Shuman v. SquareTrade Inc.

Background

Shuman filed a proposed class action against SquareTrade, which the opinion describes as a seller of service contracts protecting consumer goods. He alleged that SquareTrade consistently failed to provide consumers with the full contract terms when they purchased a service contract and systematically reimbursed less than the purchase price of a covered item when claims were filed.

The complaint asserted six claims: two under the Magnuson-Moss Warranty Act, one for breach of contract, one under the Song-Beverly Consumer Warranty Act, one under California's Unfair Competition Law (the UCL), and one for unjust enrichment. SquareTrade moved to dismiss Claims One, Two, Four, Five, and Six. Shuman stipulated to dismissal of Claims One, Two, and Four, so the court analyzed only the UCL claim and the unjust-enrichment claim.

The UCL Claim

SquareTrade argued that California's UCL did not apply because Shuman did not reside in California and did not purchase the protection plan there. It argued that California, Pennsylvania, and Maryland had relevant interests, but that Pennsylvania's interest predominated because the purchase and alleged transaction-related conduct occurred there. Shuman argued that California law should apply because SquareTrade allegedly changed its reimbursement policies and completed the alleged wrongdoing in California after the purchase.

The court applied California's governmental-interest choice-of-law test. It accepted that the consumer-protection laws of California, Pennsylvania, and Maryland materially differed. It then concluded that Pennsylvania was the place of the relevant transaction and therefore had the predominant interest in having its law applied. The court rejected Shuman's argument that SquareTrade's later policy change in California controlled the analysis, reasoning that the relevant transaction alleged in the complaint occurred in Pennsylvania.

Based on the allegations in the amended complaint, the court held that Shuman could not assert a California UCL claim. It dismissed Claim Five with prejudice. The court also stated that Shuman had conceded at oral argument that he could not allege additional geographical facts that would change the choice-of-law analysis, and it declined to allow amendment of the UCL claim.

The Unjust-Enrichment Claim

SquareTrade argued that unjust enrichment was unavailable because Shuman alleged an express contract covering the same subject. The court recognized the general rule that a quasi-contract claim cannot succeed when a valid express contract governs the parties' rights. But it also recognized that a plaintiff may plead unjust enrichment and breach of contract in the alternative when the existence, enforceability, or scope of the contract is disputed.

Because the parties disputed the existence and scope of the express contract underlying Shuman's breach-of-contract claim, the court declined to dismiss the unjust-enrichment claim at the pleading stage.

Disposition

The court stated that SquareTrade's motion to dismiss was granted in part and denied in part. The final order dismissed Claims One, Two, Four, and Five with prejudice. The opinion does not dismiss Claim Three for breach of contract or Claim Six for unjust enrichment.