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Chaim Kowalsky, On Behalf of Himself and All Others Similarly Situated v. Hewlett-Packard Company and Does 1 Through 100

August 10, 2011

CHAIM KOWALSKY, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED,
PLAINTIFF,
v.
HEWLETT-PACKARD COMPANY AND DOES 1 THROUGH 100, INCLUSIVE,
DEFENDANTS.



The opinion of the court was delivered by: Lucy H. Koh United States District Judge

ORDER DENYING MOTION TO DISMISS

Now before the Court is Defendant Hewlett-Packard Company‟s ("HP") motion to dismiss Plaintiff Chaim Kowalsky‟s second amended complaint for failure to state a claim, pursuant to 19 Federal Rules of Civil Procedure 12(b)(6) and 9(b). Dkt. No. 53 ("HP‟s Mot."). After considering 20 HP‟s motion to dismiss, Plaintiff‟s opposition, Dkt. No. 54 ("Opp‟n"), and HP‟s reply, Dkt. No. 55 21 ("Reply"), the Court finds this matter suitable for decision without oral argument. See Civil Local 22 Rule 7-1(b). Accordingly, the hearing on HP‟s motion to dismiss, set for August 11, 2011, is 23 hereby VACATED. The August, 11, 2011 Case Management Conference will remain as set for 24 1:30 p.m. For the reasons stated below, HP‟s motion to dismiss is DENIED.

I. Background

This class action lawsuit arises out of the marketing and sale of allegedly defective HP Office Jet Pro All-in-One printers of the 8500 series ("8500 Printer"). Plaintiff alleges that HP 28 marketed the 8500 Printer as an all-in-one fax, copier, and scanner, Dkt. No. 52, Second Amended Complaint ("SAC") ¶¶ 2-3, and represented that the 8500 Printer was capable of scanning and 2 copying documents fed through its 50-sheet automatic document feeder ("ADF") at speeds of 34-3 35 pages per minute. SAC ¶¶ 4, 28. Plaintiff alleges that, contrary to these representations, the 8500 Printer has a defect that causes the printer to randomly skip pages when copying, scanning, 5 and faxing, and that this defect renders the 50-sheet ADF useable for only two to three sheets at a 6 time. Id. at ¶ 4. 7

Based on these allegations, among others, Plaintiff‟s first amended complaint ("FAC") asserted five causes of action under California law: (1) unlawful, unfair, and deceptive business 9 practices in violation of the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 10 17200 et seq.; (2) untrue and misleading advertising in violation of the California False Advertising 11 Law ("FAL"), Cal. Bus. & Prof. Code § 17500 et seq. ; (3) violations of the Consumers Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1750, et seq.; (4) breach of express warranty; and (5) 13 breach of implied warranty of merchantability. This Court has jurisdiction over these claims 14 pursuant to the removal provisions of the Class Action Fairness Act. 28 U.S.C. §§ 1332(d), 1453 15 (2006).

On December 13, 2010, the Court issued an order granting in part and denying in part HP‟s 17 motion to dismiss the FAC. Dkt. No. 35. The Court dismissed the warranty and FAL claims. But, 18 relying in part on statements by California courts that the UCL imposes strict liability, the Court 19 found that Plaintiff could state a claim for affirmative misrepresentations under the UCL and 20 CLRA without necessarily establishing HP‟s prior knowledge of the defect. See id. at 11-13. 21 HP subsequently sought leave to move for reconsideration of the portion of the Court‟s 22 order denying its motion to dismiss Plaintiff‟s UCL and CLRA claims based on pre-existing and 23 new authority that was not previously brought to the Court‟s attention. Mot. for Leave to Seek 24 Recons., Dkt. No. 38. On April 15, 2011, the Court exercised its discretion under Federal Rule of Civil Procedure 54(b) to revise its prior order. Order Granting Mot. for Recons., Dkt. No. 48. The Court granted HP‟s motion for reconsideration because the Court determined that prior federal 27 district court cases required Plaintiff to plead HP‟s prior knowledge, or reason to know, of the 28 defect. Id. 4-9. The Court found that Plaintiff had failed sufficiently to allege facts raising a plausible inference that HP knew, or by the exercise of reasonable care should have known, of the 2 alleged defect in the 8500 Printer. Id. at 7, 9. The Court granted Plaintiff leave to amend, 3 however, on the basis that "Plaintiff may be able to allege additional facts raising a plausible 4 inference that HP knew, or by the exercise of reasonable care should have known, of the defect."

Id. 6

Plaintiff filed the SAC on May 16, 2011, keeping the UCL and CLRA claims but dropping the FAL and warranty claims. Dkt. No. 52. The SAC contains additional factual allegations, not 8 included in the FAC, to support Plaintiff‟s general claim that HP knew of the alleged defect. SAC 9 ¶¶ 28, 69-71. Specifically, Plaintiff alleges that HP‟s claims regarding the "core functions" of the 10 8500 Printer "could only be verified as accurate through testing of the Printer." SAC ¶ 69(a). "By 11 making these claims, HP indicated that it either performed these tests or was negligent in making claims which lacked any reasonable basis." SAC ¶ 69(b). In addition, Plaintiff alleges that HP 13 makes claims in its advertising and on its website that it tests its printers "using the recognized 14 ISO/IEC 24734 and 24735 standards." SAC ¶ 69(d). "Under the 24735 standard, multiple tests are 15 conducted using repeated scanning of a multi-page document through the printer‟s ADF. Multiple tests are conducted to confirm these speed claims." Id. Moreover, Plaintiff alleges that consumers 17 began complaining of "a recurring page-skipping problem" as early as April 2009, SAC ¶ 69(f), 18 months before Plaintiff bought his 8500 Printer in July 2009. SAC ¶ 30.

II. Legal Standard

A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In turn, for a 22 complaint to state a claim for relief under Rule 8(a), it must contain "a short and plain statement of 23 the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). The complaint may 24 "set out 2 or more statements of a claim . . . alternatively or hypothetically . . . ." Fed. R. Civ. P. 25 8(d). In considering whether the complaint is sufficient to state a claim, the Court must accept as 26 true all of the factual allegations contained in the complaint. Ashcroft v. Iqbal, 129 S.Ct. 1937, 27 1949 (2009). However, the Court need not accept as true "allegations that contradict matters 28 properly subject to judicial notice or by exhibit" or "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." St. Clare v. Gilead Scis., Inc., 536 2 F.3d 1049, 1055 (9th Cir. 2008). While a complaint need not allege detailed factual allegations, it 3 "must contain sufficient factual matter, accepted as true, to ""state a claim to relief that is plausible 4 on its face.‟" Iqbal, 129 S.Ct. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 5 (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference 6 that the defendant is liable for the misconduct alleged." Id. at 1949. 7

Additionally, claims sounding in fraud are subject to the heightened pleading requirements 8 of Federal Rule of Civil Procedure 9(b). A plaintiff alleging fraud "must state with particularity 9 the circumstances constituting fraud." Fed. R. Civ. P. 9(b). To satisfy this standard, the allegations 10 must be "specific enough to give defendants notice of the particular misconduct which is alleged to 11 constitute the fraud charged so that they can defend against the charge and not just deny that they 12 have done anything wrong." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Thus, claims 13 sounding in fraud must allege "an account of the time, place, and specific content of the false 14 representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). In contrast, the heightened pleading requirement of Rule 9(b) does not apply to allegations regarding a defendant‟s state of mind. Thus, knowledge and 17 intent need only be alleged generally to state a valid claim for fraud. Fed. R. Civ. P. 9(b) ("Malice, 18 intent, knowledge, and other conditions of a person‟s mind may be alleged generally."); Swingless 19 Golf Club Corp. v. Taylor, 679 F. Supp. 2d 1060, 1067 (N.D. Cal. 2009).

III. Discussion

A. Rule 9(b) Pleading Requirement

As an initial matter, the parties are still in dispute as to which elements of the UCL and CLRA claims are subject to the heightened pleading requirements of Rule 9(b). Quoting Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009), HP argues that "the pleading . . . as a whole 25 must satisfy the particularity requirement of Rule 9(b)," including allegations of HP‟s state of 26 mind. HP‟s Mot. 6 (emphasis added by HP). Plaintiff argues that Rule 9(b) does not apply at all to 27 the allegations of the SAC because the SAC no longer alleges the former FAL and warranty 28 claims, and the SAC has disclaimed any allegations of actual fraud. Opp‟n 3. Plaintiff also argues, in the alternative, that Rule 9(b) does not apply to allegations regarding HP‟s state of mind. Id. at 4. While the Court has already settled these issues in its prior orders, see Dkt. Nos. 38 and 48, the 3 reasons are set forth below for the parties‟ convenience.

HP is correct that Rule 9(b) does apply to the UCL and CLRA claims set forth in the SAC.

The Court rejects Plaintiff‟s argument that the SAC no longer sounds in fraud because it dropped 6 the FAL and warranty claims. Fraud may be alleged explicitly or "by alleging facts that 7 necessarily constitute fraud (even if the word "fraud‟ is not used)." Vess v. Ciba-Geigy Corp. USA, 8 317 F.3d 1097, 1105 (9th Cir. 2003). Plaintiff‟s remaining UCL and CLRA claims are premised 9 on allegations that HP knew, or should have known, of an inherent design defect in the 8500 10 Printer and falsely advertised the product, thereby inducing Plaintiff and thousands of putative class members to purchase a defective product. Plaintiff‟s allegations therefore describe a unified course of fraudulent conduct, and the claims based on this conduct are subject to the ...


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