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Swearingen v. Haas Automation

November 12, 2009

MARK SWEARINGEN DBA SEMCO CASE MANUFACTURING, INDIVIDUALLY AND AS A REPRESENTATIVE OF OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
HAAS AUTOMATION, INC., CNG ASSOCIATES, INC., MACHINING TIME SAVERS, INC., HAI CAPITAL, INC., AND DOES 1 THROUGH 20, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER GRANTING MOTION TO DISMISS SECOND AMENDED COMPLAINT

Defendants have filed a motion to dismiss Plaintiff's Second Amended Complaint ("SAC") for failure to state a claim. For the reasons discussed below, Defendants' motion is GRANTED.

I. BACKGROUND

The following facts are taken from the SAC. The Court makes no finding as to the truthfulness of the allegations.

Haas Automation, Inc. ("Haas") manufactures machine tools which consist of four major product lines: vertical machining centers (VMCs), horizontal machining centers (HMCs), CNC lathes and rotary tables. (SAC ¶ 12.) These machines sell for over $30,000 up to hundreds of thousands of dollars. (Id.)

Haas advises potential customers to purchase Haas machines from Haas Factory Outlets around the United States, including the Haas Factory Outlet located in Anaheim, California, which is a division of defendant Machining Time Savers, Inc. ("MTS"). (SAC ¶ 13). Haas recommends that potential customers finance their purchase through various entities, including defendants HAI Capital ("HAI") and CNC Associates, Inc ("CNC"). (SAC ¶ 14.) Plaintiff alleges that HAI and CNC are "captive leasing companies of Haas" that facilitate purchasing and leasing arrangements between Haas and potential Haas customers. (Id.)

All Haas machines are manufactured to trigger a "lock out" alarm (displayed as an error code of "144") after 800 hours of logged use. (SAC ¶ 16.) If a Haas distributor does not provide the machine operator with an access code within the defined time period, the machine shuts down and will not operate. (Id.) Only if a customer is completely up to date on all payments and in compliance with all terms in the agreement(s) will Haas allow its distributors to provide the customer with an access code that will permit another 800 hours of use. (Id.) If a customer is not up to date on payments or not in compliance with applicable terms, the Haas distributor will not provide an access code. (Id.) The only way a customer can, at the outset, obtain a permanent access code which will permanently "unlock" the machine is if the customer has purchased the machine outright and paid for it in full. (Id.)

Plaintiff purchased his first Haas machine from MTS in 1998. The manual for this machine provided:

This machine is equipped with an electronically-recorded serial number that cannot be altered. This is done in case of theft and to track machines when sold to other owners. After approximately 800 hours of use, the machine will automatically shut down if it has not been unlocked by Haas Automation. To unlock the machine, we must have the above registration with the serial number and the authorization from your dealer. You will receive a number that you will write in over the serial number on setting page (# 26). The authorization from the dealer will come upon final acceptance of the machine. If, for any reason, the serial number of the machine is erased in memory, the machine will revert back to 200 hour limit for your protection.

(SAC ¶ 8.) Plaintiff believed that the 800 hour lock-out mechanism was for his own protection and benefit. (Id.) When Plaintiff got the error message on this first machine, Plaintiff called MTS and received the code that unlocked the machine for another 800 hours. (Id.) Plaintiff called MTS eight or nine more times to obtain access codes. (Id.) At no time was he advised that Defendants were using the code as a means of ensuring collections. (Id.) Plaintiff believes that before MTS provided him with the code, MTS checked with HAI and CNC to obtain their consent to give Plaintiff the code. (Id.)

In 2000, Plaintiff bought a second Haas machine. (SAC ¶ 9.) Again, Plaintiff continued to get the 800 hour error code but was always provided with the access code and was never told that the code was being used for collection purposes. (Id.)

In 2007, Plaintiff bought a third Haas machine from MTS. (FAC ¶ 10.) He financed the machine through CNC. (Id.) In April 2009, Plaintiff fell behind in his payments. (Id.) He was advised for the first time that if he did not bring his account current, he would "be denied further requests for a time code for the Haas equipment." (Id.) This was the first time Plaintiff had been told that the "protection" code was not to protect him, but, rather, to protect Haas and its finance arms. (Id.) Plaintiff was able to bring his account current, however, "during this time, his machine was shut down twice over the weekend, causing production to stop until Monday and causing delay in satisfying contracts." (Id.)

Plaintiff brings this action of behalf of himself and a purported class of similarly situated individuals consisting of: "All business operators/entities who purchased a Haas product equipped with a collections lock out code without prior disclosure of and consent to the existence of that lock out code within the past four years." (SAC ¶ 19.)

Plaintiff's SAC asserts the following claims against Defendants: (1) violation of the Comprehensive Computer Data Access and Fraud Act, Cal. Penal Code ยง 502; and (2) violation of California's Unfair ...


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