859 F. Supp. 2d 1056 | N.D. Cal. | 2012
ORDER GRANTING MOTION TO DISMISS WITHOUT LEAVE TO AMEND
I. INTRODUCTION
Plaintiff Henry Garcia filed this putative class action against defendants Sony Computer Entertainment America, LLC, and Activision Blizzard, alleging that they are acting in concert to sell certain Activision videogames, including “Call of Duty: Modern Warfare 2” and “Call of Duty: Black Ops” (collectively “Call of Duty”), which cause older versions of the Sony Playstation 3 (PS3) videogame console to overheat
II. FACTS
Garcia alleges that he purchased a PS3 in December of 2006.
The SAC goes on to assert that Sony manufactures, advertises, and sells PS3 gaming consoles to consumers, and enters into licensing agreements with Activision and other videogame developers to develop, market, and sell videogames that play on PS3 systems. These PS3-branded games play on PS3 consoles only, owing to Sony’s proprietary software. Plaintiff generally maintains that Sony “is intimately involved with the design and programming of these videogames, far beyond merely providing the basic software for compatibility.” Id. at ¶¶ 1, 22-23. According to the SAC, Sony has publicly reported that it “support[sj” videogame developers “by expanding and reinforcing software development tools.” Id. at ¶ 28.-Plaintiff also asserts that Sony and Activision test newly developed games extensively before they receive Sony’s authorization to be sold as PS3-compatible. Specifically, the SAC states that Sony provides videogame developers with PS3 units for testing, and receives prototypes of the videogame from developers for
Once Sony approves a videogame developed by a licensee, it is offered to consumers in packaging that features the PS3 logo, and the phrases, “PlayStation Network” and “Only On PlayStation.” Id. at ¶ 26. The complaint also generally alleges that the packaging of PS3 consoles informs consumers that: “This model of the PlayStation®3 system is designed to play PlayStation®3 format software and has limited backward compatibility. This system is not compatible with and will not play PlayStation®2 format software. Some PlayStation® format software may play on this system.” Id. at ¶ 24. That notice is entitled, “Compatible Software/Media,” and denoted with an asterisk that directs: “See the product documentation for details.” No further reference to those additional materials is made in the SAC, however, plaintiff also alleges that Sony’s website states: “The PlayStation [3] supports the following disc media formats: PlayStation®3 format software with either region coding of [1] or [ALL].” Id. at ¶ 25.
The SAC alleges defendants knew in advance “that the technology of the PS3 videogames would surpass the capabilities of the PS3 console and that the PS3 console would not be able to handle video-games’ advanced technology.” Id. at ¶¶ 7, 36, 40. In support of this contention, the complaint states that defendants have known for many years, beginning prior to the introduction of the PS3, that the video-game industry is highly competitive and driven by demand for increasingly advanced video and audio effects, which in turn require gaming consoles with greater computational capacity. In the intervening years, consumers have posted complaints on the Internet identifying the problem, according to the SAC. Garcia generally alleges defendants have nonetheless continued to misrepresent that PS3branded games are compatible with all PS3 consoles, in order to win sales and additional profits. The SAC states that Garcia relied on these alleged misrepresentations, and suffered a cognizable injury when his console failed. The SAC goes on to aver that he would not have purchased his PS3 console or “Call of Duty,” had he known they would not be compatible. Garcia now brings two claims for relief on behalf of a putative class of similarly-situated consumers, seeking damages and other equitable remedies.
III. LEGAL STANDARD
A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Pleadings are “so construed as to do substantial justice.” Fed. R.Civ.P. 8(e). While “detailed factual allegations are not required,” a complaint must have sufficient factual allegations to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). A claim is facially plausible “when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard asks for “more than a sheer possibility that a defendant has acted unlawfully.” Id. Put another way, the complaint must plausibly show — not merely allege— that the pleader is entitled to relief. Id. This determination is a context-specific task requiring the court “to draw on its judicial experience and common sense.” Id. at 1950.
A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims
In dismissing a complaint, leave to amend must be granted unless it is clear that the complaint’s deficiencies cannot be cured by amendment. Lucas v. Dep’t of Corrections, 66 F.3d 245, 248 (9th Cir.1995). When amendment would be futile, however, dismissal may be ordered with prejudice. Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir.1996). When the “plaintiff has previously been granted leave to amend and has subsequently failed to add the requisite particularity to its claims, ‘[t]he district court’s discretion to deny leave to amend is particularly broad.’ ’’ Zueco Partners LLC v. Digimarc Corp., 552 F.3d 981, 1007 (9th Cir.2009) (quoting In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1097-98 (9th Cir.2002)).
Additionally, Rule 9(b) of the Federal Rules of Civil Procedure requires that “[i]n allegations of fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Rule 9(b) applies to claims under California’s UCL and CLRA that “allege a unified course of fraudulent conduct and rely entirely on that course of conduct as the basis” for liability. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir.2009). To satisfy the rule, a plaintiff must allege the “who, what, where, when, and how” of the charged misconduct. Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir.1997). In other words, “the circumstances constituting the alleged fraud must be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong.” Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097, 1106 (9th Cir.2003).
IV. DISCUSSION
A. Unfair Competition Law
Garcia’s first claim for relief alleges that defendants engaged in “unlawful, unfair, or fraudulent business acts or practices” under California’s UCL. Cal. Bus. & Prof.Code § 17200. As the language of that statute suggests, a plaintiff may proceed under the UCL on three possible theories. First, “unlawful” conduct that violates another law is independently actionable under § 17200. Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999). Alternatively, , a plaintiff may plead that defendants’ conduct is “unfair” within the meaning of the several standards developed by the courts. Id. at 186-87, 83 Cal.Rptr.2d 548, 973 P.2d 527 (finding of unfairness must be “tethered to some legislatively declared policy or proof of some actual or threatened impact on competition”); Camacho v. Auto. Club of So. Cal., 142 Cal.App.4th 1394, 1403, 48 Cal.Rptr.3d 770 (2006) (applying test for violations of § 5 of the Federal Trade Commission Act to
Turning to this last theory first, a claim for relief from “fraudulent” conduct under the UCL is distinct from a claim for common law fraud. Unlike ordinary fraud, which requires plaintiff to plead a deception that is actually false, known to be false by the perpetrator, and reasonably relied upon by the victim, thereby incurring damages, none of these elements is required to state a claim for equitable relief under the UCL. Tobacco II, 46 Cal.4th at 312, 93 Cal.Rptr.3d 559, 207 P.3d 20 (citing Day v. AT & T Corp., 63 Cal.App.4th 325, 332, 74 Cal.Rptr.2d 55 (1998)); In re Actimmune Mktg. Litig., No. C 09-02376, 2009 WL 3740648, at *8 (N.D.Cal. Nov. 6, 2009). Instead, the analysis under the UCL focuses on the likely impact of defendants’ alleged deceptive conduct on members of the public. Id. To be actionable, a “fraudulent” representation may include a false statement, or one which, though strictly accurate, nonetheless has the likely effect of misleading or deceiving the public. McKell, 142 Cal.App.4th at 1471, 49 Cal.Rptr.3d 227 (quoting Mass. Mut. Life Ins. Co. v. Superior Court, 97 Cal.App.4th 1282, 1298-90, 119 Cal.Rptr.2d 190 (2002)). “‘Likely to deceive’ implies more than a mere possibility that the advertisement might conceivably be misunderstood by some few consumers viewing it in an unreasonable manner. Rather, the phrase indicates that the ad is such that it is probable that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” Lavie v. Procter & Gamble Co., 105 Cal.App.4th 496, 508, 129 Cal.Rptr.2d 486 (2003).
“A perfectly true statement couched in such a manner that it is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information,” is actionable under the UCL. Id. Whether or not a particular statement is deceptive turns on its likely effect on a reasonable consumer. McKell, 142 Cal.App.4th at 1471, 49 Cal.Rptr.3d 227 (citing Lavie, 105 Cal.App.4th at 507, 129 Cal.Rptr.2d 486). “A reasonable consumer is the ordinary consumer acting reasonably under the circumstances, [who] is not versed in the art of inspecting and judging a product, [or] in the process of its preparation or manufacture.” Colgan v. Leatherman Tool Grp., 135 Cal.App.4th 663, 682, 38 Cal.Rptr.3d 36 (2006) (internal citations and quotation marks omitted).
Finally, to proceed with a putative class action for “fraudulent” conduct under the UCL, a private litigant must establish standing. Cal. Bus. & Prof.Code § 17203 (“[a]ny person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and com
Here, plaintiffs first amended complaint was dismissed under Rule 12(b)(6) because it claimed Sony had represented that the PS3 system was “designed to play PlayStation3 format software,” but, significantly, stopped short of alleging “that this statement was false or misleading at the time [he] purchased his unit,” particularly with respect to future games. (Order 4:17-20). In other words, Garcia neglected to idéntify any element of deception that concurred with his alleged injury, and therefore failed to plead reliance. Tobacco II, 46 Cal.4th at 327, 93 Cal.Rptr.3d 559, 207 P.3d 20. To the extent the SAC rests on Garcia’s 2006 purchase of the PS3 as the alleged injury, it remains defective. As an initial matter, it is doubtful whether Garcia has identified the alleged misrepresentations with sufficient particularity to satisfy Federal Rule of Civil Procedure 9(b). Although the SAC generally asserts that the statements to be found on the PS3’s packaging and Sony’s website are misleading and exemplary of defendants’ deceptive marketing campaign, see SAC ¶¶ 24-25, it does not specifically aver that Garcia relied on those particular statements, or even expressly state that he was aware of them. These omissions are fatal under Rule 9(b).
More fundamentally, although the newly-amended complaint suggests Sony knew or should have known — in 2006 — that advances in video gaming technology would render the PS3 incompatible with future games years hence, the only “fact” alleged in support of that claim is that Sony was generally aware of the competitive and dynamic nature of the video game industry. That allegation, without more, does not state a plausible claim. Garcia simply cannot maintain an action sounding in fraud based on Sony’s supposed clairvoyance as to unspecified, future technological advancements in the field. Cf. Morgan v. AT & T Wireless Servs., Inc., 177 Cal.App.4th 1235, 1256-57, 99 Cal.Rptr.3d 768 (2009) (plaintiff stated a claim because defendant knew at the time it sold cellular telephones to consumers that impending changes to the network would degrade service). Garcia has therefore failed to state a viable claim under the UCL predicated solely on the purchase of the PS3.
The SAC advances the theory that the PS3 logos on the packaging of “Call of Duty,” considered in conjunction with Sony’s general statements concerning the console’s compatibility, constitute deception. The only misrepresentations identified by the SAC on the game itself are Sony’s logos — “PS3,” “PlayStation Network,” and “Only On PlayStation.” Plaintiff evidently ascribes a great deal of significance to these phrases, as the SAC contains no other allegations about the videogame’s packaging or the documentation that may have accompanied it. Given, that the SAC acknowledges that the PS3 line includes numerous models released over a number of years, it is difficult to accept Garcia’s allegation that the mere presence of PS3 logos on the front of the game’s box, without reference to other disclosures that may have appeared on it, constitutes an affirmative misrepresentation that would deceive a reasonable consumer into believing that all such branded games must be compatible with all PS3 models in perpetuity, or at least for some unspecified number of years. Contrary to plaintiffs suggestion, the logos simply do not rise to the level of an express, affirmative representation to that effect. Garcia cannot maintain, without more, that reasonable consumers are likely to adopt his specific, and fairly extreme, understanding of the logos. Lavie, 105 Cal.App.4th at 508, 129 Cal.Rptr.2d 486 (“likely to deceive” means “more than a mere possibility that the advertisement might conceivably be misunderstood by some few consumers viewing it in an unreasonable manner”).
Putting that defect aside, as it could conceivably be cured by amendment of the pleadings, the SAC goes on to suggest that Sony and Activision were, as a result of their general experience in the video game industry, aware of consumer demand for increasingly advanced audio-visual effects in videogames, and knew that consumers would not expect PS3 consoles to be “rendered obsolete in a few years.” SAC ¶ 7. The SAC apparently offers these allegations in service of the contention that consumers were deceived.
There are at least two, related defects in this theory. First, although Daugherty does not directly govern the analysis of Garcia’s misrepresentations claims, it does teach that, absent an affirmative misrepresentation, consumers have no legitimate expectation that a product will properly function after the expiration of the warranty. 144 Cal.App.4th at 838, 51 Cal.Rptr.3d 118. Thus, consumers may have an expectation of functionality beyond the warranty period only if supported by some identifiable, affirmative representation by defendants. Despite an opportunity to amend, no such averment has emerged in the SAC. Instead, plaintiff seeks to characterize incomplete or ambiguous statements as deceptive, based solely on consumer expectations that lack any independent basis. Relatedly, it is less than self-evident that consumers would expect first-generation gaming consoles to be compatible with games released years later, given the premise that the videogame industry is typified by rapid technological change. Common experience suggests the contrary: that constant innovation often leads to incompatibility and the obsolescence of older products.
In sum, Garcia does not succeed in stating a plausible claim under the UCL for “fraudulent” business acts or practices because the SAC fails to identify, with sufficient specificity to satisfy Rule 9(b), any representation by defendants that is likely to deceive a reasonable consumer. Garcia insists that whether or not defendants’ statements are likely to be deceptive is
Turning to the alternative theory of “unlawful” business acts or practices under the UCL, the SAC lists a host of independent violations of state law. Like Garcia’s standalone UCL claim for “fraudulent” business practices, however, each of these statutes requires a plausible allegation of deception.
Finally, the SAC’s factual allegations also do not support a claim for relief from “unfair” conduct under the UCL. Although this theory is not much developed by the parties, Garcia’s pleadings track the various standards employed by the courts to suggest defendants’ conduct is unfair in the sense that it offends public policy, is immoral, unethical, oppressive, unscrupulous, and injurious to consumers, and, on balance, more harmful than beneficial. In Lozano, the Ninth Circuit held consumers’ claims of unfairness must be “tied to a ‘legislatively declared’ policy.” Lozano, 504 F.3d at 736 (citing Scripps Clinic v. Superior Court, 108 Cal.App.4th 917, 134 Cal.Rptr.2d 101 (2003)). Alternatively, conduct may be deemed' “unfair” if, on balance, the harm it does to consumers outweighs its utility. Id. Here, Garcia has neglected to identify any relevant legislative policy, other than those already found inapplicable, above. While Garcia conclusorily suggests that defendants have “no legitimate .business reason to advertise certain of its videogames as compatible with all PS3 consoles,” again, the SAC does not adequately identify any such affirmative misrepresentations by defendants. Accordingly, Garcia has failed to state a UCL claim under any of the three possible § 17200 theories.
Garcia’s amendments to the SAC repackage certain of his legal theories, but supply no additional, material facts. The dismissal must therefore be without leave to amend, as Garcia has now had two opportunities to amend his complaint to add sufficient factual allegations to state a claim, and has proved unable to cure the
B. Consumers Legal Remedies Act
The SAC alleges defendants violated four subsections of the CLRA, which prohibits “unfair methods of competition and unfair or deceptive acts or practices” in the sale of goods or services to a consumer. Cal. Civ.Code § 1770. Specifically, Garcia relies on California Civil Code § 1770(a)(5), (7), (9), and (16), which proscribe both “[r]epresenting” and “[advertising” goods or aspects of a transaction in a false or misleading manner. To state a claim under the CLRA, like the UCL, plaintiff must show that defendant’s conduct or advertising is “likely to deceive a ‘reasonable consumer.’ ” Benson v. Kwikset Corp., 152 Cal.App.4th 1254, 1274-75, 62 Cal.Rptr.3d 284 (2007). The “reasonable consumer” standard applied to UCL claims also applies to the CLRA. Consumer Advocates, 113 Cal.App.4th at 1360, 8 Cal.Rptr.3d 22. Further, pleadings under the CLRA that “sound in fraud” must be plead in compliance with Rule 9(b). Kearns, 567 F.3d at 1125.
To the extent plaintiffs second claim for relief relies solely on Garcia’s purchase of the PS3 console, it remains unchanged, and defective for the reasons stated in the prior order.
V. CONCLUSION
For the reasons set forth above, defendants’ motions to dismiss must be granted with prejudice. The Clerk is directed to close the case.
IT IS SO ORDERED.
. Sony has allegedly released "several version of PS3 consoles," including eight distinct models released between 2006 and 2008 that are at issue in this litigation, referred to as the "fat” models in the pleadings. SAC ¶ 19. Subsequent models, referred to by plaintiff as the "slim models,” do not suffer from the overheating problem alleged in his complaint. Id. at ¶ 20.
. Defendants also doubt the specific theory of harm advanced in the SAC — that is, they question whether there are sufficient facts pleaded to support Garcia's claim that his PS3 overheated as a result of playing "Call of Duty.” They note that Garcia allegedly played the game for several months before the service light appeared, and suggest that his four-year old PS3 was likely near the end of its useful life, and liable to fail irrespective of the game. This issue need not be reached because the SAC is defective for other reasons. It is at least worth noting, however, that a
. As discussed above, they also have not been pleaded with the requisite particularity under Rule 9(b). Kearns, 567 F.3d at 1125; Actimmune, 2009 WL 3740648, at *8.
. The SAC further suggests that PS3 owners are “locked in” to the PS3 platform by Sony because the PS3 consoles are relatively expensive, and only compatible with video games approved by Sony and specifically designed for the PS3’s proprietary software platform. Thus, new console systems are rarely introduced, and if a player’s console fails, the player must buy a new PS3 to continue using his or her existing library of PS3 games. While these allegations may enhance the plausibility of Garcia's claim marginally, defendants’ alleged general profit motive provides an inadequate basis from which to draw any material inference.
. See Cal. Civ.Code §§ 1572 (actual fraud, requiring "an intent to deceive”); 1573 (constructive fraud, consisting of either a breach of duty, or "any such act or omission as the law specially declares to be fraudulent”); 1709 (claim for deceit is actionable against "[o]ne who willfully deceives another .... ”); and 1711 (deceit to defraud the public may be alleged against "[o]ne who practices a deceit with intent to defraud the public, or a particular class of persons”). To state a claim under the California Business & Professions Code § 17500 for false advertising or the CLRA, plaintiff must plead facts to show that "members of the public are likely to be deceived." Comm. on Children’s Television, Inc. v. Gen. Foods Corp., 35 Cal.3d 197, 211, 197 Cal.Rptr. 783, 673 P.2d 660 (1983) (§ 17500); Consumer Advocates v. EchoStar Satellite Corp., 113 Cal.App.4th 1351, 1361-62, 8 Cal.Rptr.3d 22 (2003) (CLRA).
. Specifically, the SAC fails to state a claim because the pleadings do not identify any misrepresentation contemporaneous with Garcia’s purchase, or show reliance, and secondly, because plaintiff’s claims are not pleaded with adequate specificity under Rule 9(b).