Opinion
CIVIL NO. 21-00281 JAO-KJM
2023-01-11
Ingrid WEISSE and Loren Bullard, Plaintiffs, v. LG ELECTRONICS, INC. and LG Electronics USA, Inc., Defendants.
Kenneth S. Kasdan, Christopher K. Hikida, Sharla Ann Manley, Kasdan Turner Thomson Booth LLC, Honolulu, HI, for Plaintiffs. Daniel Petrokas, Pro Hac Vice, Jack Shaked, Pro Hac Vice, Mohan Warusha Hennadige, Pro Hac Vice, Phoebe A. Wilkinson, Pro Hac Vice, Hogan Lovells, New York, NY, Edmund K. Saffery, Deirdre Marie-Iha, Goodsill Anderson Quinn & Stifel LLP, Honolulu, HI, for Defendant LG Electronics USA, Inc.
Kenneth S. Kasdan, Christopher K. Hikida, Sharla Ann Manley, Kasdan Turner Thomson Booth LLC, Honolulu, HI, for Plaintiffs. Daniel Petrokas, Pro Hac Vice, Jack Shaked, Pro Hac Vice, Mohan Warusha Hennadige, Pro Hac Vice, Phoebe A. Wilkinson, Pro Hac Vice, Hogan Lovells, New York, NY, Edmund K. Saffery, Deirdre Marie-Iha, Goodsill Anderson Quinn & Stifel LLP, Honolulu, HI, for Defendant LG Electronics USA, Inc.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT LG ELECTRONICS USA, INC.'S MOTION TO DISMISS
Jill A. Otake, United States District Judge
Plaintiffs Ingrid Weisse and Loren Bullard ("Plaintiffs") bring this putative class action against Defendants LG Electronics, Inc. ("LGE") and LG Electronics USA, Inc. ("LGEUS") (collectively, "Defendants") based on allegations that Defendants manufactured and sold certain Packaged Terminal Air Conditioners ("PTACs") in the State of Hawai'i that are defective because they are prone to corrosion and unfit for use here based on Hawaii's environmental conditions. LGEUS moves to dismiss all claims with prejudice. ECF No. 45 ("Motion").
For the following reasons, the Court GRANTS IN PART and DENIES IN PART LGEUS's motion.
I. BACKGROUND
A. Factual History
Plaintiffs own condominium units in a high-rise building located at 988 Halekauwila in Honolulu, Hawai'i. ECF No. 43 ¶ 7. Defendants' PTACs were installed in units in that building, including in Plaintiffs' units, sometime after June 2017. Id. ¶¶ 7-8. Pursuant to their purchase agreements, Plaintiffs were assigned any warranties related to their units; they therefore hold the LG Packaged Terminal Air Conditioner Systems Warranty associated with their PTACs. Id. ¶¶ 11-12; see also ECF No. 43-1. Under that warranty, Defendants warrant "against defects in materials or workmanship under normal use" as follows: (a) a one-year warranty for "[a]ny part of the LGE Packaged Terminal Air-Conditioner that fails because of a defect in materials or workmanship"; (b) a five-year warranty for "[a]ny part of the sealed refrigerating system (the compressor, condenser, evaporator, and all connecting tubing) that fails because of a defect in materials or workmanship"; and (c) a warranty between the second and fifth year that covers replacement of "certain parts that fail due to a defect in materials or workmanship" covering the following parts: "fan motors, switches, thermostats, heater, heater protectors, compressor overload, solenoids, circuit boards, auxiliary controls, thermistors, frost controls, ICR pump, capacitors, varistors, and indoor blower bearing." ECF No. 43 ¶¶ 13-15 (internal quotation marks omitted); see also ECF No. 43-1 at 2; ECF No. 43-3 at 2. The warranty, however, contains an exclusion if the product malfunctions or fails due to "Operating the Product in a corrosive coastal environment, or in an environment containing corrosive chemical agents or other hazardous chemicals." ECF No. 43 ¶ 35 (internal quotation marks omitted); see also ECF No. 43-1 at 2; ECF No. 43-3 at 3-4.
At LGEUS's request, the Court takes judicial notice of the fact that Plaintiffs' condominium building is located less than a half-mile from the Pacific Ocean. See ECF No. 48 at 7 n.2; Fed. R. Evid. 201(b).
LGE is listed as the warrantor on the warranties provided to Plaintiffs, but LGEUS is listed as the warrantor on later versions of the warranty. ECF No. 43 ¶¶ 17-18; see also ECF No. 43-1 at 2; ECF No. 43-3 at 2.
Plaintiffs claim that, due to the environmental conditions in Hawai'i, including elevated atmospheric chloride levels and a tropical climate, combined with PTACs being manufactured with crevices and containing defective components, the PTACs are significantly and prematurely corroding, causing refrigerant leaks that impede the PTACs from functioning and pose a danger to human health. See, e.g., ECF No. 43 ¶¶ 3-4, 24-25, 30-31, 36. Plaintiffs further allege Defendants knew or should have known that certain PTAC models, including those installed in Plaintiffs' building, contained this inherent defect and were unfit for sale and use in Hawai'i, but nonetheless designed, marketed, sold, and/or shipped these PTACs to Hawai'i. See id. ¶¶ 25-29. For example, Plaintiffs point to the warranty exclusion for operating PTACs in a "corrosive coastal environment" as showing Defendants "were aware that a 'coastal environment' is corrosive for the LG PTAC units." Id. ¶ 35. Plaintiffs thus contend these PTACs must be replaced with other PTACs that are fit for use in the environment of Hawai'i and not subject to significant and premature corrosion. Id. ¶ 32.
Plaintiffs allege that, on April 30, 2021, they sent a warranty claim on behalf of themselves and all owners of LG PTACs in Hawai'i; however, Defendants did not respond. Id. ¶ 16; see also ECF No. 43-2.
B. Procedural History
Plaintiffs commenced this putative class action in state court in May 2021. ECF No. 1-1. LGEUS removed the action under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d). ECF No. 1 at 4-15. LGEUS then moved to dismiss the initial complaint. ECF No. 15. Because the parties were pursuing mediation, the Court held that motion in abeyance. ECF Nos. 19, 20. In September 2022, Plaintiffs filed an Amended Complaint ("FAC"). ECF No. 43. The FAC asserts five claims against Defendants: breach of express warranty (Count I); violation of the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301 et seq. (Count II); breach of implied warranty of merchantability (Count III); breach of implied warranty of fitness for a particular purpose (Count IV); and unfair business practices violation of [Hawai'i Revised Statutes ("HRS")] §§ 480 et seq. (Count V). Id. LGEUS filed its Motion to Dismiss on October 21, 2022. ECF No. 45. Plaintiffs filed an opposition, and LGEUS filed a reply. ECF Nos. 47, 48. The Court held a hearing on the Motion on December 15, 2022. ECF No. 50.
As compared to the initial complaint, the FAC adds a federal claim for violation of the Magnuson-Moss Warranty Act ("MMWA"). Compare ECF No. 1, and ECF No. 1-1, with ECF No. 43.
Although Plaintiffs bring their claims against both LGE and LGEUS and refer collectively to Defendants throughout the FAC, only LGEUS has moved to dismiss the FAC. At the hearing, Plaintiffs acknowledged that LGE has not yet been served—meaning both that LGE has not been timely served and that the Court does not have jurisdiction over LGE. See Fed. R. Civ. P. 4(m) ("If a defendant is not served within 90 days after the complaint is filed, the court — on motion or on its own after notice to the plaintiff — must dismiss the action without prejudice against that defendant or order that service be made within a specified time."); Travelers Cas. & Sur. Co. of Am. v. Brenneke, 551 F.3d 1132, 1135 (9th Cir. 2009) ("A federal court is without personal jurisdiction over a defendant unless the defendant has been served in accordance with Fed. R. Civ. P. 4." (internal quotation marks and citation omitted)). However, Plaintiffs also suggested that they no longer intend to proceed against LGE. If so, Plaintiffs should make this clear in a formal filing, either in any forthcoming amended pleading or otherwise.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) allows an attack on the pleadings for failure to state a claim on which relief can be granted. See Fed. R. Civ. P. 12(b)(6). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (citation omitted). However, a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.' " Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955) (alteration in original). A complaint must "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570, 127 S.Ct. 1955. This means that the complaint must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).
III. DISCUSSION
A. Standing Related To "Crevices"
LGEUS argues — across two footnotes — that Plaintiffs lack standing to bring any claim that relies on PTACs being manufactured with crevices because Plaintiffs' have not sufficiently alleged their PTACs have crevices or how such crevices are connected to the alleged defects. ECF No. 45-1 at 7-8 n.2, 12 n.4. The Court disagrees.
"Three elements form the irreducible constitutional minimum of standing to file suit in federal court." Ctr. for Biological Diversity v. Mattis, 868 F.3d 803, 816 (9th Cir. 2017) (citation and internal quotation marks omitted). "The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Id. (internal quotation marks and citation omitted). "The injury in fact must constitute 'an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.' " Lopez v. Candaele, 630 F.3d 775, 785 (9th Cir. 2010) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)).
"Each element of standing 'must be supported with the manner and degree of evidence required at the successive stages of the litigation.' " Maya v. Centex Corp., 658 F.3d 1060, 1068 (9th Cir. 2011) (ellipsis omitted) (quoting Lujan, 504 U.S. at 561, 112 S.Ct. 2130). "At the pleading stage, general factual allegations of injury . . . may suffice, for on a motion to dismiss we presume that general allegations embrace those specific facts that are necessary to support the claim." Id. (brackets and internal quotation marks omitted) (quoting Lujan, 504 U.S. at 561, 112 S.Ct. 2130). The court "must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party" when "ruling on a motion to dismiss for want of standing." Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); see also Confederated Tribes & Bands of Yakama Nation v. Yakima County, 963 F.3d 982, 989 (9th Cir. 2020).
Plaintiffs allege they own certain PTACs that were installed in their condominiums, that they were assigned the warranties for those PTACs, that they seek to bring this action on behalf of "all owners of PTAC units manufactured by Defendants [LGE and LGEUS] ("LG PTAC units") and sold in the State of Hawai'i," that "[t]he LG PTAC units owned by Plaintiffs and the Class Members are significantly and prematurely corroding, and leaking refrigerant," that "LG PTAC units are manufactured with crevices that are subject to corrosion and cause refrigerant leaks," and that the corrosion results in the units failing and refrigerant leaking. ECF No. 43 ¶¶ 2, 4-7, 9-12, 27-28, 30-31; see also, e.g., id. ¶¶ 52-54 (connecting the alleged breach of express warranty to crevices subject to corrosion that cause leaks and allegations that, because of this breach, Plaintiffs' units are corroding and leaking).
Construing these allegations in Plaintiffs' favor, the Court can plausibly infer Plaintiffs' PTACs were manufactured with such crevices, that the crevices are tied to corrosion — particularly given the allegations regarding the environmental conditions in Hawai'i (i.e., a reasonable inference is that crevices could mean more exposure to those conditions) — and that extensive and rapid corrosion has already occurred and caused leaks here. See id. ¶¶ 4-6, 30, 94. Particularly because Plaintiffs have alleged that corrosion and leaking have already occurred, and have plausibly tied that to — among other things — the crevices within the PTACs, the Court is not persuaded by the cases on which LGEUS relies. See ECF No. 45-1 at 7-8 n.2. Those cases dealt with allegations of a risk of injury too speculative to support standing, which is not a concern here. See Beyer v. Symantec Corp., Case No. 18-CV-02006-EMC, 2019 WL 935135, at *4 (N.D. Cal. Feb. 26, 2019) ("Plaintiffs' claims here rest on a purported past risk of harm that has never been alleged to manifest and presumably never will, given that the vulnerabilities were patched in 2016-17 and Plaintiffs had stopped using the software long before that."); Cahen v. Toyota Motor Corp., 147 F. Supp. 3d 955, 970 (N.D. Cal. 2015) (noting that speculative future risk of harm cannot establish standing), aff'd, 717 F. App'x 720, 723 (9th Cir. 2017) (finding allegations regarding the "imminent eventuality" of hacking insufficient where plaintiffs had not alleged their vehicles had been hacked or even that they were aware of other vehicles being hacked). Any request to dismiss claims based on crevices for lack of standing is therefore denied.
B. MMWA Claim (Count II)
LGEUS moves to dismiss Plaintiffs' federal claim under the MMWA because Plaintiffs have not satisfied the MMWA's express jurisdictional requirements. ECF No. 45-1 at 21-22. Under the MMWA, consumers can bring a distinct federal cause of action for certain state-law warranty violations. See Floyd v. Am. Honda Motor Co., 966 F.3d 1027, 1035 (9th Cir. 2020). However, the MMWA provides that no claim is cognizable in a federal district court "if the action is brought as a class action and the number of named plaintiffs is less than one hundred." 15 U.S.C. § 2310(d)(3)(C). Because only two plaintiffs are named here, this requirement is not satisfied. Still, Plaintiffs argue that, because the Court has original jurisdiction over other claims in this action (based on diversity jurisdiction or CAFA), the Court can exercise jurisdiction over their MMWA claim pursuant to 28 U.S.C. § 1367(a), which permits a court with original jurisdiction over an action to exercise supplemental jurisdiction over certain claims "that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy[.]" 28 U.S.C. § 1367(a). The Court disagrees.
The Ninth Circuit has held that a district court may not exercise jurisdiction over an MMWA claim that does not meet the MMWA's jurisdictional requirements, even if the district court might otherwise have jurisdiction over the claim on a different basis. See Floyd, 966 F.3d at 1034-35. The issue in Floyd was not identical to the facts here; there, the plaintiffs argued the district court had jurisdiction over their MMWA claim under CAFA, even though the number of named plaintiffs was less than one hundred. See id. Nonetheless, the Ninth Circuit stated that "[t]he text is clear that a requirement for an MMWA class action in federal court is at least one hundred named plaintiffs." Id. at 1034. In rendering its decision that CAFA did not override the MMWA's numerosity requirement, the Ninth Circuit relied heavily on standard principles of statutory construction requiring courts to " 'strive to give effect to' " statutes that " 'allegedly touch[ ] on the same topic.' " Id. (quoting Epic Sys. Corp. v. Lewis, 584 U.S. —, 138 S. Ct. 1612, 1624, 200 L.Ed.2d 889 (2018)).
The same reasoning applies here and bars Plaintiffs from using § 1367(a) to override the MMWA. To the extent Plaintiffs rely on out-of-Circuit authority (much of which pre-dates Floyd) to argue to the contrary, see ECF No. 47 at 22, the Court is not persuaded. See Angiano v. Anheuser-Busch InBev Worldwide, Inc., 532 F. Supp. 3d 911, 920-21 (C.D. Cal. 2021) (citing Floyd to reject two named plaintiffs' argument that the court could exercise supplemental jurisdiction over their MMWA claim).
Moreover, Section 1367(a) itself makes clear that supplemental jurisdiction does not exist in certain circumstances, such as when a federal statute "expressly provide[s] otherwise." 28 U.S.C. § 1367(a). Floyd indicates that the MMWA's jurisdictional requirements are an example of a federal statute that expressly provides otherwise. See 966 F.3d at 1035 ("[T]he MMWA simply prevents claims under that Act from proceeding in federal court absent the satisfaction of certain jurisdictional prerequisites."); cf. Shoner v. Carrier Corp., 30 F.4th 1144, 1147 (9th Cir. 2022) ("[In Floyd], we clarified that a plaintiff asserting an MMWA class claim must name 100 class members in the complaint.").
Based on Plaintiffs' request that they be granted leave to amend to name more plaintiffs, the Court concludes that the prudent course here is to dismiss their MMWA claim with leave to amend (rather than resolve the parties' dispute, at this time, regarding whether remand is appropriate). See ECF No. 47 at 21-22 & nn.4-5; ECF No. 48 at 15 n.6. In doing so, the Court notes that Plaintiffs have not asked to proceed with their MMWA claim on an individual basis — nor have the parties briefed whether Plaintiffs may do so. The Court thus does not address the viability of such a claim, but will grant leave for Plaintiffs either to name additional plaintiffs and pursue class-wide relief, or seek only individual relief as to this claim.
Based on the foregoing, Count II is DISMISSED WITH LEAVE TO AMEND.
C. Implied Warranty Claims (Counts III And IV)
The parties present a number of arguments related to Plaintiffs' claims for breach of implied warranty of merchantability (Count III) and breach of implied warranty of fitness for a particular purpose (Count IV). In their Motion, LGEUS focuses almost exclusively on the argument that Plaintiffs' implied warranty claims must be dismissed because LGEUS disclaimed any implied warranty under Hawai'i law. ECF No. 45-1 at 13-17. Plaintiffs do not dispute the existence of such a disclaimer; instead, they argue the MMWA limits LGEUS's ability to disclaim implied warranties where, as here, they have also offered an express warranty. ECF No. 47 at 10-12. Alternatively, they argue that any disclaimer was unconscionable under Hawai'i law. Id. at 12-15. The parties also dispute whether Plaintiffs have alleged the requisite "particular purpose" necessary to state Count IV. ECF No. 45-1 at 16-17; ECF No. 47 at 15-16. For the following reasons, the Court concludes Plaintiffs have sufficiently alleged both implied warranty claims.
1. The MMWA's Impact On Implied Warranty Claims
The Court has already dismissed Plaintiffs' federal claim under the MMWA. But in arguing their implied warranty claims under Hawai'i law are viable, Plaintiffs rely on a separate provision of the MMWA that limits a supplier's ability to disclaim implied warranties. See 15 U.S.C. § 2308. As is relevant here, § 2308 provides:
(a) Restrictions on disclaimers or modifications15 U.S.C. § 2308(a), (b). The Court agrees that, based on § 2308, any valid disclaimer of implied warranties under Hawai'i law does not defeat Plaintiffs' implied warranty claims.
No supplier may disclaim or modify (except as provided in subsection (b)) any implied warranty to a consumer with respect to such consumer product if [ ] such supplier makes any written warranty to the consumer with respect to such consumer product[.]
(b) Limitation on duration
For purposes of this chapter . . . , implied warranties may be limited in duration to the duration of a written warranty of reasonable duration, if such limitation is conscionable and is set forth in clear and unmistakable language and prominently displayed on the face of the warranty.
First, the Court notes that LGEUS does not contend that § 2308 is inapplicable to Plaintiffs' implied warranty claims brought under Hawai'i law or that Hawai'i law permitting the conspicuous disclaimer of implied warranties, HRS § 490:2-316(2), overrides § 2308. For purposes of resolving this Motion, then, the Court will presume § 2308 applies here. See 15 U.S.C. § 2308(c) ("A disclaimer, modification, or limitation made in violation of this section shall be ineffective for purposes of this chapter and State law." (emphasis added)); Walters v. Holiday Motor Corp., Civil Action No. 7:12-cv-00011, 2012 WL 5465012, at *4 (W.D. Va. May 21, 2012) (looking to MMWA's standards for claim under state law); but see Rokicsak v. Colony Marine Sales & Serv., Inc., 219 F. Supp. 2d 810, 817 (E.D. Mich. 2002) ("15 U.S.C. § 2308 does not revive a state law breach of implied warranty claim, but instead permits a buyer to pursue a federal MMA claim against a supplier if the supplier disclaims an implied warranty while either making a written warranty or entering into a service contract."); but cf. Ortega v. Toyota Motor Sales, U.S.A., Inc., 422 F. App'x 599 (9th Cir. 2011) (concluding § 2308 did not preempt a California law, which stated that implied warranties were co-extensive with express warranties but in no case shorter than 30 days or longer than three months, such that California law applied and limited implied warranty to three months, rather than the three years applicable under the express warranty).
Next, the Court is not yet convinced that, for purposes of the MMWA, the applicable express warranty here is one year rather than five years, i.e., that any implied warranty claim is untimely. LGEUS argues (for the first time on reply) that implied warranty claims under Hawai'i law apply only to the good as a whole, and because the express warranty as to the entire good here is limited to one year (as compared to the five-year warranties as to certain component parts), these claims must be dismissed as untimely. ECF No. 48 at 10-11.
The Court acknowledges LGEUS is responding to Plaintiffs' argument in opposition that § 2308 applies here. But if the parties purportedly conducted thorough meet and confers before LGEUS filed this Motion, see ECF No. 45-3, it is unclear why this issue was not raised then and addressed in the Motion — particularly considering it appears in the FAC, see ECF No. 43 ¶ 63. The result is that the Court is being asked to resolve an issue on limited briefing.
The relevant provisions of Hawai'i law do refer to implied warranties in terms of "goods." See, e.g., HRS § 490:2-314 ("Goods to be merchantable must be at least such as . . . fit for the ordinary purposes for which such goods are used[.]" (emphases added)); HRS § 490:2-315 ("Where the seller at the time of contracting has reason to know any particular purposes for which the goods are required and that the buyer is relying on the seller's skill . . . to select or furnish suitable goods, there is . . . an implied warranty that the goods shall be fit for such purpose." (emphases added)). But LGEUS has not convincingly demonstrated at this time that, as a matter of law, the failure of a part or system within such a good may not form the basis for an implied warranty claim where: (1) there exist express warranties for such parts or systems, see ECF No. 43-1 at 2 (providing one-year warranty for "[a]ny part" and five-year warranties for "[a]ny part of the sealed refrigerating system" as well as certain other parts, including "thermostats, heater, heater protectors, . . . solenoids, . . . capacitators . . ."); and (2) a party has alleged defects related to those parts or systems that impact the functioning of the product as a whole, see ECF No. 43 ¶¶ 4, 54, 80, 86 (alleging "[e]xtensive corrosion has occurred in the components of the sealed refrigerating system" as well as "the heater, heater protections, solenoids, capacitators . . ."). Cf. Ontai v. Straub Clinic & Hosp. Inc., 66 Haw. 237, 251, 659 P.2d 734, 744 (1983) (addressing implied warranty claim regarding "X-ray table and its component footrest [that] together comprised a specialized piece of equipment" where the component footrest was alleged to be defective for not preventing the plaintiff from falling off the X-ray table when it was tilted).
LGEUS emphasizes that one of the warranties attached to the FAC states it will cover for one year "replacement of malfunctioning Product." See ECF No. 48 at 10-11 (quoting, with emphasis added, ECF No. 43-3 at 3) (brackets omitted). But the other warranty attached to the FAC does not include the language LGEUS relies on, stating instead that LGE will cover for one year: "Any part of LGE Packaged Terminal Air-Conditioner that fails because of a defect in materials or workmanship." ECF No. 43-1 at 2. The Court also notes that both warranties include prefatory language referring to the "Product" generally for "the warranty period set forth below" without distinguishing between the one- and five-year periods that follow, and indicating that Defendants have the option to "repair or replace the product," all of which tends to negate LGEUS's argument. Nor is the Court persuaded by LGEUS's reliance on HRL Land or Sea Yachts v. Travel Supreme, Inc., No. 1:07-cv-945, 2009 WL 427375, at *6-7 (W.D. Mich. Feb. 20, 2009), where the district court concluded the defendant had not made any written warranty, but even if it had, that express warranties as to isolated consumer products like tires, paint, fabric, or batteries did not create an implied warranty for "repairs on the entire RV." Here, LGEUS acknowledges making a written warranty, which for now the Court must accept refers to the product as a whole and provides for either replacement or repair based on defects in components at issue in this case that render the entire product defective.
See ECF No. 43-1 at 2 ("LG Electronics, Inc. ('LG') warrants your LG Packaged Terminal Air Conditioner ('Product') against defect in materials or workmanship under normal use during the warranty period set forth below. LG will, at its option, repair or replace the product"); ECF No. 43-3 at 2 (same, except that the warranter is LGEUS and that the term "product" at the end of the second sentence is capitalized). While LGEUS has "reserve[d] all rights" to challenge, at a later time, whether either warranty attached to the FAC applies here, ECF No. 45-1 at 8 n.3, the Court presumes for purposes of this Motion that both could apply. See ECF No. 45 ¶¶ 17-18.
Thus, based on the argument and authority currently before it, the Court cannot yet conclude that any implied warranty claim is untimely because it is limited in duration to one year. And, in light of this conclusion that the implied warranty disclaimer here has not yet been shown to defeat Plaintiffs' implied warranty claims, the Court need not address whether such a disclaimer is unconscionable.
2. Particular Purpose
LGEUS argues Count IV (warranty of fitness for a particular purpose) must also be dismissed because Plaintiffs have alleged only that they intended to use PTACs for their ordinary purpose — "providing effective internal temperature control" — rather than any particular purpose. ECF No. 43 ¶ 42. Plaintiffs counter that their particular purpose was using PTACs in the specific environmental conditions in the State of Hawai'i. See ECF No. 43 ¶¶ 84-85.
The Court notes LGEUS did not argue in its Motion that the "corrosive coastal environment" exclusion impacts whether Plaintiffs have or can plausibly allege the requisite "particular purpose." See ECF No. 45-1 at 16-17. While LGEUS suggests as much in a few sentences on reply, the Court will not address that cursory argument raised for the first time on reply. See ECF No. 48 at 13-14; LR 7.2.
"[T]he implied warranty of fitness for a particular purpose is narrower and more specific" than the implied warranty of merchantability. Ontai, 66 Haw. at 250, 659 P.2d at 744 (citation omitted). "[T]he essential components of an implied warranty of fitness are that the seller has reason to know of the particular purpose for which the goods are required, and that the buyer relies on the seller's expertise in supplying a suitable product." Id.; see HRS § 490:2-315. To establish this claim, a plaintiff must prove that: "(1) [the plaintiff] desired a product for a particular purpose; (2) [d]efendants had reason to know about this purpose; and (3) the product sold to [the plaintiff] failed to meet that purpose." Neilsen v. Am. Honda Motor Co., 92 Hawai'i 180, 191, 989 P.2d 264, 275 (App. 1999) (citations omitted). "Whether [the implied warranty of fitness for a particular purpose] arises in any individual case is basically a question of fact to be determined by the circumstances of the contracting." Ontai, 66 Haw. at 250, 659 P.2d at 744 (quoting HRS § 490:2-315, cmt. 1).
While LGEUS cites an example where a court has dismissed this type of claim at the pleading stage when the only alleged purpose is the ordinary one, see ECF No. 45-1 at 16-17, that cited example is not particularly helpful to the dispute here: whether using a product in a particular climate or environment can suffice to allege the requisite "particular purpose." Comment 2 to HRS § 490:2-315 suggests, in broad terms, that using a product in a particular environment may suffice to state a plausible claim for relief, providing:
A "particular purpose" differs from the ordinary purpose for which the goods are used in that it envisages a specific use by the buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used
are those envisaged in the concept of merchantability and go to uses which are customarily made of the goods in question. For example, shoes are generally used for the purpose of walking upon ordinary ground, but a seller may know that a particular pair was selected to be used for climbing mountains.HRS § 490:2-315, cmt. 2 (emphasis added). And from the Court's own research, it appears courts across the country have reached different results when faced with the more specific question of whether using a product in a particular climate or environment differs enough from the ordinary purpose for which that product is used. Compare In re Masonite Corp. Hardboard Siding Prod. Liab. Litig., 21 F. Supp. 2d 593, 602 n.6 (E.D. La. 1998) (observing there was "no merit" to claim related to exterior siding on a residential home) ("The claim that use in the Florida climate constitutes a 'particular purpose' would lead to the extraordinary conclusion that use of the product in every unique locale is a 'particular purpose.' Such a reading of warranty law would render claims for breach of the warranty of merchantability meaningless as the former would entirely consume the latter rule."), with Bob Davis Paint & Drywall Inc. v. Valspar Corp., 452 F. Supp. 3d 589, 598-99 (S.D. Tex. 2020) (concluding plaintiff stated claim where he used paint on beachfront homes exposed to salt air, high heat, and high humidity and relied on advice that paint would be suitable for these distinctive homes exposed to a harsh environment, reasoning that "[j]ust because [plaintiff] was using the paint as it ought to be used — applying it to the exterior of homes — does not mean that his particular purpose was not unique. The paint was still used as paint, but not on ordinary homes."); Bayvue Props. of Punta Gorda, Ltd. v. Unicorn Int'l, Inc., No. 2:91CV184-B-D, 1995 WL 1945498, at *2 (N.D. Miss. Apr. 20, 1995) (concluding genuine issue of fact existed as to implied warranty claims related to carpet installed in plaintiff's coastal Florida motel, including as to "the usefulness of the carpet in coastal areas of high humidity and ozone content" where plaintiff's experts testified type of carpet was defective because it discolored or was affected when exposed to high humidity, temperature, and ozone levels typical of that coastal region); and Piotrowski v. Southworth Prod. Corp., 15 F.3d 748, 750, 752 (8th Cir. 1994) (concluding district court did not err in submitting claim to jury where defendant's sales manager was aware hydraulic lift tables would be used in "a wet environment" when recommending specific model but evidence showed "wheels were corroded and rusting and were not adequately lubricated in a wet environment, thereby causing the wheels to stick and preventing the proper operation of the lift table").
Based on this authority, and particularly because the existence of this type of warranty is ordinarily a question of fact, the Court concludes that Plaintiffs' allegations, accepted as true, are sufficient to state a claim for breach of the implied warranty of fitness for a particular purpose. See Ontai, 66 Haw. at 250, 659 P.2d at 744; see also Reynolds Metals Co. v. Alcan, Inc., No. C04-0175L, 2005 WL 8172440, at *3 n.6 (W.D. Wash. Feb. 15, 2005) (noting whether marine use of alloy at issue was "ordinary" or "particular" was a question of fact, and that depending on the trier of fact's conclusions, the alloy's corrosive attributes may breach both implied warranties, either, or none), reconsidered in part, No. C04-175L, 2005 WL 8172241 (W.D. Wash. May 17, 2005).
Based on the foregoing, LGEUS's request to dismiss Counts III and IV is DENIED. D. Express Warranty Claim (Count I)
LGEUS argues Plaintiffs' express warranty claim must be dismissed on three separate grounds: (1) based on an express exclusion for defects caused by using the PTACs in a "corrosive coastal environment"; (2) because Plaintiffs have not alleged they requested warranty coverage; and (3) because the express warranty does not cover design defect claims, which is all Plaintiffs have alleged here. ECF No. 45-1 at 17-21. Addressing LGEUS's first argument — regarding an exclusion for operating PTACs in a "corrosive coastal environment" — indicates that granting leave to amend this claim would be futile here, such that the Court need not address the remaining two arguments.
LGEUS argues that Plaintiffs' express warranty claim is barred based on the exclusion for "malfunction or failure" for operating the PTACs "in a corrosive coastal environment." ECF No. 43-1 at 2. Plaintiffs contend that language is ambiguous, e.g., because it is undefined or does not make clear what distinguishes a corrosive coastal environment from a non-corrosive one. ECF No. 47 at 17. Ultimately, the Court agrees with LGEUS.
The Court notes that, in opposing LGEUS's request to dismiss Count I, Plaintiffs have not argued that this exclusion is unconscionable. See ECF No. 47 at 17-20.
Under Hawai'i law generally, "[c]ontract terms are interpreted according to their plain, ordinary, and accepted sense in common speech." Provident Funding Assocs., L.P. v. Gardner, 149 Hawai'i 288, 298, 488 P.3d 1267, 1277 (2021) (internal quotation marks and citation omitted). "A contract is ambiguous when its terms are reasonably susceptible to more than one meaning." Id. (internal quotation marks and citation omitted). Mere "disagreement as to the meaning of a contract or its terms does not render clear language ambiguous." State Farm Fire & Cas. Co. v. Pac. Rent-All, Inc., 90 Hawai'i 315, 324, 978 P.2d 753, 762 (1999). Whether a contract is ambiguous is a question of law. See Found. Int'l, Inc. v. E.T. Ige Constr., Inc., 102 Hawai'i 487, 496, 78 P.3d 23, 32 (2003). "When an ambiguity exists so that there is some doubt as to the intent of the parties, intent is a question for the trier of fact." Id. at 497, 78 P.3d at 33. "In the absence of any ambiguity, a question of construction arising upon the face of the instrument is for the court to decide." Id. In the specific context of express warranties, Hawai'i law provides:
Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this article on parol or extrinsic evidence [ ] negation or limitation is inoperative to the extent that such construction is unreasonable.HRS § 490:2-316(1).
Plaintiffs contend that, because the warranty does not define "corrosive coastal environment," Plaintiffs could not have understood the term to apply to "all of Hawai'i." ECF No. 47 at 17. But "a term left undefined in the contract — without more — does not constitute an ambiguity." Damon Key Leong Kupchak Hastert v. Westport Ins. Corp., 421 F. Supp. 3d 946, 953 (D. Haw. 2019). And based on these standards of contract interpretation and Plaintiffs' own allegations, any express warranty claim fails as a matter of law. Plaintiffs allege the PTACs, which they operate less than a half mile from the ocean, are "unfit for installation in the tropical climate in the State of Hawai'i" because they are "manufactured with crevices that are subject to corrosion," and also that, "[d]ue to the environmental conditions in the State of Hawai'i — including elevated atmospheric chloride levels — LG PTAC units are expected to significantly and prematurely corrode, causing refrigerant leaks impeding the ability of the LG PTAC units to function properly." ECF No. 43 ¶¶ 3, 25, 31. Plaintiffs therefore contend that their units "must be replaced with PTAC units which are fit for use in the environment in the State of Hawai'i and are not subject to significant and premature corrosion." Id. ¶ 32. Thus, Plaintiffs themselves have alleged that the malfunctions they complain about were caused by operating the PTACs in a corrosive coastal environment. Indeed, when pressed at the hearing, Plaintiffs' counsel was unable to articulate any alternative, reasonable meaning for "corrosive coastal environment," and instead essentially conceded that Hawai'i is a corrosive coastal environment and that the defects alleged here are tied to operating the PTACs within that environment. The argument, then, that the applicability of the exclusion may be unclear in, e.g., a non-corrosive coastal environment carries little weight in this particular case where Plaintiffs concede their allegations fall within the exclusion. See also id. ¶ 85 ("LG PTAC units are defective and not fit for the specific environmental conditions in the State of Hawai'i for which they are used because they are significantly and prematurely corroding."); id. ¶ 90 (complaining that Defendants "[f]ailed to disclose that LG PTAC components were unfit for use in the State of Hawai'i because components would significantly and prematurely corrode in normal and typical use under the environmental conditions in the State of Hawai'i"). While such an exclusion may subject LGEUS to liability on different grounds, as discussed below, it is neither unreasonable nor inconsistent with the rest of the express warranty language such that it should be deemed inoperative here. See HRS § 490:2-316(1). Plaintiffs therefore do not state a plausible claim for breach of express warranty, and based on their own allegations and concessions, amendment would be futile. Count I is therefore DISMISSED WITH PREJUDICE.
E. Unfair Business Practice Violation (Count V)
Finally, though, the Court concludes LGEUS may not similarly rely on the "corrosive coastal environment" exclusion to defeat Plaintiffs' claim for unfair and deceptive acts or practices ("UDAP") under HRS § 480-2. Plaintiffs base their UDAP claim on the allegation that Defendants sold PTACs in Hawai'i knowing they were unfit for use in Hawai'i. ECF No. 43 ¶¶ 90-94. Section 480-2 prohibits "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." HRS § 480-2(a). A practice is unfair when it "offends established public policy and when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers." Balthazar v. Verizon Haw., Inc., 109 Hawai'i 69, 77, 123 P.3d 194, 202 (2005), as corrected (Dec. 12, 2005) (internal quotation marks and citation omitted). An act is deceptive when it is (1) a representation, omission, or practice that (2) is likely to mislead consumers acting reasonably under the circumstances where (3) the representation, omission, or practice is material. See Kekauoha-Alisa v. Ameriquest Mortg. Co. (In re Kekauoha-Alisa), 674 F.3d 1083, 1091 (9th Cir. 2012) (citing Courbat v. Dahana Ranch, Inc., 111 Hawai'i 254, 262, 141 P.3d 427, 435 (2006)). This test is objective, "turning on whether the act or omission 'is likely to mislead consumers' . . . as to information 'important to consumers' . . . in making a decision regarding the product or service." Courbat, 111 Hawai'i at 262, 141 P.3d at 435 (citations omitted). "Hawaii's consumer protection laws look to a reasonable consumer, not the particular consumer," and thus do not require an individualized showing of reliance. Yokoyama v. Midland Nat'l Life Ins. Co., 594 F.3d 1087, 1092 (9th Cir. 2010); see also In re Kekauoha-Alisa, 674 F.3d at 1091 ("There need not be an intent to deceive nor actual deceit." (citation omitted)). Ordinarily, the question of whether a practice constitutes an unfair or deceptive trade practice is a question of fact. See Balthazar, 109 Hawai'i at 72 n.4, 123 P.3d at 197 n.4.
A consumer bringing a UDAP claim must allege: (1) a violation of HRS § 480; (2) injury resulting from such violation; and (3) damages. See Haw. Med. Ass'n v. Haw. Med. Serv. Ass'n, 113 Hawai'i 77, 113-14, 148 P.3d 1179, 1215-16 (2006); HRS § 480-13(b)(1). Defendants contend — and Plaintiffs do not dispute — that because Plaintiffs' UDAP claim alleges fraudulent business practices, it must also be pled with particularity pursuant to Federal Rule of Civil Procedure 9(b). See, e.g., Smallwood v. NCsoft Corp., 730 F. Supp. 2d 1213, 1232-33 (D. Haw. 2010). Rule 9(b) requires a party asserting fraud to "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). The claim must be accompanied by the who, what, when, where and how of the misconduct charged, and set forth more than the neutral facts identifying the transaction. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009).
The Court concludes that Plaintiffs' allegations suffice to state a UDAP claim, even under Rule 9(b)'s heightened standards. They allege LGEUS sold PTACs in Hawai'i despite knowing or having reason to know that they would significantly and prematurely corrode due to their design and the environmental conditions, resulting in the products not working and posing a risk to human health. See, e.g., ECF No. 43 ¶¶ 25, 30, 31, 35, 90, 92. They also allege what specific models are at issue, as well as where and when they were installed. See id. ¶¶ 7-8, 27-29. While Plaintiffs do point to the "corrosive coastal environment" exclusion to support the allegation that LGEUS's conduct was unfair or deceptive, see id. ¶¶ 35, 92, the Court rejects LGEUS's argument that the existence of that exclusion defeats Plaintiffs' UDAP claim as a matter of law. See ECF No. 45-1 at 25-27. It is plausible that a reasonable consumer could be aware that operating PTACs in a certain environment voided the express warranty, but still be misled into believing that the PTACs would not significantly, prematurely, and rapidly corrode — particularly given LGEUS was selling PTACs to customers they knew lived in that environment.
LGEUS's contention — articulated for the first time at the hearing — that Plaintiffs failed to adequately allege when the corrosion began does not undermine the Court's conclusion. Plaintiffs state that the PTACs were installed sometime after June 1, 2017. See ECF No. 43 ¶ 8. The case was filed in state court four years later. See ECF No. 1-1. The Court is satisfied that the detail of when the corrosion appeared can be inferred from this timetable.
For this reason, the Court is not persuaded by LGEUS's reliance on Cooper v. Simpson Strong-Tie Co., 460 F. Supp. 3d 894, 907-09 (N.D. Cal. 2020), where both the plaintiffs' allegations and defendant's warnings were distinguishable. In Cooper, the plaintiffs alleged the defendant failed to warn that a particular product (construction connectors and fasteners installed in a home) would corrode even if installed correctly and instead created the expectation that the product would have a life spanning the life of a home. See id. at 907. But those allegations were not plausible because the product's application guide disclaimed that proper installation would make the product corrosion proof, and instead detailed, e.g., that many environments can cause corrosion, that the products could corrode when installed in corrosive environments or in contact with corrosive materials, and that variables in a building environment make it impossible to predict if or when corrosion will begin or reach a critical level. See id. at 907-08. Here, in contrast, Plaintiffs allege that due to the environmental conditions in Hawai'i, and the crevices within the PTACs, they are "expected to significantly and prematurely corrode causing refrigerant leaks impeding the ability of the LG PTAC units to function properly" and posing a danger to human health, and that Defendants knew or had reason to know this when selling their products in Hawai'i. ECF No. 43 ¶¶ 25, 30, 31, 35, 90, 92 (emphasis added). Unlike the disclaimer in Cooper, the warranty exclusion here does not necessarily disclose the risk of corrosion — or at least the kind of rapid, extensive, significant, and premature corrosion Plaintiffs are alleging — by excluding repair or replacement for operating the product in a corrosive coastal environment. See ECF No. 43-1 at 2; ECF No. 43-3 at 2-3. The Court thus concludes Plaintiffs have plausibly alleged a UDAP claim in Count V on this basis.
LGEUS separately argues that, to the extent Plaintiffs seek to bring a UDAP claim based on unfair competition, they have failed to state such a claim. Although they argued against dismissal on this basis when opposing LGEUS's Motion, see ECF No. 47 at 31-34, Plaintiff's counsel conceded at the hearing that Plaintiffs are not seeking to raise an unfair competition claim. In any event, the Court would conclude that the FAC fails to do so.
In order to state a claim for unfair methods of competition, a plaintiff must state sufficient facts to set forth the nature of the competition, how the defendant's conduct negatively affected competition, and how the plaintiff was harmed as a result of the defendant's actions. See Davis v. Four Seasons Hotel Ltd., 122 Hawai'i 423, 438, 228 P.3d 303, 318 (2010); HRS § 480-2(a),(e). Here, Plaintiffs have sufficiently alleged the nature of the market — other air conditioner options, presumably available to Hawai'i consumers. ECF No. 43 ¶ 93. But as to harm to competition, Plaintiffs only allege: "Defendants' unfair and deceptive business practices negatively affected competition by hiding the true market value of the LG PTACs; thus, giving Defendants an unfair market advantage relative to other air conditioner options." Id. (emphasis added). This allegation is too conclusory to plausibly allege a negative impact on competition; nor can the Court conclude that the allegation of market advantage is plausible when the FAC is devoid of any facts about the market for similar PTACs (e.g., their price, value, warranties, potential for defect, availability within Hawai'i, etc.). "Ordinarily, the factual support needed to show injury to competition must include proof of the relevant geographic markets and demonstration of the restraint's anticompetitive effects within those markets." Sunday's Child, LLC v. Irongate Azrep BW LLC, Civil No. 13-00502 DKW-RLP, 2017 WL 10651861, at *4 (D. Haw. Oct. 27, 2017) (internal quotation marks, alteration, and citation omitted).
Regardless, based on counsel's statement at the hearing that Plaintiffs do not seek to press such a claim here, any unfair competition aspect of Count V is DISMISSED WITHOUT LEAVE TO AMEND.
IV. CONCLUSION
For the reasons stated above, the Court GRANTS LGEUS's Motion to Dismiss as follows: Count I is DISMISSED WITHOUT LEAVE TO AMEND; Count II is DISMISSED WITH LEAVE TO AMEND; and the unfair competition aspect of Count V is DISMISSED WITHOUT LEAVE TO AMEND. LGEUS's Motion is otherwise DENIED.
Plaintiffs may file an amended complaint addressing the deficiencies noted above by February 1, 2023. No new claims or parties may be added without obtaining leave of court.
IT IS SO ORDERED.