Wednesday, February 19, 2020
Reverses Dismissal Because District Court Failed to Thoroughly Analyze California Law
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday reversed the dismissal of a putative class action against Samsung in which it is alleged that the manufacturer’s post-purchase disclaimers with respect to its smart TVs’ ability to connect to YouTube are ineffective.
The appeals court did not say that they’re right—though broadly hinting that they are—but remanded the case, finding that the District Court judge botched his analysis of applicable California law.
Four named plaintiffs in the diversity action—two residing in Los Angeles County, one in Illinois and one in Massachusetts—each purchased a Samsung Smart TV in either 2011 or 2012, allegedly in reliance on the advertised representation that the user could access YouTube. As of June 26, 2017, that capacity ended owing to a change in technology.
The Jan. 29, 2018 amended complaint sets forth that Samsung “promoted Smart TVs by placing the YouTube logo on its packaging, in-store displays, and by displaying the YouTube app in its commercials and in online advertising to inform consumers that Smart TVs came with YouTube access included upon purchase.” It adds that Samsung “sold its Smart TVs in a manner that also indicated it was selling access to video streaming apps, including YouTube.”
Different Purchasing Choice
The complaint goes on to aver:
“If Defendant had made Plaintiffs aware that the Affected Smart TV they ultimately purchased would not have access to YouTube or would in some date in the future lose access to YouTube, Plaintiffs would have made a different purchasing decision. Plaintiffs would have either decided to purchase a non-smart television, to purchase another brand that would provide access to YouTube for the life of the product, or to pay less for a television due to the loss of YouTube accessibility.”
The plaintiffs sought damages, attorney fees, and specific performance by Samsung by restoring their ability to connect to YouTube via their smart TVs.
District Court Order
In a July 20, 2018 order, District Court Judge Jeffrey S. White of the Northern District of California dismissed various claims, with leave to amend. The plaintiffs chose not to amend and appealed.
White granted Samsung’s request that judicial notice be taken of the content of user manuals inside the boxes in which the smart TVs were contained, as well as a disclaimer appearing on the screen when the TV was turned on..
“Given that the Court finds the express disclaimers made by Samsung are included as part of the purchase agreement Plaintiffs allege has been breached, Plaintiffs cannot maintain their first cause of action, the breach of contract claim, in its current form,” White said.
Based on his conclusion that the express disclaimers were effective, White also dismissed claims for negligent misrepresentation, fraud, consumer protection, and unjust enrichment claims (as well as dismissing one for breach of the implied warranty of merchantability which was not appealed).
Ninth Circuit Reversal
Reversal came in a memorandum opinion. On the panel were Circuit Judge Michelle T. Friedland, Senior Circuit Judge A. Wallace Tashima, and District Court Judge Robert S. Lasnik of the Western District of Washington, sitting by designation.
The opinion recites that the plaintiffs contended in the District Court that a purchaser would not see a disclaimer until after unpackaging the Smart TV so that it was not part of the purchase agreement under California law and that, in any event, it would be, under California law, unenforceable due to unconscionability.
“The district court failed to address these arguments,” the opinion says, “despite the fact that they both had to be resolved in Samsung’s favor before the court could conclude that the disclaimers were part of the parties’ bargain and/or were enforceable.”
“The order obliquely acknowledges that there was a temporal disconnect between plaintiffs’ purchase of the Smart TVs and the post-purchase disclosure of limitations on the promised access to YouTube. It does not. however, analyze the impact of the delay on the basis of the parties’ bargain under California law. With regards to purchasers’ assent, the district court took judicial notice of certain documents and concluded that the disclaimers contained therein were part of the parties’ agreement. The district court did not consistently identify the disclaimer language it found relevant, however, or discuss whether the writings would put a reasonable consumer on notice that contractual terms were in the offing.”
White did not address the unconscionability argument, at all, the opinion notes.
The opinion comes close to dictating that, on remand, the disclaimer be found invalid. It says in a footnote:
“If, as appears to be the case, the district court took judicial notice of only the user manual that was in the box with plaintiffs’ Smart TVs and the electronic manuals containing disclaimers to which the user manuals directed the purchaser, there is no evidence that plaintiffs manifested assent to, or knew about, the hidden terms.”
Another footnote points out that while the plaintiffs sued for breach of contract, what they actually stated, under California law, was a claim for breach of an express warranty, and directed that the claim be so denominated on remand.
It pinpoints three specific issues that need to be addressed on remand with respect to California’s view of disclaimers of express warranties:
“• whether a seller can use post-purchase disclaimers to negate or limit express representations it made in its efforts to sell the product:
“• whether the disclaimers in this case contradicted an express warranty and were thus inoperative under Cal. Com. Code § 2316(1);
“• whether a post-purchase disclaimer buried in a lengthy digital document is unenforceable (for instance, because the purchaser did not manifest assent).”
The case is Baird v. Samsung Electronics America, 18-16579.
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