Shuman v. SquareTrade Inc.

Background

This putative class action concerned SquareTrade protection plans for consumer goods. Michael Shuman alleged that SquareTrade failed to provide consumers the plans’ full terms and systematically paid less than the purchase price of covered products when consumers filed claims. The operative First Amended Class Action Complaint added Tommy Gonzales and Kathleen Abbott as plaintiffs.

Shuman’s remaining claims were for breach of contract and unjust enrichment. His claims under the Magnuson-Moss Warranty Act and Song-Beverly Consumer Warranty Act had been dismissed by stipulation, and the court had previously dismissed his California Unfair Competition Law claim because Pennsylvania law governed his claims.

Gonzales alleged that he bought a SquareTrade plan for a belt sander after seeing online descriptions stating that the sander would be covered, with 100% parts and labor and no deductibles. When the sander failed, SquareTrade paid him $32.64, or 85.8% of the $38 purchase price, through its Fast Cash program. Gonzales asserted breach-of-contract, California Unfair Competition Law, and unjust-enrichment claims.

Abbott alleged that Walmart employees described SquareTrade plans as warranties and that brochures referred to product protection. She alleged that SquareTrade later reimbursed only 85.8% of the purchase prices for several covered products. Abbott asserted breach-of-contract, New York General Business Law Sections 349 and 350, and unjust-enrichment claims.

Gonzales’s Motion to Dismiss

The court held that Gonzales’s breach-of-contract claim was too indefinite. The complaint identified isolated terms such as “covered,” “protection from common malfunctions,” “100% parts and labor,” and “no deductibles,” but did not specifically allege what payment SquareTrade had agreed to make if the product could not be repaired or replaced. Because the alleged terms did not allow the court to determine whether a breach occurred or to calculate damages, the claim was dismissed with leave to amend.

The court also dismissed Gonzales’s Unfair Competition Law claim with leave to amend. It rejected SquareTrade’s argument that Gonzales lacked standing to seek an injunction, because he alleged that he continued to buy products that could be covered and might buy SquareTrade plans again if its reimbursement practices changed. But the court found that he had not adequately alleged either an unfair or fraudulent practice. The alleged facts did not plausibly show that he was promised the full purchase price or that a reasonable consumer would have been misled. The court separately found that Gonzales had not adequately alleged that he lacked an adequate legal remedy, as required to obtain restitution for past harm under the Unfair Competition Law.

The court dismissed Gonzales’s unjust-enrichment claim with leave to amend because it relied on the same allegations and theory as his insufficient contract and Unfair Competition Law claims. The court therefore granted SquareTrade’s motion to dismiss all of Gonzales’s claims.

Abbott’s Motion to Dismiss

The court held that Abbott’s breach-of-contract claim was insufficiently pleaded under New York law. References to “protection” on a brochure cover and a clerk’s use of the word “warranty” did not give the court a sufficient basis to determine whether SquareTrade had promised the full purchase price, replacement cost, or another amount. The court dismissed the claim with leave to amend.

The court dismissed Abbott’s New York General Business Law claims with leave to amend. It held that the alleged references to “protection” and “warranty,” without more, were insufficient as a matter of law to show that a reasonable consumer would believe the plan covered the full purchase price. The court also dismissed Abbott’s unjust-enrichment claim for the same reasons it dismissed Gonzales’s corresponding claim. The court therefore granted SquareTrade’s motion to dismiss all of Abbott’s claims.

Shuman’s Summary-Judgment Motion

SquareTrade moved for summary judgment, which asks whether the undisputed evidence requires judgment before trial, on Shuman’s breach-of-contract and unjust-enrichment claims. Plaintiffs acknowledged that Shuman was not expressly promised reimbursement of the bag’s purchase price regardless of the item’s replacement cost. The court nevertheless concluded that this fact did not defeat Shuman’s claims.

The court rejected SquareTrade’s argument that Shuman was pursuing a new theory. The complaint alleged coverage through reimbursement of either the purchase price or the cost of replacing the product. Shuman also alleged that SquareTrade told him it could not find an exact replacement and would send him the item’s purchase cost, but then paid $99.99 instead of the $129.99 purchase price. He further alleged that he bought an identical replacement bag for the same $129.99 price two days after receiving SquareTrade’s payment.

The court found a genuine dispute of material fact about whether SquareTrade breached its contractual obligation by paying less than the full purchase price when that amount was also the replacement cost. For the same reasons, it rejected SquareTrade’s argument that nothing unjust had occurred. The court denied the Shuman Motion.

Disposition

The Shuman Motion was denied. The Gonzales Motion and Abbott Motion were granted, and Gonzales’s and Abbott’s claims were dismissed with leave to amend. The court ordered plaintiffs to file an amended complaint by December 3, 2021.