Wade v. OnePlus USA Corp.

Background

Eric Wade and other plaintiffs sued OnePlus USA Corp. in a proposed class action concerning the design, marketing, and sale of the OnePlus 9 and OnePlus 9 Pro smartphones. The plaintiffs alleged that the phones contained a “Secret Setting” that restricted, or “throttled,” access to processing power and other resources. Their claims included unfair competition, false advertising, fraud, and related federal and state-law claims.

OnePlus moved to dismiss the first amended complaint under Federal Rule of Civil Procedure 12(b)(1), which addresses subject-matter jurisdiction, and Rule 12(b)(6), which addresses whether a complaint states a legally sufficient claim.

Standing

The court dismissed the first amended complaint for lack of Article III standing. Article III standing requires a plaintiff to show an actual injury, among other requirements. The plaintiffs alleged that the phones had the alleged setting, but they did not allege that the named plaintiffs personally experienced reduced power or performance while using their phones.

The court distinguished a prior smartphone-throttling case in which the alleged software updates affected all plaintiffs alike. Here, the plaintiffs alleged that the setting affected only certain applications and functions, so the complaint did not make clear that each named plaintiff was affected in the same way. The court allowed the plaintiffs to amend this defect and stated that they could also amend their nationwide class allegations.

The court rejected the defendant’s separate argument that the plaintiffs lacked standing because they had not satisfied a condition in the applicable End User License Agreement. The agreement required “friendly negotiation” but did not clearly state that negotiation was a condition that had to occur before litigation. The court also observed that the parties had participated in an unsuccessful mediation, which it viewed as satisfying the asserted condition for a not-yet-filed second amended complaint.

Failure to State a Claim

The court also dismissed the first amended complaint for failure to state a claim.

For claims under the federal Computer Fraud and Abuse Act and California’s Computer Data Access and Fraud Act, the plaintiffs appeared to allege two possible theories: that the setting was installed at the factory before sale, or that it was implemented through an update after sale. If the setting was installed at the factory, the plaintiffs could not plausibly allege that the installation was unauthorized, as required by certain provisions of those statutes. If it was implemented after sale, the plaintiffs had not alleged enough facts to make the claims plausible. If they pursued both theories, they had to clarify which alleged conduct supported each claim. The court also found that the plaintiffs had not adequately alleged the required losses, including the $5,000 loss threshold under the federal law.

The court found that the trespass-to-chattels claim was subject to dismissal because the plaintiffs had not adequately alleged injury. It also noted authority holding that such a claim may not apply when the alleged interference occurred before the product was sold.

The fraud claims did not satisfy Rule 9(b), which requires fraud to be pleaded with particularity, and the plaintiffs had not adequately alleged an actionable omission. The court stated that the fraud theories might become clearer if the amended pleading identified when the setting was installed on the phones.

The claim for money had and received was dismissed because the plaintiffs did not plead a definite amount. The court also found that the plaintiffs had not adequately alleged a loss of money or property required for statutory standing under California’s Unfair Competition Law and False Advertising Law.

As to equitable-relief claims, including the unfair-competition, false-advertising, and unjust-enrichment claims, the court stated that the plaintiffs would have to prove that they lacked an adequate legal remedy. The court held that equitable claims could be pleaded in the alternative to legal claims at the pleading stage and directed the plaintiffs to clarify that point in any amendment.

Disposition

Judge Beth Labson Freeman granted OnePlus’s motion to dismiss the first amended complaint with leave to amend. The court required any amended complaint to be filed by October 3, 2022, and stated that the plaintiffs could not add new claims or parties without express permission from the court.