Ninth Circuit Adheres to Precedent and Finds That Subverting Express Warranties Simply Does Not Compute

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On May 19, 2022, in an unpublished decision, a Ninth Circuit panel reaffirmed that under California law manufacturers do not have a duty to disclose defects in their products that manifest after the expiration of the product’s warranty unless the defect poses an unreasonable safety risk.  Taleshpour v. Apple, Inc., 2022 WL 1577802 (9th Cir. May 19, 2022).  The court affirmed dismissal of a proposed class action against Apple Inc., holding that California consumer protection laws were not violated as a matter of law because the alleged defect in MacBook Pro laptop computers arose after the expiration of the warranty and the complaint did not allege any safety issue.  The court followed existing Circuit precedent, even though there is some conflicting authority in the California courts of appeal.

Plaintiffs alleged that in certain MacBook Pro models, the backlight ribbon cables used to connect the display screen to the display control tear because the cables do not provide enough slack when the laptops open and close.  Apple agreed to replace the display of all 13-inch MacBook Pros that suffer from the alleged defect, but not the 15-inch model or any model released after 2016.  Plaintiffs alleged on behalf of the class that the excluded models suffered from the same backlight defect as the pre-2016 13-inch version.  Plaintiffs conceded the backlight ribbon issues arose after the expiration of Apple’s one-year warranty.

The district court opinion (549 F. Supp. 3d 1033 (N.D. Cal. 2021)) observed that “the state of the law on the duty to disclose under California law is in some disarray.”  In Wilson v. Hewlett-Packard Company, 668 F.3d 1136 (9th Cir. 2012), the court held that, under the Consumers Legal Remedies Act (“CLRA”), a plaintiff who does not allege a manufacturer made affirmative misrepresentations about an alleged defect must “allege that the design defect caused an unreasonably safety hazard.”  But a subsequent California Court of Appeal decision, Rutledge v. Hewlett-Packard Company, 238 Cal. App. 4th 1164 (2015), held that a plaintiff pursuing a fraudulent omission CLRA claim “need not always plead an unreasonable safety hazard.”  In Hodsdon v. Mars, Inc., 891 F.3d 857 (9th Cir. 2018), the Ninth Circuit found Rutledge and another court of appeal case unclear and potentially inconsistent with Wilson, but concluded it was unnecessary to decide whether Wilson had been effectively overruled, because plaintiffs’ claims failed under any potential reading of California law.  In dicta, Hodsdon reasoned that Rutledge could be read to impose a duty to disclose a non-safety defect if it went to the central function of a product and it arose during the warranty period.

Accordingly, the district court read California law, as interpreted in the Ninth Circuit, to mean that “a manufacturer has a duty to disclose any defects that fall within the warranty period, whether relating to safety or to costly repairs, that would have caused the consumer to not purchase the product in the first place.”  Because the alleged backlight defect arose outside the warranty period, the court ruled that Plaintiffs did not state a claim for fraud by omission under the CLRA.

On appeal, Plaintiffs asked the Ninth Circuit to reconsider Wilson and Circuit cases following it, and they argued that Hodsdon had effectively overruled Wilson’s reading of California law.

The court declined to revisit Wilson.  Invoking the en banc reversal rule, the court held that a three-judge panel cannot overrule Ninth Circuit precedent (i.e., Wilson) unless “the prior decision is effectively overruled by a state or federal court of last resort.”  The California Supreme Court has not “effectively overruled” Wilson, so it remains binding Ninth Circuit precedent, and could not have been overruled by the three-judge panel in Hodsdon.  In addition, Hodsdon was distinguishable because it involved labeling on candy wrappers, not a product defect or warranty issue, and had expressly declined to define the scope of a duty to disclose and the status of Wilson.  The court agreed with the district court that under Wilson, Apple’s duty to disclose the purported defect was limited to defects arising during the warranty period unless the defect posed a safety threat.  Dismissal of the CLRA claim was therefore proper.

The court also affirmed the dismissal of plaintiff’s claims for common law fraud and claims under other consumer protection statutes, in California and elsewhere, because all the claims depended on Apple having a duty to disclose – which it did not.

In sum, Plaintiffs’ effort to circumvent Wilson and the en banc reversal rule was met with a 404-error code.  For the moment at least, with respect to claims for fraudulent omissions, the Ninth Circuit continues to decline to interpret California law to blow up express warranties by imposing liability for non-safety problems with products that occur outside the contracted-for warranty period.

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