Tietsworth v. Sears, Case No. 5:09-CV-00288 JF (HRL).

• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
• Writing for the Court: JEREMY FOGEL, District Judge.
• Citation: 720 F.Supp.2d 1123
• Parties: Renee TIETSWORTH, Suzanne Rebro, and Sondra Simpson, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. SEARS, Roebuck and Co., and Whirlpool Corporation, Defendants.
• Decision Date: 31 March 2010
• Docket Number: Case No. 5:09-CV-00288 JF (HRL).

720 F.Supp.2d 1123

Renee TIETSWORTH, Suzanne Rebro, and Sondra Simpson, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs,
v.
SEARS, Roebuck and Co., and Whirlpool Corporation, Defendants.

Case No. 5:09-CV-00288 JF (HRL).

United States District Court,N.D. California,
San Jose Division.

March 31, 2010.

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Jennie Lee Anderson, Lori Erin Andrus, Andrus Anderson LLP, San Francisco, CA, for Plaintiffs.

Clement L. Glynn, James M. Hanlon, Jr., Glynn & Finley, Walnut Creek, CA, Galen Driscoll Bellamy, Joel Steven Neckers, Michael Timothy Williams, Wheeler Trigg O'Donnell LLP, Denver, CO, for Defendants.

ORDER ¹ GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND GRANTING DEFENDANTS' MOTION TO STRIKE CLASS ALLEGATIONS JEREMY FOGEL, District Judge.

Defendants Whirlpool Corporation (“Whirlpool”) and Sears, Roebuck and Co. (“Sears”) move to dismiss and strike class allegations from the Second Amended Complaint (“SAC”) filed by Plaintiffs Renee Tietsworth (“Tietsworth”), Suzanne Rebro (“Rebro”), Sondra Simpson (“Simpson”), John Carey (“Carey”), and John Engelke (“Engelke”), on behalf of themselves and a putative class of similarly

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situated consumers. For the reasons discussed below, the motion to dismiss will be granted in part and dismissed in part and the motion to strike will be granted, with leave to amend.

I. BACKGROUND

On December 22, 2008, Tietsworth filed suit in state court on behalf of herself and all others similarly situated, alleging that Defendants engaged in fraudulent concealment and nondisclosure, breached express and implied warranties, violated the California Consumers Legal Remedies Act (“CLRA”) and California Unfair Competition Law (“UCL”), and unjustly enriched themselves at the expense of Tietsworth and the putative class. On January 22, 2009, Defendants removed the action to this Court. One week later, Defendants moved to dismiss the action pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). On May 14, 2009, 2009 WL 1363548, this Court dismissed the action with leave to amend. On June 15, 2009, Plaintiffs filed their first amended complaint (“FAC”), adding two individual plaintiffs, Rebro and Simpson, re-alleging Tietsworth's original claims and adding a new claim under the Magnuson-Moss Warranty Act (“MMWA”). 15 U.S.C. 2301 et seq. Defendants again moved to dismiss the action pursuant to Rule 12(b)(6) and on October 13, 2009 the Court granted the motion, again with leave to amend.

On November 12, 2009, Plaintiffs filed a second amended complaint (“SAC”) ² , adding two individual plaintiffs, John Carey and John Engelke, and re-asserting the same claims for relief pled in the FAC. On December 14, 2009, Defendants filed the instant motions to dismiss and strike class allegations. On February 12, 2010, Plaintiff John Engelke voluntarily dismissed his complaint against all Defendants without prejudice pursuant to Fed.R.Civ.P. 41(a)(1)(A). Accordingly, the Court's analysis of Defendants' motions will be limited to the allegations of Plaintiffs Tietsworth, Rebro, Simpson, and Carey.

Plaintiffs allege that at all relevant times, Whirlpool manufactured top-loading Kenmore Elite Oasis automatic washing machines (“the Machines”), and Sears marketed, advertised, distributed, warranted, and offered repair services for the Machines. SAC ¶ 12. Each individual plaintiff claims to have bought a new Oasis washer from Sears between May 2006 and June 2007; Plaintiffs allege that thousands of the Machines contain a defect that causes them to “stop in mid-cycle and display a variety of ‘F’ error codes.” SAC ¶¶ 30, 51, 56, 67. 74. ³ Rebro, Simpson and Carey claim that these electrical problems began within the first year after they purchased their washers. Id. ¶¶ 60, 70, 76. Plaintiffs also allege that the “F” error codes are the result of defective Electronic Control Boards and that the defect forces users to restart the Machines, sometimes repeatedly, to complete a single load of laundry. Id. ¶¶ 32, 52, 61, 70, 76. ⁴

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Plaintiffs claim that the alleged defects in the Electronic Control Boards belie Sears' representation that “the Machines were and are the highest quality, top-of-the-line washers that allow consumers to do laundry in a more convenient, faster and efficient manner and enable consumers to save water, energy and time.” Id. ¶ 13. They allege a series of misrepresentations by Defendants, including: statements on the Sears website and contained in stickers and informational placards on floor models of the Machines in Sears' showrooms that the Machines would use 47% less water and 53% less energy and would lower water and energy bills, id. ¶¶ 13, 15; statements made by Sears' salespeople that the Machines were “top-of-the-line” and “would save them energy and water and would allow them to wash even large loads in a single cycle without becoming unbalanced, id. ¶ 14; statements in the owner's manual that “[y]our new Kenmore product is designed and manufactured for years of dependable operation” and that the Machine has features that “increase the ease of use and improve wash performance,” including but not limited to, an electronic panel that is “easy to use,' ” id. ¶ 16; and statements made in an extensive advertising and promotional campaign that repeated Defendants' representations with respect to the greater efficiency and durability of the Machines. Id. ¶ 26.

Plaintiffs allege that Defendants' statements “relate directly to the functioning and performance of the Machine's Electronic Control Board because the Electronic Control Board controls the laundry cycles, the water levels and spin speed.” Id. ¶ 17. They claim that a functioning Electronic Control Board is necessary to operate the Machine in a manner that saves energy and water and finishes loads of laundry as advertised. Id.

Plaintiffs also claim that Defendants had a duty to disclose the defect in the Electronic Control Board based on their alleged exclusive knowledge of the defect. Id. ¶ 19. Plaintiffs allege that Defendants knew about the defect by May 2006 at the latest. Id. The SAC alleges specifically that: “the Machines already had the highest rate of return by customers due to complaints about the electronic controls”; “the F51 error code was the leading number of service calls”; “the Electronic Control Boards were the most frequently replaced part on the Machines in 2006”; and “Defendants concluded [internally] that software remodification was required to solve the problem and began ‘reprogramming boards to correct severe and destabilizing of balance problems.’ ” Id. In addition, Plaintiffs claim that in 2007 Defendants acknowledged the connection between the Electronic Control Board defect and the Machines spinning out of control in a “Service Flash entitled ‘Wash Basket Loses Stability during Some Spin Conditions.’ ” Id. Moreover, they allege that Defendants “mutually acknowledged that units equipped with the defective Electronic Control Boards, ‘ required repair/replacement.’ ” Id.

The SAC also asserts that Defendants, even after issuing the Service Flash, continued to sell the Machines and Plaintiffs and Class members continued to be denied replacements for their defective parts, told that neither the Machines nor the Electronic Control Board were defective and charged for repairing defective parts. Id. Defendants also allegedly limited the Service Flash to Machines with serial codes between CS48-CT35 “even though all of the Machines suffered from the same defect.” Id. Moreover, Whirlpool and Sears allegedly shared information concerning the Machines' defects and adopted “joint process initiatives” to “track and develop ways to address customer complaints with

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respect to machines manufactured by Whirlpool and sold by Sears since 2005.” Id. ¶ 20. Plaintiffs claim that Sears and Whirlpool “collaborated about potential redesigns” to address the defective Machines and agreed that Whirlpool would pay for a portion of the defective Electronic Control Boards that were replaced. Id. The SAC states that Sears Product Engineer David Chowanec indicated that the defective Electronic Control Boards in particular negatively impacted Machines purchased in 2006 and 2007 and that Sears is “currently trying to seek compensation [from Defendant Whirlpool] for a ‘catastrophic failure.’ ” Id. ¶ 21.

Then, in December 2007, Defendants allegedly issued a Service Flash recognizing the defect and directing the Electronic Control Board be replaced in floor models of certain types of the Machines. Id. ¶ 22. The Service Flash did not apply to Machines already sold to consumers. Id.

Plaintiffs claim that Defendants' failure to disclose the defect is material in that they would not have purchased or would have paid significantly less for their Machines had the defect been disclosed. Id. ¶¶ 24, 28, 37, 55, 59, 66, 69, 83. Simpson alleges that she specifically asked a Sears agent about any potential problems with the Electronic Control Board and that the agent failed to disclose the alleged defect. Id. ¶ 68.

Tietsworth alleges she first experienced an error code problem approximately eighteen months after the purchase of her machine and that she contacted Sears in June 2008. Id. ¶¶ 51, 52. She claims that Sears informed her that “she could either purchase an extended warranty for approximately $218 or have someone come out to repair the Machine” at a cost of $70, a technician fee that did not include the cost of repair. Id. ¶ 53. She does not allege that she incurred any actual expenses, id. ¶¶ 51-55, nor does she allege that she asked Sears to repair or replace her washer at no cost. Id.

Rebro alleges that she purchased her washer in May 2006 and that she began experiencing Electronic Control Board problems...