McKinney v. Google, Inc. et al, No. 5:2010cv01177 - Document 46 (N.D. Cal. 2010)

Court Description: Memorandum in Opposition re 41 MOTION to Dismiss DEFENDANTS GOOGLE INC. AND HTC CORPORATION'S NOTICE OF MOTION AND MOTIN TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF filed byMary McKinney. (Attachments: # 1 Proposed Order Denying Defendant Google Inc's Motion to Dismiss)(Avila, Sara) (Filed on 8/25/2010) (Entered: 08/25/2010)
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McKinney v. Google, Inc. et al 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Doc. 46 MILSTEIN, ADELMAN & KREGER, LLP WAYNE S. KREGER, State Bar No. 154759 wkreger@maklawyers.com SARA D. AVILA, State Bar No. 263213 savila@maklawyers.com 2800 Donald Douglas Loop North Santa Monica, California 90405 Telephone (310) 396-9600 Facsimile (310) 396-9635 WHATLEY DRAKE & KALLAS, LLC Joe R. Whatley, Jr. (pro hac vice pending, NY Bar No.4406088) jwhatley@wdklaw.com Edith M. Kallas (pro hac vice pending, NY Bar No. 2200434) ekallas@wdklaw.com Patrick J. Sheehan (pro hac vice pending, NY Bar No. 3016060) psheehan@wdklaw.com 1540 Broadway, 37th Floor New York, New York 10036 Tel: (212) 447-7070 Fax: (212) 447-7077 Attorneys for Plaintiff Additional Counsel Listed on Signature Page 15 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA – SAN JOSE DIVISION 16 17 18 MARY MCKINNEY, Individually and on behalf of all others similarly situated, Plaintiff, 19 20 v. 21 GOOGLE, INC., a Delaware corporation; HTC CORP., a Delaware corporation; and T-MOBILE USA, INC., a Delaware corporation. 22 23 24 ) ) ) ) ) ) ) ) ) Defendants 25 5:10-cv-01177-JW CLASS ACTION PLAINTIFFS’ MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION OF GOOGLE INC. AND HTC CORP. MOTION TO DISMISS FIRST AMENDED COMPLAINT Date: Time: Courtroom: November 1, 2010 9:00 a.m. 8 Judge: Hon. James Ware 26 27 28 1 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 Dockets.Justia.com 1 TABLE OF CONTENTS 2 I. Issues Presented .................................................................................................................... 5 4 II. Prefatory Statement and Summary of Facts ......................................................................... 5 5 III. Argument .............................................................................................................................. 6 3 6 A. McKinney Has Adequately Pleaded her FCA Claim, which Is Subject to Rule 8(a)6 McKinney’s FCA Claims Are Not Subject to Rule 9(b) .......................................... 7 B. Defendants’ Analogy to the California Unfair Competition Law Fails.................... 7 Even under Rule 9(b), McKinney’s Claims are Well-Pleaded................................. 9 C. Google and HTC are Liable under the FCA ............................................................. 9 D. Defendants’ Conduct in this Case is Unjust ........................................................... 12 E. McKinney’s Warranty Claims Are Well-Pleaded .................................................. 14 7 8 9 10 11 12 13 IV. Conclusion .......................................................................................................................... 16 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 TABLE OF AUTHORITIES 1 FEDERAL CASES 2 Anunziato v. eMachines, Inc., 402 F. Supp. 2d 1133 (C.D. Cal. 2005)........................................ 8 3 AT&T v. FCC, 572 F.2d 17 (2d Cir. 1978)........................................................................... 12, 13 4 Clemens v DaimlerChrysler Corp., 534 F.3d 1017 (9th Cir. 2008) ........................................... 16 5 F.C.C. v. Midwest Video Corp., 440 U.S. 689 (1979) ................................................................ 11 6 Global Crossing Telecommuns., Inc. v. Metrophones Telecommuns., Inc., 550 U.S. 45 (2007)............................................................................................................................... 15 7 Howard v. Am. Online Inc., 208 F.3d 741 (9th Cir. 2000) ......................................................... 11 8 In re Apple iPhone 3G Prods. Liability Litig., ____ F. Supp. 2d ____, No. M 0902045, 2010 WL 3059417, at *6 (N.D. Cal. Apr. 2, 2010) .............................................. 6, 15 9 In re Mattel, Inc., 588 F. Supp. 2d 1111 (C.D. Cal. 2008) ........................................................... 9 10 Iowa Telcoms. Servs. v. Iowa Utils. Bd., 563 F.3d 743 (8th Cir. 2009) ..................................... 11 11 Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009) .......................................................... 9 12 Multimedia Patent Trust v. Microsoft Corp., 525 F. Supp. 2d 1200 (S.D. Cal. 2007)................. 9 13 National Ass'n of Regulatory Utility Comm'rs v. F.C.C., 525 F.2d 630 (D.C. Cir. 1975) ..................................................................................................................................... 11 14 Nordberg v. Trilegeant Corp., 445 F. Supp. 2d 1082 (N.D. Cal. 2006)....................................... 9 15 North County Communications Corp. v. California Catalog & Technology, 594 F.3d 1149 (9th Cir. 2010) ..................................................................................................... 15 16 Nvidia GPU Litig., 2009 U.S. Dist. LEXIS 108500 (N.D. Cal. Nov. 19, 2009) ........................ 15 17 Qarbon.com, Inc. v. eHelp Corp., 315 F. Supp. 2d 1046 (N.D. Cal. 2004) ................................. 9 18 Time Warner Telecom, Inc. v. F.C.C., 507 F.3d 205 (3d Cir. 2007) .......................................... 10 19 Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003) ............................................................................ 14 Vess v. Ciba-Geigy Corp., 317 F.3d 1097 (9th Cir. 2003) ..................................................... 8, 10 20 STATE CASES 21 Anthony v. General Motors, 33 Cal.App.3d 699 (1973)............................................................. 16 22 Bank of the West v. Superior Ct., 2 Cal.4th 1254 (1992).............................................................. 8 23 Committee on Children's Tel., Inc. v. General Foods Corp., 35 Cal.3d 197 (1983).................... 9 Cortez v. Purolator Air Filtration Prods. Co., 999 P.2d 706 (Cal. 2000).................................. 10 24 In re Tobacco II Cases, 207 P.3d 20 (Cal. 2009) ....................................................................... 10 25 People v. Superior Ct., 9 Cal.3d 283 (1973)................................................................................. 9 26 FEDERAL STATUTES 27 27 U.S.C. § 201(b) ........................................................................................................................ 6 47 U.S.C. § 153(10) .................................................................................................................... 10 28 47 U.S.C. § 153(h) ...................................................................................................................... 13 3 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 47 U.S.C. § 201(b) ........................................................................................................................ 8 47 U.S.C. § 203........................................................................................................................... 14 2 47 U.S.C. § 332........................................................................................................................... 16 3 47 U.S.C. §§ 201-223 ................................................................................................................. 13 4 47 U.S.C. § 153(44) .................................................................................................................... 11 5 FEDERAL RULES Fed. R. Civ. P. 9(b) ....................................................................................................................... 8 6 OTHER AUTHORITIES 7 8 In re Joint FCC/FTC Policy Statement for Advertising of Dial-Around and Other Long-Distance Services to Consumers, 15 F.C.C.R. 8654, 8655, 2000 WL 232230 (FCC 2000) .............................................................................................................. 14 9 In re NOS Communications, Inc., 16 F.C.C.R. 8133, 8136 (F.C.C. Apr. 2, 2001).................... 14 10 11 In re Personal Communications Indus. Assoc's Broadband Personal Communications Servs. Alliance's Pet. for Forbearance, 13 F.C.C.R. 16857 at ¶ 15 (FCC 1998) ...................................................................................................................... 13 12 International Harvester Co., 104 F.T.C. 949, 1059-60 (FTC 1984) ........................................... 14 13 14 15 Multipoint Distribution Service, 45 F.C.C. 2d 616, 618 (1974)................................................. 11 Resale and Shared Use, Docket 20097, Report & Order, 60 F.C.C.2d 261, 263, 1976 WL 31603 at *2 (1976)................................................................................................ 12 Thompson Medical Co., 104 F.T.C. 648, 839 (1984), aff'd, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987)............................................................................ 14 16 17 18 19 20 21 22 23 24 25 26 27 28 4 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 I. 1. Whether the Amended Complaint has adequately pleaded a cause of action under 2 Sections 201 and 207 of the Federal Communications Act? 3 2. Whether the breach of warranty and Magnuson-Moss Warranty Act claims in the 4 First Amended Complaint have been adequately pleaded? 5 6 Issues Presented II. Prefatory Statement and Summary of Facts 7 On January 29, Plaintiff Mary McKinney filed suit in California state court against 8 Google, Inc.; T-Mobile USA, Inc; and HTC Corp. based on several violations of California and 9 Federal law. Defendants removed that case to this Court on March 22, 2010, and Plaintiff Mary 10 McKinney, on behalf of herself and others similarly situated, filed a First Amended Complaint 11 (“Complaint”) on June 11, 2010. Docs. 24, 26. That Complaint alleged violations of Sections 12 201(b) and 207 of the Federal Communications Act (“FCA”). 27 U.S.C. §§ 201(b), 207; Compl. 13 ¶¶ 56-59. It also alleged breaches of express warranties and implied warranties of merchantability 14 against all Defendants. Compl. ¶¶ 60-76. 15 The basic facts underlying McKinney’s claims on behalf of herself and the Class are 16 simple: Google and HTC worked in tandem to design and market the Google Nexus One 17 smartphone (the “Google Phone” or “the device”), which is a 3G device that is designed to 18 provide superior data transfer rates over earlier model devices. Compl. ¶¶ 31-32, 38-40. T- 19 Mobile was the exclusive provider of 3G wireless network connectivity for the device, without 20 which the device would have been useless. Compl. ¶ 27. Google offered purchasers of the device 21 incentives to subscribe to T-Mobile’s wireless service or, if they were already T-Mobile 22 customers, incentives to extend their contracts with T-Mobile when purchasing the Google Phone. 23 Compl. ¶¶ 33-34, 37. 24 homepage, which is some of the most coveted real estate on the Internet. Compl. ¶¶ 30-32. 25 Google, HTC, and T-Mobile also promoted the device in the media. Google offered the device for sale and promoted the device on its Unfortunately for McKinney and the Class, the Google Phone did not operate as a true 3G 26 27 device. Despite T-Mobile’s representations to the contrary, see Compl. ¶ 51, its network 28 connectivity did not offer the true 3G experience that customers believed that they were 5 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 purchasing. Compl. ¶¶ 38, 40-44. Class members experience frequent problems with both calling 2 and data transfer. Compl. ¶ 49. Although both Google and HTC were aware of the problems that 3 their customers faced, there was a total failure of customer service and technical support provided 4 to their customers: A spokesperson for HTC, the manufacturer of the Nexus One phone sold by Google and deployed thus far on T-Mobile’s GSM network, told Betanews late Monday evening that it is aware of the magnitude of 3G connectivity problems reported by customers nationwide since last week. As of Monday evening, several hundred messages were posted to Google's support Web site, many reporting essentially the same problem: For the most part, their 3G connections are spotty and variable; and for some, 3G is non-existent. 5 6 7 8 9 Contrary to reports, however, HTC is not acknowledging a problem with the phone. As of now, the T-Mobile network remains equally suspect, especially amid the complete lack of much news whatsoever, including to its customers, from Google. 10 11 12 Compl. ¶ 43 (emphasis added); see also Compl. ¶¶ 45, 48. 13 Now, Class members are locked into service agreements with T-Mobile, unable to get 14 refunds from either their carrier (T-Mobile) or the architects of the failed Google Phone (HTC and 15 Google), and they face unreasonably high termination fees should they desire to sign up for 16 another device or a service plan with another carrier. Compl. ¶¶ 46, 48, 52-55, 59, 62, 64. 17 McKinney and the Class members were injured in fact and lost money or property as a result of 18 Defendants’ material misstatements and omissions of material fact, because they paid more to 19 receive inferior service in relation to what they believed they had purchased. Compl. ¶ 52. Such 20 conduct is unjust and violates Section 201(b) of the FCA. 21 III. Argument A. 22 McKinney Has Adequately Pleaded her FCA Claim, which Is Subject to Rule 8(a). 23 24 McKinney has not pleaded California state law consumer protection claims in the 25 Complaint. Rather, she pursues relief under Sections 201 and 207 of the Federal Communications 26 Act.1 Nevertheless, Defendants Google and HTC have cited several lines of cases concerning 27 1 28 In a different case, this Court previously determined that such state law claims are preempted under Section 332 of the FCA. In re Apple iPhone 3G Prods. Liability Litig., ____ F. Supp. 2d ____, No. M 09-02045, 2010 WL 3059417, at *6 (N.D. Cal. Apr. 2, 2010) (Ware, J.). 6 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 California statutes, primarily the Unfair Competition Law (UCL). They then contend that, under 2 caselaw interpreting an entirely different statutory framework, McKinney’s claims are 3 inadequately pleaded. That argument fails for three reasons. 4 1. McKinney’s FCA Claims Are Not Subject to Rule 9(b). 5 First, HTC and Google have not cited a single case applying the heightened pleading 6 requirements of Rule 9(b) to claims made under Sections 201 and 207 of the FCA. Fed. R. Civ. P. 7 9(b). Def. Google & HTC Mem. at 8-10. McKinney also has not uncovered a single instance in 8 which a district court dismissed a claim under those sections for failure to plead fraud with 9 particularity—to be sure, that is because the plain language of the FCA does not require such 10 averments. The statutory elements require only that “[a]ll charges, practices, classifications, and 11 regulations for and in connection with such communication service, shall be just and reasonable, 12 and any such charge, practice, classification, or regulation that is unjust or unreasonable is 13 declared to be unlawful.” 47 U.S.C. § 201(b). There is no intent element, let alone a description 14 of fraudulent conduct. Certainly if a body of caselaw existed that required heightened pleading 15 for FCA claims, Google and HTC could have presented those cases in their briefing. 16 2. Defendants’ Analogy to the California Unfair Competition Law Fails. 17 Second, even accepting the Defendants’ analogy to the California UCL as the relevant 18 legal framework—and, to be sure, it is not—their argument still fails. “The text of Rule 9(b) 19 requires only that in ‘all averments of fraud . . . the circumstances constituting fraud . . . shall be 20 stated with particularity.’ The rule does not require that allegations supporting a claim be stated 21 with particularity when those allegations describe non-fraudulent conduct.” Vess v. Ciba-Geigy 22 Corp., 317 F.3d 1097, 1104 (9th Cir. 2003) (emphasis added, reversing dismissal of UCL claims 23 under Rule 9(b) because those claims did not solely depend on averments of fraud). 24 The California Supreme Court has noted that in “drafting [the UCL], the Legislature 25 deliberately traded the attributes of tort law for speed and administrative simplicity. As a result, 26 to state a claim under the Act one need not plead and prove the elements of a tort. Instead, one 27 need only show that ‘members of the public are likely to be deceived.’” Bank of the West v. 28 Superior Court, 2 Cal.4th 1254, 1266-67 (1992) (internal citations omitted). The California 7 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 Supreme Court and numerous other courts have consistently interpreted the UCL broadly to 2 sustain consumer protection claims without requiring they be pleaded with Rule 9(b) particularity. 3 See Committee on Children’s Tel., Inc. v. General Foods Corp., 35 Cal.3d 197, 211-12 n.11 4 (1983) (“The requirement that fraud be pleaded with specificity . . . does not apply to causes of 5 action under the consumer protection statutes”); People v. Superior Ct., 9 Cal.3d 283, 287-88 6 (1973) (issues relating to when, where or whom constituted evidentiary facts that need not be 7 pleaded for UCL); In re Mattel, Inc., 588 F. Supp. 2d 1111, 1118 (C.D. Cal. 2008) (Rule 9(b) did 8 not apply to the plaintiff’s UCL claims where the plaintiffs “merely allege[d] that the 9 representations were likely to deceive and that [p]laintiffs were damaged by the deception; they 10 make no effort to allege common law fraud elements”); Anunziato v. eMachines, Inc., 402 F. 11 Supp. 2d 1133, 1138 (C.D. Cal. 2005) (UCL false advertising claims can be asserted without 12 implicating Rule 9(b)); Nordberg v. Trilegeant Corp., 445 F. Supp. 2d 1082, 1097 (N.D. Cal. 13 2006) (“Rule 9(b) is not strictly applicable to the current action as the CLRA is not a fraud statute. 14 . . . To require that plaintiffs prove more than the statute itself requires would undercut the intent 15 of the legislature in creating a remedy separate and apart from common-law fraud”); Multimedia 16 Patent Trust v. Microsoft Corp., 525 F. Supp. 2d 1200, 1217 (S.D. Cal. 2007) (“[T]o the extent 17 that a federal pleading is grounded in fraud, it must meet the requirements of Rule 9(b). . . . 18 [H]owever, the elements of common law fraud law are not essential to a claim under the 19 California unfair competition law.”). 20 Kearns v. Ford Motor Co., relied on by Google and HTC, is not to the contrary. Kearns v. 21 Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009). In Kearns, the Ninth Circuit merely held that 22 Rule 9(b) is applicable to UCL and CLRA claims when a claim based solely on fraud is alleged, 23 as the plaintiffs did in that case. Kearns, 567 F.3d at 1125 (“[r]eviewing the complaint, Kearns 24 alleges that Ford engaged in a fraudulent course of conduct”). Here, the claims at issue are not 25 based solely on a fraudulent course of conduct, as the elements for a fraud claim need to be shown 26 to establish Defendants’ liability. No cause of action here asserts or relies on a fraudulent course 27 of conduct—and certainly none is solely “fraud based”. 28 8 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 In Vess v. Ciba-Geigy, the Ninth Circuit held Rule 9(b)’s particularity requirements apply 2 when a claim is “grounded in fraud,” which only occurs when plaintiffs allege “a unified course of 3 fraudulent conduct and rely entirely on that course of conduct as the basis of a claim.” Vess, 317 4 F.3d at 1103 (emphasis added). McKinney’s claims are based on the FCA and warranty, and thus 5 are not dependent—much less “entirely dependent”—on proving “fraudulent” conduct. 6 McKinney’s claims are thus not governed “entirely” by Rule 9(b). Vess, 317 F.3d at 1103; 7 Qarbon.com, Inc. v. eHelp Corp., 315 F. Supp. 2d 1046, 1052 (N.D. Cal. 2004). 8 That comports entirely with the current state of California law on the matter. In re 9 Tobacco II Cases, 207 P.3d 20, 35 & n.14 (Cal. 2009) (relying on Bank of the West and 10 Committee on Children’s Television). Under California law, a UCL “plaintiff need not show that 11 a UCL defendant intended to injure anyone through its unfair or unlawful conduct. The UCL 12 imposes strict liability when property or monetary losses are occasioned by conduct that 13 constitutes an unfair business practice.” Cortez v. Purolator Air Filtration Prods. Co., 999 P.2d 14 706, 717 (Cal. 2000). Even under Defendants’ chosen framework, there still is no intent element, 15 and McKinney has no need to plead any of her claims—or the facts underlying them—beyond the 16 “short and plain statement” required by Rule 8(a). 17 3. Even under Rule 9(b), McKinney’s Claims are Well-Pleaded. 18 McKinney satisfies any applicable pleading standard. She has alleged in her Complaint 19 the circumstances that support her claim. She has discussed adequately the representations made 20 by Defendants in and through the media, as well as their shortcomings in meeting the advertised 21 goals of the Google Phone. For Defendants to say they are unsure which of their representations 22 created the impression that they were selling a 3G device is erroneous. Google even offered up 23 what was described as “the most valuable ad space on the entire Internet” to see its phone. 24 Compl. ¶¶ 29-30. 25 B. 26 The FCA defines “common carrier” as “any person engaged as a common carrier for hire, 27 in interstate or foreign communication by wire[.]” 47 U.S.C. § 153(10); Time Warner Telecom, 28 Inc. v. F.C.C., 507 F.3d 205, 210 (3d Cir. 2007). Section 153(43) defines “telecommunications” Google and HTC are Liable under the FCA. 9 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 as “the transmission, between or among points specified by the user, of information of the user’s 2 choosing, without change in the form or content of the information as sent and received.” Section 3 153(46) defines “telecommunications service” as “the offering of telecommunications for a fee 4 directly to the public . . . regardless of the facilities used.” Further, 47 U.S.C. section 153(44) 5 defines “telecommunications carrier[s]” as “provider[s] of telecommunications services.” The 6 FCC has held that the term “telecommunications carrier” has essentially the same meaning as the 7 term “common carrier” under the FCA. See Iowa Telcoms. Servs. v. Iowa Utils. Bd., 563 F.3d 8 743, 746 (8th Cir. 2009) (citing AT&T Submarine Sys., Inc., 13 F.C.C.R. 21585, 21587-88 ¶ 6 9 (1998); Cable & Wireless, PLC, 12 F.C.C.R. 8516, 8522 ¶ 13 (1997); V.I. Tel. Corp. v. F.C.C., 10 198 F.3d 921, 925 (D.C. Cir. 1999)). 11 “Federal regulations describe a common carrier as ‘any person engaged in rendering 12 communication service for hire to the public.’” Howard v. Am. Online Inc., 208 F.3d 741, 752 13 (9th Cir. 2000) (quoting 47 C.F.R. § 21.2). As the Supreme Court has noted, “[a] common-carrier 14 service in the communications context is one that ‘makes a public offering to provide 15 [communications facilities] whereby all members of the public who choose to employ such 16 facilities may communicate or transmit intelligence of their own design and choosing . . . .’” 17 F.C.C. v. Midwest Video Corp., 440 U.S. 689, 701 (1979) (quoting Report and Order, Industrial 18 Radiolocation Service, No. 16106, 5 F.C.C.2d 197, 202 (1966)); see also National Ass’n of 19 Regulatory Utility Comm’rs v. F.C.C., 525 F.2d 630, 641 (D.C. Cir. 1975), cert. denied, 425 U.S. 20 992, (1976); Multipoint Distribution Service, 45 F.C.C. 2d 616, 618 (1974). 21 As alleged in the Complaint, Google first sold the Google Phone exclusively through its 22 online store, and marketed the device heavily online. Compl. ¶¶ 26, 29, 30, 34, 36. Those devices 23 are activated for sale to the general public either on T-Mobile’s network, or as “unlocked” devices 24 for use on the AT&T Mobility network at a significantly higher price. Compl. ¶ 33-35. There is 25 no evidence that Google and HTC discriminated among purchasers of the device. The Google 26 Phone also has capabilities that HTC and Google worked in tandem to create and support, 27 including the following: 28 exclusively by Google at all levels; syncing with the proprietary “Google Calendar” function, exclusive Gmail access from the device’s desktop, which is run 10 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 which is run by Google at all levels; downloadable applications from the Android marketplace, 2 many of which are developed by Google and/or HTC; GPS directions provided through the 3 Google maps function, which is developed and run by Google; and most importantly, access to the 4 traditional Google search function for searching a user’s contacts, desktop, and the Internet. 5 Google and HTC’s packaging for the device did not mention any limitations on the device’s 6 capabilities. In fact, its spare, white box was intended to mimic the minimalist features for which 7 the Google homepage is known. Cell Phone Technology, Christmas Present—Images of the 8 Google Nexus One Unboxing, Dec. 23, 2009, http://www.puzi8.com/christmas-present-images-of- 9 the-google-nexus-one-unboxing.html/ (last visited Aug. 24, 2010). 10 Even HTC’s own product overview describes the Google Phone as featuring “active noise 11 suppression by Audience™, a large high resolution 3.7-inch display for a truly vivid visual 12 experience, as well as a 1GHz Snapdragon processor for super fast response. It runs Android 2.1 13 with key enhancements such as the car dock mode to optimize the Google Maps Navigation 14 experience while driving and the clock mode to offer a practical desk clock with quick access to 15 the alarm clock, music player and multimedia gallery.” HTC, Nexus One Product Overview at 16 http://www.htc.com/www/product/nexusone/overview.html (last visited Aug. 24, 2010). HTC 17 continues to describe the Google Phone as having 3G download speeds. HTC, Nexus One 18 Product Specifications at http://www.htc.com/www/product/nexusone/specification.html (last 19 visited Aug. 24, 2010) (“7.2 Mbps down-link speeds”). It still does not mention the limitations of 20 the product’s speed and data transfer rates. 21 At best, Google and HTC are “resellers” of communications services for other mobile 22 companies (in this instance, T-Mobile unless purchasers bought an “unlocked” Google Phone). 23 See Compl. ¶¶34-37. “Resale is the subscription to communications services and facilities by one 24 entity and the reoffering of communications services and facilities to the public (with or without 25 ‘adding value’) for profit.” Resale and Shared Use, Docket 20097, Report & Order, 60 F.C.C.2d 26 261, 263, 1976 WL 31603 at *2 (1976), recon., 62 F.C.C.2d 588, 1977 WL 38811 (1977), aff’d 27 sub nom. AT&T v. FCC, 572 F.2d 17 (2d Cir.), cert. denied, 439 U.S. 875 (1978). That act of 28 “reselling,” however, still makes both HTC and Google common carriers within the meaning of 11 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 the FCA. The FCC has held that “the resale of communications service is common carrier activity 2 within the meaning of § 3(h) of the Communications Act, 47 U.S.C. § 153(h), and that those 3 engaged in such resale are subject to the regulatory provisions of Title II of the Act, which deals 4 with communication common carriers, 47 U.S.C. §§ 201-223.” Am. Tel. & Tel. Co. v. F.C.C., 572 5 F.2d 17, 24 (2d Cir. 1978). There is no material difference between Defendants here, who sold 6 exclusive mobile phone service plans with their devices, and the IXCs of old who sold long 7 distance phone service on a network that they did not build. 8 C. Defendants’ Conduct in this Case is Unjust. 9 The practices challenged in this case are described succinctly in First Cause of Action in 10 the Complaint: Defendants’ “charges for the Google Phone as an internet access device and the 11 companion T-Mobile premium service plans . . . that Plaintiff and Class Members were required 12 to purchase were unjust based upon the claims they made as compared to what was actually 13 provided. . . . . Even if Defendants are found to have been charging a ‘reasonable rate’ for their 14 products and services, they are still subject to a claim for damages for non-disclosure or false 15 advertising of the material facts set forth herein based on its misrepresentations or failing to 16 inform Class Members of other material terms, conditions, or limitations on the services provided 17 Class Members.” Compl. ¶ 59. Such conduct plainly violates the consumer protections of the 18 FCA: 26 Sections 201 and 202, codifying the bedrock consumer protection obligations of a common carrier, have represented the core concepts of federal common carrier regulation dating back over a hundred years. Although these provisions were enacted in a context in which virtually all telecommunications services were provided by monopolists, they have remained in the law over two decades during which numerous common carriers have provided service on a competitive basis. These sections set out broad standards of conduct, requiring the provision of interstate service upon reasonable request, pursuant to charges and practices which are just and reasonable and not unjustly discriminatory. . . . The Commission gives the standards meaning by defining practices that run afoul of carriers' obligations, either by rulemaking or by case-by-case adjudication. The existence of the broad obligations, however, is what gives the Commission the power to protect consumers by defining forbidden practices and enforcing compliance. Thus, sections 201 and 202 lie at the heart of consumer protection under the Act. 27 In re Personal Communications Indus. Assoc’s Broadband Personal Communications Servs. 28 Alliance’s Pet. for Forbearance, 13 F.C.C.R. 16857 at ¶ 15 (FCC 1998). “The FCC has found 19 20 21 22 23 24 25 12 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 that unfair and deceptive marketing practices by interstate common carriers may constitute unjust 2 and unreasonable practices under section 201(b).” In re NOS Communications, Inc., 16 F.C.C.R. 3 8133, 8136 (F.C.C. Apr. 2, 2001) (concluding that misleading disclosures of common carrier 4 violated Section 201(b)). 5 In fact, the FCC has even drawn on the large body of administrative and regulatory law 6 developed by the Federal Trade Commission to combat false and misleading advertising by 7 common carriers: “The FCC has found that unfair and deceptive marketing practices by common 8 carriers constitute unjust and unreasonable practices under section 201(b). Principles of truth-in- 9 advertising law developed by the FTC under Section 5 of the FTC Act provide helpful guidance to 10 carriers regarding how to comply with section 201(b) of the Communications Act in this context.” 11 In re Joint FCC/FTC Policy Statement for Advertising of Dial-Around and Other Long-Distance 12 Services to Consumers, 15 F.C.C.R. 8654, 8655, 2000 WL 232230 (FCC 2000). That large body 13 of law has been approved by the FCC as expressly requiring two fundamental concepts be obeyed: 14 “1) advertising must be truthful and not misleading; and 2) before disseminating an ad, advertisers 15 must have adequate substantiation for all objective product claims.” In re Joint FCC/FTC Policy 16 Statement for Advertising, 15 F.C.C.R. at 8655, ¶ 5; see also generally Federal Trade Commission 17 Policy Statement on Deception, appended to Cliffdale Associates, Inc., 103 F.T.C. 110, 174 et seq. 18 (1984); Advertising Substantiation Policy Statement, appended to Thompson Medical Co., 104 19 F.T.C. 648, 839 (1984), aff’d, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987). 20 Information necessary to prevent consumers from being deceived on matters that are important to 21 them must be disclosed. International Harvester Co., 104 F.T.C. 949, 1059-60 (FTC 1984). 22 To the extent that HTC and Google contend case law requires that the FCC must 23 previously have determined their conduct challenged in the complaint violates Section 201(b), that 24 argument is belied by the plain language of the FCA and common sense. Defendants and their 25 industry cohorts have actively sought a deregulated environment in which the FCC takes a hands- 26 off approach to the mobile phone industry, preferring to let market forces work. 47 U.S.C. § 203; 27 Ting v. AT&T, 319 F.3d 1126, 1139 (9th Cir. 2003). Therefore, under Sections 201(b) and 207, 28 private rights of action are expressly authorized to remedy conduct that violates the FCA. 13 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 Plaintiffs are allowed to press their claim on run-of-the-mill matters, such as false or misleading 2 advertising, in the courts. 3 North County Communications Corp. v. California Catalog & Technology, 594 F.3d 1149 4 (9th Cir. 2010), is absolutely consistent with that result—as are the later cases on which 5 Defendants rely. In North County, the Ninth Circuit faced a highly technical regulatory question 6 and stated that, because the FCC “has not determined that the CMRS providers’ lack of payment 7 to CLECs like North County violates § 201(b),” it would not wade into that controversy in the 8 first instance. 594 F.3d at 1158. As the Supreme Court stated in Global Crossing, on which 9 North County depends, “the FCC has long implemented § 201(b) through the issuance of rules 10 and regulations. This is obviously so when the rules take the form of FCC approval or 11 prescription for the future of rates that exclusively are reasonable.” 12 Telecommuns., Inc. v. Metrophones Telecommuns., Inc., 550 U.S. 45, 52-53 (2007). The question 13 faced here is a much simpler one than the North County court faced, and is supported by a broad 14 range of FCC cases, which expressly refer to FTC advertising regulation caselaw and rulemaking. 15 This Court would not need any specialized technical knowledge to resolve this case. It presents a 16 “bedrock” consumer protection case, which this Court is well suited to resolve. Global Crossing 17 D. McKinney’s Warranty Claims Are Well-Pleaded. 18 Because McKinney’s claims are subject only to Rule 8(a), this Court should examine her 19 allegations regarding the Google Phone warranties under a notice pleading standard. Without the 20 benefit of discovery, McKinney has relied only on publicly available information regarding the 21 Google Phone, which was exclusively sold online during the period of her purchase. 22 McKinney’s search for information regarding the representations Defendants made to the 23 public, without the benefit of discovery, has been complicated by the fact that Defendants’ have 24 ceased sale of the Google Phone. Suzanne Choney, Google Will Stop Selling Nexus One Phones 25 in US, msnbc.com, July 19, 2010, at http://www.msnbc.msn.com/id/38309866 (last visited Aug. 26 24, 2010). Now, Google’s online store presents a message of “sorry” when the public searches for 27 information regarding the device. See www.google.com/phone (last visited Aug. 24, 2010). 28 14 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 Nevertheless, McKinney’s warranty claims are well-pleaded.2 McKinney and all Class 2 Members who purchased the defective Google Phone “in the state of California,” can pursue state- 3 law breach of warranty claims against Defendants. See Nvidia GPU Litig., 2009 U.S. Dist. 4 LEXIS 108500, at *17 (N.D. Cal. Nov. 19, 2009). While discovery will address this issue, it is 5 likely such transactions took place in California. Because all purchases were limited to the 6 Google website for many months of sales, those sales likely occurred “in the state of California” 7 through Google’s Mountainview, California headquarters. 8 represented to consumers that they were going to receive a state-of-the-art smartphone that 9 provided 3G coverage, and Defendants worked together to achieve their sales based on those 10 representations. Compl. ¶ 6. They also failed to fully apprise consumers regarding the harsh 11 terms of the deal into which they were induced, so the consumers would be unaware of the 12 penalties that Defendants would assess if consumers were displeased with their defective device. 13 Compl. ¶¶ 45-47. Google and HTC consistently 14 To the extent that Defendants assert that McKinney has no privity with HTC, they are 15 wrong. The “plain language of the Song-Beverly Act,” wrote this Court in Nvidia, “does not 16 require vertical contractual privity between a manufacturer and a consumer.” Nvidia, 2009 U.S. 17 Dist. LEXIS 108500, at *15. The Ninth Circuit has stated that an exception to the privity 18 requirement “arises when the plaintiff relies on written labels or advertisements of a 19 manufacturer.” Clemens v DaimlerChrysler Corp., 534 F.3d 1017, 1023 (9th Cir. 2008); Anthony 20 v. General Motors, 33 Cal.App.3d 699, 706 (1973). Representations that McKinney was getting a 21 state-of-the-art smartphone with 3G connectivity when she completed her transaction were a 22 substantial factor in her purchasing decision. 23 Moreover, even after the device was released, both Google and HTC representatives 24 continued to make statements regarding the fitness of the Google Phone. Compl. ¶¶ 42-47. 25 2 26 27 28 McKinney recognizes that this Court has previously found state law warranty and MagnusonMoss Warranty Act claims preempted by Section 332 of the FCA, 47 U.S.C. § 332. In re Apple iPhone 3G Prods. Liability Litig., 2010 WL 3059417, at *6 & n.10, *10. Although she maintains that these claims are not preempted, she recognizes that this Court previously has ruled to the contrary. 15 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 Because McKinney’s state law warranty claims are well-pleaded, her Magnuson-Moss claim 2 stands, as well. 3 IV. 4 5 6 Conclusion For the reasons addressed above, this Court should deny the Motion to Dismiss of the Defendants Google and HTC in all respects. This case should proceed quickly through discovery and into trial. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 2 3 DATED: August 25, 2010 Attorneys for Plaintiff Mary McKinney and the Proposed Class 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 By: /s/ Sara D. Avila MILSTEIN, ADELMAN & KREGER, LLP Wayne S. Kreger Sara D. Avila WHATLEY DRAKE & KALLAS, LLC Joe R. Whatley, Jr. Edith M. Kallas Patrick J. Sheehan LAW OFFICE OF HOWARD RUBINSTEIN Howard Rubinstein howardr@pdq.net 914 Waters Avenue, Suite 20 Aspen, Colorado 81611 Tel: (832) 715-2788 SMITH & VANTURE, LLP Brian W. Smith bws@smithvanture.com 1615 Forum Place, Suite 4C West Palm Beach, Florida 33401 Tel: (800) 443-4529 Fax: (561) 688-0630 20 21 22 23 24 25 26 27 28 17 PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO MOTION TO DISMISS FIRST AMENDED COMPLAINT 5:10-CV-01177-JW sf-2855868 1 2 3 4 CERTIFICATE OF SERVICE I hereby certify that I have this 25th day of August 2010, served via the Court’s electronic filing system, a true and correct copy of the above and foregoing on counsel as follows: 5 6 7 8 9 10 11 Edith M. Kallas Email: ekallas@wdklaw.com James Condon Grant Email: jimgrant@dwt.com Joe R. Whatley , Jr Email: jwhatley@wdklaw.com Joseph Edward Addiego , III Email: joeaddiego@dwt.com 12 13 14 15 16 Patrick J. Sheehan Email: psheehan@wdklaw.com Rosemarie Theresa Ring Email: rose.ring@mto.com Sara Dawn Avila Email: savila@maklawyers.com 17 18 Wayne Scott Kreger Email: wkreger@maklawyers.com 19 20 21 22 23 24 25 26 27 28 /s/ David Marin