Carvalho v. HP, Inc.

Background

Rodney Carvalho and Mark Maher challenged HP’s advertising of products on its website. They alleged that HP displayed inflated strikethrough prices and then advertised lower sale prices as discounts, creating the impression that customers were saving money even though HP allegedly did not sell the products at the higher prices for a reasonably substantial period. They also alleged that HP advertised some discounts as lasting for limited periods, although the discounts allegedly continued beyond their stated expiration dates.

Carvalho alleged that he bought an HP computer and mouse after HP advertised savings based on strikethrough prices. Maher alleged that he bought an HP laptop after HP advertised a $130 savings based on a strikethrough price. The Second Amended Complaint asserted claims under California’s Consumer Legal Remedies Act, False Advertising Law, and Unfair Competition Law, plus an unjust-enrichment claim. The plaintiffs also sought to represent proposed classes of people and entities who bought HP products advertised as discounted from strikethrough prices.

HP’s motion and judicial-notice request

HP moved to dismiss under Federal Rules of Civil Procedure 9(b) and 12(b)(6). Rule 12(b)(6) tests whether a complaint states a legally sufficient claim, while Rule 9(b) requires fraud allegations to describe the alleged misconduct specifically. HP argued that the strikethrough prices were not false or misleading, that reasonable consumers were not likely to be deceived, and that the plaintiffs lacked standing for certain limited-time and limited-quantity theories.

HP also asked the court to take judicial notice of eleven webpage printouts showing HP products for sale. The court found the documents’ relevance difficult to understand without further analysis, was concerned that considering them could effectively turn the motion into a summary-judgment motion, and noted the plaintiffs’ objections. The court denied HP’s request for judicial notice.

Price-related claims

The court concluded that the plaintiffs adequately alleged that HP’s strikethrough prices were misleading. The allegations described the prices at which products were offered on HP’s website before and after the purchases and the limited availability of the products at third-party retailers. The court accepted the plaintiffs’ allegations at this stage and found that they explained why the strikethrough prices allegedly did not reflect prevailing market prices.

The court also concluded that the plaintiffs adequately alleged that a reasonable consumer was likely to be deceived. HP’s disclaimer identified the strikethrough price as a manufacturer’s suggested retail price, but the disclaimer appeared in a section that consumers had to expand by clicking a plus sign. The court stated that whether the prices or disclaimer were presented in a way likely to deceive a reasonable consumer could not be resolved at this stage.

The court therefore denied HP’s motion to dismiss the False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act claims.

Limited-time and limited-quantity theories

The court ruled that the plaintiffs could not proceed on a limited-quantity theory because neither plaintiff alleged reliance on a limited-quantity offer. The motion to dismiss the False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act claims as to that theory was granted.

For the limited-time theory, the court ruled that Carvalho had adequately alleged standing to proceed, but Maher had not alleged that he relied on a limited-time offer. The motion to dismiss those claims as to a limited-time theory was therefore denied as to Carvalho and granted as to Maher.

Unjust enrichment and disposition

HP argued that the unjust-enrichment claim should be dismissed if the fraud-based claims were dismissed. Because the court did not dismiss the underlying False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act claims, it denied HP’s motion to dismiss the unjust-enrichment claim on that basis.

The court’s order granted HP’s motion to dismiss as to a limited-quantity theory; denied it as to a limited-time theory for Carvalho and granted it as to that theory for Maher; denied it as to the False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act claims; and denied it as to the unjust-enrichment claim.