Opinion
Master File No. C053580 JF.
May 12, 2006
BRUCE L. SIMON, COTCHETT, PITRE, SIMON McCARTHY, San Francisco Airport Office Center, Burlingame, CA.
PATRICK McNICHOLAS, McNICHOLAS McNICHOLAS, LLP, Los Angeles, CA.
JONATHAN SHUB, SHELLER, LUDWIG BADEY, Philadelphia, PA, Co-Lead Counsel for Plaintiffs and the Class.
STEVEN BERK, CUNEO, WALDMAN GILBERT, LLC, Counsel for Plaintiffs and the Class.
DAVID BUCHANAN, SEEGER WEISS LLP, Counsel for Plaintiffs and the Class.
MARK CHAVEZ, CHAVEZ GERTLER, Counsel for Plaintiffs and the Class.
MARC EDELSON, EDELSON ASSOCIATES, LLC, Counsel for Plaintiffs and the Class.
STEPHEN M. GARCIA, THE GARCIA LAW FIRM, Counsel for Plaintiffs and the Class.
MICHAEL D. LIBERTY, LAW OFFICES OF MICHAEL D. LIBERTY, Counsel for Plaintiffs and the Class.
SCOTT E. SHAPIRO, LAW OFFICES OF SCOTT E. SHAPIRO, P.C., Counsel for Plaintiffs and the Class.
PLAINTIFFS' OPPOSITION TO DEFENDANT'S MOTION TO DISMISS SECOND CONSOLIDATED AND AMENDED COMPLAINT
I. INTRODUCTION
Plaintiffs, Nicklos Ciolino and Daniel Feder, bring this class action against defendant Hewlett-Packard Company (hereinafter "HP") to challenge the use of "smart chip" technology in HP's inkjet printer cartridges. Plaintiffs contend that HP's use of the "smart chip" is part of a deceptive and misleading scheme to increase the sale of printer cartridges by limiting a consumer's ability to use all of the ink in a cartridge. They allege causes of action for breach of express warranty, breach of implied warranty, unjust enrichment, violation of the California Legal Remedies Act, violation of the California False Advertising Act, and violation of the California Unfair Competition Law.
In their Second Consolidated Class Action Complaint (hereinafter "SAC"), plaintiffs followed the Court's guidance from the first motion to dismiss to plead "the requisite causal connection between the alleged injuries and HP's conduct" and "explain how their specific injuries will be redressed by the relief sought." See Order, 5:10-12. HP has now filed another motion to dismiss. Significantly, HP does not dispute that plaintiffs have standing to challenge its use of misleading low-ink messages. See Motion, 2:13-14; 6:11-12; 8:4-5. Nor does HP dispute that plaintiffs' causes of action are sufficient. Instead, the instant motion only challenges plaintiffs' standing to seek injunctive relief in connection with HP's use of concealed expiration dates.
As set forth more fully below, plaintiffs have standing because the expiration date feature is an integral part of the "smart chip" technology that caused harm to plaintiffs, and because the continued use of the expiration date feature presents a real and immediate threat of future injury. Accordingly, defendant's motion to dismiss should be denied.
II. SUMMARY OF COMPLAINT
HP engages in deceptive conduct that is designed to increase the sale of its replacement ink cartridges. SAC ¶ 1. Specifically, HP embeds "smart chips" into its printer cartridges, claiming that the technology will improve printer performance. Id. ¶¶ 1, 22. "Smart chips" feature two features that harm consumers: (1) it can send premature and false low-ink messages to consumers; and (2) it can automatically disable printer cartridges on a predetermined date. SAC ¶ 2. Each feature deceives consumers into purchasing additional ink from HP. Id.
HP promotes the "smart chip" technology through its "SureSupply" campaign. Id. ¶ 28. HP claims that by using "SureSupply," consumers will "[n]ever run out of supplies" and will "[s]ave time [a]nd money." Id. Contrary to these representations, the "smart chip" increases the cost for consumers to use HP printers because consumers are deceived into discarding printer cartridges that still have usable ink and prematurely purchasing unnecessary replacement cartridges. Id. ¶ 29.
Plaintiffs are owners of HP printers that utilize cartridges equipped with "smart chip" technology. Id. ¶¶ 6-7, 30, 32. Plaintiffs received multiple low-ink messages in connection with the use of their HP printers. Id. ¶ 30, 32. As a result of the low-ink messages, plaintiffs were misled into believing their printer cartridges were empty or nearly empty, and plaintiffs did not obtain the full value of the HP cartridges they purchased. Id. Plaintiffs suffered actual and monetary injury by virtue of purchasing HP ink that they were unable to use. Id. ¶¶ 31, 33. Plaintiffs seek monetary damages for the HP ink they purchased but were unable to use. Id. ¶ 73. They also seek injunctive relief regarding HP's use of "smart chip" technology and the "SureSupply" campaign. Id. ¶¶ 65, 73.
III. LEGAL ARGUMENT
A. Standard Of Review
The doctrine of standing arises from our Constitution's limitation of federal court jurisdiction to "Cases" and "Controversies." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Standing is comprised of three elements: (1) "injury in fact," which is an actual or imminent invasion of a legally protected interest that is concrete and particularized; (2) a causal connection between the injury and defendant's conduct; and (3) likelihood that the injury will be redressed by a favorable decision. Id. at 561.
When, as in this case, a motion to dismiss challenges the sufficiency of plaintiffs' injury allegations rather than the accuracy of those allegations, the standard of review is similar to a Rule 12(b)(6) standard. Stevens v. Harper, 213 F.R.D. 358, 370, n. 12 (E.D. Cal. 2002). Under Rule 12(b)(6), even if the pleading suggests that the chance of recovery is "very remote," the Court must allow the plaintiff to develop the case. United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). A claim may be dismissed only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
For purposes of deciding a motion to dismiss for lack of standing, the Court must accept each material allegation in the complaint as true and construe the complaint in the light most favorable to the plaintiff. Warth v. Seldin, 422 U.S. 490, 501 (1975). Unlike on a motion for summary judgment, where evidence is required, only "general factual allegations of injury" are required at the pleading stage because courts "presume that general allegations embrace the specific facts necessary to support the claim." Lujan, 504 U.S. at 561.
B. Plaintiffs Have Standing To Challenge HP's Use Of "Smart Chips" Based On Their Receipt Of Low-Ink Warnings
Plaintiffs allege that they purchased printer cartridges containing "smart chip" technology. See SAC ¶¶ 6-7, 30, 32. Plaintiffs further allege that the "smart chip" technology caused them to discard cartridges containing useable levels of ink, resulting in economic harm. Id. ¶¶ 31, 33. Notwithstanding these allegations, HP argues that plaintiffs only have standing to challenge the use of low-ink messages and not the use of a concealed expiration date. The cases cited by HP in support of this argument, including Gilmore v. Gonzalez, 435 F.3d 1125 (9th Cir. 2006) and Stevens v. Harper, 213 F.R.D. 358 (E.D. Cal. 2002), are factually distinguishable and do not support dismissal.
In Gilmore, the plaintiff sued numerous federal officials and airline carriers regarding a "host" of security measures implemented in the airline, train, and bus industries. 435 F.3d at 1134. It was undisputed, however, that plaintiff's sole injury was an inability to fly caused by his refusal to comply with one particular safety measure, i.e., an identification policy. Gilmore, 435 F.3d at 1135. Plaintiff did not contend that he had been subjected to any other security measures or that he ever traveled by train or bus. Id. After an in camera review of documents relating to the subject security measures, and without specific discussion about the relationship between the putatively illegal security measures, the Court held that plaintiff's standing was limited to challenging the airlines' identification policy. Id. at 1129.
In Stevens, plaintiffs were nine incarcerated youths. 213 F.R.D. at 364. The plaintiffs alleged claims of "extraordinary breadth" arising from constitutional and statutory violations at eleven different correctional facilities. Id. at 364-367. Defendants filed a motion to dismiss and motion for partial summary judgment. Id. at 364. Thereafter, the Court dismissed the claims of certain plaintiffs because those plaintiffs had failed to establish that defendants' practices presented a continued risk of harm to them. Id. at 370-371. In particular, plaintiff Martinez did not "state that he has any particular reason to currently fear for his safety" and plaintiff Brown did "not allege that his current living conditions . . . are inadequate in any way." Id.
Neither the Gilmore Court nor the Stevens Court was presented with the unique facts in this case, where the putatively illegal practices are intermingled features of the same overarching practice that causes the same injury to the same group of consumers. The misleading low-ink warnings and concealed expiration dates are both part of the same "smart chip" technology that is touted in the "SureSupply" campaign. These features supplement each other and work in combination. As HP itself observed, the undisclosed expiration date feature of its cartridges is averted when consumers discard the still useable cartridge based on a low-ink message. See Motion, 7:25-8:1.
Perhaps this case would be comparable to Gilmore or Stevens if plaintiffs were seeking relief for features contained in different consumer products, such as an HP digital camera or desktop computer. However, this is not what plaintiffs allege. Plaintiffs' claims all relate to one product — HP printer cartridges containing "smart chips," one scheme — HP's scheme to increase the purchase of printer cartridges, one common course of misleading statements — HP's claims that "smart chips" save money and improve printer performance, and one injury — a consumer's inability to use all of the ink in his or her printer cartridge. Here, plaintiffs are not alleging claims of "extraordinary breadth" as was the situation in Stevens. The fact that plaintiffs have not yet encountered an expired cartridge does not relieve HP of liability because plaintiffs have undisputably sustained injury as a result of the low-ink warnings. HP's expiration dates and low-ink messages are companion features of the same technology, and economic harm caused by one is sufficient to confer standing to challenge the other. Therefore, HP's motion to dismiss for lack of standing should be denied.
C. Plaintiffs Have Standing To Challenge HP's Use Of "Smart Chips" Based On The Threat Of Future Harm Caused By Undisclosed Expiration Dates
In addition to the receipt of low-ink warnings, the imminent threat caused by HP's continued use of a concealed expiration date in the cartridges equipped with "smart chip" technology provides an independent basis for standing. The Supreme Court has made clear, "threatened injury as a result of the putatively illegal conduct of the defendant" is sufficient to confer standing. Valley Forge Christian College v. American United for Separation of Church and State, Inc., 454 U.S. 464, 472 (1982). So long as plaintiff can show that "there is a possibility that defendant's conduct may have a future effect, even if injury has not yet occurred, the court may hold that standing has been satisfied." Wright, Miller Kane, Federal Practice and Procedure Civil 3d, § 1785.1 (2005) (emphasis added). The threat of future harm need not be certain to confer standing. See, e.g., American Society for the Prevention of Cruelty to Animals v. Ringling Bros. and Barnum Bailey Circus, 317 F.3d 334 (2003); and Massey v. Banning Unified School District, 256 F. Supp. 2d 1090 (C.D. Cal. 2003).
In Society for the Prevention of Cruelty, supra, plaintiff was a former elephant handler who sought injunctive relief against defendants' mistreatment of elephants. Plaintiff in that case alleged that he "would like to visit [the elephants] again so he can continue his personal relationship with them, and enjoy observing them." 317 F.3d at 337. Although plaintiff did not articulate what kind of "visit" he had in mind, the Court supplied the following construction of the allegations — that plaintiff wants to attend the circus in the future and " might " observe the physical manifestations of the alleged animal mistreatment. Society for the Prevention of Cruelty, 317 F.3d at 337 (emphasis added). The Ninth Circuit held that this potential for future harm was adequate to demonstrate standing. Id.
In Massey, supra, the plaintiff sought an injunction against her former school district regarding the district's policy on homosexuality. 256 F. Supp. 2d at 1091-1092. Although the plaintiff no longer lived in or attended school in that district and was not subject to its policies, the Court held that she had standing to seek prospective relief because there was a likelihood that plaintiff would return there. Id. at 1098. The Massey Court explained, "[a]lthough Defendants urge the Court not to assume that Plaintiff will return to the District based solely on the allegation set forth in the Complaint, the Court finds that a decision as to the likelihood of her return is premature." Id. The Court denied the motion to dismiss for lack of standing. Id.
In this case, HP's use of a concealed expiration date in its "smart chip" equipped cartridges is an ongoing business practice. Plaintiffs own, and use, HP printers that utilize cartridges equipped with "smart chip" technology. As such, they have a direct stake in the putatively illegal use of an undisclosed and premature expiration date because this practice impairs plaintiffs' ability to get full use of the ink cartridges they buy. HP's use of the expiration date presents a more than speculative threat of future malfunction. In the past, the concealed expiration date feature may have been avoided because plaintiffs would discard their cartridges based on a low-ink message. However, now that plaintiffs have knowledge that the low-ink warnings are false and will disregard the warnings. Thus, the threat that they will encounter a useable, but expired, cartridge is more imminent. The threatened harm of an inoperable cartridge constitutes injury-in-fact. This injury is directly traceable to HP's practice of manufacturing its printer cartridges with a concealed expiration date. This injury is redressable by the grant of the prospective relief sought. Therefore, plaintiffs have standing, and the motion to dismiss should be denied.
The imminence of encountering an expired cartridge is a factual issue dependent on factors such as how long cartridges sit on a retailer's shelf before sale to consumers. If, for example, a cartridge sits on a store shelf for an extended period, the consumer may have a much shorter period to use the cartridge than the 30 months between manufacture and expiration.
D. Plaintiffs Have Standing To Seek Injunctive Relief
It is axiomatic that "one does not have to await consummation of threatened injury to obtain preventative relief." Blum v. Yaretsky, 457 U.S. 991, 1000 (1982) (citations omitted). In order to establish entitlement to injunctive relief, however, plaintiffs must allege an imminent threat of irreparable harm. Hodgers-Durgin v. De La Vina, 199 F.3d 1037, 1042 (1999). In the context of standing, "imminence" is an "elastic concept." Lujan, 504 U.S. at 564, n. 2.
In this case, HP does not dispute plaintiffs' standing to seek injunctive relief relating to the low-ink messages programmed in its printer cartridges. HP's motion only disputes plaintiffs' standing to seek injunctive relief relating to the expiration date feature. As stated in section III.C. above, there is an imminent threat that plaintiffs will encounter an expired cartridge in the normal course of using their printers, particularly given that they are now aware of the falsity of the low-ink messages. Other than to increase the frequency of their use of HP's printer cartridges, there is no way for plaintiffs to protect themselves from the automatic shut-off caused by the expiration dates concealed in their cartridges. Once the malfunction occurs, plaintiffs lose the ability to use all of the ink that they purchased, and they are forced to purchase new printer cartridges. Plaintiffs therefore face an imminent and irreparable threat of having a cartridge expire and becoming useless before it is depleted of ink. Accordingly, plaintiffs are entitled to seek injunctive relief.
E. If Plaintiffs' Allegations Of Standing Are Deemed Insufficient, Plaintiffs Should Be Granted Leave To Amend
As the Court is well aware, leave to amend is "freely given, particularly in the absence of any apparent or declared reason to deny amendment such as undue delay, bad faith, a dilatory motive on the part of the amending party, undue prejudice to the opposing party or futility." Foman v. Davis, 371 U.S. 178, 182 (1962). Leave to amend should only be denied where "the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000). If the Court finds that standing has not been alleged adequately, plaintiffs respectfully request that they be granted leave to amend.
IV. CONCLUSION
For the foregoing reasons, plaintiffs have standing to challenge HP's misleading and unfair business practices, and to seek the requested relief. Accordingly, plaintiffs respectfully request that the Court deny defendant's motion to dismiss.