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Carlotti v. Asus Computer International

United States District Court, N.D. California

November 19, 2019




         On May 4, 2018, Plaintiff Joseph Carlotti filed a class action complaint in Alameda County Superior Court against Defendants ASUS Computer International (“ACI”) and ASUSTek Computer Inc. (“ASUSTek”). [Docket No. 1-1 (“Compl.”).] ACI removed the action to this court on June 7, 2018 under the Class Action Fairness Act. [Docket No. 1.] The parties seek preliminary approval of a class action settlement. [Docket No. 59 (“Mot.”).] The court held a hearing on August 22, 2019. Following the hearing, court ordered the parties to submit additional briefing, which they submitted on September 12, 2019 and October 7, 2019. [Docket Nos. 68 (“Supp. Br.”); 68-1 (“Gutride Supp. Decl.”), Ex. A (“Agreement”).]

         For the reasons stated below, the motion for preliminary approval is granted.

         I. BACKGROUND

         A. Facts and Claims

         Carlotti alleges that Defendants manufactured and sold two laptop models that contain defects: the ASUS GL502VS (“VS”) and the ASUS GL502VKS (“VKS”). These models were allegedly advertised as “portable laptops with a powerful graphical processor suited for gaming and video editing.” Compl. ¶ 2. However, according to Carlotti, the laptop models contain two main defects that render them inadequate for these processes. Id. ¶ 1. First, the laptops allegedly have several issues relating to their power supply units, including: (1) the battery drains during use, even when connected to a power outlet; (2) there are “significant reductions in computational performance” when the battery power is low; and (3) there is accelerated degradation of the batteries (“Power Defect”). Id. ¶ 2. Second, Carlotti claims that the laptops' cooling system is insufficient to prevent overheating, leading to reduced durability and performance (“Overheating Issue”). Id. ¶ 6.

         The operative complaint proposes a class of “[a]ll persons in the United States who purchased one or more ASUS GL502VS or GL502VSK laptops.” Compl. ¶ 83. The California Subclass includes “[a]ll members of the Class who made their purchase in California.” Id. On behalf of the putative class and subclass, Carlotti brings numerous claims for relief, including: (1) breach of express warranty; (2) breach of the implied warranty of merchantability; (3) violations of the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301, et seq.; (4) deceit and fraudulent concealment; (5) unjust enrichment; (6) violations of the Consumers Legal Remedies Act, Cal. Civ. Code §§ 1750, et seq.; (7) violations of the False Advertising Law, Cal. Bus. & Prof. Code §§ 17500; (8) violations of the Song-Beverly Consumer Warranty Act, Cal. Civ. Code §§ 1790 et seq.; and (9) violations of the Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq.

         B. Procedural History

         Carlotti represents that the parties “conducted a thorough examination and investigation of the facts and law relating to the matters in the Litigation.” Mot. at 2. Class counsel engaged in pre-litigation investigation and discovery, including researching Defendants' marketing and advertising, reviewing Carlotti's documentation, and analyzing the information available on Defendants' websites. [Docket No. 61 (“Gutride Decl.”) ¶ 4.] Carlotti filed the complaint in Alameda County Superior Court on May 4, 2018. Id. ¶ 2. Defendant ACI removed the case to this district on June 7, 2018. Id. ¶ 5. Carlotti filed a motion for alternative method of service on ASUSTeK, a Taiwanese corporation, which the court granted on February 11, 2019. [Docket Nos. 39, 42.]

         Class counsel represents that they engaged in meet-and-confer efforts with Defendants' counsel throughout the case, including the scope of discovery, the retention and production of electronically stored information, the terms of a protective order, and the timing of production and depositions. Gutride Decl. ¶ 7. Carlotti propounded written discovery, including requests for production of documents and interrogatories. Id. ¶ 8. Defendants produced hundreds of documents, and class counsel retained an electrical engineering expert to assist in reviewing Defendants' production. Docket No. 63 (“Sacks Decl.”) ¶ 14; Gutride Decl. ¶ 9. Defendants deposed Carlotti on November 14, 2018. Gutride Decl. ¶ 10. On March 19, 2019, the parties held a mediation before Martin Quinn, Esq. at JAMS. Id. ¶ 12. The case settled as a result of the mediation, and there has been no briefing or hearing for summary judgment or class certification.

         The court held a hearing on August 22, 2019. Following the hearing, court ordered the parties to submit additional information about the proposed settlement. [Docket No. 65.] The parties submitted supplemental briefing on September 12, 2019 and October 7, 2019.


         The following description of the Agreement includes the changes implemented after the hearing.[1] Under the terms of the Agreement, Defendants will provide an extended warranty (“Extended Warranty”) on all VS laptops to cover certain repairs, which include repairs to or replacement of a motherboard and/or a new AC power adapter (“Qualifying Repairs”). Agreement ¶¶ 2.48, 5.1. The Extended Warranty will last until the latest of (1) three years from the date of purchase; (2) 90 days after final approval of the class action settlement; or (3) 180 days after the date Defendants previously replaced the internal power supply and/or AC power adaptor. Id. ¶ 5.1. The value of the Extended Warranty is estimated at $16, 110, 225.00. Supp. Br. at 9.

         Additionally, all class members are entitled to submit a claim for monetary relief, including those who are eligible for Qualifying Repairs under the Extended Warranty. The amount of the settlement benefits is not limited by the number of claims submitted or any fees or costs in the case, all of which are covered by Defendants. The amount of benefits to which each class member is entitled depends on (1) whether the class member previously complained about one of the defects addressed in this case and (2) the proof of purchase:

Group A includes class members who registered their laptop with Defendants, bought the laptop from the ASUS website, or can submit a proof of purchase. Members of this group who submit a claim have the option to select either a $110 cash payment or a $210 credit certificate, which is freely transferable, stackable, and is valid for at least two years. Agreement ¶ 6.1(a).
Group B includes class members who previously complained to Defendants about the defects. Members of this group will automatically receive a $210 credit certificate without filing a claim. Members can elect to file a claim instead and receive a $110 cash payment. Id. ¶ 6.1(b). The parties represent that fewer than 500 people qualify for Group B.
Group C includes any other member of the class (i.e., those that do not have the proof required to be in Group A or did not file a prior complaint to qualify for Group B). Although this group does not have to submit the proof that is required to be part of Group A, they still must provide the serial number of their laptops. Members of this group have the option to submit a claim for either a $55 cash payment or a $105 credit certificate. Id. ¶ 6.1(c).

         The highest potential monetary value of the settlement is $5, 208, 000. See Docket No. 62 (“Nafisi Decl.”) ¶ 19. For Group A claims only, Defendants retain the right to demand an inspection of a laptop to verify that it suffers from either defect. Members of any Group must certify under penalty of perjury that their laptop suffered from the Power Defect and/or Overheating Issue. See Agreement, Ex. A, A1.

         The parties propose that Angeion Group act as the settlement administrator. Class members will be notified by email if Defendants have an email address for them; by postcard via First Class U.S. Mail if Defendants have their physical address but not an email address; and by both email and postcard if Defendants have an email address and a physical mailing address. Agreement ¶ 7.2(b). If a physical mailing is returned as undelivered, then the claims administrator will use a skip trace search to identify updated mailing addresses. Id. ¶ 7.2(e). Notice will also be published in People magazine and USA Today, and will be distributed via press release. See Id. ¶ 7.2(i); Mot. At 9. There will also be an online notice published across internet websites and social media platforms, and an online notice on Defendants' websites and social media platforms. Agreement ¶ 7.2(h). This media notice procedure is expected to reach 76.75% of the target audience with an average frequency of 3.03 times each. [Docket No. 60 (“Weisbrot Decl.”) ¶¶ 22-23.] The claims administrator will launch a settlement website. Id. ¶ 7.2(f).

         Carlotti's counsel will seek approval of an award of costs and fees in the amount of $787, 500.00 after the class members are notified and have the opportunity to opt out of the settlement or object. Agreement ¶ 2.4. Carlotti will seek an incentive award of $5, 000. Id. ¶ 2.29.


         “The Ninth Circuit maintains a ‘strong judicial policy' that favors the settlement of class actions.” McKnight v. Uber Techs., Inc., No. 14-cv-05615-JST, 2017 WL 3427985, at *2 (N.D. Cal. Aug. 7, 2017) (quoting Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992)). The settlement of a certified class action must be “fair, reasonable, and adequate.” Fed.R.Civ.P. 23(e)(2). “The court's role in reviewing a proposed settlement is to represent those class members who were not parties to the settlement negotiations and agreement.” Tadepalli v. Uber Techs., Inc., No. 15-cv-04348-MEJ, 2016 WL 1622881, at *6 (N.D. Cal. Apr. 25, 2016). At the preliminary approval state, the court's role is to assess whether the settlement “falls within the range of possible approval.” Terry v. Hoovestol, Inc., No. 16-cv-05183-JST, 2018 WL 4283420, at *1 (N.D. Cal. Sept. 7, 2018) (internal quotation marks and further citations omitted).

         The court will look to two authorities in deciding whether to grant preliminary approval: (1) the fairness factors set forth in Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir. 2004); and (2) the factors in Rule 23(e)(2). “The relative degree of importance to be attached to any particular factor will depend upon . . . the unique facts and circumstances presented by each individual case.” Officers for Justice v. Civil Serv. Comm'n of City & Cty. of San Francisco, 688 F.2d 615, 625 (9th Cir. 1982). The court will also consider the Northern District of California's Procedural Guidance for Class Action Settlements.[2]

         A. Churchill Factors

         A class action “may be settled, voluntarily dismissed, or compromised only with the court's approval.” Fed.R.Civ.P. 23(e). The “decision to approve or reject a settlement is committed to the sound discretion of the trial judge because he is exposed to the litigants, and their strategies, positions, and proof.” In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir. 2000), as amended (June 19, 2000) (citation omitted). The district court's role in reviewing proposed class action settlements is to determine whether a settlement is “fundamentally fair, adequate, and reasonable.” Id. The court is tasked with balancing a number of factors, including:

(1) the strength of the plaintiffs' case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members to the proposed settlement.

Churchill, 361 F.3d at 575.

         1. Strength of Plaintiff's Case and Risks of Litigation

         The first three factors are addressed together and require the court to assess the plaintiff's “likelihood of success on the merits and the range of possible recovery” versus the risks of continued litigation and maintaining class action status through the duration of the trial. See Garner v. State Farm Mut. Auto. Ins. Co., No. 08-cv-1365-CW, 2010 WL 1687832, at *9 (N.D. Cal. Apr. 22, 2010). However, the court need not “reach any ultimate conclusions on the contested issues of fact and law which underlie the merits of the dispute, for it is the very uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation that induce consensual settlements.” Officers for Justice, 688 F.2d at 625. These factors weigh in favor of approving settlement when the defendant has “plausible defenses that could have ultimately left class members with a reduced or non-existent recovery.” In re TracFone Unlimited Serv. Plan Litig., 112 F.Supp.3d 993, 999 (N.D. Cal. 2015).

         The complaint in this case alleges various breach of warranty and false advertising claims based on the alleged defects in the two ASUS laptop models at issue. While Carlotti and his counsel assert that the claims are meritorious, they concede that several issues in the case could possibly result in little or no recovery on a class-wide basis, including the difficulty of proving:

(1) that all the Laptops uniformly experienced the Power Defect and Overheating Issues, (2) that Defendants' marketing materials were likely to deceive reasonable consumers, (3) that omissions in the marketing materials were material to reasonable consumers, (4) the amount of damages or restitution due to the class or to any class member, and (5) that common questions predominate over individual issues such that a class may be certified.

Mot. at 14. Adam Gutride, one of Carlotti's counsel, identified additional arguments raised by Defendants:

(a) Plaintiff could not identify any actionable misrepresentation or omissions, as opposed to inactionable puffery, regarding the Laptops; (b) Plaintiff lacked standing to assert claims related to the GL502VS Laptops (because he purchased a GL502VSK Laptop); (c) there was no defect in the GL502VSK Laptops; (d) Plaintiff's common law fraud claims are barred by California's economic loss rule; (e) there was no breach of express warranty because the written warranty did not cover design defects, ASUS complied with its warranty by replacing Plaintiff's laptop, and there was no other express warranty; (f) there was no unfair or unlawful conduct; (g) Plaintiff could not certify a class because individualized questions of materiality, reliance, and injury would predominate; and (h) Plaintiff and the Class suffered no damages because the Laptops performed as well as, or better than, other laptops in the market. In support of those arguments, Defendants argued that GL502VS and GL502VSK Laptop models differed in material respects. ASUS conceded that it received some complaints from GL502VS Laptop purchasers about the Power Defect and Overheating Issue, but ASUS claimed that it addressed the problem by designing the next model (the GL502VSK) with an upgraded power adapter and a different CPU and motherboard, which allegedly resolved the defects identified by Plaintiff. ASUS claimed that the Power Defect and Overheating Issue only affected 2% of the GL502VS laptops and .5% of the GL502VSK laptops.

Gutride Decl. ¶ 15. Carlotti also asserts that even if the class prevails at trial, the court could “require an individualized damage prove-up, ” which would be far more time-intensive and costly than the relatively simple claims process outlined in the settlement.

         The record establishes that there is significant risk to individual and class recovery if the case were to proceed further in litigation. If Defendants were able to show, for example, that they complied with Carlotti's warranty by replacing his laptop, then Carlotti may lack standing to represent the class for the warranty claims. See Gutride Decl. ¶ 15. Further, even if the class were certified, Defendants could still move to decertify the class at any time. See In re Netflix Privacy Litig., 2013 WL 1120801, at *6 (N.D. Cal. Mar. 18, 2013) (“The notion that a district court could decertify a class at any time is one that weighs in favor of settlement.”).

         Weighing the potential benefits to the class against the risks of continued litigation, the court finds that first three Churchill factors support approving the settlement.

         2. Amount Offered in Settlement

         The fourth Churchill factor, which looks at the amount of recovery offered in settlement, favors preliminary approval. When considering whether the amount offered in settlement is fair and adequate, “[i]t is the complete package taken as a whole, rather than the individual component parts, that must be examined for overall fairness.” Officers for Justice, 688 F.2d at 628. In addition, “it is well-settled law that a proposed settlement may be acceptable even though it amounts to only a fraction of the potential recovery that might be available to the class members at trial.” Nat'l Rural Telecommunications Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 527 (CD. Cal. 2004).

         In this case, the Agreement entitles all class members to submit a claim for monetary relief. The amount of the settlement benefits is not limited by the number of claims submitted or any fees or costs in the case, all of which are covered by Defendants. The amount of benefits any class member can receive depends on whether they previously complained about one of the defects at issue in this case and the proof they have relating to their purchase. Class members in Group A and B have the option of receiving either a $110 cash payment or a $210 credit certification, while class members in Group C can receive either a $55 cash payment or a $105 credit certificate. Carlotti represents that approximately 24, 800 laptops were sold during the class period. Mot. at 7. The maximum (albeit theoretical) monetary recovery under the settlement is $5, 208, 000.

         Class members are entitled to receive injunctive relief in addition to the monetary recovery. The Extended Warranty covers repairs relating to the Power Defect to the VS laptops, of which approximately 13, 500 were sold during the class period. Nafisi Decl. ¶ 18. In the initial motion, counsel estimated that cost of repair for the Power Defect in the VS laptops would be approximately $500 per laptop. Id. In the supplemental papers, this figure was amended. See Docket No. 68-3 (“Morquecho Decl.”) ¶¶ 2-3. The current cost of replacing an original motherboard in a VS laptop without a warranty is $1, 153.63. Id. ¶ 2. The current replacement cost for a VS power adapter is $39.72. Id. ¶ 3. If all class members who purchased a VS laptop during the class period received both repairs, the monetary value of the repairs would be 13, 500*($1, 153.63$39.72) = $16, 110, 225. In total, the Agreement provides monetary and equitable relief with an estimated maximum value of over $21.3 million.

         At the hearing, the court asked what relief the class would receive if they prevailed. Class counsel responded that the damages for the false advertising claims would likely be calculated based on the premiums that class members paid for laptops that were advertised to perform high capacity functions such as gaming and video editing. The premiums are the difference in price between the laptops at issue (approximately $1, 700) and laptops that could not perform the high capacity functions. Class counsel estimated the premiums would be 2-5%, or $34-85 per laptop. Because this claim would affect all members of the class, which is estimated to include approximately 24, 800 members, the total monetary recovery for the false advertising claims is estimated to be between $843, 200 ($34x24800) and $2, 108, 000 ($85x24, 800).

         For the warranty claim, class counsel represented that damages would likely be calculated based on the cost of repair. In the initial motion, counsel estimated that cost of repair for the Power Defect in the VS laptops would be approximately $500 per laptop. Nafisi Decl. ¶ 18. In the supplemental papers, this figure was amended to $1, 193.35 (assuming that the laptop was no longer covered by a warranty). See Morquecho Decl. ¶¶ 2-3. Unlike the false advertising claim, however, the warranty claims would affect only those class members whose laptops experienced the defects, which they estimate as about 2% of the class (approximately 500 people). Based on this estimate, the total value of the warranty claim would be about $596, 675. In total, the estimated maximum recovery for the class if they prevailed would be $2, 704, 675, which is a fraction of the estimated settlement value.

         The total potential settlement value does not reflect the realistic value of the settlement because most of that number is based on the value of the Extended Warranty without considering the relatively low percentage of the class who experienced the defects. However, looking at the relief provided to any individual class member, the amount offered in the settlement appears reasonable. Anyone who bought a VS laptop with a Power Defect[3] would be entitled to receive a full repair of the issue through the Extended Warranty (valued at $1, 193.35), and between $55 and $210 in monetary benefits in addition to the repairs. Therefore, class members who were affected by the defects can receive a full equitable remedy in the form of repairs while still recovering a significant monetary benefit.

         The court finds that the relief offered is closely tailored to address the alleged wrongful conduct and is within the realm of reasonable recovery in this case.

         3. Stage of Proceedings

         Class settlements are presumed fair when they are reached “following sufficient discovery and genuine arms-length negotiation.” DIRECTV, Inc., 221 F.R.D. at 528; 4 Newberg at § 11.24. “The extent of discovery [also] may be relevant in determining the adequacy of the parties' knowledge of the case.” DIRECTV, 221 F.R.D. at 527 (quoting Manual for Complex Litigation, Third § 30.42 (1995)). “A court is more likely to approve a settlement if most of the discovery is completed because it suggests that the parties arrived at a compromise based on a full understanding of the legal and factual issues surrounding the case.” Id. (quoting 5 Moore's Federal Practice, §23.85[2][e] (Matthew Bender 3d ed.)). However, “[i]n the context of class action settlements, as long as the parties have sufficient information to make an informed decision about settlement, ‘formal discovery is not a necessary ticket to the bargaining table.'” Wilson v. Tesla, Inc., No. 17-cv-03763-JSC, 2019 WL 2929988, at *8 (N.D. Cal. July 8, 2019) (quoting Linney v. Cellular Alaska P'ship, 151 F.3d 1234, 1239 (9th Cir. 1998)).

         Carlotti represents that the parties “conducted a thorough examination and investigation of the facts and law relating to the matters in the Litigation.” Mot. at 2. They state that they conducted “an in-depth technical analysis of the issue that involved surveying and interviewing dozens of affected consumers, reviewing hundreds of online posts, and developing a detailed understanding of ASUS's representations and remediation attempts.” Nafisi Decl. ¶ 3. Carlotti's counsel hired an electrical engineering expert and engaged in extensive pre-litigation investigation and discovery. Id. Carlotti appeared for a deposition. Id. On March 19, 2019, the parties participated in an all-day mediation conducted by Martin Quinn, of JAMS. The case settled as a result of the mediation, and there has been no briefing or hearing for summary judgment or class certification. Luanne Sacks, lead counsel for Defendants, also testifies that the parties engaged in significant discovery. Sacks Decl. ¶ 14. She states that Defendants deposed Carlotti, responded to his interrogatories and document requests, and produced hundreds of pages of documents. Id. She also avers that they were in the process of scheduling the deposition for ACI's Rule 30(b)(6) witness immediately prior to the settlement. Id.

         At the hearing, the court noted that there was a limited amount of written discovery propounded in this case and that the number of documents (“hundreds”) seemed low for a consumer class action. The court also noted that the case was settled early and without substantial litigation. Class counsel represented that a substantial portion of the investigation took place before the complaint was filed, when they analyzed software updates released by Defendants that were meant to address the defects; talked to consumers who had installed the updates to determine their efficacy; and ran diagnostic tests on affected laptops. Once the complaint was filed, Carlotti analyzed additional documentation provided by Defendants, including information on the remedial efforts Defendants had been undertaking. They retained an electrical engineering expert to review the technical documents. The parties represented that they exchanged a substantial amount of information outside of formal discovery procedures.

         The court finds that the parties adequately investigated the claims and defenses in this case and that the parties had enough information to make an informed decision about settlement.

         4. Experience and Views of Counsel

         Carlotti is represented by counsel from Gutride Safier, LLP (“GSLLP”) and Migliaccio & Rathod (“M&R”). Class counsel represents that they have no conflicts of interest with the class and have extensive experience and expertise in prosecuting complex class actions. Mot. at 21. Adam Gutride of GSLLP submitted a declaration in support of the motion for preliminary approval and attached a resume of the firm's cases. Gutride Decl., Ex. 2. GSLLP has been appointed as class counsel in more than 25 consumer cases and has overseen more than a dozen large class action settlements. Gutride Decl. ¶ 13. Esfand Nafisi of M&R also submitted a declaration and attached the resumes of M&R attorneys, as well as a list of the notable consumer cases prosecuted by the firm. Nafisi Decl., Ex. 1.

         The court is satisfied that class counsel have provided adequate representation on behalf of the class.

         5. Government Participant

         This factor is inapplicable because there is no government participant in this case. See Mendoza v. Hyundai Motor Co., Ltd, No. 15-cv-01685-BLF, 2017 WL 342059, at *7 (N.D. Cal. Jan. 23, 2017).

         6. Reaction of Class Members

         The reaction of the class members is best assessed at the final approval hearing since the court can look at how many class members submitted claim forms and objections. See Rodriguez v. W. Publ'g Corp., 563 F.3d 948, 967 (9th Cir. 2009) (affirming approval of a class action settlement where there were 54 objections out of 376, 301 notices sent). Therefore, this factor should not be considered in preliminary approval.

         B. Rule 23(e) Factors

         Rule 23(e) requires the court to consider whether:

(A) the class representatives and class counsel have adequately represented the class;
(B) the proposal was negotiated at arm's length;
(C) the relief provided for the class is adequate, taking into account:
(i) the costs, risks, and delay of trial and appeal;
(ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims;
(iii) the terms of any proposed award of attorney's fees, including timing of payment; and
(iv) any agreement required to be identified under Rule 23(e)(3); and
(D) the proposal treats class members equitably relative to each other.

Fed. R. Civ. P. 23(e).

         1. Adequacy of Representation

         In determining whether to approve a class action settlement, a court must consider whether “the class representatives and class counsel have adequately represented the class.” Fed.R.Civ.P. 23(e)(2)(A).

         a. Class ...

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