Shuman v. SquareTrade Inc.

Background

This putative class action concerns SquareTrade protection plans for consumer products. Michael Shuman alleged that SquareTrade did not provide consumers with the full contract terms when they bought plans and later paid less than the purchase price of covered products. 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.

The amended complaint added Tommy Gonzales and Kathleen Abbott. Gonzales alleged that he bought a SquareTrade plan for a belt sander, received a payment equal to 85.8% of the sander’s purchase price through SquareTrade’s “Fast Cash” program, and was not offered repair, replacement, or another reimbursement option. He asserted breach of contract, California Unfair Competition Law, and unjust enrichment claims. Abbott alleged that she bought SquareTrade plans for several products after seeing references to “protection” and hearing a Walmart clerk describe the plans as warranties. She later received reimbursements equal to 85.8% of the purchase prices. She asserted breach of contract, claims under New York General Business Law Sections 349 and 350, and unjust enrichment.

SquareTrade moved under Rule 12(b)(6), which allows dismissal for failure to state a legally sufficient claim, against Gonzales and Abbott. It also moved for summary judgment under Rule 56 on Shuman’s remaining claims. Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law.

Gonzales’s Claims

The court granted SquareTrade’s motion to dismiss all of Gonzales’s claims, with leave to amend.

For breach of contract, the court held that Gonzales had alleged only isolated words such as “covered,” “protection from common malfunctions,” “100% parts and labor,” and “no deductibles.” Those allegations did not identify the parties’ agreement about what SquareTrade had to pay if the product could not be repaired or replaced. Because the alleged contract was too indefinite to determine whether a breach occurred or how damages should be calculated, the claim was insufficiently pleaded. The court allowed amendment to allege more specific facts about the contract and the alleged breach.

The court rejected SquareTrade’s argument that Gonzales lacked standing to seek an injunction. Gonzales alleged that he continued to buy products that could be covered by SquareTrade plans and would buy additional plans if SquareTrade changed its reimbursement practices. The court concluded that these allegations sufficiently showed a future risk for purposes of injunctive relief.

The court nevertheless dismissed Gonzales’s California Unfair Competition Law claim. It held that Gonzales had not plausibly alleged either unfair or fraudulent conduct because his theory depended on an assumption that he was entitled to the product’s full purchase price, and the complaint did not allege facts showing that SquareTrade had promised that amount or that he was otherwise entitled to it. The court also held that Gonzales had not adequately alleged that he lacked an adequate remedy at law, as required to seek equitable restitution for past harm under that statute. His unjust enrichment claim failed for the same reasons because it relied on the same allegations and theory.

Abbott’s Claims

The court granted SquareTrade’s motion to dismiss all of Abbott’s claims, with leave to amend.

The court held that Abbott’s breach-of-contract allegations—that a brochure referred to “protection” and a sales clerk called the plan a “warranty”—did not provide a definite basis for deciding whether SquareTrade had promised the full purchase price, replacement cost, or some other amount. The court therefore found that she had not adequately pleaded an enforceable contract and allowed amendment.

The court dismissed Abbott’s New York General Business Law claims under Sections 349 and 350. Those provisions address deceptive business practices and false advertising. The court held that, as a matter of law, references to “protection” and “warranty,” without more, were not enough to show that a reasonable consumer would believe the plan covered the full purchase price of a product. Abbott’s unjust enrichment claim also failed for the same reasons the court gave for dismissing Gonzales’s corresponding claim.

Shuman’s Summary-Judgment Motion

The court denied SquareTrade’s motion for summary judgment on Shuman’s breach-of-contract and unjust enrichment claims.

The plaintiffs did not dispute that Shuman had not been explicitly promised the full purchase price of his bag. They also stipulated that there was no evidence SquareTrade had to pay the full purchase price regardless of the replacement cost when a claim was submitted. The court nevertheless held that this fact did not defeat Shuman’s claims.

The court concluded that Shuman’s theory was not an improper new theory. The amended complaint alleged protection that included reimbursement of 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 therefore send him the purchase cost, but paid only $99.99 instead of $129.99. He alleged that he bought an identical replacement bag for $129.99 two days after receiving SquareTrade’s payment. These allegations created a genuine dispute about whether SquareTrade breached an obligation to pay the replacement cost. For the same reasons, the court rejected summary judgment on Shuman’s unjust enrichment claim.

Disposition

The court denied the Shuman summary-judgment motion. It granted the Gonzales and Abbott motions to dismiss and dismissed all claims asserted by Gonzales and Abbott with leave to amend. The court ordered that the amended complaint be filed by December 3, 2021.