False Ad Claims Fail to Crystalize as Court Dismisses Amended Complaint against Sharp Electronics with Prejudice

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Dismissals of class action complaints with prejudice are not as common as dismissals with leave to replead, but a recent decision in the District of New Jersey illustrates the circumstances under which a dismissal with prejudice is appropriate.

Plaintiffs filed a putative class action against Sharp Electronics alleging that Sharp falsely and misleadingly marketed its line of flat screen televisions as light emitting diode (“LED”) TVs without disclosing that its references to LED referred to the television’s LED light source technology for liquid crystal displays (“LCD”) rather than to a more advanced LED display technology. The plaintiffs claimed they relied on misleading statements to this effect on Sharp’s television cartons. Dismissing the plaintiffs’ original complaint, Judge William Martini observed that Sharp had stated on the television cartons that the product inside the carton was both an “LED TV” and a “Liquid Crystal Television.” The court found that the plaintiffs therefore did not adequately allege that a reasonable consumer could be deceived by Sharp’s marketing statements, and dismissed their original complaint without prejudice.

In their amended complaint, plaintiffs channeled new allegations that they purchased Sharp televisions because Sharp made marketing assertions on the Internet and at point-of-sale that the television was an LED TV. The court dismissed the amended complaint as well, this time with prejudice. First, the court held that the plaintiffs failed to meet the heightened pleading standard of Rule 9(b) because they failed to provide the court with the “who, what, when, where and how” of the alleged consumer fraud. Second, the court held that the plaintiffs again failed to adequately allege that a reasonable consumer could be deceived by Sharp’s marketing because the plaintiffs merely alleged misrepresentations “on the internet,” and the court determined that Sharp’s website contained a crystal clear disclosure in the “tech specs” section of its webpage that Sharp’s LED TVs were, in fact, displayed on LCD panels. These disclosures, like the disclosures on the TV cartons raised in the original complaint, again defeated plaintiffs’ claims that a reasonable consumer would be deceived.

The court assumed that plaintiffs’ counsel was well aware of the requirements of Rule 9(b), and given that plaintiffs failed to supplement the pleadings when given the chance to do so, the court surmised that plaintiffs would have no additional particulars to plead if given another opportunity to amend. Accordingly, the court dismissed the amended complaint with prejudice.

Dismissal with leave to file a third complaint (and on occasion even more) are not unheard of, and it will be interesting to see whether more courts follow Judge Martini’s lead and hold that, where a plaintiff twice fails to state a claim under the pleading standard of 9(b), the claim should be dismissed with prejudice on the ground that plaintiff would have nothing more to add in yet another amended complaint. Watch this space for further developments.

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Lyuba Shamailova, a summer associate, assisted in preparing this post.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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