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Rutledge v. Hewlett-Packard Co.

California Court of Appeals, Sixth District

July 22, 2015

ED RUTLEDGE et al., Plaintiffs and Appellants,
HEWLETT-PACKARD COMPANY, Defendant and Respondent BIZCOM ELECTRONICS, INC., Objector and Respondent.

Superior Court Santa Clara County No.: CV817837 The Honorable James P. Kleinberg Judge

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Green & Noblin Robert S. Green Bramson, Plutzik, Mahler & Birkhaeuser Jenelle Welling Kershaw, Cutter & Ratinoff and C. Brooks Cutter for Plaintiffs and Appellants.

Drinker Biddle & Reath Michael J. Stortz Beth O’Neal Arnese Bergeson Daniel J. Bergeson and John W. Fowler for Defendant and Respondent.

No appearance for Objector and Respondent.



This case is a class action brought by purchasers of notebook computers that were manufactured by Hewlett-Packard Company (HP). Appellants are I Braun Degenshein (Degenshein), and Susanna Giuliano-Ghahramani (Giuliano-Ghahramani), both of whom are representative plaintiffs of a class of California residents who purchased certain HP notebook computers.

The basis of appellants’ consumer action against HP is that certain notebook computers manufactured by HP contained inverters that HP knew would likely fail and cause display screens to dim and darken at some point before the end of the notebook’s useful life.

Appellants alleged claims against HP for violation of the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.), violation of the Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.), unjust enrichment and breach of express warranty.

After years of litigation, the trial court ultimately made a “no merits” determination as to the CLRA claim, and granted HP’s motion for summary judgment as to appellants’ remaining claims.

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On appeal, appellants challenge seven trial court orders: two summary adjudication orders related to two different class representatives and the class itself, two class certification orders related to denial of a nationwide class and the denial of certification of the CLRA claim, and three discovery sanctions orders.[1]

Summary Adjudication

“‘The purpose of the law of summary judgment [or summary adjudication] is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.’ [Citation.] As such, the summary judgment statute (Code Civ. Proc., § 437c), ‘provides a particularly suitable means to test the sufficiency of the plaintiff’s prima facie case and/or of the defendant’s [defense].’ [Citation.]” (Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th 1076, 1091 [29 Cal.Rptr.3d 499] (Valley).)

The moving party “bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 [107 Cal.Rptr.2d 841, 24 P.3d 493], fn. omitted (Aguilar).)

A cause of action has no merit under Code of Civil Procedure section 437c, subdivision (o), “if either of the following exists: [¶] (1) One or more of the elements of the cause of action cannot be separately established, even if that element is separately pleaded[, or] [¶] (2) [a] defendant establishes an affirmative defense to that cause of action.” (See Aguilar, supra, 25 Cal.4th at p. 853.) The party moving for summary judgment “bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact." (Aguilar, supra, 25 Cal.4th at p. 850; see Code Civ. Proc, § 437c.)

Thus, as here, when a defendant moves for summary judgment, he must make a prima facie showing, i.e., “he must present evidence that would require a reasonable trier of fact not to find any underlying material fact more likely than not-otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.” (Aguilar, supra, 25 Cal.4th at p. 851, fn. & some italics omitted.)

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“The moving party must satisfy his or her initial burden before the opposing party must controvert anything. (§ 437c, subd. (p)(1), (2).) Accordingly, a moving defendant who claims that the plaintiff cannot prove all the elements of his case must present evidence in support of this claim. The defendant cannot simply challenge the plaintiff to prove his case by opposition. (Aguilar, supra, 25 Cal.4th at pp. 854-855.)” (Y.K.A. Industries, Inc. v. Redevelopment Agency of City of San Jose (2009) 174 Cal.App.4th 339, 353 [94 Cal.Rptr.3d 424] (Y.K.A.).) In other words, “a plaintiff resisting a motion for summary judgment bears no burden to establish any element of his or her case unless and until the defendant presents evidence either affirmatively negating that element (proving its absence in fact), or affirmatively showing that the plaintiff does not possess and cannot acquire evidence to prove its existence.” (Reeves v. Safeway Stores, Inc. (2004) 121 Cal.App.4th 95, 107 [16 Cal.Rptr.3d 717].)

The court’s “primary function [in evaluating a summary judgment motion] is to identify issues rather than to determine [them]. [Citation.]... If the evidence is in conflict, the factual issues must be resolved by trial.” (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 839 [89 Cal.Rptr.2d 540].) Thus, should the court determine that triable issues of fact exists, the summary judgment motion must be denied. (Chavez v. Carpenter (2001) 91 Cal.App.4th 1433, 1448 [111 Cal.Rptr.2d 534].) "There is to be no weighing of evidence.” (Kids’ Universe v. In2Labs (2002) 95 Cal.App.4th 870, 880, 116 Cal.Rptr.2d 158.)

Our review of the granting or denial of summary judgment is de novo. (Valley, supra, 129 Cal.App.4th at p. 1092.) In conducting such de novo review, we “consider[] all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.]” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334 [100 Cal.Rptr.2d 352, 8 P.3d 1089].) "This review consists of ‘an independent assessment of the correctness of the trial court’s ruling, [in which we] apply[] the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law.’ [Citation.] We need not defer to the trial court and are not bound by the reasons in its summary judgment ruling; we review the ruling of the trial court, not its rationale. [Citation.]” (Valley, supra, 129 Cal.App.4th at p. 1092.)

Factual Background

Here, appellants challenge two orders of the trial court granting summary adjudication in favor of HP. The first is of Degenshein’s claims in the first

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amended complaint.[2] The second is of Giuliano-Ghahramani’s and the class claims in the second amended complaint.

The first amended complaint was filed on October 14, 2003, and alleged four causes of action against HP: Violation of the CLRA, violation of the UCL, unjust enrichment[3] and breach of express warranty. The first amended complaint included Degenshein as representative plaintiff. Degenshein purchased a Zinfandel 4.0 notebook computer in April 2002 that came with a standard one-year warranty from HP. Degenshein experienced problems with his display screen blacking out shortly before the expiration of his one-year warranty, but did not notify HP of the problem with his notebook until two months after the warranty had expired.

The second amended complaint was filed on February 24, 2010, asserting the same causes of action as the first amended complaint. The second amended complaint adds Giuliano-Ghahramani as representative plaintiff. Giuliano-Ghahramani purchased a Zinfandel 3.5 notebook computer in January 2002, and experienced problems with the display screen in November 2002. Giuliano-Ghahramani submitted the notebook to HP during the warranty and HP replaced the inverter.

In June 2009, the trial court granted HP’s motion for summary adjudication and made a no merits determination as to Degenshein’s claims. HP moved for entry of judgment against Degenshein. The court denied the motion, and instead, allowed Degenshein to amend the complaint to add Giuliano-Ghahramani as plaintiff. On October 7, 2009, the court approved Giuliano-Ghahramani as class representative. Giuliano-Ghahramani filed the second amended complaint in February 2010.

In June 2010, HP filed a motion for summary judgment as to Giuliano-Ghahramani and the class. The trial court granted the motion, and on April 11, 2011, the trial court entered judgment against Degenshein, Giuliano-Ghahramani, and the class as certified by the court.

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CLRA[4] and UCL Claims

“The CLRA proscribes particular ‘unfair methods of competition and unfair or deceptive acts or practices’ in transactions for the sale or lease of goods or services to consumers. (Civ.Code, § 1770, subd. (a))” (Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255 [134 Cal.Rptr.3d 588] (Collins).)

The CLRA “ ‘enacted in 1970, “established a nonexclusive statutory remedy for ‘unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer...." [Citation.]" ' [Citation.] 'The self-declared purposes of the act are “to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.” (Civ. Code, § 1760 . . . .)' " (Wang v. Massey Chevrolet (2002) 97 Cal.App.4th 856, 869 [118 Cal.Rptr.2d 770].) The CLRA “shall be liberally construed.” (Civ. Code, § 1760.)

Appellants allege that HP’s concealment and failure to disclose the defect in the inverters of the notebook computers violated the CLRA’s provision against (1) representing that goods have characteristics which they do not have (Civ. Code, § 1770, subd. (a)(5)); (2) representing that goods are of a particular standard or quality if they are of another (id., subd. (a)(7)); (3) advertising goods with the intent not to sell them as advertised (id., subd. (a)(9)); (4) representing that a transaction confers or involves rights, remedies, or obligations which it does not have or involve (id., subd. (a)(14); and representing that the subject of the transaction has been supplied in accordance with a previous representation when it has not (id., subd. (a)(16).)

With regard to the UCL, appellants allege that HP violated the statute by “concealing and/or omitting the true facts about the defect to [appellants] and Class members.” Additionally, appellants allege that HP’s violation of the CLRA by “omitting the true nature and characteristics of its notebook computers and suppressing the known defects, ” violated the UCL.

The purpose of the UCL is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. It defines “unfair competition” to mean and include “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the false advertising law]. (commencing

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with Section 17500 et seq.).” (Bus. & Prof. Code, § 17200; see Rushing, et al., Matthew Bender Practice Guide: California Unfair Competition and Business Torts (2015) Unfair Competition, §§ 2.03, 2.04 & 2.05.)

“The scope of the UCL is quite broad. [Citations.] Because the statute ([Bus. & Prof. Code, § 17200, defining unfair competition]) is framed in the disjunctive, a business practice need only meet one of the three criteria [unlawful, unfair or fraudulent] to be considered unfair competition. [Citation.] [¶] A cause of action for unfair competition under the UCL may be established ‘ “independent of any contractual relationship between the parties.” ’ ” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471 [49 Cal.Rptr.3d 227].)

Appellants argue the fraudulent concealment claims under the CLRA and the UCL are supported by the fact that HP “conceals the material fact that HP notebook computers have known defects that cause display problems.” Further, appellants assert that HP was obligated to disclose the inverter defect, because it was contrary to HP’s advertising about the notebooks and was material to the proper functioning of the notebook computers.

For a claim of fraudulent omission to be actionable under the CLRA, “the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose.” (Daugherty v. American Honda Motor Co. (2006), 144 Cal.App.4th 824, 835 [51 Cal.Rptr.3d 118] (Daugherty).) Moreover, “[i]n order to be deceived, members of the public must have had an expectation or an assumption about the materials used” in the product. (Bardin v. DaimlerChrysler Corp. (2006), 136 Cal.App.4th 1255, 1275 [39 Cal.Rptr.3d 634] (Bardin).) Appellants argue that because consumers had an expectation that the display screen of their notebooks would function properly for the duration of the notebook’s “useful life, ” HP had a duty to disclose the material fact that the inverters were defective in manufacturing and installation. In particular, appellants assert that consumers expect a notebook computer to be portable, and a properly working display screen is essential to the notebook’s portability.[5]

HP argues manufacturers do not have an independent duty to disclose a product defect absent an unreasonable risk of “physical injury or safety

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(Daugherty, supra, 144 Cal.App.4th at p. 836; see, e.g., Bardin, supra, 136 Cal.App.4th 1255.) HP further notes that here, the risk posed by the alleged defect in the inverters had nothing to do with a physical injury or a safety concern. Rather, the risk to the consumer was the cost to repair the notebook, and as such, it does not rise to a duty to disclose.

Both Daugherty and Bardin do address disclosure of defects related to safety concerns in the context of CLRA and UCL claims. However, neither Daugherty nor Bardin preclude a duty to disclose material information known to a manufacturer and concealed form a consumer. Specifically, in Daugherty, the court noted that while the plaintiff’s complaint alleged that the engine defect presented an “ ‘unreasonable risk’ ” of “ ‘serious potential damages, ’ ” and that the defendant “carried on with a willful and conscious disregard of the safety of Plaintiffs..., ” the complaint was “devoid of factual allegations showing any instance of physical injury or safety concerns posed by the defect.” (Daugherty, supra, 144 Cal.App.4th 824, 836.) The court in Daugherty concluded that the complaint did not state facts sufficient to support its claim that the engine defect posed a safety concern to consumers. (Ibid.)

In Bardin, the plaintiffs alleged that a car manufacturer failed to disclose that tubular steel was used in the exhaust manifolds of certain cars instead of more durable and more expensive cast iron. (Bardin, supra, 136 Cal.App.4th at p. 1260.) The court concluded that in addition to failing to allege any safety concerns associated with the defective exhaust manifolds, the plaintiffs failed to allege any unfair conduct on the part of the auto manufacturer. (Ibid.) The Bardin court did not hold that a defect must be related to a safety concern to be material for purposes of fraudulent omission.

Citing Collins, supra, 202 Cal.App.4th 249, appellants assert that HP had a duty to disclose the defective nature of the inverters, because the defective inverters “obliterate[] the function of a computer as a computer.” In Collins, the defendant sold computers with defective microchips that were “ ‘missing [the] actual physical hardware logic that industry standards require’ ” and the defendant had knowledge of the defective nature of the microchips at the time the computers were sold. (Id. at p. 257). The defective microchips were material, because they corrupted floppy disks, a necessary component in the functioning of computers at the time. The court held that the defendant failed to disclose and actively concealed the fact of this faulty microchip from consumers in violation of the CLRA and the UCL. (202 Cal.App.4th at p. 258.)

The court in Collins distinguished both Daugherty and Bardin in finding that the manufacturer had a duty to disclose a material defect in its product.

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Specifically, the Collins court noted that the defect in the hardware logic of the computer was the result of improper manufacturing, causing the chip to corrupt data on the user’s floppy disk. The defect in Collins was not the result of a breakage of the product over time because of use and wear and tear like the engine oil leak in Daugherty. In addition, unlike the metal composition of the exhaust manifolds in Bardin, the hardware logic in the computers in Collins was material, ...

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