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recognizing that out-of-state plaintiffs injured outside of California cannot bring UCL claims
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NO. C 11-05403 JW
07-11-2012
Monica Granfield, Plaintiff, v. NVIDIA Corp., Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS
I. INTRODUCTION
Monica Granfield ("Plaintiff") brings this putative class action against Nvidia Corp. ("Defendant") alleging breach of implied warranty, breach of numerous consumer protection laws, and violation of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310. Plaintiff alleges that Defendant manufactured defective graphics processing units ("GPUs"), and sold those GPUs to a variety of computer manufacturers. Plaintiff further alleges that as a result of defects with the GPU in her computer, the computer suffered permanent damage.
Presently before the Court is Defendant's Motion to Dismiss. The Court finds it appropriate to take the Motion under submission without oral argument. See Civ. L.R. 7-1(b). Based on the papers submitted to date, the Court GRANTS in part and DENIES in part Defendant's Motion.
(Notice of Motion and Motion to Dismiss Second Amended Class Action Complaint, hereafter, "Motion," Docket Item No. 46; see also Memorandum of Points and Authorities in Support of Motion to Dismiss Second Amended Class Action Complaint, hereafter, "Memorandum," Docket Item No. 47.)
II. BACKGROUND
In a Second Amended Complaint filed on March 19, 2012, Plaintiff alleges as follows:
(Second Amended Class Action Complaint, hereafter, "Complaint," Docket Item No. 45.)
Plaintiff is a citizen of Massachusetts. (Complaint ¶ 16.) Defendant Nvidia is a Delaware corporation with its principal place of business in Santa Clara, California. (Id. ¶ 17.) Defendant is the second largest manufacturer of GPUs worldwide. (Id.) On April 22, 2008, Plaintiff purchased an HP Pavilion notebook computer containing a defective GPU manufactured by Defendant. (Id. ¶ 16.) Plaintiff's computer continues to demonstrate signs of a defect caused by the GPU, including degraded video display and occasional complete shut down. (Id.)
For a computer to correctly display videos or images on its screen, the Central Processing Unit ("CPU") sends messages to the GPU, which is connected to the computer's motherboard. (Complaint ¶ 20.) Each GPU package consists of the "die," which is a silicon chip, mounted onto the substrate of the circuit board. (Id. ¶ 21.) The die is soldered onto the substrate via "bumps" of solder that carry signals and power. (Id. ¶ 22.) When a GPU is turned on, the die becomes hot and heats the substrate secondarily. (Id. ¶ 23.)
In 2006, Defendant began experiencing cracks at the substrate-to-bump interface joint in its GPUs. (Complaint ¶ 26.) In response, Defendant began using high-lead solder, based on Defendant's belief that high-lead solder bumps would be more malleable and better able to withstand fatigue. (Id. ¶ 27.) In actuality, high-lead solder bumps are more susceptible to fatigue from ordinary usage, leading them to weaken and crack. (Id. ¶ 29.) In addition, Defendant utilized an underfill material that is not capable of withstanding the normal operating temperatures of the computers in which Defendant's GPUs are normally installed. (Id. ¶ 30.) Because computer temperatures exceed the temperature this material can withstand, the material loses its structural integrity and is unable to hold the bumps in place.
(Id. ¶ 34.) As a result, the electricity contact from the bumps is not maintained, and users are not able to use their computers for their ordinary functions. (Id.)
As a result of Defendant's decision to utilize high-lead bumps in conjunction with this underfill, Defendant's GPUs experience cracks at the substrate-to-bump interface joint, which causes computers to malfunction. (Complaint ¶ 42.) In particular, the GPU causes computers to display corrupted video images, distorted lines and garbled characters, and to experience complete monitor/display system failure. (Id. ¶ 43.)
According to a former product manager at HP, HP began conducting an investigation into defects with computers containing Defendant's GPUs in 2006. (Complaint ¶ 47.) HP found issues with fractures at the bump level between the dye and the substrate, and it was obvious that these issues were caused by the thermal transition of the underfill material. (Id. ¶ 49.) HP shared this information with Defendant, but Defendant maintained that it was not the company's fault. (Id.) By early 2007 HP had overwhelming data demonstrating the root cause of the failures, and shared all of this information with Defendant. (Id. ¶ 51.) Dell also notified Defendant of defects with the GPUs by early 2007. (Id. ¶ 55.) Despite knowledge of the defect, Defendant continued to sell and ship defective GPUs for inclusion in computers. (Id. ¶ 56.)
On the basis of the allegations outlined above, Plaintiff alleges seven causes of action: (1) Violation of the California Consumer Legal Remedies Act, Cal. Civ. Code § 1761(a); (2) Violation of California's Unfair Competition Law, Cal. Bus. & Profs. Code §§ 17200, et seq.; (3) Violation of Massachusetts General Law Chapter 93A ("Chapter 93A"); (4) Breach of the Implied Warranty of Merchantability under Massachusetts law; (5) Breach of the Implied Warranty under the Magnuson-Moss Act, 15 U.S.C. § 2301, on behalf of all Massachusetts buyers; (6) Breach of Implied Warranty under the laws of twenty-eight states; and (7) Breach of Implied Warranty under the Magnuson-Moss Act on behalf of buyers in those twenty-eight states.
III. STANDARDS
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed against a defendant for failure to state a claim upon which relief may be granted against that defendant. Dismissal may be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990); Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984). For purposes of evaluating a motion to dismiss, the court "must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the nonmoving party." Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). Any existing ambiguities must be resolved in favor of the pleading. Walling v. Beverly Enters., 476 F.2d 393, 396 (9th Cir. 1973).
However, mere conclusions couched in factual allegations are not sufficient to state a cause of action. Papasan v. Allain, 478 U.S. 265, 286 (1986); see also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988). The complaint must plead "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). Thus, "for a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). Courts may dismiss a case without leave to amend if the plaintiff is unable to cure the defect by amendment. Lopez v. Smith, 203 F.3d 1122, 1129 (9th Cir. 2000).
IV. DISCUSSION
Defendant moves to dismiss Plaintiff's Complaint on the grounds that: (1) Plaintiff's claims under California law are barred under the Ninth Circuit's recent decision in Mazza v. America Honda Motor Co.; (2) Plaintiff's claims under the consumer protection laws of every state other than Massachusetts must be dismissed because Plaintiff lacks standing to assert them; (3) Plaintiff has not stated a claim under Chapter 93A because Defendant owed no duty to Plaintiff under Chapter 93A; (4) Plaintiff's implied warranty of merchantability claim fails because Defendant is not a manufacturer of goods; and (5) Plaintiff's Magnuson-Moss Act claims fail along with Plaintiff's state-law warranty claims. Plaintiff responds that: (1) Mazza was wrongly decided by the Ninth Circuit and Plaintiff should be entitled to pursue California state law claims even though she purchased her computer in another state; (2) Plaintiff may assert the laws of other states on behalf of class members in those states; (3) Plaintiff has sufficiently alleged a violation of Chapter 93A; (4) Plaintiff has stated a breach of implied warranty claim because the GPU manufactured by Defendant is a good subject to the implied warranty of merchantability; and (5) the Magnuson-Moss Act provides a cause of action for breach of implied warranty even in the absence of a written warranty. The Court considers each of Plaintiff's causes of action in turn. A. California State Law Claims
666 F.3d 581 (9th Cir. 2012).
(Memorandum at 7-25.)
(Plaintiff Monica Granfield's Opposition to Nvidia Corporation's Motion to Dismiss Second Amended Class Action Complaint at 1, 8-23, hereafter, "Opp'n," Docket Item No. 51.)
At issue is whether Plaintiff, a Massachusetts resident who purchased her computer in that state, may assert claims for violations of California state law.
In a class action lawsuit alleging violations of consumer protection laws, "each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place." As the Ninth Circuit explained in Mazza, "each foreign state has an interest in applying its law to transactions within its borders," which means that, "if California law were applied to [a nationwide class], foreign states would be impaired in their ability to calibrate liability to foster commerce." Id. at 593. This is consistent with the "principle of federalism that each State may make its own reasoned judgment about what conduct is permitted or proscribed within its borders." Id. at 591 (quotation and citation omitted).
Mazza, 666 F.3d at 594.
Here, Plaintiff concedes that under Mazza, she is not entitled to bring a claim under California law in light of the fact that she purchased her computer in Massachusetts. (Opp'n at 2-3.) Given this concession, the Court finds that Plaintiff's disagreement with the clear holding of the Ninth Circuit is not sufficient to sustain her California law claims.
Accordingly, the Court GRANTS Defendant's Motion to Dismiss as to Plaintiff's First and Second Causes of Action with prejudice. B. Non-Massachusetts State Law Claims
At issue is whether Plaintiff may assert claims under the consumer protection laws of any state other than Massachusetts.
"Where . . . a representative plaintiff is lacking for a particular state, all claims based on that state's laws are subject to dismissal." In re Flash Memory Antitrust Litig., 643 F. Supp. 2d 1133, 1164 (N.D. Cal. 2009) (citation omitted) (emphasis in original); see also In re Apple & AT&TM Antitrust Litig., 596 F. Supp. 2d 1288, 1309 (N.D. Cal. 2008) (dismissing claims based on consumer protection laws of every state from which no plaintiff was named). This rule is consistent with the holding of Mazza that "each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place."
Here, Plaintiff is the only named Plaintiff and has not alleged that she made any relevant purchases outside of Massachusetts. Thus, the Court finds that Plaintiff does not have standing to assert claims under the laws of any of the other twenty-eight states named in her Complaint.
(See Complaint ¶ 16.)
Accordingly, the Court GRANTS Defendant's Motion to Dismiss as to Plaintiff's Sixth Cause of Action with prejudice. In addition, because Plaintiff's Magnuson-Moss claim as to these twenty-eight states is purely derivative of her state law claims, the Court finds that it cannot be sustained in light of the dismissal of the underlying state law claims. Accordingly, the Court GRANTS Defendant's Motion to Dismiss as to Plaintiff's Seventh Cause of Action with prejudice. C. Chapter 93A
See Milicevic v. Fletcher Jones Imps., Ltd., 402 F.3d 912, 918 (9th Cir. 2005) ("Except in the specific instances in which Magnuson-Moss expressly prescribes a regulating rule, the Act calls for the application of state written and implied warranty law, not the creation of additional federal law.") (citation and internal punctuation omitted). Here, Plaintiff has not alleged any violations of the Magnuson-Moss Act independent of her state law claims. (See Complaint ¶¶ 126-136.) Thus, the Magnuson-Moss Act serves only to create a federal cause of action though which to pursue viable state law claims.
At issue is whether Plaintiff has adequately pleaded a cause of action for violation of Chapter 93A.
Chapter 93A provides that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." Mass. Gen. Laws ch. 93A, § 2 (1968). "Chapter 93A created new substantive rights by making conduct unlawful which was not unlawful under the common law or any prior statute." Schubach v. Household Fin. Corp., 375 Mass. 133, 137 (1978) (quotation and citation omitted). "The fact that particular conduct is permitted by statute or common law principles should be considered, but it is not conclusive on the question of unfairness." Id. Instead, the "circumstances of each case must be analyzed, and unfairness is to be measured not simply by determining whether particular conduct is lawful apart from [Chapter 93A] but also by analyzing the effect of the conduct on the public." Id. (citation omitted). "[T]he definition of an actionable unfair or deceptive act or practice goes far beyond the scope of the common law action for fraud or deceit." Slaney v. Westwood Auto, Inc., 366 Mass. 688, 703 (1975).
Here, Plaintiff alleges in pertinent part:
Defendant violated [Chapter 93A] by selling the [Nvidia] GPUs, which Defendant knew were defective. (Complaint ¶ 93.) Defendant also violated 93A by failing to disclose the defect in the [Nvidia] GPUs; [sic] a material fact of which Defendant had exclusive knowledge. (Id.) As the [c]lass [c]omputers were used and attained their normal operating temperatures during use, the [underfill] began to soften as a result of thermal stress. (Id. ¶ 42.) As a result of [Defendant's] deliberate decision to utilize high-lead solder bumps in conjunction with the [underfill], the Nvidia GPUs experienced cracks at the substrate-to-bump joint interface which causes the [c]lass [c]omputers to malfunction. (Id.) HP began conducting an investigation in 2006 into suspected defects in its laptops containing the Nvidia GPUs. (Id. ¶ 47.) [Defendant] knew of the investigation results and should have been aware of the chip defects before the GPUs were shipped to OEM manufacturers. (Id.)
At least by the middle of 2007, [HP] had [Defendant] perform [tests revealing the defect] in their labs and they reproduced it. (Id. ¶ 52.) Dell was also notifying [Defendant] of problems with its GPUs by early 2007. (Id. ¶ 55.) Despite knowledge of the Nvidia GPU defect, [Defendant] continued to sell and ship the defective Nvidia GPUs to OEM manufacturers, which resulted in the defective [Nvida] GPUs being installed in the [computers] that were sold to [c]lass members, and millions of dollars in harm and injury being caused to Plaintiff and to [c]lass [m]embers. (Id. ¶ 56.)
Based on the allegations above, the Court finds that Plaintiff has adequately alleged a violation of Chapter 93A. Taking the allegations in Plaintiff's Complaint as true, the Court finds that Defendant's conduct in continuing to sell and ship GPUs that it knew would cause damage to the computers in which they were installed would rise to the level of an unfair business practice under Massachusetts law. Even if Defendant would not be required to disclose the defect or stop sales under a common law fraud standard, this alleged practice of knowingly selling GPUs which were not only defective, but also would cause damage to the remainder of the computer, if proven to be true, would constitute unfair business practice. Because Plaintiff has alleged a business practice that is unfair to consumers, she has adequately stated a claim for a violation of Chapter 93A.
See Schubach, 375 Mass. at 137.
Accordingly, the Court DENIES Defendant's Motion as to Plaintiff's Third Cause of Action. D. Implied Warranty under Massachusetts Law
At issue is whether Plaintiff may bring a breach of implied warranty claim against Defendant, given her allegation that Defendant manufactured only one component of her computer.
Under Massachusetts law, a warranty that goods are merchantable "is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind." Mass. Gen. Laws ch. 106, § 2-314 (1957). This warranty only "applies to transactions in goods." Goods are defined as all things "which are movable at the time of identification to the contract for sale." Id. A manufacturer of goods is liable to all purchasers of that good for breach of the implied warranty of merchantability; privity of contract is not required. See Jacobs v. Yamaha Motor Corp., U.S.A., 420 Mass. 323, 331 (1995) ("[A] buyer of consumer goods has the right to maintain an action for breach of the implied warranty of merchantability against the manufacturer of that product.").
Cumberland Farms, Inc. v. Drehmann Paving & Flooring Co., 25 Mass. App. Ct. 530, 534 (Mass. Ct. App. 1988) (quotation and citation omitted).
Here, Plaintiff alleges in pertinent part:
The [c]lass [c]omputers are "goods" within the meaning of that term under the Implied Warranty of Merchantability statute of Massachusetts. (Complaint ¶ 100.) The Implied Warranty of Merchantability is implied in the sale of the [c]lass [c]omputers containing the defective Nvidia GPUs, and requires, among other things, that the [c]lass [c]omputers containing the [Nvidia] GPUs pass without objection in the trade and are fit for the ordinary purposes for which they are used. (Id. ¶ 102.) The Nvidia GPUs do not function in their ordinary capacity and were not merchantable at the time of sale because the Nvidia GPUs were defectively designed. (Id. ¶ 103.) The defect in the Nvidia GPUs renders the [c]lass [c]omputers non-merchantable because the [c]lass [c]omputers containing the Nvidia GPUs could not be used for their ordinary purposes and thereby proximately caused the economic damages suffered by Plaintiff. (Id. ¶ 104.)
Based on the allegations above, the Court finds that Plaintiff has not stated a claim under the implied warranty of merchantability. Absent are allegations establishing that the GPUs at issue are "goods" as that term is used in the commercial code. Rather, Plaintiff's Complaint alleges that "the GPU is placed into a chip 'package,' which is soldered onto the motherboard." (Complaint ¶ 21.) The Complaint also alleges that the GPU is "physically attached" to the motherboard substrate. (Id. ¶ 30.) Thus, because the GPUs are admittedly not movable at the time of their sale, they do not fall within the definition of "goods" such that the implied warranty of merchantability attaches. Indeed, the Complaint seems to acknowledge that it is the computers into which these GPUs are placed that constitute "goods" which would be subject to the implied warranty. (See id. ¶ 100.) Thus, the Court finds Plaintiff cannot state a breach of implied warranty claim against Defendant, who is alleged only to be the manufacturer of the GPU.
See Cumberland Farms, 25 Mass. App. Ct. at 534.
Accordingly, the Court GRANTS Defendant's Motion to Dismiss as to Plaintiff's Fourth Cause of Action. In addition, because Plaintiff's Fifth Cause of Action under the Magnuson-Moss Act is derivative of her implied warranty claims, the Court finds that this claim must also fail in light of the dismissal of her state law claim. Accordingly, the Court GRANTS Defendant's Motion as to Plaintiff's Seventh Cause of Action. Finally, because Plaintiff's Complaint makes clear that the GPUs at issue are not goods to which an implied warranty would attach, the Court finds that these claims cannot be cured through amendment. Accordingly, the Court DISMISSES these claims with prejudice. E. Products Not Purchased by Plaintiff
As is discussed above, the Magnuson-Moss Act does not create substantive rights but merely provides a federal cause of action to enforce warranty rights created by state law. See Milicevic, 402 F.3d at 918.
At issue is whether Plaintiff may assert claims based on alleged defects in products other than the product that she purchased.
A plaintiff has standing to assert injury based on a defective product or false advertising only if the plaintiff experienced injury stemming from the purchase of that product. See Johns v. Bayer Corp., No. 09 CV-1935 DMS, 2010 WL 476688, at *5 (S.D. Cal. Feb 9, 2010); see also Carrea v. Dreyer's Grand Ice Cream, Inc., No. C 10-01044 JSW, 2011 WL 159380, at *3 (N.D. Cal. Jan. 10, 2011) (dismissing claims based on products other than those purchased by the plaintiff). Accordingly, when a plaintiff asserts claims based both on products that she purchased and products that she did not purchase, claims relating to products not purchased must be dismissed for lack of standing. See Carrea, 2011 WL 159380, at *3; see also Mlejnecky v. Olympus Imaging Am. Inc., No. 2:10 CV-02630 JAM, 2011 WL 1497096, at *4 (E.D. Cal. Apr. 19, 2011).
Here, Plaintiff alleges that she purchased a computer containing an Nvidia GeForce 8600M GPU. (Complaint ¶ 16.) However, Plaintiff seeks to assert claims based on defects in eleven additional models of Nvidia GPUs. (Id. ¶ 1.) The Court finds that since Plaintiff does not allege any injury stemming from the purchase or use of these other models, Plaintiff lacks standing to assert claims based on alleged defects in them. Accordingly, the Court STRIKES all allegations relating to products not purchased by Plaintiff.
The Court recognizes that some courts have taken the approach of dismissing claims involving products not purchased by the plaintiff. See, e.g., Mlejnecky, 2011 WL 1497096, at *4. The Court finds, however, that because Plaintiff has not asserted separate claims based on these products and instead seeks to assert all of her claims on the basis of all products, the appropriate remedy is to strike allegations pertaining to non-purchased products pursuant to Fed. R. Civ. P. 12(f).
V. CONCLUSION
The Court GRANTS Defendant's Motion to Dismiss as to Plaintiff's First, Second, Fourth, Fifth, Sixth and Seventh Causes of Action. The Court DISMISSES these claims with prejudice.
The Court DENIES Defendant's Motion as to Plaintiff's Third Cause of Action.
The Court STRIKES all allegations relating to products not purchased by Plaintiff.
On or before July 31, 2012, Plaintiff shall file an Amended Complaint consistent with the terms of this Order. The Amended Complaint shall additionally plead the basis of the Court's jurisdiction, specifically the amount in controversy requirement of diversity jurisdiction.
The Court previously vacated the Case Management Conference in this case in light of the pending Motion. The Court now sets September 24, 2012 at 10 a.m. as the new Conference date. On or before September 14, 2012, the parties shall file a Joint Case Management Statement with a proposed schedule on how this case should proceed. Dated: July 11, 2012
/s/_________
JAMES WARE
United States District Chief Judge
THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:
Alexander K Talarides atalarides@orrick.com
Dustin Lamm Schubert dschubert@schubertlawfirm.com
Edward F. Haber ehaber@shulaw.com
Ian J. McLoughlin imcloughlin@shulaw.com
Jason A. Pikler jpikler@schubertlawfirm.com
Justin M. Lichterman jlichterman@orrick.com
Michelle H. Blauner mblauner@shulaw.com
Robert P. Varian rvarian@orrick.com
Virginia Hope Johnson vjohnson@princelobel.com
Willem F. Jonckheer wjonckheer@schubertlawfirm.com
Dated: July 11, 2012
Richard W. Wieking, Clerk
By: /s/ JW Chambers
William Noble
Courtroom Deputy