Rutledge v. Hewlett-Packard

Filed 8/21/15 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
ED RUTLEDGE et al., H036790
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. CV817837
v. ORDER MODIFYING OPINION
AND DENYING REHEARING
HEWLETT-PACKARD COMPANY,
NO CHANGE IN JUDGMENT
Defendant and Respondent;
BIZCOM ELECTRONICS, INC.,
Objector and Respondent.
THE COURT:
It is ordered that the opinion filed herein on July 22, 2015, be modified as follows:
1. On the signature line 2, the name “PREMO, J.” is replaced with “ELIA, J.” and
on the signature line 3, the name “ELIA, J.” is replaced with “WALSH, J.*” so the
signature page reflects the correct panel as follows:
______________________________________
RUSHING, P.J.
WE CONCUR:
____________________________________
ELIA, J.
___________________________________
WALSH, J.*
*
Judge of the Santa Clara County Superior Court assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.
There is no change in judgment.
Respondent’s petition for rehearing is denied.
2
______________________________________
RUSHING, P.J.
WE CONCUR:
____________________________________
ELIA, J.
___________________________________
WALSH, J.*
*
Judge of the Santa Clara County Superior Court assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
3
Filed 7/22/15 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
ED RUTLEDGE et al., H036790
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. CV817837
v.
HEWLETT-PACKARD COMPANY,
Defendant and Respondent;
BIZCOM ELECTRONICS, INC.,
Objector and Respondent.
This case is a class action brought by purchasers of notebook computers that were
manufactured by Hewlett-Packard, Inc. (HP). Appellants are I Braun Degenshein
(Degenshein), and Susanna Giuliano-Ghahramani (Giuliano-Ghahramani), both of whom
are representative plaintiffs of a class of California residents who purchased certain HP
notebook computers.
The basis of appellants’ consumer action against HP is that certain notebook
computers manufactured by HP contained inverters that HP knew would likely fail and
cause display screens to dim and darken at some point before the end of the notebook’s
useful life.
Appellants alleged claims against HP for violation of the Unfair Competition Law
(UCL) (Bus. & Prof. Code, § 17200 et seq.), violation of the Consumer Legal Remedies
Act (CLRA) (Civ. Code, § 1750 et seq.), unjust enrichment and breach of express
warranty.
After years of litigation, the trial court ultimately made a “no merits”
determination as to the CLRA claim, and granted HP’s motion for summary judgment as
to appellants’ remaining claims.
On appeal, appellants challenge seven trial court orders: two summary
adjudication orders related to two different class representatives and the class itself, two
class certification orders related to denial of a nationwide class and the denial of
certification of the CLRA claim, and three discovery sanctions orders.1
Summary Adjudication
“ ‘The purpose of the law of summary judgment [or summary adjudication] is to
provide courts with a mechanism to cut through the parties’ pleadings in order to
determine whether, despite their allegations, trial is in fact necessary to resolve their
dispute.’ [Citation.] As such, the summary judgment statute (Code Civ. Proc., § 437c),
‘provides a particularly suitable means to test the sufficiency of the plaintiff’s prima facie
case and/or of the defendant’s [defense].’ [Citation.]” (Law Offices of Dixon R. Howell
v. Valley (2005) 129 Cal. App. 4th 1076, 1091 (Valley).)
The moving party “bears the burden of persuasion that there is no triable issue of
material fact and that he is entitled to judgment as a matter of law.” (Aguilar v. Atlantic
Richfield Co. (2001) 25 Cal. 4th 826, 850, fn. omitted (Aguilar).)
A cause of action has no merit under Code of Civil Procedure section 437c,
subdivision (o), “if either of the following exists: [¶] (1) One or more of the elements of
the cause of action cannot be separately established, even if that element is separately
pleaded[, or] [¶] (2) [a] defendant establishes an affirmative defense to that cause of
1
Please see the statement of facts from our previous opinion in Hewlett Packard
Co. v. Superior Court (2008) 167 Cal. App. 4th 87.
2
action.” (Aguilar, supra, 25 Cal.4th at p. 853.) The party moving for summary judgment
“bears an initial burden of production to make a prima facie showing of the nonexistence
of any triable issue of material fact; if he carries his burden of production, he causes a
shift, and the opposing party is then subjected to a burden of production of his own to
make a prima facie showing of the existence of a triable issue of material fact.” (Code
Civ. Proc., § 437c; Aguilar, supra, 25 Cal.4th at p. 850.)
Thus, as here, when a defendant moves for summary judgment, he must make a
prima facie showing, i.e., “he must present evidence that would require a reasonable trier
of fact not to find any underlying material fact more likely than not—otherwise, he would
not be entitled to judgment as a matter of law, but would have to present his evidence to
a trier of fact.” (Aguilar, supra, 25 Cal.4th at p. 851, fn. omitted.)
“The moving party must satisfy his or her initial burden before the opposing party
must controvert anything. (§ 437c, subd. (p)(1) & (2).) Accordingly, a moving
defendant who claims that the plaintiff cannot prove all the elements of his case must
present evidence in support of this claim. The defendant cannot simply challenge the
plaintiff to prove his case by opposition. (Aguilar, supra, 25 Cal.4th at pp. 854-855.)”
(Y.K.A. Industries, Inc. v. Redevelopment Agency of San Jose (2009) 174 Cal. App. 4th
339, 353 (Y.K.A.).) In other words, “a plaintiff resisting a motion for summary judgment
bears no burden to establish any element of his or her case unless and until the defendant
presents evidence either affirmatively negating that element (proving its absence in fact),
or affirmatively showing that the plaintiff does not possess and cannot acquire evidence
to prove its existence.” (Reeves v. Safeway Stores, Inc. (2004) 121 Cal. App. 4th 95, 107.)
The court’s “primary function [in evaluating a summary judgment motion] is to
identify issues rather than to determine [them]. [Citation.] . . . If the evidence is in
conflict, the factual issues must be resolved by trial.” (Binder v. Aetna Life Ins. Co.
(1999) 75 Cal. App. 4th 832, 839.) Thus, should the court determine that triable issues of
3
fact exists, the summary judgment motion must be denied. (Chavez v. Carpenter (2001)
91 Cal. App. 4th 1433, 1448.) “There is to be no weighing of the evidence.” (Kids’
Universe v. In2Labs (2002) 95 Cal. App. 4th 870, 880.)
Our review of the granting or denial of summary judgment is de novo. (Valley,
supra, 129 Cal.App.4th at p. 1092.) In conducting such de novo review, we “consider[]
all the evidence set forth in the moving and opposition papers except that to which
objections have been made and sustained. [Citation.]” (Guz v. Bechtel National, Inc.
(2000) 24 Cal. 4th 317, 334.) “This review consists of ‘an independent assessment of the
correctness of the trial court’s ruling, [in which we] apply[] the same legal standard as the
trial court in determining whether there are any genuine issues of material fact or whether
the moving party is entitled to judgment as a matter of law.’ [Citation.] We need not
defer to the trial court and are not bound by the reasons in its summary judgment ruling;
we review the ruling of the trial court, not its rationale. [Citation.]” (Valley, supra, 129
Cal.App.4th at p. 1092.)
Factual Background
Here, appellants challenge two orders of the trial court granting summary
adjudication in favor of HP. The first is of Degenshein’s claims in the first amended
complaint.2 The second is of Giuliano-Ghahramani’s and the class claims in the second
amended complaint.
The first amended complaint was filed on October 14, 2003, and alleged four
causes of action against HP: Violation of the CLRA, violation of the UCL, unjust
2
At the outset it should be noted that appellants do not provide the operative first
amended complaint that was the basis of the first motion for summary judgment. This
defect would have resulted in the judgment being affirmed in favor of HP based on an
insufficient record. (Maria P. v. Riles (1987) 43 Cal. 3d 1281, 1295-1296 [failure to
provide an adequate record on an issue requires that the issue be resolved against the
appellant].) However, HP cured this defect by providing the first amended complaint in
its appendix. Therefore, we consider the merits of appellants’ claims.
4
enrichment3 and breach of express warranty. The first amended complaint included
Degenshein as the representative plaintiff. Degenshein purchased a Zinfandel 4.0
notebook computer in April 2002 that came with a standard one-year warranty from HP.
Degenshein experienced problems with his display screen blacking out shortly before the
expiration of his one-year warranty, but did not notify HP of the problem with his
notebook until two months after the warranty had expired.
The second amended complaint was filed on February 24, 2010, asserting the
same causes of action as the first amended complaint. The second amended complaint
adds Giuliano-Ghahramani as representative plaintiff. Giuliano-Ghahramani purchased a
Zinfandel 3.5 notebook computer in January 20502, and experienced problems with the
display screen in November 2002. Giuliano-Ghahramani submitted the notebook to HP
during the warranty and HP replaced the inverter.
In June 2009, the trial court granted HP’s motion for summary adjudication and
made a no merits determination as to Degenshein’s claims. HP moved for entry of
judgment against Degenshein. The court denied the motion, and instead, allowed
Degenshein to amend the complaint to add Giuliano-Ghahramani as plaintiff. On October
7, 2009, the court approved Giuliano-Ghahramani as class representative. Giuliano-
Ghahramani filed the second amended complaint in February 2010.
In June 2010, HP filed a motion for summary judgment as to Giuliano-Ghahramani
and the class. The trial court granted the motion, and on April 11, 2011, the trial court
entered judgment against Degenshein, Giuliano-Ghahramani, and the class as certified by
the court.
3
Appellants made no argument in the trial court and no argument on appeal
regarding their unjust enrichment claim. We deem this issue waived. (Interinsurance
Exchange v. Collins (1994) 30 Cal. App. 4th 1445, 1448 [the absence of argument allows
this court to treat the point as waived].)
5
CLRA4 and UCL Claims
“The CLRA proscribes particular ‘unfair methods of competition and unfair or
deceptive acts or practices’ in transactions for the sale or lease of goods or services to
consumers. (Civ.Code, § 1770, subd. (a))” (Collins v. eMachines, Inc. (2011) 202
Cal. App. 4th 249, 255 (Collins).)
The CLRA “ ‘enacted in 1970, “established a nonexclusive statutory remedy for
‘unfair methods of competition and unfair or deceptive acts or practices undertaken by
any person in a transaction intended to result or which results in the sale or lease of goods
or services to any consumer. . . .’ [Citation.]” ’ [Citation.] ‘The self-declared purposes
of the act are “to protect consumers against unfair and deceptive business practices and to
provide efficient and economical procedures to secure such protection.” (Civ. Code,
§ 1760.)’ ” (Wang v. Massey Chevrolet (2002) 97 Cal. App. 4th 856, 869.)) The CLRA
“shall be liberally construed.” (Civ. Code, § 1760.)
Appellants allege that HP’s concealment and failure to disclose the defect in the
inverters of the notebook computers violated the CLRA’s provision against
(1) representing that goods have characteristics which they do not have (Civ. Code,
§ 1770, subd. (a)(5)); (2) representing that goods are of a particular standard or quality if
they are of another (id., subd. (a)(7)); (3) advertising goods with the intent not to sell
them as advertised (id., subd. (a)(9)); (4) representing that a transaction confers or
involves rights, remedies, or obligations which it does not have or involve (id.,
subd. (a)(14); and representing that the subject of the transaction has been supplied in
accordance with a previous representation when it has not (id., subd. (a)(16).)
With regard to the UCL, appellants allege that HP violated the statute by
“concealing and/or omitting the true facts about the defect to [appellants] and Class
4
CLRA claims cannot be disposed of by motion for summary judgment. (Civil
Code, § 1781, subd. (c)(3).) Here, appellants filed a combined motion for summary
judgment and for a “no merits” determination on the CLRA claim.
6
members.” Additionally, appellants allege that HP’s violation of the CLRA by “omitting
the true nature and characteristics of its notebook computers and suppressing the known
defects,” violated the UCL.
The purpose of the UCL is to protect both consumers and competitors by
promoting fair competition in commercial markets for goods and services. It defines
“unfair competition” to mean and include “any unlawful, unfair or fraudulent business act
or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited
by [the false advertising law]. (commencing with Section 17500 et seq.).” (Bus. & Prof.
Code, § 17200; see also Rushing, et al., Matthew Bender Practice Guide: California
Unfair Competition and Business Torts (2014) Unfair Competition, §§ 2.03, 2.04 &
2.05.)
“The scope of the UCL is quite broad. [Citations.] Because the statute ([Bus. &
Prof. Code, § 17200, defining unfair competition]) is framed in the disjunctive, a business
practice need only meet one of the three criteria [unlawful, unfair or fraudulent] to be
considered unfair competition. [Citation.] [¶] A cause of action for unfair competition
under the UCL may be established ‘ “independent of any contractual relationship
between the parties.” ’ ” ( McKell v. Washington Mutual, Inc. (2006) 142 Cal. App. 4th
1457, 1470-1471.)
Appellants argue the fraudulent concealment claims under the CLRA and the UCL
are supported by the fact that HP “conceals the material fact that HP notebook computers
have known defects that cause display problems.” Further, appellants assert that HP was
obligated to disclose the inverter defect, because it was contrary to HP’s advertising
about the notebooks and was material to the proper functioning of the notebook
computers.
For a claim of fraudulent omission to be actionable under the CLRA, “the
omission must be contrary to a representation actually made by the defendant, or an
7
omission of a fact the defendant was obliged to disclose.” (Daugherty v. American
Honda Motor Co. (2006), 144 Cal. App. 4th 824, 835 (Daugherty).) Moreover, “[i]n order
to be deceived, members of the public must have had an expectation or an assumption
about the materials used” in the product. (Bardin v. DaimlerChrysler Corp. (2006), 136
Cal. App. 4th 1255, 1275 (Bardin).) Appellants argue that because consumers had an
expectation that the display screen of their notebooks would function properly for the
duration of the notebook’s “useful life,” HP had a duty to disclose the material fact that
the inverters were defective in manufacturing and installation. In particular, appellants
assert that consumers expect a notebook computer to be portable, and a properly working
display screen is essential to the notebook’s portability.5
HP argues manufacturers do not have an independent duty to disclose a product
defect absent an unreasonable risk of “physical injury or other safety concern.”
(Daugherty, supra, 144 Cal.App.4th at p. 836; see, e.g., Bardin, supra, 136 Cal. App. 4th
1255.) HP further notes that here, the risk posed by the alleged defect in the inverters had
nothing to do with a physical injury or a safety concern. Rather, the risk to the consumer
was the cost to repair the notebook, and as such, it does not rise to a duty to disclose.
Both Daugherty and Bardin do address disclosure of defects related to safety
concerns in the context of CLRA and UCL claims. However, neither Daugherty nor
Bardin preclude a duty to disclose material information known to a manufacturer and
concealed form a consumer. Specifically, in Daugherty, the court noted that while the
5
We note that a case similar to this has proceeded through the federal courts and
has been dismissed pursuant to Federal Rule of Civil Procedure, rule 12(b)(6) for failure
to state a claim. (Long v. Hewlett Packard Co. 2007 U.S. Dist. LEXIS 79292; Long v.
Hewlett-Packard Co. (9th Circ. Mar. 3, 2009) 316 Fed.Appx. 585 (Collectively Long).)
This court is “ ‘not bound by a federal circuit court opinion. [Citation.]” (Governor
Gray Davis Com. v. American Taxpayers Alliance (2002) 102 Cal. App. 4th 449, 468.)
Moreover, the standard for a motion to dismiss under the Federal Rule of Civil
Procedure, rule 12(b)(6) is inapplicable to a motion for summary judgment under Code of
Civil Procedure section 437c.
8
plaintiff’s complaint alleged that the engine defect presented an “ ‘unreasonable risk’ ” of
“ ‘serious potential damages,’ ” and that the defendant “carried on with a willful and
conscious disregard of the safety of Plaintiffs . . . ,” the complaint was “devoid of factual
allegations showing any instance of physical injury or safety concerns posed by the
defect.” (Daugherty, supra, 144 Cal. App. 4th 824, 836.) The court in Daugherty
concluded that the complaint did not state facts sufficient to support its claim that the
engine defect posed a safety concern to consumers. (Ibid.)
In Bardin, the plaintiffs alleged that a car manufacturer failed to disclose that
tubular steel was used in the exhaust manifolds of certain cars instead of more durable
and more expensive cast iron. (Bardin, supra, 136 Cal.App.4th at p. 1260.) The court
concluded that in addition to failing to allege any safety concerns associated with the
defective exhaust manifolds, the plaintiffs failed to allege any unfair conduct on the part
of the auto manufacturer. (Ibid.) The Bardin court did not hold that a defect must be
related to a safety concern to be material for purposes of fraudulent omission.
Citing Collins, supra, 202 Cal. App. 4th 249, appellants assert that HP had a duty to
disclose the defective nature of the inverters, because the defective inverters “obliterate[]
the function of a computer as a computer.” In Collins, the defendant sold computers with
defective microchips that were “ ‘missing [the] actual physical hardware logic that
industry standards require’ ” and the defendant had knowledge of the defective nature of
the microchips at the time the computers were sold. (Id. at p. 257). The defective
microchips were material, because they corrupted floppy disks, a necessary component in
the functioning of computers at the time. The court held that the defendant failed to
disclose and actively concealed the fact of this faulty microchip from consumers in
violation of the CLRA and the UCL. (Id. a p. 258.)
The court in Collins distinguished both Daugherty and Bardin in finding that the
manufacturer had a duty to disclose a material defect in its product. Specifically, the
9
Collins court noted that the defect in the hardware logic of the computer was the result of
improper manufacturing, causing the chip to corrupt data on the user’s floppy disk. The
defect in Collins was not the result of a breakage of the product over time because of use
and wear tear like the engine oil leak in Daugherty. In addition, unlike the metal
composition of the exhaust manifolds in Bardin, the hardware logic in the computers in
Collins was material, because it was central and necessary to the function of the computer
as a computer. (Collins, supra, 202 Cal.App.4th at p. 258.)
Similarly here, appellants assert that the defect in the inverters occurred in its
manufacturing and installation and was material, because it affected the performance of
the display screens of notebook computers. Appellants argue that a functioning display
screen is critical to a notebook computer’s function, because without it, the computer
would not be portable and would require the connection of an outside monitor.
HP asserts Collins is inapplicable because appellants do not allege that their
notebooks malfunctioned out of the box; rather, the defect allegation in this case is that
the inverters would malfunction at some time in the future. Indeed, the Collins court
noted, “[t]his [is] not a situation where the microchip [is] complete and operational when
sold,” but wears out or breaks over time. (Collins, supra, 202 Cal.App.4th. at p. 254)
However, while appellants’ allege that the inverters were “substantially certain to fail” at
some point in the future, appellants’ theory is that the inverters were defective in
manufacturing and installation at the time the notebooks were sold.
HP argues Degenshein and class members similar to him do not have a claim for
fraudulent concealment under the UCL, because they received notebooks with inverters
that functioned for the duration of the one-year warranty, and were not damaged by HP’s
alleged failure to disclose the fact of the faulty inverter. However, a claim for fraudulent
business practices “reflects the UCL’s focus on the defendant’s conduct, rather than the
plaintiff’s damages, in service of the statute’s larger purpose of protecting the general
10
public against unscrupulous business practices.” (In re Tobacco II Cases (2009) 46
Cal. 4th 298, 312.) The question under the UCL is related to HP’s conduct in failing to
disclose the faulty inverter, not on whether the notebook’s computer functioned for one-
year. HP’s argument that the expiration of the warranty period precludes a claim for
fraudulent concealment under the UCL is incorrect.
Moreover, whether the information about the faulty inverter is material is a
question for the trier of fact. (See, e.g., Engalla v. Pemanente Medical Group, Inc.
(1997) 15 Cal. 4th 951, 976 [“A misrepresentation is judged to be ‘material’ if ‘a
reasonable man would attach importance to its existence or nonexistence in determining
his choice of action in the transaction in question’ [citations], and as such materiality is
generally a question of fact unless the ‘fact misrepresented is so obviously unimportant
that the jury could not reasonable find that a reasonable man would have been influenced
by it.”].)
Appellants point to specific misrepresentations in HP’s press releases and
advertising that created a duty to disclose the known defects in the notebook computers.
Appellants’ claim of misrepresentation is based on statements made by HP about its
products in certain press releases. Specifically, appellants point to press releases from
January and March 2001. In these releases, HP represented that its “ ‘latest . . . notebook
PCs reinforce HP’s commitment to providing choice customization and the latest
technologies to meet the diverse needs of today’s customers,’ ” and that the notebooks
fall within HP’s tradition of “ ‘reliable, manageable, stable, secure and expandable
products.’ ”
While it is true that “[s]ellers are permitted to ‘puff’ their products by stating
opinions about the quality of the good so long as they do not cross the line and make
factual representations about important characteristics like a product’s safety.” (Osborne
v. Suburu of America, Inc. (1988) 198 Cal. App. 3d 646, 660, fn. 8.) The question of
11
whether a manufacturer’s representation about a product is specific, and was relied upon
by a consumer should be decided by a trier of fact. Here, Giuliano-Ghahramani alleged
that she purchased her notebook based on an HP advertisement she saw. In addition,
Giuliano-Ghahramani produced the advertisement and testified that she purchased the
notebook because of the display screen shown and described in the ad, noting that the HP
notebook screen “was a larger screen at the time.” Appellants’ evidence is sufficient to
create a triable issue of fact as to the nature of HP’s representations, and whether that
triggered a duty to disclose the defect.
Evidence of Defect and HP’s Knowledge
We note at the outset that as the moving party, HP has not met its burden to show
that “one or more elements of a cause of action, even if not separately pleaded, cannot be
established . . . .” (Code Civ. Proc. § 473c, subd. (p)(2).) “[A] moving defendant who
claims that the plaintiff cannot prove all the elements of his case must present evidence to
support his claim. The defendant cannot simply challenge the plaintiff to prove his case
by opposition.” (Y.K.A., supra, 174 Cal.App.4th at p. 353, citing Aguilar, supra, 25
Cal.4th at pp. 854-855.) Here, appellants alleged that HP omitted and concealed from
them material information about the notebooks in violation of the CLRA and the UCL.
HP has not presented evidence as the elements of this claim, including materiality or
consumer expectations.
In support of their claim of defect in manufacture and installation of the inverters,
appellants submitted the declaration of Eric Langberg, an engineering expert who opined
that all of the Zinfandel 3.5 computers, and 42,000 Zinfandel computers contained TDK
inverters that had an insufficient fuse rating, and as result, the backlights would not
receive adequate power to light the screens. Langberg also offered the opinion that an
inverter “has an indefinite useful life,” such that a failure of an inverter at any time would
be premature. Langberg opined that the mounting hole for the Ambit inverters is located
12
too close to the integrated circuit, and the location of the integrated circuit leads to early
failure of the inverter. In addition, Langberg offered the opinion that the amount of force
used to mount the Ambit inverters caused cracks in the soldering of the integrated circuit.
HP points to the fact that Langberg did not identify any actual inverter
malfunction in any of the class members’ notebook computers, other than Degenshein’s.
In addition, Langberg stated: “[f]rom a statistical reliability standpoint, I do not have an
opinion on notebook computer useful life.” Langberg said that he could not put a
percentage onto the phrase “substantially certain to prematurely fail.” Langberg said that
he had no basis for rendering an opinion when an inverter failure would be premature
versus not premature. Langberg also stated that he had no way to know how many 3.5
and 4.0 notebooks had failed inverters because the repair data does not provide for
“what’s actually happening in the field.” Langberg had no opinion as to when HP knew
of any defects in the TDK or Ambit inverters in the notebook computers.
Langberg’s opinion evidence creates a triable issue of fact as to whether the TDK
inverters were defective and whether the Ambit inverters were installed incorrectly.
Despite the fact that Langberg provided no evidence of what “substantially certain to
fail” means, no opinion of what it would mean for an inverter to fail prematurely, and no
explanation of what constitutes a computer’s “useful life,” he did provide evidence from
which a reasonable trier of fact could conclude that the inverters were defective.
As to HP’s knowledge of the defect, appellants present an e-mail from David Lee,
an HP engineer, stating that at the “Zinfandel Platform Team” meeting on
January 8, 2002, HP addressed the electrical and mechanical engineering problems of the
TDK that inverters were causing backlight failures in Zinfandel 3.0 and 3.5 computers.
The electrical engineering problem with the Zinfandel 3.5 computers was traced to TDK
inverters with an “insufficient margin on fuse rating.” As a result of this discovery, on
April 15, 2002, HP issued a service note to Compal, the Taiwanese Original Design
13
Manufacturer (ODM) who manufactured the notebooks for HP. The TDK note provided
that the TDK inverters had a “blown” fuse that resulted in no backlight to the display
screen on the computer. The note required that the TDK inverters in Zinfandel 3.5
computers that were submitted for repair to Bizcom, Inc. (Bizcom), HP’s authorized
repair center, be replaced with inverters manufactured by Ambit.
With regard to the Ambit inverters, appellants present evidence of a second service
note6 that was issued in November 2003, and related to the Ambit inverters that Bizcom
installed as replacements in Zinfandel computers. This second service note applied to all
Zinfandel notebooks, regardless of version (i.e., 3.0, 3.5 or 4.0) service history or actual
inverter failure. This service note stated that the torque setting of Bizcom’s automated
screwdrivers used to install the Ambit inverters was too high, resulting in solder cracking
on the inverters. The note instructed Bizcom to reduce the torque setting on the
screwdrivers for future repairs.
Appellants also point to the call center data7, as well as the Bizcom repair data to
show that HP notebooks contained defective inverters, and that HP was aware of the
same. Langberg analyzed the data, and stated that during the period from January 2002
and December 2003, the number of notebooks submitted for service per month for
6
At HP’s motion for summary adjudication of Degenshein’s claims, HP objected
to the admission of the Ambit service note as a “subsequent remedial measure” under
Evidence Code section 1151. The court sustained the objection. This was error. The
Ambit service note was offered to show defect in the installation of the inverters. It was
not offered to show negligence on the part of HP, and therefore, Evidence Code 1151
does not apply.
It should also be noted that at HP’s subsequent motion for summary adjudication
of Giuliano-Ghahramani’s and the class claims, HP did not object to the Ambit service
note, and it was admitted as evidence.
7
Call center data refers to “anybody who calls HP, the 800 number, who has a
question . . . the call service representative . . . enters an entry when that call
happens . . . .”
14
inverter replacement ranged from 0 percent to .8 percent. In most months during that
same period, the percentage of notebooks submitted for inverter repair was less than .5
percent. However, the failure rate of .8 percent noted in February 2002, increased to
1.0 percent in April 2002.
HP argues that because a dim, dark or flickering display can be caused by many
things, including liquid spills and customer misuse, there is no way to extrapolate proof
of defective inverters from call center data complaining of display screen problems, or
Bizcom repair data. However, Langberg’s analysis of the increase in inverter failure over
time could lead a reasonable trier of fact to conclude that the inverters were defective,
and that HP was aware of the defect.
We find appellants’ evidence creates a triable issue of fact as to whether the TDK
and Ambit inverters were defective and whether HP had knowledge of the defects.
Langberg’s testimony creates a triable issue of fact as to whether the TDK inverters were
defective because they had an insufficient fuse rating, and whether the Ambit inverters
used to replace the TDK inverters were installed incorrectly. The call center data and
service data demonstrating an increase in inverter failure over time, coupled with
Langberg’s analysis of the data create a triable issue of fact as to whether HP knew about
the defects and if so, when. In addition, the occurrence of the HP meeting on
January 8, 2002 to address the electrical engineering problems with the TDK inverters,
and the continued shipment of Zinfandel 3.5 notebooks containing those inverters for the
three months following, creates a triable issue of fact as to whether HP knew about the
defect in the TDK inverters and concealed this fact from the consumers who purchased
notebooks containing the TDK inverters. Finally, the Ambit service note, coupled with
the evidence of the procedure by which HP issues a service note creates a triable issue as
to when HP knew about the defect in the Ambit inverter installation.
15
HP is not entitled to judgment as a matter of law as to the UCL claims, and is not
entitled to a no merits determination as to the CLRA claims in the First and Second
Amended Complaints.
Breach of Express Warranty
The one-year warranty for the notebook computer states, in relevant part: “HP
warrants to you, the end-user customer, that HP hardware, accessories, and supplies will
be free from defects in materials and workmanship after the date of purchase, for the
period specified in the Warranty Duration table below. HP Pavilion and Omnibook XE
Series Notebooks typically come with a standard one-year warranty. Please see the
Warranty Duration table for more details. If HP receives notice of such defects during the
warranty period, HP will at its option, either repair or replace products which prove to be
defective. Replacement products may be either new or equivalent in performance to new.
[¶] . . . [¶] . . . HP does not warrant that the operation of HP products will be
uninterrupted or error free. If HP is unable, within a reasonable time, to repair or replace
any product to a condition as warranted, you will be entitled to a refund of the purchase
price upon prompt return of the product.”
For notebook computers presented to HP for repair during the one-year warranty
stated above, HP also provided a 90-day repair warranty for materials and work at no
charge to the purchaser. The repair warranty provided that if the product was returned to
HP within 90 days of a repair, it would “correct any defects in materials or workmanship
used in the repair.” In addition, customers were given the option of purchasing extended
warranty and service packages at the time of the original purchase of the notebook.
The primary difference between the first amended complaint and the second
amended complaint is the breach of express warranty cause of action. The first amended
complaint alleges that Degenshein did not submit his notebook for repair to HP until after
16
his one-year warranty had expired. The second amended complaint alleges that Giuliano-
Ghahramani submitted her notebook for repair before her one-year warranty had expired.
Degenshein
It is undisputed in this case that Degenshein did not notify HP until 14 months
after he purchased his notebook; two months after the expiration of the one-year
warranty. Appellant asserts that Degenshein’s late notice of his defective computer was
not fatal to his breach of express warranty claim, because HP had “constructive notice” of
the display screen problems based on other customer complaints about other notebook
computers in HP’s product line. In addition, appellant asserts that the inverters were
substantially certain to fail during the notebook’s “useful life,” and that HP knew this
would occur at the time the notebooks were sold.
The warranty at issue in this case is clear that it applies to the end-user, and
provides that the product “will be free from defects in materials and workmanship after
the date of purchase, for the period specified in the Warranty Duration table below.” The
word “defects” in the warranty clearly refers to defects in the end-user’s computer, as
opposed to other computers purchased by other customers on earlier or later dates. In
addition, the warranty provides for HP’s obligation to repair or replace defective products
only if HP “receives notice of such defects during the warranty period . . . .”
Appellants’ argument is contradictory to Daugherty, supra, 144 Cal. App. 4th 824,
which held that “[a] warranty is a contractual promise from the seller that the goods
conform to the promise.” (Id. at p. 830.) In Daugherty, the plaintiffs argued that
Honda’s warranty did not require discovery of the defect during the warranty period if
Honda was aware of the defect at the time of sale. The court rejected the plaintiffs’
argument, noting that numerous courts have found that a latent defect that is discovered
after the express warranty has expired cannot form the basis for a breach of express
warranty claim. (Id. at pp 831-832.)
17
The court in Daugherty reasoned: “. . . in giving its promise to repair or replace
any part that was defective in material or workmanship and stating the car was covered
for three years or 36,000 miles, Honda ‘did not agree, and plaintiffs did not understand it
to agree, to repair latent defects that lead to a malfunction after the term of the
warranty.’ ” (Daugherty, supra, 144 Cal.App.4th at p. 832.) The court stated further:
“ ‘[v]irtually all product failures discovered . . . after expiration of the warranty can be
attributed to a “latent defect” that existed at the time of sale or during the term of the
warranty. All parts will wear out sooner or later and thus have a limited effective life.
Manufacturers always have knowledge regarding the effective life of particular parts and
the likelihood of their failing within a particular period of time[, and] can always be said
to “know” that many parts will fail after the warranty period has expired. A rule that
would make failure of a part actionable based on such “knowledge” would render
meaningless time/mileage limitations in warranty coverage.’ ” (Daugherty, supra, 144
Cal.App.4th at 830, quoting Abraham v. Volkswagen of Am., Inc. (2d Cir. 1986) 795 F.2d
238, 250.)
Appellants rely on Hicks v. Kaufman & Broad Home Corp. (2001) 89 Cal. App. 4th
908 (Hicks) for the proposition that the one-year time limit of HP’s express warranty
should not bar claims of defects discovered after expiration, because the inverters in HP’s
notebooks were “substantially likely to fail” during the notebooks’ “useful life.” In
Hicks, homeowners sued their builders for faulty foundations in their homes. The court
concluded that “proof of breach of warranty does not require proof the product has
malfunctioned but only that it contains an inherent defect which is substantially certain to
result in malfunction during the useful life of the product.” (Id. at p. 918.) The Hicks
court further stated: “Foundations . . . are not like cars or tires. Cars and tires have a
limited useful life. . . . A foundation’s useful life, however, is indefinite.” (Id. at p. 923,
fn. omitted.)
18
Hicks is readily distinguished from the present case. The court’s rationale in Hicks
focused on the lifespan of a home foundation, and the fact that the defect in the
foundation could manifest in a malfunction at any time during that lifespan. As a result,
the duration of the express warranty was not dispositive of a claim of defect. Here,
unlike a home foundation with an indefinite useful life, a computer, like a car or tires, has
limited useful life.
Applying the rationale of Daugherty to the present case, HP is not liable for
breach of warranty for those claims made after the expiration of the one-year warranty
period. The warranty in this case required the end-user to notify HP during the warranty
period. It is undisputed that Degenshein did not notify HP of the problem with his
computer until after his one-year warranty had expired. Moreover, HP’s putative
knowledge of a potential failure of a product in the future or of a latent defect that could
cause product failure down the road does not alter the one-year time limits provided in
the express warranty as appellants suggests. (See, e.g., Daugherty, supra, 144
Cal.App.4th at p. 830.) Appellants’ interpretation of the warranty suggesting that
constructive notice would satisfy the notice requirement is unreasonable and would not
effectuate the intent of HP and the end-user. “A contract must receive such an
interpretation as will make it . . . reasonable, and capable of being carried into effect, if it
can be done without violating the intention of the parties.” (Civ. Code § 1643.)
Because it is undisputed that Degenshein did not notify HP about a problem with
his display screen until after his one-year warranty had expired, his claim for breach of
warranty fails, and HP is entitled to judgment as a matter of law as to Degenshein’s
breach of warranty cause of action.
Giuliano-Ghahramani
Unlike Degenshein, Giuliano-Ghahramani notified HP of a problem with the
display screen of her notebook computer within the one-year warranty period.
19
Specifically, Giuliano-Ghahramani purchased her notebook in January 2002, and notified
HP about problems with her display screen in November 2002. In response, HP replaced
the inverter. Giuliano-Ghahramani notified HP about display screen problems a second
time in December 2002, and HP again replaced the inverter. Finally, Giuliano-
Ghahramani notified HP in June 2003 about display screen problems after the expiration of
the one-year warranty, and the 90-day repair warranty. HP did not repair Giuliano-
Ghahramani’s notebook outside of the warranty period.
Giuliano-Ghahramani asserts that there is a triable issue of fact as to whether HP
actually repaired her notebook computer in 2002 when she twice presented it to HP for
display screen problems during the warranty period. Specifically, although Giuliano-
Ghahramani stated that the notebook worked “great” after HP returned it to her during the
warranty, the fact that the notebook had display screen problems in June 2003 after the
warranty had expired demonstrates that HP’s repair during the warranty was insufficient.
Giuliano-Ghahramani asserts that when she submitted her notebook to HP, HP replaced
her inverter with other defective inverters.
Giuliano-Ghahramani points to the TDK and Ambit service notes of April 2002 and
November 2003, respectively as evidence that HP’s repair of her notebook during the one-
year warranty was not adequate. Specifically, she argues that as directed by the TDK
service note, the TDK inverter in her notebook was replaced with an Ambit inverter when
she submitted the notebook for repair during the one-year warranty period. She asserts that
pursuant to the Ambit service note, Bizcom used a screwdriver that had torque settings that
were too high. As a result, Giuliano-Ghahramani argues, HP did not adequately repair her
computer under the warranty.
Here, under the terms of the warranty, HP replaced the inverter in Giuliano-
Ghahramani’s computer and returned it to her in operative condition. However, Giuliano-
Ghahramani’s computer malfunctioned again during the warranty, and HP again replaced
20
the inverter. Giuliano-Ghahramani argues HP breached the warranty because it replaced
one faulty inverter with another. Therefore, it did not return her computer to her in a
condition as warranted, namely, to be free from defect. In fact, the computer was returned
to her in a defective condition, which was a breach of warranty.
HP asserts that because Giuliano-Ghahramani’s notebook continued to function
throughout the duration of the one-year warranty period, HP complied with its warranty.
HP further argues that the fact that Giuliano-Ghahramani’s notebook malfunctioned six
months after the expiration of the warranty is not a consideration in a breach of warranty
claim. Daugherty makes it clear that that a plaintiff cannot maintain a breach of warranty
claim for a product that is repaired within the warranty period and fails again months
after the warranty has expired. (Daugherty, 144 Cal. App. 4th at pp. 830-832.) If the
result were otherwise, it “ ‘would change the landscape of warranty and product liability
law in California. Failure of a product to last forever would become a “defect,” a
manufacturer would no longer be able to issue limited warranties, and product defect
litigation would become as widespread as manufacturing itself.’ ” (Daugherty, supra 144
Cal. App. 4th at p. 829.)
Appellants’ claim for breach of express warranty with regard to Giuliano-
Ghahramani is distinct from that in Daugherty. Specifically, appellants do not base their
claim for breach of warranty on the fact that Giuliano-Ghahramani’s notebook had a
defect that manifested outside the warranty period. Appellants argue that HP breached its
warranty by replacing one faulty inverter for another. As a result, HP failed to adequately
repair Giuliano-Ghahramani’s notebook, and did not return it to her in the condition as
warranted.
In support of their argument that failure to repair can form a basis for a breach of
warranty claim, appellants cite cases dealing with inadequate repairs under the Song-
Beverly Consumer Warranty Act (Civ. Code § 1790, et seq.). These cases include Jensen
21
v. BMW of North America, Inc. (1995) 35 Cal. App. 4th 112 (Jensen), Oregel v. American
Isuzu Motors, Inc. (2001) 90 Cal. App. 4th 1094, and the recent case of Donlen v. Ford
Motor Company (2013) 217 Cal. App. 4th 138 (Donlen).8 All of these cases involved
multiple unsuccessful attempts to repair the consumers’ cars within the warranty period
and addressed the question of whether there was substantial evidence to support a finding
of inadequate repair.
While the present case does not encompass a claim for violation of the Song-
Beverly Act, the cases appellants cite are illustrative of what constitutes a failure to repair.
In Jensen, the plaintiff experienced a recurring brake problem with her BMW, and she
returned the car to the dealer for repair multiple times. (Jensen, supra, 35 Cal.App.4th at
p.p. 120-121.) The brake problem persisted and Jensen sought relief under the Song-
Beverly Act for failure to repair. After a jury returned a verdict for Jensen, BMW
appealed, arguing there was insufficient evidence to support a finding that BMW failed to
adequately repair her car. (Id., at p. 134.) The Court of Appeal affirmed, finding that there
was substantial evidence to support the jury’s finding of failure to repair. (Id., at p. 135)
Specifically, the court noted that Jensen experienced the same brake problem after each
repair attempt, BMW had issued a service bulletin to dealerships alerting them to the brake
problem, and there was expert testimony that the brake problem persisted. (Ibid.)
There are factual similarities between the present case and Jensen. Giuliano-
Ghahramani presented evidence that she continued to experience the same display screen
problems after submitting her notebook for repeated repairs, evidence of the Ambit service
note that provided that the torque setting for the screwdrivers being used to replace the
inverters was too high and caused cracking of the solder joint, and expert opinion of
8
Donlen was brought to this court’s attention by appellants’ letter brief filed
June18, 2013.
22
Langberg stating that using too much torque on an already defective inverter design would
cause cracking that would continue to worsen until complete failure of the inverter.
The evidence in this case creates a triable issue as to whether HP adequately
repaired Giuliano-Ghahramani’s notebook when she submitted it to HP two times during
the one-year warranty. While HP focuses its argument on the fact that Giuliano-
Ghahramani stated that the notebook worked “great” when it was returned to her, there is
evidence showing that the notebook continued to have the same flickering display screen
problems after both repair attempts. In addition, there is evidence that when Giuliano-
Ghahramani’s notebook failed six months after the expiration of the warranty, it was
because of the faulty inverter. This repeated failure of Giuliano-Ghahramani’s notebook
following two repair attempts could lead a reasonable trier of fact to find that HP failed to
adequately repair her notebook.
We find there is a triable issue of fact as to Giuliano-Ghahramani’s breach of
express warranty claim. The evidence here creates a triable issue as to whether HP
complied with its warranty by replacing a faulty inverter with another faulty inverter, and
returning Giuliano-Ghahramani’s notebook to her in a defective condition. The fact that
Giuliano-Ghahramani’s notebook continued to present the same flickering display screen
problems after two repair attempts, and ultimately failed because of the faulty inverter
creates a triable issue as to whether HP complied with its warranty. HP is not entitled to
judgment as a matter of law as to the breach of express warranty claims.
Class Certification Orders
Appellants assert the court erred in failing to certify a nationwide class, and in
denying certification of the CLRA claims
Denial of Nationwide Class-Factual Background
In 2005, Rutledge and Degenshien moved for class certification of the breach of
express warranty, violation of the UCL and unjust enrichment claims; they did not seek
23
certification of the CLRA claims. In the motion, Rutledge and Degenshein alleged that
Zinfandel 3.5 and 4.0 notebook computers released from December 2001 until November
2002 contained inverters that were substantially certain to fail during the “useful life” of
the computer. In addition, the motion alleged that HP knew of the defect in the display
screen components in the computers at the time of class members’ purchases beginning
in December 2001.
In 2007, the trial court certified a class consisting of only California residents,
denying appellants’ request for a nationwide class.9 As a result, Degenshein was
designated as the only class representative. The certified class was defined as “[a]ll
persons or entities who own or owned one or more of the following HP Pavilion
notebook models: zt1150; zt1155; zt1170; zt1175; zt1108; zt1185; zt1190; zt1195;
zt1250; xz185; xz275; and xz295; containing a TDK TAD669 Rev. 2.0 inverter or an
Ambit inverter, part numbers PK070012310 and PK070011210; who purchased the
notebook from an entity located in California; and who experienced a dim, dark, or
flickering display.”
Analysis
Appellants argue on appeal that the trial court erred in limiting the class to only
California residents, rather than HP consumers nationwide.
“Because trial courts are ideally situated to evaluate the efficiencies and
practicalities of permitting group action, they are afforded great discretion in granting or
denying certification. . . . [citations] . . . . [Accordingly,] a trial court ruling supported by
substantial evidence generally will not be disturbed ‘unless (1) improper criteria were
used [citation]; or (2) erroneous legal assumptions were made [citation]’ [citation].’ ”
(Linder v. Thrifty Oil Co. (2000) 23 Cal. 4th 429, 435-436.)
9
HP challenged the trial court’s certification of the class. This court affirmed the
trial court’s class certification order in Hewlett-Packard Co. v. Superior Court, supra,
167 Cal. App. 4th 87.
24
In denying appellants’ request to certify a nationwide class, the court found that
appellants: “fail[ed] to establish the constitutionality of applying California law to out-
of-state class members’ claims. [Appellants] also fail[ed] to persuasively articulate why
California has a special obligation that would fairly call for it to assume the burden of
adjudicating a nationwide class action. The purchases occurred at local retail stores in a
multitude of jurisdictions. Presumably consumers would have exercised their warranty
rights under their respective states’ laws. Further, there appear to be warranty issues
unique to some jurisdictions. [Appellants] fail[ed] to provide sufficient information or a
satisfactory assessment as to how the state law differences may be managed fairly and
efficiently.”
A nationwide class is proper under constitutional law when a state has
“ ‘significant contact or significant aggregation of contacts’ to the claims asserted by
each member of the plaintiff class, contacts ‘creating state interests,’ in order to ensure
that the choice of [forum] is not arbitrary or unfair.” (Phillips Petroleum Co. v. Shutts
(1985) 472 U.S. 797, 821-822.) Appellants point to the significant contacts California
has with the claims asserted against HP that justify the application of California law
under constitutional law principles. Specifically, HP a has national advertising campaign
that was created by a California agency. HP’s contracts with Compal for the production
of the computers were governed under California law. HP’s designated service provider
for computer repairs, Bizcom, is located in California. Finally, certain HP witnesses are
located in California, including David Lee, who approved the service notes at issue in this
case. Mr. Lee works in HP’s Mobile Computing Division located in Cupertino.
Appellants argue on appeal that the court erred in finding that California did not
have sufficient contacts to the claims of the class members such that California law
should apply to non-resident plaintiffs. Appellants cite cases of California computer
manufacturers that have been included in nationwide class actions. (See, e.g. Wershba v.
25
Apple Computer, Inc. (2001) 91 Cal. App. 4th 224 (Wershba); Wolph v. Acer America
Corp. (2011) 272 F.R.D. 477 (Wolph).) Appellants argue the same result should be
applied in this case, namely, that the court should certify a nationwide class.
In Wershba, plaintiffs sued Apple Computer for violations of the UCL and the
CLRA in connection with Apple’s decision to terminate free technical support promised
to purchasers of certain Apple products. (Wershba, supra, 91 Cal.App.4th at p. 231.)
This court found that a nationwide class was appropriate for settlement of the action
because the plaintiffs had established that California had sufficient contacts with the
claims against Apple such that application of California law would be constitutionally
appropriate. (Id. at p. 244.) In arriving at that conclusion, this court considered the fact
that Apple is a California corporation, with its principle place of business in Cupertino,
the brochures promising free technical support were made and distributed from
California, and the policy to terminate the technical support at issue in the case was made
at Apple’s headquarters in California. (Id. at p. 242.)
Moreover, in Wolph, the court found a nationwide class proper because the
warranty contracts at issue contained an express California choice-of-law provision, the
computers that were alleged to be defective were designed, developed and tested in
California, and the decisions about retail sales of the computers were made in California.
(Wolph, supra, 272 F.R.D. at pp. 484-485.)
The facts of Wershba and Wolph are similar to the present case. HP’s
headquarters and principle place of business is California, policy decisions regarding the
notebooks at issue, including issuing the service notes, were made in California, and all
of the warranty repairs were performed in California. As such, appellants established
sufficient contacts with California as to each class member’s claims such that application
of California law to non-resident plaintiffs would not be “arbitrary and unfair.” (Phillips
Petroleum Co., supra, 472 U.S. at pp. 821-822.)
26
Moreover, choice-of-law rules, under which the trial court determines whether the
law of other states is materially different and whether other states have an interest in
having their law applied, support the application of California law to a nationwide class.
(See, e.g., Washington Mutual Bank v. Superior Court (2001) 24 Cal. 4th 906, 919
(Washington Mutual).) The state where the injury occurs has a “ ‘predominant interest’ ”
in applying its law. (McCann v. Foster Wheeler LLC, (2010) 48 Cal. 4th 68, 98
(McCann).) In addition, Civil Code section 1646, provides that “[a] contract is to be
interpreted according to the law and usage of the place where it is to be performed; or, if
it does not indicate a place of performance, according to the law and usage of the place
where it is made.” (Civ. Code § 1646.) Here, appellants’ allege that HP failed to comply
with its repair obligations under the express warranty. As such, the alleged injuries
occurred in California where HP conducted the repairs, and California has the
“ ‘predominant interest’ ” in applying its law. (McCann, supra, 48 Cal.4th at p. 98.)
Here, in denying certification of a nationwide class, the court noted that
application of California law to non-resident plaintiffs would not be appropriate to the
extent that consumer protection laws differ in other jurisdictions, potentially affording
plaintiffs better remedies or more claims. The court stated: “[y]ou’re asking the court to
apply California law and that may be appropriate except to the extent it may deprive
somebody of a cause of action he would otherwise have.” The court further noted that
application of California law to non-resident plaintiffs would be inappropriate “to the
extent that we would be depriving somebody of a right where they acquired their
computer in another jurisdiction, perhaps from a retailer, or who knows where, and
they’re governed by other laws in those jurisdictions.”
The same rationale cited by the trial court was rejected by this court in Wershba ,
noting, “California’s consumer protection laws are among the strongest in the country.”
(Wershba, supra, 91 Cal.App.4th at p. 242.) This court cited Clothesrigger Inc. v. GTE
27
Corp. (1987) 191 Cal. App. 3d 605 (Clothesrigger) for the proposition that California
courts may apply California’s pro-consumer laws to non-residents, stating, “ ‘California’s
more favorable laws may properly apply to benefit nonresident plaintiffs when their
home states have no identifiable interest in denying such persons full recovery.’ ”
(Wershba, supra, 91 Cal.App.4th at p. 243, citing Clothesrigger, supra, 191 Cal.App.3d
at p. 616.) The court in Wolph found similarly, stating, “California’s interest in having its
consumer protection laws applied to claims involving those notebooks outweigh any
other particular state’s interest in have its laws applied.” (Wolph, supra, 272 F.R.D. at
p. 486.)
Here, because California has sufficient contacts to the claims of the class members
to meet constitutional standards, the burden was on HP to demonstrate that the interests
of other state’s laws were greater than California’s interests. (See Wershba, supra, 91
Cal.App.4th at p. 244; Washington Mutual, supra, 24 Cal.4th at p. 921.) Other than to
refer to the possibility that other jurisdictions have differing warranty laws that could
affect consumers disparately, the court did not address whether HP met its burden of
demonstrating that the interests of other state’s laws were greater than California’s, nor
did it make such finding.
Moreover, the court improperly placed the burden on appellants “to persuasively
articulate why California has a special obligation that would fairly call for it to assume
the burden of adjudicating a nationwide class action.” The same reasoning was rejected
in Clothesrigger, where the trial court denied nationwide class certification because
“California had no interest in becoming the ‘savior’ of the other 49 states.”
(Clothesrigger, supra, 191 Cal.App.3d at p. 613.) Such consideration was not proper
under choice-of-law rules.
We find the trial court’s order denying nationwide class certification must be
reversed. The record shows that California had sufficient contacts with the claims such
28
that California has an interest in applying its laws to nonresident plaintiffs satisfying
constitutional principles. In addition, HP did not satisfy its burden of showing that other
state’s interests in applying their law were greater than California’s. Here, the court
improperly used the possibility of differing warranty laws as a reason to deny nationwide
certification without considering whether other jurisdictions had an interest in applying
those laws. Finally, the court improperly required appellants to demonstrate why
California had a “special obligation” in applying its consumer protection laws to
nonresident plaintiffs. Such consideration is not a proper one for a choice-of-law
analysis.
Denial of Class Certification of CLRA Claims-Factual Background
In between the first and second motions for class certification, appellants moved
for summary adjudication of some of HP’s affirmative defenses. The court granted the
motion as to the following affirmative defenses asserted by HP: accord and satisfaction,
intervening and superseding events, acts of third parties, and failure to mitigate.
Appellants filed a second motion for class certification seeking to certify the
CLRA claims for class treatment. The court denied the motion, reasoning that
Degenshein’s failure to request certification of the CLRA claims estopped Giuliano-
Ghahramani from requesting such certification, and that certification would present one-
way intervention issues given the adverse adjudication of HP’s affirmative defenses.
Analysis
In denying appellants’ request for certification of its CLRA claims, the court
determined that such certification was improper under Fireside Bank v. Superior Court
(2007) 40 Cal. 4th 1069 (Fireside Bank) and its prohibition against one-way intervention.
The court noted that “class certification issues must be resolved prior to any merits
determination.” In addition, the court noted that appellants could have moved for
29
certification of the CLRA claims “years ago” and “have failed to adequately explain why
they did not do so and should be allowed to do so now.”
The problem of one-way intervention occurs when “not-yet-bound absent
plaintiffs may elect to stay in a class after favorable merits rulings but opt out after
unfavorable ones.” (Fireside Bank, supra, 40 Cal.4th at p. 1074.) Thus, “trial courts in
class action proceedings should decide whether a class is proper and, if so, order class
notice before ruling on the substantive merits of the action.” (Ibid.) The doctrine is
designed to prevent class members from taking advantage of favorable rulings while
avoiding any res judicata effect of unfavorable ones, essentially picking and choosing
how to proceed based on how the merits of the class litigation unfold.
Certifying new class claims in a case such as this where the court had already
made decisions on the merits would violate the proscription against one-way intervention,
in that “potential members of the class can reserve the decision to become part of the
class” until after the court has made decisions on the merits of the case. This creates the
“classic no-win option” for the HP. (Home Savings v. Superior Court (1974) 42
Cal. App. 3d 1006, 1011.) Moreover, certifying a new class claim would subject HPs to
“ ‘ “ ‘an open-ended lawsuit that cannot be defeated, cannot be settled, and cannot be
adjudicated.’ ” ’ ” Fireside Bank, supra, 40 Cal.4th at 1081.)
We find the court properly denied appellants’ request to certify the CLRA claims,
and the order was supported by substantial evidence. At the time of appellants’ request,
the court had already ruled that HP was precluded from asserting some of its affirmative
defenses. If the court allowed the requested certification, newly added class members
could join the class with the benefit of knowing that HP would be barred from raising the
adjudicated defenses. The order denying certification of the CLRA claims will not be
disturbed on appeal.
30
Discovery Sanctions
Appellants dispute three orders of the trial court regarding discovery sanctions.
The first is an order of the trial court sanctioning appellants for an untimely motion to
compel compliance with a subpoena of a third party. The other two orders denied
appellants’ request for evidentiary sanctions against HP.
Monetary Sanctions Against Appellants
Appellants assert the court erred in ordering $4,000 in monetary sanctions against
them in connection with their 2011 motion to compel documents requested in their
July 2004 deposition subpoena of Bizcom.10 Appellants argue the sanctions were not
appropriate because their motion to compel was not untimely, they presented colorable
arguments to the trial court regarding the timeliness of the motion, and the sanctions
order violated due process.
Factual Background
Appellants brought a motion to compel production of documents originally
demanded in a July 2004 subpoena of Bizcom. The motion to compel was filed in
February 2011. The court deemed the motion untimely based on Code of Civil Procedure
section 2025.480, subdivision (b), and while Bizcom requested monetary sanctions in the
amount of $38,673.25, the court ordered sanctions in the reduced amount of $4,000.
The record shows that appellants served a deposition subpoena on Bizcom on
July 2, 2004 that contained 14 document requests. Bizcom produced documents and
served objections on August 27, 2004. Appellants did not contact Bizcom again until
nearly two years later in April 2006. At that time, appellants noted that Bizcom
“ ‘responded to [the] subpoena in 2004,’ ” and that Bizcom “ ‘worked amicably . . . to
respond to that subpoena.’ ” Appellants further informed Bizcom that they would be
10
Neither HP, nor Bizcom assert arguments on appeal regarding this sanctions
order. Bizcom appeared oral at argument. We denied its request to argue, because
Bizcom did not file a brief in this case.
31
serving a second subpoena seeking “ ‘a subset’ ” of the documents requested in 2004.
Bizcom served objections to the second subpoena request on April 14, 2006, and
produced the documents requested on May 1, 2006. Four years later, in 2010, Appellants
again contacted Bizcom stating their belief that Bizcom left out certain documents
requested in the 2004 and 2006 requests. Appellants served three separate subpoenas on
Bizcom, and on August 24, 2010, Bizcom served objections. After participating in an
informal discovery conference in the trial court, Bizcom produced additional documents
on September 20, 2010. Appellants were not satisfied and sought additional documents.
Ultimately, appellants served the motion to compel on February 11, 2011.
Analysis
“A trial court has broad discretion when imposing a discovery sanction.
Accordingly, the trial court’s order will not be reversed on appeal in the absence of a
manifest abuse of discretion that exceeds the bounds of reason . . . .” (Lee v. Lee (2009)
175 Cal. App. 4th 1553, 1559 (Lee).) The appellant bears the burden on appeal of
demonstrating that the trial court abused its discretion in imposing a discovery sanction.
(Young v. Rosenthal (1989) 212 Cal. App. 3d 96, 114-115.)
Code of Civil Procedure section 2025.480, subdivision (b) provides that a motion
to compel further answers from a deponent “shall be made no later than 60 days after the
completion of the record of the deposition . . . .” Code of Civil Procedure
section 2025.480, subdivision (j) provides, “The court shall impose a monetary sanction
under Chapter 7 (commencing with Section 2023.010) against any party, person, or
attorney who unsuccessfully makes or opposes a motion to compel an answer or
production, unless it finds that the one subject to the sanctions acted with substantial
justification or that other circumstances make the imposition of the sanction unjust.”
Appellants assert the court erred in ordering the sanctions, because the 2011
motion was not untimely. Appellants cite Unzipped Apparel, LLC v. Bader (2007) 156
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Cal. App. 4th 123 (Unzipped) in arguing that because Bizcom agreed to produce
documents in the deposition, they “can rest assured that the 60-day period [during which
it must bring a motion to compel] does not begin to run until the production is over.”
Appellants argue that Bizcom’s production of documents from the July 2004 deposition
was not complete at the time of the motion, and as a result, the 60-day period for filing a
motion to compel had not run, and their 2011 motion was timely.
In Unzipped, the court specifically noted that for a business record subpoena, such
as the subpoena of Bizcom at issue here, the 60-day period during which a motion to
compel must be filed, begins to run when the deponent serves objections on the party. At
the time the objections are served, the record of deposition is complete. (Unzipped,
supra, 156 Cal.App.4th at p. 136.) In reference to the 60-day period, the Unzipped court
noted that “the deadline is mandatory.” (Ibid.)
Based on our review of the record, appellants’ February 2011 motion to compel
was untimely. Appellants continued to seek documents requested in their 2004 subpoena
of Bizcom for seven years. If appellants were not satisfied with Bizcom’s production of
documents from its initial request, the time to file a motion to compel was within 60 days
of August 27, 2004, the date on which Bizcom served its objections to the 2004
subpoena.
The court did not err in finding appellants’ motion untimely under Code of Civil
Procedure Section 2025.480, subdivision (b), and in ordering the monetary sanction
under Code of Civil Procedure Section 2025.480, subdivision (j). The court did not
abuse its discretion in concluding that appellants did not act with substantial justification
in bringing the untimely motion. Contrary to appellants’ assertion, there is no due
process violation in the sanctions order in this case. Appellants were on notice under
Code of Civil Procedure Section 2025.480, subdivision (j) of a mandatory sanction for
unsuccessfully making a motion to compel.
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Denial of Evidentiary Sanctions Against HP
Appellants sought two evidentiary orders as discovery sanctions against HP. First,
appellants sought an order establishing that the TDK and Ambit inverters were
substantially certain to fail. In addition, appellants sought an order establishing that HP
was on notice of and had knowledge of the defective nature of the TDK and Ambit
inverters as of January 15, 2002.
Factual Background
The specific discovery at issue in this case was related to monthly reports of
customer calls to HP that were described by HP’s witness, Richard Chiaramonte at his
deposition. Mr. Chiaramonte described reports that contained raw numbers of overall
call center traffic with respect to all of HP’s consumer products.
At the hearing on the motion for sanctions, the court asked appellants to provide a
declaration from their expert, describing what information was missing from HP’s
production of documents related to call data that would be relevant. The court stated:
“[a]nd [appellant]s’ counsel, you have got, I presume, at this point, an expert retained
who has reviewed materials . . . . [¶] . . . [¶] . . . I want a declaration from that expert that
tells the Court what that expert thinks he or she needs to testify at trial and which they
haven’t received. In other words, if they say I don’t—I can’t issue an opinion because I
am missing X, Y, and Z. Appellants did not provide the requested information to the
court.
Analysis
As stated above, a trial court has broad discretion when imposing a discovery
sanction. (Lee, supra, 175 Cal.App.4th at p. 1559.) Although the court has discretion in
choosing a sanction, this discretion must be exercised in a manner consistent with the
basic purposes of such sanctions, e.g., to compel disclosure of discoverable information.
(Marriage of Economou (1990) 224 Cal. App. 3d 1466, 1475.) Courts have continued to
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uphold the principle cited in Caryl Richards, Inc. v. Superior Court (1961) 188
Cal. App. 2d 300, that sanctions may not be imposed solely to punish the offending party.
(McGinty v. Superior Court (1994) 26 Cal. App. 4th 204, 214 (McGinty) [“punishment is
not an appropriate aim of discovery sanctions”].) Furthermore, the sanction chosen
should not provide a windfall to the other party, by putting the prevailing party in a better
position than if he or she had obtained the discovery sought and it had been favorable.
(Deyo v. Kilbourne (1978) 84 Cal.App.3d. 771, 793; McGinty, supra, 26 Cal.App.4th at
p. 214.)
Appellants argue the court abused its discretion in failing to order the evidence
sanctions they sought. In support of this assertion, appellants point to the fact that over
the course of litigation in this case, the court ordered HP to respond to appellants’
discovery requests at least seven times, and appellants sought and obtained six orders to
enforce prior orders.
On appeal, appellants do not demonstrate that the court’s refusal to order their
requested evidentiary sanctions constituted “manifest abuse exceeding the bounds of
reason.” (Doe v. United States Swimming, Inc. (2011) 200 Cal. App. 4th 1424, 1435.)
The sanctions appellants requested were sweeping evidentiary conclusions that were the
heart of appellants’ theory of HP’s liability-namely that the TDK and Ambit inverters
were substantially certain to fail and HP had knowledge of this fact in January 2002. If
the sanctions were ordered, it would provide a windfall to appellants relieving them of
their burden of proving their theory of liability. In denying appellants’ request for these
sanctions, the trial court properly followed McGinty, and its rationale that the purpose of
discovery sanctions is not avoidance of a decision on the merits.
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DISPOSITION
The summary adjudication of the UCL claims of Degenshein, Giuliano-
Ghahramani and the class in the first and second amended complaints in favor of HP is
reversed.
The no merits determination as to the CLRA claims of Degenshein and Giuliano-
Ghahramani in the first and second amended complaints in favor of HP is reversed.
The summary adjudication of the breach of express warranty claim of Degenshein
in favor of HP is affirmed.
The summary adjudication of the breach of express warranty claim of Giuliano-
Ghahramani and the class in favor of HP is reversed.
The order denying certification of the CLRA claims is affirmed.
The order denying certification of a nationwide class is reversed.
The order imposing monetary sanctions against appellants is affirmed.
The order denying evidentiary sanctions against HP is affirmed.
Each party shall bear its own costs on appeal.
______________________________________
RUSHING, P.J.
WE CONCUR:
____________________________________
PREMO, J.
____________________________________
ELIA, J.
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Trial Court: Santa Clara County Superior Court
Superior Court No.: CV817837
Trial Judge: The Honorable James P. Kleinberg
Attorneys for Plaintiffs and Green & Noblin
Appellants Ed Rutledge et al.: Robert S. Green
Bramson, Plutzik, Mahler & Birkhaeuser
Jenelle Welling
Kershaw, Cutter & Ratinoff
C. Brooks Cutter
Attorneys for Defendant and Drinker Biddle & Reath
Respondent Hewlett-Packard Company: Michael J. Stortz
Beth O’Neal Arnese
Bergeson
Daniel J. Bergeson
John W. Fowler
No appearance for Objector and Respondent
Rutledge et al. v. Hewlett-Packard Company
H036790
37