argues that the warranty does not cover the same subject matter as his claim because it
does not specifically address software compatibility issues or future software upgrades. However,
Martin’s complaint recognizes that the warranty covers precisely the basis for his claim: the BD
player’s ultimate functionality. Dkt. 1, ¶ 152 (alleging that the warranty failed to disclose that
the BD player was not “fully functional” absent software upgrades). That is the pertinent subject
matter. Because an express contract existed between the parties, and because the contract
covered the same subject matter of the claim at issue, defendants’ motion to dismiss will be
granted with respect to Martin’s unjust enrichment claim.
Martin’s claim that his contract is with Newegg, and not with the defendants, also fails.
The BD player warranty is an express contract between Martin and the defendants. See Ball v.
Sony Elecs. Inc., No. 05-cv-307, 2005 WL 2406145, at *5 (W.D. Wis. Sept. 28, 2005).
(explaining that even when the manufacturer of a product is not a party to a sales contract for
the manufacturer’s product, a contract arises between the ultimate purchaser and the
manufacturer providing the warranty). Finally, Martin’s argument that dismissal is premature
because he is permitted to plead in the alternative is similarly unavailing. Martin is correct that
he may plead alternative theories of relief, but Martin’s allegations of fact do not fit his
alternative theory of equitable relief. He concedes that he has a warranty. Dkt. 1, ¶ 37. A
warranty is an express contract. Therefore, his unjust enrichment claim will be dismissed.
D. WDTPA
Martin alleges that defendants LG and LGUS violated WDTPA, Wis. Stat. § 100.18, by
making untrue, deceptive, or misleading representations regarding the functionality of the BD
player. Dkt. 1, ¶¶ 174-186. Defendants LG and LGUS respond that Martin’s claims are not
13
alleged with sufficient particularity, although they do not directly attack the applicability of
WDTPA to Martin’s case. 6 See Dkt. 34, Dkt. 35, Dkt. 68, and Dkt. 69.
To state a WDTPA claim, Martin must allege that: (1) LG and LGUS made a
representation to the public with the intent to induce an obligation; (2) the representation was
untrue; and (3) it caused Martin a pecuniary loss. K&S Tool & Die Corp. v. Perfection Mach. Sales,
Inc., 2007 WI 70, ¶ 19, 301 Wis. 2d 109, 732 N.W.2d 792 (quoting Wis. Stat. § 100.18).
Martin alleges that LG and LGUS advertised on the packaging of the BD player that it was
“compatible with all BD/DVD/CD formats.” Dkt. 1, ¶ 179. He maintains that the statement
was intended to induce him and others to buy the BD player. But because the BD player was
not in fact compatible with all BDs unless its software was updated, Martin argues that the
statement was not true. Martin claims that he suffered a pecuniary loss in the diminution of the
player’s value and the money he spent on BDs that he was not able to watch. Because he has
alleged each of the criteria listed above with sufficient particularity, Martin’s complaint
sufficiently states a plausible claim. LG’s and LGUS’s motion to dismiss will therefore be denied
with respect to this claim.
E. Civil conspiracy
Martin alleges that defendants civilly conspired to establish and maintain a “system in
which BD players’ device key sets periodically expire, requiring new software to play any BD
programmed to recognize that expiration.” Dkt. 1, ¶ 65. He argues that their planned
obsolescence scheme was a concerted action to “violate or disregard the law, including by
intentionally interfering with contracts” and “intentionally and fraudulently misrepresenting the
6
WDTPA claims are not subject to the economic loss doctrine. Kailin v. Armstrong, 2002 WI
App 70, ¶ 43, 252 Wis. 2d 676, 643 N.W.2d 132, (finding that the economic loss doctrine does
not apply to WDTPA claims); see also Dow v. Poltzer, 364 F. Supp. 2d 931, 938 (E.D. Wis. 2005)
(denying dismissal of a WDTPA claim based on the economic loss doctrine).
14
functionality of the BD players, violating the Wisconsin Deceptive Trade Practices Act, and
unjustly enriching themselves.” Id. ¶ 205. Of the alleged concerted actions, only his WDTPA
claim against LG and LGUS will survive the motions to dismiss. Thus, the issue is whether
Martin’s complaint adequately alleges a civil conspiracy to violate WDTPA.
“To state a cause of action for civil conspiracy, the complaint must allege: (1) [t]he
formation and operation of the conspiracy; (2) the wrongful act or acts done pursuant thereto;
and (3) the damage resulting from such act or acts.” Thomas ex rel. Gramling v. Mallett, 2005 WI
129, ¶ 168, 285 Wis. 2d 236, 701 N.W.2d 523 (quotations omitted). A civil conspiracy claim
cannot stand alone; it must be predicated on an underlying wrongful act. Maleki v. Fine-Lando
Clinic Chartered, S.C., 162 Wis. 2d 73, 469 N.W.2d 629, 637 (1991) (“[F]or a cause of action
for conspiracy to lie, there must be an underlying conduct which would in itself be actionable.”).
Regardless of whether Martin could theoretically base a civil conspiracy claim on a WDTPA
claim, he has not yet done so in this case. The parties that he alleges violated WDTPA are LG
and LGUS, a parent company and its wholly owned subsidiary. Where a parent company and
its subsidiary have a complete unity of interests and the parent exercises complete control over
the subsidiary, they cannot conspire together. Brew City Redevelopment Grp., LLC v. Ferchill Grp.,
2006 WI 128, ¶ 46-49, 297 Wis. 2d 606, 724 N.W.2d 879. Martin does not differentiate LG
and LGUS in his complaint. He does not suggest that they had different objectives in the
conspiracy or give any reason to avoid the conclusion that he is alleging an intra-corporate
conspiracy. But because Martin has not yet had the benefit of discovery to determine whether
LG and LGUS did in fact have unity of interests and whether LG did in fact control LGUS
completely, dismissal of this claim is premature. It is plausible that defendants could have
conspired and so their motion to dismiss this claim will be denied.
15
CLASS CERTIFICATION
Martin initiated this case as a class action. Dkt. 3. He offers four proposed classes: (1) a
Wisconsin Class; (2) a Wisconsin Super Multi Blue Class; (3) a National Class; and (4) a
National Super Multi Blue Class. The parties dispute whether the court should consider
Martin’s standing to represent his proposed classes before or after it considers certifying them.
When determining class certification and standing, the “logically antecedent” issue should be
considered first. Compare Ortiz v. Fibreboard Corp., 527 U.S. 815, 831 (1999), with Arreola v.
Godinez, 546 F.3d 788, 794 (7th Cir. 2008).
In this case, Martin’s standing issue is “logically antecedent” to certification. If Martin
lacks standing to represent a purported class, then there is no need to certify it. The standing
inquiry “focuses on whether the plaintiff is the proper party to bring this suit.” Raines v. Byrd,
521 U.S. 811, 818 (1997). For Martin to have standing, he must demonstrate: (1) an injury in
fact; (2) a causal connection between the injury and the conduct complained of; and (3) a
likelihood that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife,
504 U.S. 555, 560-61 (1992). Martin must also be a part of the class he seeks to represent: he
must possess the same interest and suffer the same injury as the class. E. Tex. Motor Freight Sys. v.
Rodriguez, 431 U.S. 395, 403 (1977); In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1015 (7th
Cir. 2002) (“No class action is proper unless all litigants are governed by the same legal rules.”).
Martin lacks standing to assert claims on behalf of two of his four proposed classes. He
cannot assert claims under laws of states where he does not reside and has suffered no injury. See
In re Dairy Farmers of Am., Inc. Cheese Antitrust Litig., No. 09-cv-3690, 2013 WL 4506000, at *8
(N.D. Ill. Aug. 23, 2013). Conversely, he cannot assert claims under Wisconsin law on behalf of
other class members who have no connection to Wisconsin. Therefore, Martin lacks standing to
represent a national class and the court will decline to certify either his proposed National Class
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or National Super Multi Blue Class. The question remains whether Martin has standing to
represent his proposed Wisconsin classes. When considering both the proposed Wisconsin Class
and Wisconsin Super Multi Blue Class, Martin’s standing issues described above do not apply.
Martin resides in Wisconsin, which is where he was injured, and his claims arise under
Wisconsin law. He therefore has standing to represent a class of similarly situated
Wisconsinites.
Whether to certify such a class is a different question. Rule 23(c)(1)(A) permits district
courts to wait until “an early practicable time” before ruling on a motion to certify a class.
Martin filed his motion for class certification early in this case. Dkt. 3. Although by doing so he
protected the putative class from attempts to buy him off as a named plaintiff, the timing did
not afford defendants the opportunity to oppose the motion. Nor has Martin had the
opportunity yet to conduct discovery from defendants. Damasco v. Clearwire Corp., 662 F.3d 891,
897 (7th Cir. 2011) (“[A] court may abuse its discretion by not allowing for appropriate
discovery before deciding whether to certify a class.”). The court “must engage in a ‘rigorous
analysis’—sometimes probing behind the pleadings—before ruling on certification.” Id. at 89697 (citing Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). Because this motion is
premature without discovery, and because parties have not yet briefed the question of class
certification for these narrowed claims, the court will dismiss Martin’s motion to certify a class
without prejudice. Martin may renew his motion to certify a state-wide class within a deadline
to be set at the next scheduling conference.
CONCLUSION
To summarize, the Cyberlink defendants’ motion to dismiss is granted because this court
lacks personal jurisdiction over the Cyberlink parties. The economic loss doctrine bars Martin’s
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claims for tortious interference with contract and fraudulent misrepresentation; therefore, both
claims are dismissed. His unjust enrichment claim must be dismissed because an express
contract exists between Martin and defendants LG, LGUS, and HLDS. But Martin has
sufficiently stated a claim under the WDTPA against defendants LG and LGUS. Finally,
although Martin’s only surviving claim is a WDTPA against a parent company and its wholly
owned subsidiary, the court will not dismiss his claim for civil conspiracy against LG and LGUS
because, without additional information, it is plausible that they could have conspired. Martin
may not proceed on behalf of his proposed National Class or National Super Multi Blue Class,
but he may renew his motion to certify the Wisconsin classes at a later date.
ORDER
IT IS ORDERED that:
1. Defendants Cyberlink Corp. and Cyberlink.com Corp.’s motion to dismiss, Dkt. 22,
is GRANTED. These defendants are dismissed from this case.
2. Martin’s motion for leave to file a declaration in support of personal jurisdiction over
Cyberlink, Dkt. 44, is DENIED.
3. Defendant LG Electronics USA, Inc.’s motion to dismiss, Dkt. 34, is GRANTED in
part and DENIED in part. Plaintiff Martin will be permitted to proceed on his
WDTPA and civil conspiracy claims against LGUS, but not on his tortious
interference with contract, fraudulent misrepresentation, or unjust enrichment
claims.
4. Defendants LG Electronics, Inc. and Hitachi-LG Data Storage, Inc.’s motion to
dismiss, Dkt. 68, is GRANTED in part and DENIED in part. Martin will be
permitted to proceed on his WDTPA and civil conspiracy claims against LG, but not
on his tortious interference with contract, fraudulent misrepresentation, and unjust
enrichment claims against LG. HLDS is dismissed from this case.
5. Martin’s motion for class certification, Dkt. 3, is DENIED without prejudice.
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6. The court will hold a follow-up telephonic scheduling conference on April 8 at 2 p.m.
before Magistrate Judge Stephen L. Crocker to calendar the remainder of the case
leading to trial. Plaintiff is responsible for setting up the call to chambers at (608)
264-5153.
Entered March 31, 2015.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge
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