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E-FILED
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SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA

ED RUTLEDGE, et al., Plaintiffs, vs.

Case No. 1-03-CV-817837 ORDER RE: DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT, OR ALTERNATIVELY SUMMARY ADJUDICATION AND "NO MERITS" DETERMINATION; PLAINTIFFS' MOTION FOR SANCTIONS.

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HEWLETT-PACKARD COMPANY, et al, Defendant. The above-captioned motions came on for hearing before the Honorable James P. Kleinberg on March 25, 2011 at 9:00a.m. in Department 1. RobertS. Green, Esq., Jenelle Welling, Esq., and Nicole Reynolds, Esq. appeared on behalf of plaintiffs Ed Rutledge, et al. ("Plaintiffs"). Michael Stortz, Esq., Jay Fowler, Esq., and Daniel Bergeson, Esq. appeared for defendant Hewlett-Packard Company ("HP"). The matter having been submitted, the court orders as follows:

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ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011

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HP moves for summary judgment, or alternatively, for summary adjudication and for a "no merits" determination, against the class 1 claims and individual claims of plaintiff Susanna Giuliano-Ghahramani ("Giuliano") in the Second Amended Complaint ("SAC") for (1) Violatio of Consumers Legal Remedies Act ("CLRA") [Giluiano] (2) Violation ofthe Unfair Competitio Law ("UCL") [class]; (3) Unjust Enrichment [Giuliano]; and (4) Breach of Express Warranty [class] (hereinafter "HP' s First Motion"). HP also moves for summary judgment, or alternatively for summary adjudication as to class members who owned Zinfandel4.0 notebooks that were never repaired by Bizcom ("HP's Second Motion"). Plaintiffs move for sanctions following the March 9, 2011 ex parte application to enforce the February 4, 2011 order. On March 2, 2011, Plaintiffs filed an application to file a supplemental declaration of Nicole D. Reynolds in support of their opposition to HP's MSJ/MSA. The application is DENIED because the papers were served and filed beyond Plaintiffs' opposition deadline, and Plaintiffs fail to demonstrate good cause for the late submission. (See Hobson v. Raychem Corp. (1999) 73 Cal.App.4th 614, 623.) Plaintiffs' Motion for Sanctions Plaintiffs move for issue and evidence sanctions and adverse jury instructions based on HP's failure to comply with a February 4, 2011 order compelling HP to provide further responses and produce documents responsive to Plaintiffs' Request for Production No. 72, which sought copies of monthly reports identified in Richard Chiaramonte's deposition. Plaintiffs seek issue sanctions establishing that: (1) the TDK and Ambit inverters were substantially certain to fail; (2) HP was on notice of and had knowledge ofthe defective nature of the TDK and Ambit inverters as of January 15, 2002. Plaintiffs also seek evidence sanctions that: (1) HP is precluded from utilizing at trial in any fashion documents or computer output, or testimony premised on the
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The certified class is defined as: "All 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. Excluded from the class are employees, directors, officers, or agents of [HP]." ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011 2

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review and/or knowledge of such documents or computer output, which were within the scope of the discovery requested by Plaintiffs but not produced; (2) HP is precluded from objecting to Plaintiffs' introduction of documents received from HP in this litigation on authentication and hearsay grounds; and (3) Plaintiffs are permitted to introduce the inverter service notes, engineering advisories, and service bulletins as evidence of defect, and instruct the jury that the service notes and technical services bulletins can be considered as such by the jury. Finally, Plaintiffs seek adverse instructions for the jury that the court has found HP willfully failed to produce documents and provide information in the discovery phase of this case, and that the jury may take that into account when it draws inferences from the evidence. The motion is DENIED. The court is not persuaded that HP's failure to comply with discovery justifies the far-reaching sanctions sought by Plaintiffs. HP's First Motion HP's request for judicial notice of: (1) the court's January 31, 2007 order re: Plaintiffs motion for class certification (Exh. A to June 17, 2010 RJN); (2) June 15, 2009 order after hearing remotion for summary judgment (Exh. B to June 17, 2010 RJN); and (3) October 8, 2009 hearing transcript (Exh. C to June 17,2010 RJN) is GRANTED. (See Evid. Code, 452, subd. (d).) The court finds that HP carries its burden of demonstrating the absence of triable issues of material fact. Regarding the class claims for breach of warranty, HP demonstrates that it provided a one-year Limited Warranty to each class member at the time of purchase that required the purchasers to give notice of defects within the warranty period to obtain repair or replacement (HP's Sep. St. MF nos. 1-2), and also offered customers extended warranties and customer care and support packages in addition to the standard Limited Warranty that class members could choose from to extend warranties at the time of purchase (MF nos. 3-4). HP also demonstrates that for those notebooks that were timely presented for an in-warranty repair, HP also provided a standard 90-day warranty on the work and materials used in the repair (the "Limited Repair Warranty") at no charge to the customer. (MF nos. 16-17.) In previously granting summary judgment against plaintiff I. Braun Degenshein ("Degenshein"), this court ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011 3

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held that Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824 controls, and under Daugherty, an express warranty does not cover a latent defect that manifests itself after the warranty period has elapsed. Thus, as to those class members similarly-situated to Degenshein, HP demonstrates it did not breach its express warranty to them because they never contacted HP within the one-year Limited Warranty period about their alleged defects. As to those class members who did contact HP within a year of purchase regarding a display screen defect, HP demonstrates that there is no evidence HP ever declined to repair or replace a notebook computer that manifested the alleged defect when provided with timely notice, as required under the Limited Warranty. (MF nos. 30.) Thus, HP demonstrates that it complied with its promises under the Limited Warranty. In response to Giuliano's in-warranty contacts, HP demonstrates that it repaired her notebook in November and December, 2002, and that her computer was "working great upon retum". 2 Although Giuliano contacted HP again in June of2003 complaining that the back light on her computer screen was out, 3 this contact was outside of the Limited Warranty period, as well as the 90-day Limited Repair Warranty period. Thus, HP's failure to repair her computer in June 2003 was not a breach of express warranty. Plaintiffs argue there was a breach of warranty because HP guaranteed that all computers would be "free from defect" but knew that every original inverter was substantially certain to fail. However, this "free from defect" language must be read together with the part of the Limited Warranty that states if HP receives notice of defects during the warranty period, it would repair or replace the products that prove to be defective. Moreover, this court has already rejected that the "substantially certain to prematurely fail" language from Hicks v. Kaufman &
Broad Home Corp. (2001) 89 Cal.App.4th 908 is the applicable legal standard for breach of

warranty claims not involving home foundations. HP demonstrates that class members cannot prevail on a "fraudulent" UCL theory because this court has already determined in granting summary judgment against Degenshein that the statements alleged in the SAC (e.g., in HP's press releases, on the company's website,

2 3

See Depo. Giuliano at pp. 112:7-121:17, Exh. I to Decl. B. Amese ISO HP's MSJ/MSA. Id. at p. 150. ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011
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and in HP's 2001 annual report) are not actionable for purposes of the fraudulent prong of the UCL because they do not relate to specific characteristics of subject notebooks, e.g., inverters or display screens. (See MF nos. 35-36.) HP demonstrates that class members cannot prevail on an "unfair" theory under the UCL because this court has already found that HP's quoting of a price to repair a notebook after the warranty expiration could not be considered "unfair," since HP was under no obligation to provide free repairs outside of the warranty period. Finally, HP demonstrates that class members cannot establish an "unlawful" UCL claim because the only statutory violation in support of this claim is the CLRA (MF no. 12), but as this court determined in granting summary judgment against Degenshein, the analysis as to the CLRA and UCL fraudbased claims is identical and dispositive, and alleging a breach of warranty cannot serve as the predicate violation for unlawful conduct under the UCL because warranties are private contracts. HP establishes the lack of merit in Giuliano's CLRA claim by demonstrating that Giuliano cannot show that she relied on HP's press releases or other materials described in the SAC prior to purchasing her notebook (MF no. 60), and cannot establish actual damages and lost money or property for purposes of the CLRA and UCL, since she paid nothing out of pocket for her in-warranty repairs (MF nos. 61-62). Finally, HP demonstrates that Giuliano cannot establish her unjust enrichment claim, because an express binding agreement exists and defines the parties' rights (MF nos. 63-64). (See California Med. Assn v. Aetna US. Healthcare of

California, Inc. (200 1) 94 Cal.App.4th 151, 172.)

Plaintiffs argue Giuliano's claims, as well as all of the class members' claims should survive summary adjudication because every class member received a defective inverter. Plaintiffs submit the declaration of engineering expert, Eric A. Langberg, who states that all of the Zinfandel3.5 computers, and 42,000 Zinfandel4.0 computers contained a TDK inverter that had an insufficient fuse rating, meaning the backlight would not receive adequate power to light the screen, and thus, they were all defective. (Plaintiffs' Sep. St. Additional Material Facts ["AMF"] nos. 1-4, 16, 18; Decl. Langberg 38, 40.) Plaintiffs submit that HP documented that

the fuse rating on the TDK inverter was insufficient for its application, causing the fuse to "blow" out and directed its Original Design Manufacturer, Compal, to stop using the TDK ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011
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inverters, implementing a silent recall program dubbed "Repair on Return" wherein its authorized repair center Bizcom replaced the defective TDK inverters in any Zinfandel computer sent in for warranty service for any reason with inverters made by Ambit. (AMF nos. 8, 12, 19.) HP also exercised its contractual right to make Compal absorb the costs of this "epidemic" failure. (AMF nos. 21-28.) However, Langberg's opinion on the defective nature ofthe Zinfandel3.5 and 4.0 computers is based on tlie "substantially certain to prematurely fail" language derived from
Hicks, which this court has repeatedly refused to accept as the applicable standard for

establishing breach of warranty for the consumer goods at issue in this lawsuit. Moreover, as HP points out, Langberg failed to provide critical testimony in support of his opinion in this regard. For example, he testified that he did not think he could put a percentage on the phrase "substantially certain to premature fai1". 4 When asked ifhe had an opinion about the useful life of notebook computers, he said: "From a statistical reliability standpoint, I do not have an opinion on notebook computer useful life. " 5 He also testified that he had no way to know how many 3.5 and 4.0 notebooks actually had failed inverters as of December 31, 2006 and 2007, testifying that the repair data does not indicate "what's actually happening in the field." He further testified that he had "no basis for making any type of opinion on when [an inverter failure] would be premature versus not premature." 7 He also testified that he was not asked to render an opinion on when HP knew of defects in the TDK or Ambit inverters in the 3.5 and 4.0 Zinfandels. 8 Thus, even in support of a "substantially certain to prematurely fail" theory for breach of express warranty, Langberg's opinion does not contain the necessary evidence to establish a triable issue. Plaintiffs submit that the Ambit inverters installed as original equipment in some Zinfandel3.5s and 4.0s had a second design defect- the area allocated for the mounting screw
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See Depo. E. Langberg at p. 84:8-12, Exh. A to Decl. B. Amese ISO HP's Reply ISO MSJ/MSA. 5 !d. at p. 96:19-23. 6 !d. at pp. 97:17-25 to 98:1-9. 7 !d. at p. 105:3-15. 8 !d. at p. 132:15-20. ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011
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was placed too closely to the integrated circuit and the location of the integrated circuit inhibited the flex necessary to accommodate the mechanical stress induced when opening and closing the notebook, leading to mechanical stress concentrated at the integrated circuit pins, and leading to early failure. (AMF nos. 30-35.) Plaintiffs submit a third defect in workmanship: the amount o force used to mount the inverters caused cracks in the soldering where the integrated circuit is fastened (MF no. 36), and inverter will not function properly with soldering cracks. (AMF nos. 32, 44, 47-48.) Plaintiffs contend HP later destroyed many of the weekly reports Bizcom provided about such repeat repairs and refused to produce data entries indicating repeat repairs. (See Decl. Reynolds in Opp. to MSJ/MSA 66, AMF nos. 50-51.) According to Plaintiffs, an

analysis of the incomplete data HP produced indicates that more than 1,350 inverters failed more than once between January 1, 2002 and October 31, 2003. (AMF no. 52.) Plaintiffs argue that a reasonable jury could conclude that each time Bizcom replaced an inverter, the accompanying receipt (which indicated the computer had been "repaired" [AMF nos. 92-93]) was a misrepresentation. Plaintiffs submit that when Giuliano sent in her computer for warranty service, Bizcom used too much force in mounting the replacement inverter, and then returned the computer with the cracked inverter. (AMF nos. 44.) Plaintiffs maintain that this was not a "repair" and thus, HP misrepresented that it had repaired Giuliano's computer for her. (AMF no. 93.) There is no corresponding allegation in the SAC that HP misrepresented that computers were "repaired" when they, in fact, were not. As discussed above, the undisputed evidence demonstrates that when Giuliano's computer was returned to her in December of2002, she stated that it "worked great," and Giuliano did not contact HP again until June of2003, which was outside of the Limited Warranty period, as well as the 90-day Limited Repair Warranty period. At the hearing on this motion, Plaintiffs' counsel pointed out that Giuliano later disagreed with the statement that her computer worked great. Counsel also argued that there is a triable issue as to whether HP's promise to "repair" is reasonably susceptible to the interpretation that HP promised to "cure" any nonconformity, and the court should not conclude that "repair" just means to "replace a part." However, as HP's counsel pointed out, HP's promise to "repair" ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011 7

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must still be read in conjunction with the warranty period, and there is no dispute that in respons to Giuliano's in-warranty complaint, HP returned her computer to her in December of2002 fully operable. The evidence demonstrates that Giuliano did not contact HP again until after the Limited Warranty period and Limited Repair Warranty period expired, and Plaintiffs have submitted no evidence suggesting that Giuliano's computer was not operable between the time HP returned her computer to her in December of2002 and June of2003 when she contacted HP again. Thus, it is still undisputed that HP did what it was obliged to do under its warranties by providing an adequate repair to Giuliano for her in-warranty claims. Plaintiffs further argue that HP emphasized the reliability of its computers, not as an opinion, exaggeration or hyperbole, but as a product attribute (AMF nos. 83-84) and Giuliano testified she bought the computer because she believed it would be reliable (AMF nos. 80-82). Plaintiffs submit the expert opinion of Michael Belch, a marketing communications expert, who opines that HP's product positioning is not non-actionable puffery because consumers purchasing computers pay more attention to specific product claims such as reliability; that HP would not have advertised the inverter component specifically; and that in advertising the display screen, HP necessarily represented that all components necessary for the screen to function properly would themselves function properly. (AMF nos. 84-89; Decl. Belch ,-r,-r 17-21.) Plaintiffs submit that Giuliano was persuaded to buy the Zinfandel because of the advertised display screen. (AMF no. 80.) This court has repeatedly held that the language cited in the SAC regarding HP's public assertions of quality and reliability constitute non-actionable puffery, and there is no evidence that HP made representations that relate to specific characteristics of subject notebooks, e.g., inverters or display screens. As for Belch's opinion that HP made specific misrepresentations regarding the functioning of inverter components, this is not alleged in the SAC. Giuliano did not testify that the Circuit City mailer advertisements she saw included representations about anything other than the types of vague and highly subjective statements this court has found to b puffery. Plaintiffs cannot create a triable issue on this issue with legal conclusions by a marketing expert. As for a duty to disclose, Daugherty held that a manufacturer had no duty to ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011

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disclose that, "in the fullness of time," a given part might eventually fail, necessitating repairs. Because HP did not make any distinct misrepresentations about its inverter in any advertisements, and it had no duty to disclose any possible inverter issues, there are no omissions alleged or evidence presented that could support a cause of action under the "fraudulent" prong of the UCL or the CLRA. As to the unjust enrichment claim, Giuliano does not dispute HP's argument that a quasicontract action for unjust enrichment does not lie where an express binding agreement exists and defines the parties' rights. Here, the Limited Warranty defines the rights between HP and Giuliano, and as discussed above, there is no dispute that HP complied with its obligations under the Limited Warranty or the Limited Repair Warranty. Finally, Plaintiffs argue that there are still triable issues as to the non-enforceability of the Limited Warranty on the grounds that (1) the Limited Warranty failed of its essential purpose due to repeated and unreasonable delays in repairing or inability to adequately repair the inverters (AMF nos. 124-128); and (2) the Limited Warranty is unconscionable because the Limited Warranty was presented on a take-it-or-leave-it basis (AMF no. 129) and the "extended warranties" are actually service contracts, which are not alternatives to express warranties, according to Plaintiffs' expert consumer law expert, James L. Brown (AMF no. 130, Decl. J. 38-40). There is no corresponding allegation in the SAC that HP's Limited Warranty "failed of its essential purpose" or that there were unreasonable delays in repairing computers that were sent to HP during the warranty period. Moreover, it cannot be said that the Limited Warranty failed of its essential purpose because there is no evidence that HP failed to repair or replace a defective computer sent to HP during the warranty period. This court has already rejected Plaintiffs' assertion of unconscionability in connection with the breach of warranty claims because unconscionability is a defense to the enforcement of a contract. For all ofthese reasons, HP's motion for summary judgment is GRANTED, and the cou determines there is no merit to Giuliano's CLRA claim. // // ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011 9

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HP's Second Motion HP moves for summary judgment/adjudication as to certain class members who owned Zinfandel4.0 notebooks. Given that HP's First Motion applies to all class members' claims, HP's Second Motion is moot in light of the ruling above granting HP's First Motion.

I T IS SO ORDERED.

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Dated: March

'2 ?, 2011

Honorable James P. Kleinberg Judge of the Superior Court

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ORDER RE: DEFENDANT'S MOTIONS- Hearing March 25, 2011 10