Carvalho v. HP, Inc.

Background

Rodney Carvalho and Mark Maher challenged HP’s website advertising. They alleged that HP displayed “strikethrough” prices and represented that customers were saving money, even though HP allegedly had not sold the products at those higher prices for a reasonably substantial period. They also alleged that HP advertised discounts as lasting for limited periods when some offers continued beyond their stated expiration dates.

Carvalho alleged that he bought an HP computer and mouse after HP advertised strikethrough prices, sale prices, savings, and a Labor Day coupon. Maher alleged that he bought an HP laptop after HP displayed a strikethrough price and stated that he had saved money. The plaintiffs sought to represent classes of people who bought HP products advertised as discounted from strikethrough prices.

The First Amended Complaint asserted nine claims: breach of contract; breach of express warranty; negligent misrepresentation; intentional misrepresentation; violation of California’s Consumer Legal Remedies Act; unjust enrichment; violation of California’s False Advertising Law; violation of the False Advertising Law’s former-price provision; and violation of California’s Unfair Competition Law.

Motion-to-Dismiss Standards

HP moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, and Rule 9(b), which requires fraud allegations to describe the alleged misconduct in detail. For purposes of the motion, the court accepted well-pleaded factual allegations as true and viewed them favorably to the plaintiffs.

Consumer-Protection and Advertising Claims

The court treated HP’s products as “non-exclusive” because the same computers and peripherals were sold by HP and other retailers. In such cases, the court held that allegations showing only that HP did not sell the products at the strikethrough prices for a substantial period were insufficient. The plaintiffs also needed to allege that the strikethrough prices were inflated or did not accurately reflect prevailing market prices at other retailers.

The court therefore granted HP’s motion to dismiss the fifth, seventh, and ninth claims—under the Consumer Legal Remedies Act, the general False Advertising Law, and the Unfair Competition Law—with leave to amend as to the deficient pricing allegations. The court did not decide at that stage whether HP’s disclosure that the strikethrough prices were manufacturer’s suggested retail prices made the broader consumer-protection claims nonactionable. It noted that the disclosure appeared in expandable fine print and that whether the advertising was likely to deceive a reasonable consumer could not be resolved on the current record.

The court separately granted HP’s motion to dismiss the eighth claim, which alleged a violation of California Business and Professions Code section 17501 concerning advertised former prices, without leave to amend. The court reasoned that HP’s disclosure established that the prices were manufacturer’s suggested retail prices rather than former prices, and section 17501 applies to former prices.

The court denied HP’s motion to dismiss the limited-time-offer allegations in the Consumer Legal Remedies Act, False Advertising Law, and Unfair Competition Law claims. It found that Carvalho alleged he used a Labor Day coupon and relied on HP’s representations and omissions about the limited duration of the discounts, which was sufficient at this stage to establish his standing for those allegations.

Misrepresentation Claims

Applying the same reasoning about non-exclusive products, the court concluded that the plaintiffs had not alleged enough facts to show that HP’s strikethrough prices were inflated or did not reflect prevailing market prices. Without those allegations, the plaintiffs had not adequately alleged actionable misrepresentations. The court granted HP’s motion to dismiss the negligent and intentional misrepresentation claims with leave to amend. The court did not reach HP’s separate argument that the economic-loss doctrine barred those claims.

Contract, Warranty, and Unjust-Enrichment Claims

The plaintiffs did not oppose dismissal of their breach-of-contract and breach-of-express-warranty claims. The court granted HP’s motion to dismiss those claims without leave to amend.

The court denied HP’s motion to dismiss the unjust-enrichment claim. It rejected HP’s argument that California law does not permit an independent unjust-enrichment claim, and it declined at that stage to dismiss the claim as duplicative of the plaintiffs’ statutory or tort claims.

Equitable Monetary Relief

HP argued that the plaintiffs could not seek equitable monetary relief under the Unfair Competition Law, False Advertising Law, and unjust-enrichment theories without alleging that they lacked an adequate legal remedy. The court denied that part of HP’s motion. It held that the plaintiffs could pursue equitable restitution at the pleading stage, while noting that the issue could be reconsidered later.

Order

The court granted in part and denied in part HP’s motion to dismiss. Specifically, it granted dismissal without leave to amend for the contract, express-warranty, and section 17501 former-price claims; granted dismissal with leave to amend for the negligent-misrepresentation, intentional-misrepresentation, Consumer Legal Remedies Act, general False Advertising Law, and Unfair Competition Law claims to the extent identified in the order; and denied dismissal of the unjust-enrichment claim and the limited-time-offer allegations. The plaintiffs were required to file a Second Amended Complaint within 21 days of the order. The court stated that failure to meet the deadline or cure the identified deficiencies would result in dismissal of the affected claims with prejudice.