Day v. Advanced Micro Devices, Inc.

Background

The plaintiffs alleged that central processing units (CPUs) sold by Advanced Micro Devices, Inc. (AMD) caused stuttering when used with processor-intensive applications such as video games. The complaint alleged that AMD marketed the CPUs specifically to gamers who build their own computers, and that both plaintiffs were gamers who built computers around AMD CPUs. The alleged stuttering occurred almost every day and on an hourly basis.

The plaintiffs brought implied-warranty and fraud claims and sought equitable relief, meaning non-monetary remedies. The court considered AMD’s motion to dismiss the plaintiffs’ third amended complaint, which asks whether the complaint alleges enough facts to support the claims at this stage of the case.

Implied-Warranty Claims

The court held that the plaintiffs plausibly alleged that the CPUs were not merchantable. An implied warranty of merchantability generally requires goods to be fit for their ordinary purpose. The court determined that, based on reasonable consumers’ expectations and AMD’s marketing, the CPUs’ ordinary purpose could include running a gaming computer suitable for gaming—not merely running a computer. The alleged frequent stuttering during gaming and other processor-intensive applications was enough to suggest that the CPUs were unfit for that purpose.

AMD argued that the implied warranty was disclaimed on its website. Because the plaintiffs did not buy the CPUs directly from AMD, the court said it was unclear whether they ever saw the disclaimer. The court treated that issue as a factual question that could not be resolved on a motion to dismiss.

AMD also argued that the plaintiffs lacked vertical privity, meaning a direct contractual relationship between the buyer and seller. The court concluded that the third-party-beneficiary exception to that requirement was available to the plaintiffs at this stage. It relied on California appellate authority and a prior Northern District of California decision, and stated that the exception had not been directly addressed in the cited Ninth Circuit decision.

Fraud Claims

The court held that the fraud allegations were sufficient to proceed. The complaint cited complaints on third-party internet forums about CPU stuttering made in the months and weeks before one plaintiff, Dobek, bought a CPU. It also alleged that AMD tested its CPUs with Microsoft before that purchase. Together, those allegations were just enough to plausibly allege that AMD knew about the stuttering problem before the sale.

The court also found that the plaintiffs adequately alleged a duty to disclose. They alleged that AMD alone knew or had access to material facts and knew that those facts were not known to, or discoverable by, the plaintiffs.

Equitable Relief

The court held that the requests for equitable relief were adequately pleaded. The plaintiffs alleged that legal remedies would not fully compensate them for damage to their computers, as opposed to damage caused only by the allegedly defective CPUs. The court found those allegations about an inadequate legal remedy sufficient at the pleading stage.

Disposition

Judge Vince Chhabria denied AMD’s motion to dismiss. The opinion stated that the implied-warranty and fraud issues were close, but that the third amended complaint did enough to survive dismissal. The order did not decide the ultimate merits of the claims.