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Marcus v. Apple Inc.

United States District Court, N.D. California

January 8, 2015

URIEL MARCUS and BENEDICT VERCELES, on behalf of others similarly situated, Plaintiffs,
v.
APPLE INC., Defendant.

ORDER GRANTING MOTION TO DISMISS

WILLIAM ALSUP, District Judge.

INTRODUCTION

In this putative product-defect class action, defendant moves to dismiss under FRCP 12(b)(6). For the following reasons, defendant's motion is GRANTED.

STATEMENT

In May 2014, plaintiffs Uriel Marcus and Benedict Verceles filed this putative class action complaint against defendant Apple Inc. in the Southern District of Texas on behalf of all persons who purchased certain Apple MacBook laptop computers in the United States between May 20, 2010 and the present. In July 2014, Apple filed a motion to dismiss and a motion to change venue to the Northern District of California. Apple's motion to change venue was unopposed, and the action was transferred to this district. Apple then re-noticed and re-filed its motion to dismiss (Dkt. Nos. 7-8, 20-21, 25-26, 30).

The complaint contains the following factual allegations. Apple allegedly sold MacBook laptop computers containing defective "logic boards" that routinely failed within two years of purchase. Failure of the component logic board, which houses the computer's "integrated circuits and processors, " rendered the computer useless. The complaint alleges that the logic board defect was the result of negligent design, production, and testing, that Apple was aware of the defect for over six years, failed to notify consumers, and that Apple continues to market and sell the defective logic boards.

Plaintiffs further allege that in 2011, Apple CEO Tim Cook was told of the defective logic boards but did not act, and that Apple subsequently "willfully and intentionally" concealed knowledge of the defect (Compl. ¶ 3). The complaint also alleges that Apple was aware of the defective logic boards by virtue of complaints within "customer reviews" posted to the Apple Online Store. The complaint excerpts 27 of these reviews. Nevertheless, Apple continues to sell them.

Plaintiffs aver that Apple "markets the reliability and functionality of the logic board" for its MacBook computers. The complaint puts forth four alleged representations made by Apple regarding the laptop computers (Compl. ¶¶ 2, 17, 18, 19):

Regarding the Macbook Pro series laptop computers, Apple makes the following representations: "State of the Art, Breakthrough, Easy Access to Connections and Ports."
Regarding the MacBook series laptop computers, Apple makes the following representations: "The new MacBook is faster, has even more memory and storage, and is an ideal notebook for customers' growing library of digital music, photos and movies."
Apple also boasts that its MacBook Pro is its "state of the art" flagship portable designed "for mobile professionals" and "life on the road."
The MacBook Pro and Macbook were represented as being, "The world's most advanced notebook."

The complaint avers that contrary to Apple's advertisements, the logic board "is not durable' or designed to withstand the rigors of life on the go' but rather is defective, and tends to fail when used as intended" (Compl. ¶ 20).

Named plaintiff Uriel Marcus, a California resident, allegedly purchased a new Apple MacBook Pro computer containing a defective logic board in May 2012 that failed approximately 18 months later. Apple diagnosed the problem as a logic board failure, and declined to repair Mr. Marcus' computer or offer a refund, allegedly stating: "You should have bought the warranty" (Compl. ¶ 11).

Named plaintiff Benedict Verceles, a Texas resident, allegedly purchased a MacBook Pro in July 2011 that suffered a logic board failure less than one month later. Apple repaired the logic board under the computer's warranty for free. The replacement logic board then allegedly failed less than two years later. Apple informed Mr. Verceles "that the replacement logic board was defective" and Apple declined to pay for its repair (Compl. ¶ 12).

The complaint puts forth the following ten claims for relief: (1) violations of California's Unfair Competition Law, Cal. Bus. & Prof. Code 17200; (2) violations of California's Consumers Legal Remedies Act ("CLRA"), Cal. Civ. Code 1750 et seq.; (3) violations of the Texas Deceptive Trade Practices Act ("DTPA"); (4) fraud under Texas common law; (5) breach of implied warranty of fitness for a particular purpose; (6) breach of implied warranty of merchantability; (7) violations of the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. 2310(d)(1); (8) violations of the Song-Beverly Consumer Warranty Act, Cal. Civ. Code 1791 et seq.; (9) money had and received; and (10) unjust enrichment.

ANALYSIS

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). While a court "must take all of the factual allegations in the complaint as true, " it is "not bound to accept as true a legal conclusion couched as a factual allegation." Id. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This "plausibility standard" is not a probability requirement. Ibid. Still, "it asks more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.'" Ibid. (quoting Twombly, 500 U.S. at 557) (internal quotation marks omitted).

As an initial matter, this order addresses Apple's reference to Deburro v. Apple Inc., No. A-13-CA-784-SS, 2013 WL 5917665 (W.D. Tex. Oct. 31, 2013) (Judge Sam Sparks). Apple avers that the Deburro action, which was dismissed with prejudice at the pleading stage in the Western District of Texas, and was also brought by plaintiffs' counsel Omar W. Rosales, was factually similar to the instant action, and included many of the same claims for relief. Plaintiffs, however, contend that the instant action is dissimilar because Deburro "involved defective USB ports, " instead of defective logic boards (Opp. 12). A review of the Deburro decision reveals that the case also involved faulty logic boards and that plaintiffs similarly alleged that "Apple's defective logic boards result[ed] in USB ports not functioning, or in the laptop itself being rendered unusable" and claimed "their MacBook Pro laptops were not fit for use because the logic boards failed five years after purchase." Id. at 1, 7. Apple does not allege that the instant action is barred by res judicata, but simply raises the Deburro action as a background fact.

1. REQUEST FOR JUDICIAL NOTICE.

Apple requests judicial notice be taken of two documents: (1) Apple's One Year Limited Warranty for its October 4, 2011, to March 27, 2013, MacBook Pro computers (applicable to Mr. Marcus's purchase); and (2) Apple's One Year Limited Warranty for its MacBook Pro computers before October 4, 2011 (applicable to Mr. Verceles's purchase) (Dkt. No. 30-1, 2). Plaintiffs' complaint makes reference to Apple's written warranty and plaintiff has not opposed Apple's request (Compl. ¶¶ 65, 76, 83). This order will therefore consider the documents in the context of Apple's motion. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith v. County of Santa Clara, 3017 F.3d 1119 (9th Cir. 2002). Apple's request for judicial notice is GRANTED.

2. FRAUD-BASED CLAIMS FOR RELIEF.

The complaint alleges that Apple violated provisions of Section 17200 of California's Unfair Competition Law, the CLRA, the Texas DTPA, and committed common law fraud in Texas. Apple avers that the heightened pleading standard of FRCP 9(b) applies to those claims for relief, and that plaintiffs have failed to meet their burden. This order agrees. Plaintiffs do not oppose application of FRCP 9(b) to their fraud-based claims.

FRCP 9(b) states that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Our court of appeals has interpreted FRCP 9(b) to require that a plaintiff state the "who, what, when, where, and how of the misconduct charged" as well as "what is false or misleading about a statement, and why it is false." Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (citations and quotation marks omitted).

Claims brought under Section 17200 or the CLRA are subject to the heightened pleading standards of FRCP 9(b) if the claims are "grounded in fraud, " meaning that the claims rely on a unified course of fraudulent conduct. Kearns v. Ford Motor Company, 567 F.3d 1120, 1125 (9th Cir. 2009). Plaintiffs here allege a fraudulent course of conduct, stating that Apple was aware of the defective logic boards, misrepresented its products' qualities, failed to disclose the defect to consumers, continued to market and sell computers containing defective logic boards, and concealed knowledge of the defect. Plaintiffs also specifically allege common law fraud (Compl. ¶¶ 3, 94-98). FRCP 9(b) therefore applies to plaintiffs' claims under Section 17200 and the CLRA. Plaintiffs' Texas common law fraud claims are additionally subject to FRCP 9(b). Flaherty & Crumrine Preferred Income Fund, Inc. v. TXU Corp., 565 F.3d 200, 213 (5th ...


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