Soo v. Lorex Corporation

• Court: District Court, N.D. California
• Decided: September 9, 2020
• Docket: 3:20-cv-01437
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 GERALD SOO, et al., Case No. 20-cv-01437-JSC

8 Plaintiffs, ORDER RE: MOTION TO COMPEL 9 v. ARBITRATION AND MOTION TO DISMISS 10 LOREX CORPORATION, et al., Re: Dkt. Nos. 33 and 34 Defendants. 11

12 13 Gerald Soo and Matthew Lauinger (collectively, “Plaintiffs”) bring this putative class 14 action against Lorex Corporation (“Lorex”) and Dahua Technology USA Inc. (“Dahua”) 15 (collectively, “Defendants”) alleging violations of various state common law claims, violations of 16 California’s Unfair Competition Law (“UCL”), Business & Professions Code § 17200 et seq., 17 New York’s Consumer Protection Act (“CPA”), General Business Law § 349, and New York’s 18 false advertising law (“FAL”), General Business Law § 350. Defendants’ motion to compel 19 arbitration and stay discovery is now pending before the Court, as well as Defendants’ motion to 20 dismiss Plaintiffs’ first amended complaint (“FAC”).1 After careful consideration of the parties’ 21 briefing, and having had the benefit of oral argument on July 23, 2020 regarding both motions, the 22 Court DENIES the motion to compel arbitration and stay discovery. Defendants have failed to 23 prove by a preponderance of the evidence that Plaintiffs agreed to arbitrate. The Court GRANTS 24 in part and DENIES in part Defendants’ motion to dismiss and DENIES Defendants’ motion to 25 stay discovery. 26

27 1 All parties have consented to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. § 1 BACKGROUND 2 Lorex, a subsidiary of Dahua, manufactured a variety of indoor and outdoor home security 3 Flir cameras with the ability to upload security footage into cloud storage. (FAC, Dkt. No. 21 ¶¶ 4 1-2.)2 The cameras also offered a “Rapid Recap” feature, with which users could see a condensed, 5 time-stamped video of activity observed by the camera. (Id.) The cameras’ cloud storage and 6 Rapid Recap features were made possible by applications (“Apps”) managed by Lorex. (Id. ¶¶ 6- 7 8.) After selling its Flir cameras since 2015, on August 15, 2019 Lorex announced it was 8 changing technology providers for the cameras’ Apps. (Id. ¶ 10.) As a result, the Flir cameras 9 could no longer connect to Apps, rendering them nonfunctional. (Id. ¶¶ 10-11.) Lorex then 10 offered consumers a “Lorex Active Deterrence Wi-Fi replacement camera” or a Lorex.com store 11 discount of US $120.00. (Id. ¶ 15.) Plaintiffs allege these are inadequate substitutes for their 12 inoperative Flir cameras. (Id. ¶¶ 17-19.) 13 Gerald Soo, a California resident, subsequently filed this putative class action on behalf of 14 purchasers of Flir cameras whose functionality was reduced by Lorex’s August 2019 change in 15 technology providers, alleging an unjust enrichment claim as well as a claim for violations of 16 California’s UCL. (Dkt. No. 1.) He then filed the FAC which added plaintiff Matthew Lauinger, 17 a New York resident, a claim for trespass to chattel, and claims under New York’s FAL and CPA. 18 (Dkt. No. 21.) Defendants responded by filing the pending motion to compel arbitration and stay 19 discovery, as well as the instant motion to dismiss Plaintiffs’ FAC. (Dkt. Nos. 33 & 34.) 20 Defendants move to compel arbitration on the grounds that Plaintiffs accepted the terms of 21 Lorex’s Product Limited Warranty (“Warranty”) included with the Flir cameras. In particular, they 22 contend that the Warranty inside the box that Plaintiffs’ cameras came in contains a binding 23 arbitration provision and that the provision is enforceable and encompasses Plaintiffs’ dispute. 24 (Dkt. No. 34.) The motion is fully briefed, and the Court heard oral argument regarding it and 25 Defendants’ motion to dismiss on July 23, 2020. (Dkt. Nos. 36 & 39.) 26 27 1 DISCUSSION 2 I. Motion to Compel 3 The Federal Arbitration Act (“FAA”) provides that arbitration agreements “shall be valid, 4 irrevocable, and enforceable, save upon such grounds as exist at law or in equity for revocation of 5 any contract.” 9 U.S.C. § 2. Under the FAA, “arbitration agreements [are] on an equal footing 6 with other contracts,” and therefore courts must “enforce them according to their terms.” Rent-A- 7 Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010) (internal citations omitted). A party may 8 petition a court to compel “arbitration [to] proceed in the manner provided for in such agreement.” 9 9 U.S.C. § 4. 10 The United States Supreme Court recognizes a “liberal policy favoring arbitration 11 agreements.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011); see also Moses H. 12 Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25 (1983) (noting that “as a matter of 13 federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of 14 arbitration”). Thus, a court must direct parties to proceed to arbitration should it determine: (1) 15 that a valid arbitration agreement exists; and (2) that “the agreement encompasses the dispute at 16 issue.” Kilgore v. KeyBank Nat'l Ass'n, 718 F.3d 1052, 1058 (9th Cir. 2013); see also Chiron 17 Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (noting that “[i]f the 18 response is affirmative on both counts, then the [FAA] requires the court to enforce the arbitration 19 agreement in accordance with its terms”). “[O]rdinary state-law principles that govern the 20 formation of contracts” decide whether an agreement to arbitrate exists. First Options of Chi. Inc. 21 v. Kaplan, 514 U.S. 938, 944 (1995). 22 For purposes of this motion, it is undisputed that Lorex provides a hard copy of the 23 Warranty in the box of every Flir camera it sells. (Dkt. No. 35 ¶ 8.) The Warranty is on a single 24 page with three columns of text: two in English and one in French.3 In the second column, in a 25 section entitled “State/Provincial Law,” the current version of the Warranty provides as follows: 26 27 State/Provincial Law 1 The Purchaser may have other rights under state, provincial, or federal laws and where the whole or part of any item of this warranty is prohibited by such laws, it shall be deemed null and void. The remainder of the warranty 2 shall remain in effect. 3 The Products covered by this Warranty must be used as intended for the warranty to apply. Without limit to the foregoing, some states do not allow the exclusion or limitation of implied warranties or the limitation of incidental 4 or consequential damages for certain products supplied to consumers or the limitation of liability for personal injury, so the above limitations, exclusions and disclaimers may be limited in their application to you. If implied 5 warranties are not allowed to be excluded in their entirety for any reason, they will be limited to the duration of the applicable written warranty in this document. This warranty gives you specific legal rights which may vary 6 depending on local law. By keeping this Product you agree to the terms of this Limited Warranty without objection or addition, and agree that binding arbitration shall be your sole remedy for any disputes over any elements of this Limited Warranty and waive any right to pursue joint, collective, or class claims in any form with respect to the 7 Product, your purchase of the Product, this Limited Warranty and Lorex’s performance hereunder. 8 (Dkt. No. 35-1 at 2.) The earlier versions do not differ in substance. (See Dkt. No. 35-1.) Every 9 version of the Warranty produced by Lorex uses the same language in its arbitration provision; 10 there is no revision or change across its 2014 to 2018 iterations. (See Dkt. No. 35-1; Dkt. No. 34 11 at 9.) Defendants contend that because the Warranty in the box advised Plaintiffs that if they kept 12

the cameras they were agreeing to the Warranty as well as to binding arbitration, and Plaintiffs did 13 not return their cameras, they agreed to arbitrate this dispute. Plaintiffs contend, in the first 14 instance, they never agreed to the Warranty arbitration provision. Because the Court finds that 15 neither Mr. Lauinger nor Mr. Soo assented to the arbitration provision, it need not address the 16 remaining issues in Defendants’ motion to compel. 17 . . . . A. Mr. Lauinger Did Not Assent to Arbitration Z 18 The arbitration provision at issue presents a “shrinkwrap-license case,” in which “the 19 [contractual] terms at issue are typically provided inside the packaging of consumer goods.” 20 Schnabel v. Trilegiant Corp., 697 F.3d 110, 121 (2d Cir. 2012). Generally, a consumer does not 21 manifest assent to the terms of a shrinkwrap-license at the time of purchase; “instead, the 22 consumer manifests assent to the terms by later actions.” Register.com, Inc. v. Verio, Inc., 356 23 F.3d 393, 428 (2d Cir. 2004) (citations omitted); see also ProCD, Inc. v. Zeidenberg, 86 F.3d 24 1447, 1452 (7th Cir. 1996) (“A buyer may accept by performing the acts the vendor proposes to 25 treat as acceptance.”). Defendants rely on Brower v. Gateway 2000, 246 A.D.2d 246, 676 N.Y.2d 26 569 (S. Ct. App. Div. 1998), to support their argument that Mr. Lauinger, a New York resident, 27 accepted the Warranty’s terms, including the arbitration provision, by keeping the camera. See 28

1 Ryman v. Sears, Roebuck and Co., 505 F.3d 993, 994 (9th Cir. 2007) (“when (1) a federal court is 2 required to apply state law, and (2) there is no relevant precedent from the state’s highest court, 3 but (3) there is relevant precedent from the state’s intermediate appellate court, the federal court 4 must follow the state intermediate appellate court decision unless the federal court finds 5 convincing evidence that the state’s supreme court likely would not follow it.”) (original 6 emphasis). 7 In Brower, the plaintiffs purchased computers from Gateway. Brower, 246 A.D.2d at 248. 8 In the materials in the computers’ boxes was a copy of Gateway’s “Standard Terms and 9 Conditions.” Id. The Conditions began with a “Note to the Customer” which provided “in 10 slightly larger print than the remainder of the document in a box that spans the width of the page: 11 ‘This document contains Gateway 2000’s Standard Terms and Conditions. By keeping your 12 Gateway 2000 computer system beyond thirty (30) days after the date of delivery, you accept 13 these Terms and Conditions.’” Id. The Terms and Conditions contained, among other terms, an 14 arbitration provision. Id. The court held that by keeping their computers beyond 30 days the 15 plaintiffs agreed to the arbitration agreement. Id. at 251. “[I]t is only after the consumer has 16 affirmatively retained the merchandise for more than 30 days—within which the consumer has 17 presumably examined and even used the product(s) and read the agreement—that the contract has 18 been effectuated . . . . no contract was formed here . . . until the merchandise was retained beyond 19 the 30-day period.” Id. Defendants argue that just as in Brower, Mr. Lauinger accepted the 20 Warranty’s terms, including the arbitration provision, by retaining the camera. They further note 21 that the same month he purchased the camera he made two calls to Lorex’s service line and this 22 conduct further supports a finding that he agreed to the Warranty’s terms. 23 Brower does not compel the finding that Mr. Lauinger agreed to arbitration. The “Terms 24 and Conditions” in Brower, unlike the Warranty at issue here, gave the customer the “unqualified 25 right” for 30 days “to return the merchandise, because the goods or terms are unsatisfactory or for 26 no reason at all.” Id. at 252. During those 30 days the customer “presumably examined and even 27 used the product(s).” Id. at 251. No contract was formed until those 30 days of the unqualified 1 customer any amount of time to examine the product, and the included written materials did give 2 the consumer the right to return the camera. As Plaintiffs observe: “Defendants’ instructions for 3 acceptance also fail to state how long consumers have to return the product, where they are 4 supposed to return it to or how the costs for return are supposed to be covered.” (Dkt. No. 36 at 5 13.) At a minimum, without evidence that Mr. Lauinger had the right to return the camera and 6 thus reject the arbitration provision there can be no agreement to arbitrate formed by “keeping the 7 [camera.]” (Dkt. No. 35-1 at 2.) 8 The other cases upon which Defendants rely require the same conclusion. In each case the 9 product manufacturer gave the consumer a certain amount of time to return the product before the 10 contract was effectuated. See Chamberlain v. LG Elecs. U.S.A., Inc., No. CV172046MWFPLAX, 11 2017 WL 3084270, at *3 (C.D. Cal. June 29, 2017) (explaining that under New York law, an “in 12 the box” contract “results when the package is opened and the consumer uses the equipment for a 13 specified period of time which is set forth in the written agreement.”) (citations and alterations 14 omitted); Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1148 (7th Cir. 1997) (holding the plaintiffs 15 accepted a “cash now, terms later” arbitration clause included in a “list of terms [] said to govern 16 unless the customer return[ed] the computer within 30 days”); Tsadilas v. Providian Nat. Bank, 13 17 A.D.3d 190 (2004) (holding that consumer consented to arbitration agreement with credit card 18 company by failing to opt out; thus, the agreement must have given the consumer the opportunity 19 to “opt out”); see also ProCD, Inc., 86 F.3d at 1452 (upholding shrinkwrap software license where 20 the seller “proposed a contract that a buyer would accept by using the software after having an 21 opportunity to read the license at leisure” and where buyer could not use the software “without 22 indicating acceptance”). 23 As Lorex has not proved that Mr. Lauinger had the opportunity to reject the proposed 24 arbitration agreement, that is, to return the camera, it has not met its burden of showing Mr. 25 Lauinger assented to the Warranty’s arbitration provision and that an agreement to arbitrate was 26 formed. The motion to compel Mr. Lauinger to arbitration must therefore be denied. 27 1 B. Mr. Soo did not Assent to Arbitration 2 As the party seeking to compel arbitration, Defendants have the burden of demonstrating 3 by a preponderance of the evidence that a valid agreement to arbitrate exists. See Norcia v. 4 Samsung Telecommunications Am., LLC, 845 F.3d 1279, 1283 (9th Cir. 2017). “[A] party cannot 5 be required to submit to arbitration any dispute which he has not agreed so to submit.” Id. 6 (citations omitted). While a “party who is bound by a contract is bound by all its terms, whether 7 or not the party was aware of them,” it is axiomatic that a party must first be bound to the contract. 8 Id. at 1284. An exception to this general rule of formation exists when “the writing does not 9 appear to be a contract and the terms are not called to the attention of the recipient.” Marin 10 Storage & Trucking, Inc. v. Benco Contracting & Eng'g, Inc., 89 Cal. App. 4th 1042, 1049–50 11 (2001), as modified (June 8, 2001). 12 Defendants contend that under California law Mr. Soo agreed to arbitrate by keeping his 13 five cameras. They argue further that Mr. Soo, unlike Mr. Lauinger, “activated” his Warranty 14 online, further demonstrating that he accepted the arbitration provision in the Warranty. 15 Defendants’ argument is foreclosed by Norcia, 845 F.3d 1279. 16 In Norcia, the plaintiff purchased a Samsung phone. Id. at 1282. In the phone box was a 17 Product Safety & Warranty Information brochure that, among other things, contained an 18 arbitration provision encompassing all disputes with Samsung, even non-warranty disputes. Id. 19 The provision stated that consumers could “opt out of the arbitration agreement by providing 20 notice to Samsung within 30 calendar days of purchase, either through email or by calling a toll- 21 free telephone number.” Id. Samsung argued that because the plaintiff had not opted out, he was 22 required to arbitrate his consumer class action. Id. at 1290. The Ninth Circuit, applying California 23 law, disagreed. Id. 24 The court held that under California law, silence or inaction cannot constitute acceptance 25 of an offer. Id. at 1284. The court also noted, however, that there are exceptions to that general 26 rule. For example, “[a]n offeree’s silence may be deemed to be consent to a contract when the 27 offeree has a duty to respond to an offer and fails to act in the face of this duty.” Id. at 1285 1 benefit offered. Id. However, even if one of these exceptions applies, a contract offeree’s silence 2 cannot constitute consent to a contract “when the offeree reasonably did not know that an offer 3 had been made.” Id. at 1285 (citation omitted). Applying these principles of California law, the 4 Ninth Circuit held that Norcia had not agreed to the arbitration provision in the brochure. Id. at 5 1286. First, it was undisputed that Norcia had not done anything to affirmatively accept the offer, 6 such as sign the brochure or affirmatively indicate his acceptance. Id. at 1285. Second, no 7 exception to the general rule that silence cannot be deemed acceptance applied because Norcia had 8 no duty to respond to Samsung’s offer, and Samsung had not identified any benefit that Norcia 9 retained given that the brochure stated that a consumer still was entitled to the limited warranty 10 benefit even if the consumer opted out of the arbitration provision. Id. at 1286. 11 Importantly, the court also held that California courts had not yet enforced an “in-the-box” 12 contract; instead, the courts had held that “even if a customer may be bound by an in-the-box 13 contract under certain circumstances, such a contract is ineffective where the customer does not 14 receive adequate notice of its existence.” Id. at 1289-90. The court held that as Samsung’s 15 brochure was entitled “Product Safety & Warranty Information” “[a] reasonable person in 16 Norcia’s position would not be on notice that the brochure contained a freestanding obligation 17 outside the scope of the warranty.” Id. at 1289. Further, “[b]ecause an offeree, regardless of 18 apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of 19 which he was unaware, contained in a document whose contractual nature is not obvious . . . 20 Norcia was not bound by the arbitration provision even if the in-the-box contract were otherwise 21 enforceable under California law.” Id. at 1290 (internal quotations and citation omitted); see also 22 Velasquez-Reyes v. Samsung Elecs. Am., Inc., No. ED CV 16-1953-DMG (KKx), 2017 WL 23 4082419, at *7 (C.D. Cal. Sept. 13, 2017), aff'd, 777 F. App’x 241 (9th Cir. 2019) (where a 24 “[Warranty] Guide’s cover page indicate[d] only that it contain[ed] health, safety, and warranty 25 information” it could not bind the plaintiff to an arbitration provision appearing toward its end). 26 The same result follows here. Under California law, Mr. Soo’s silence cannot be deemed 27 acceptance. Neither exception to that general rule applies. Further, as in Norcia, Lorex placed the 1 paragraph addressing other matters such that a “reasonable person in [Mr. Soo’s] position would 2 not be on notice that the brochure contained a freestanding obligation outside the scope of the 3 warranty.” Norcia, 845 F.3d at 1289. 4 Defendants, citing Pang v. Samsung Elecs. Am., Inc., 371 F. Supp. 3d 633 (N.D. Cal. 5 2019), contend that Norcia does not apply. In Pang, a consumer filed suit invoking the warranty 6 governing her smartphone after its camera shattered within a month of purchase. Id. at 635. The 7 court held that the plaintiff’s invocation of Samsung’s warranty within the arbitration agreement’s 8 30-day opt out period and her continued attempts to enforce the warranty in the lawsuit put the 9 “case outside the purview of Norcia.” Id. at 639. The court reasoned that “the relevant question is 10 whether a reasonable person in [the plaintiff’s] position—i.e., one who invoked the warranty 11 within 30-days of purchase—would be on notice of Samsung's offer to arbitrate.” Id. Because the 12 plaintiff “intended on making a warranty claim,” it followed that she had “fair notice” she should 13 read the warranty and its arbitration provision. Id. at 640. The court also expressed doubt that 14 these facts put the case under the general rule that “’silence or inaction does not constitute 15 acceptance of an offer’” given that the plaintiff had invoked the warranty. Id. 16 Even accepting Pang’s reasoning, the facts here are far different. First, Mr. Soo is not 17 bringing warranty claims. Second, he did not have 30 days to opt out of the arbitration agreement; 18 as with Mr. Lauinger, the record does not support a finding that Mr. Soo had any right to return his 19 cameras, let alone a right to return after having sufficient time to review Lorex’s “offer.” Third, 20 Mr. Soo has never invoked Lorex’s warranty. Mr. Soo’s online activation of the Warranty does 21 not support a finding that he had to or should have been aware of the arbitration agreement. As 22 Lorex conceded at oral argument, Mr. Soo could have registered for warranty protection without 23 ever seeing the in-the-box Warranty that contained the arbitration provision in the section entitled 24 “State/Provincial Law.” Unlike Pang, Mr. Soo’s case holds no “meaningful dissimilar[ities]” 25 from Norcia that would render its reasoning inapplicable. Pang, 371 F. Supp. 3d at 639-40. 26 Defendants have not shown by a preponderance of the evidence that Mr. Soo assented to the 27 Warranty’s arbitration provision and thus the motion to compel Mr. Soo to arbitration must be 1 II. Motions to Dismiss 2 Defendants move to dismiss the following claims pursuant to Rule 12(b)(6): violations 3 under the UCL, New York’s CPA, and New York’s FAL; as well as state law claims for trespass 4 to chattels and unjust enrichment. 5 A. UCL Violations4 6 The UCL prohibits “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. 7 & Prof. Code § 17200. Because the UCL is broadly remedial and written disjunctively, “it 8 establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, 9 or fraudulent.” Hodsdon v. Mars, Inc., 891 F.3d 857, 865 (9th Cir. 2018) (internal quotations and 10 citation omitted). 11 1. Unfairness Under the UCL 12 Practices may be deemed unfair under the UCL “even if not specifically proscribed by 13 some other law.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1143 (2003) 14 (internal quotations and citation omitted). “Unfairness” is statutorily undefined; as such, courts 15 apply three tests under the UCL’s unfair prong when evaluating a defendant’s practices. See In re 16 Carrier IQ, Inc., 78 F. Supp. 3d 1051, 1115 (N.D. Cal. 2015). The first, the “tethering test,” 17 requires “that the public policy which is a predicate to a consumer unfair competition action under 18 the ‘unfair’ prong of the UCL [] be tethered to specific constitutional, statutory, or regulatory 19 provisions.” Drum v. San Fernando Valley Bar Ass'n, 182 Cal. App. 4th 247, 257 (2010). The 20 second “balancing test” asks whether the alleged business practice “is immoral, unethical, 21 oppressive, unscrupulous or substantially injurious to consumers and requires the court to weigh 22 the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” Id. 23 (citations omitted). The third test “requires: (1) that the consumer injury be substantial; (2) that 24 the injury not be outweighed by any countervailing benefits to consumers or competition; and (3) 25 the injury is one that consumers could not have reasonably avoided.” Id. (citations omitted). 26 4 On the basis that Plaintiffs argue they have sufficiently stated claims under the CPA and FAL for 27 the same reasons they state a claim under the UCL’s unfairness and fraudulence prongs, the Court 1 Plaintiffs’ theory of unfairness relies on the “balancing test.” (FAC at ¶ 60; Dkt. No. 37 at 2 11.) Under this theory, by “intentionally rendering” the Flir cameras non-functional and 3 “providing an inadequate and temporary ‘remedy[,]’” Defendants violated the UCL. (Dkt. No. 37 4 at 11.) Defendants respond that Plaintiffs impermissibly impute OzVision’s cessation of service 5 to Defendants. This argument, however, narrowly reads Plaintiffs’ FAC. While OzVision 6 “ceas[ed] to provide P2P functionality and services that were used by all Flir cameras[,]” Plaintiffs 7 further allege that “Defendants changed technology providers knowing that such a decision would 8 cause the Flir Cameras to cease functioning.” (FAC ¶¶ 10-12.) Further, since changing providers 9 Defendants “have not created their own P2P software to replace OzVision that would continue to 10 provide support for Flir Cameras, or otherwise partnered with another third-party vendor.” (FAC 11 ¶ 13.) Therefore, construing the FAC in the light most favorable to Plaintiffs, Davis v. HSBC 12 Bank Nev., N.A., 691 F.3d 1152, 1159 (9th Cir. 2012), it is Defendants’ decision to change 13 technology providers without providing a substitute service that serves as the predicate conduct for 14 which Defendants themselves may be subject to liability under the UCL. Furthermore, it was 15 Defendants, not OzVision, who provided Plaintiffs with an allegedly inadequate remedy. 16 This conduct—intentionally rendering the cameras non-functional and providing an 17 inadequate remedy—is pled such that it could plausibly outweigh the utility of this conduct to 18 Defendants. Plaintiffs allege that Defendants financially benefitted from rendering the Flir 19 cameras nonfunctional to the financial detriment of Plaintiff Soo and other class members, that 20 Plaintiff Soo and others conferred a financial benefit to Defendants by purchasing the cameras and 21 were later “deprived of the benefit of the bargain” with Defendants. (FAC ¶ 61.) As a result, 22 Plaintiffs were forced to accept the lost value of their property, receive a replacement camera or 23 store credit “worth less” than the value of the Flir cameras. (FAC ¶ 62.) This was “substantially 24 injurious” to Plaintiffs. (FAC at ¶ 60). 25 At this stage of the pleadings, Plaintiffs sufficiently allege that Defendants’ conduct was 26 unfair under the UCL. The cost-benefit analysis the unfairness prong calls for is “not properly 27 suited for resolution at the pleading stage,” In re Carrier IQ, Inc., 78 F. Supp. 3d at 1117, and, as 1 17-CV-00551, 2017 WL 3232464, at *15 (N.D. Cal. July 28, 2017) (holding that “[w]hile the 2 benefits of Apple’s conduct may ultimately outweigh the harm to consumers, this is a factual 3 determination that cannot be made at this stage of the proceedings.”). 4 2. Unlawfulness under the UCL 5 “An unlawful business practice or act within the meaning of the UCL is an act or practice, 6 committed pursuant to business activity that is at the same time forbidden by law.” Pinel v. Aurora 7 Loan Servs., LLC, 814 F. Supp. 2d 930, 937 (N.D. Cal. 2011) (internal quotation marks and 8 citation omitted). The UCL’s “unlawful” prong covers a wide range of conduct; among them, it 9 makes violations of other laws independently actionable. See CRST Van Expedited, Inc. v. Werner 10 Enters, Inc., 479 F.3d 1099, 1107 (9th Cir. 2007) (internal quotation marks and citations omitted). 11 UCL claims under the unlawful prong “borrow[] violations of other laws . . . and make[] 12 those unlawful practices actionable under the UCL.” Berryman v. Merit Prop. Mgmt., Inc., 152 13 Cal. App. 4th 1544, 1554 (2007). “Thus, a violation of another law is a predicate for stating a 14 cause of action under the UCL’s unlawful prong.” Id. Accordingly, UCL claims under the 15 unlawful prong “stand or fall depending on the fate of the antecedent substantive causes of 16 action.” Krantz v. BT Visual Images, LLC, 89 Cal. App. 4th 164, 178 (2001). Defendants’ motion 17 to dismiss does not address this prong. 18 3. Fraudulence under the UCL 19 Typically, UCL claims alleging fraudulent business practices under the statute’s third 20 prong trigger a heightened pleading requirement; in addition to the general pleading requirements 21 set forth in Rule 8, a plaintiff alleging fraud must allege “with particularity the circumstances 22 constituting fraud.” Moss v. Infinity Ins. Co., 197 F. Supp. 3d 1191, 1198 (N.D. Cal. 2016). 23 Omissions can form the basis of a fraudulent prong UCL claim, In re Carrier IQ, Inc., 78 F. Supp. 24 3d at 1112, and given the nature of an omission-based fraud in which a plaintiff alleges a failure to 25 act rather than an affirmative act, it may be impossible to discern the precise moment at which a 26 defendant failed to act. See also MacDonald v. Ford Motor Company, 37 F. Supp. 3d 1087, 1096 27 (N.D. Cal. 2014). Accordingly, claims based on an omission “can succeed without the same level 1 “For an omission to be actionable under the UCL, the omission must be contrary to a 2 representation actually made by the defendant, or an omission of a fact the defendant was obliged 3 to disclose.” Id. (internal quotations and citations omitted). The failure to disclose a fact that a 4 party has “no affirmative duty to disclose is not likely to deceive anyone within the meaning of the 5 UCL.” In re Adobe Systems, Inc. Privacy Litigation, 66 F. Supp. 3d 1197, 1229 (N.D. Cal. 2014) 6 (citations and alterations omitted). Nonetheless, there are four circumstances under which a 7 defendant holds a duty to disclose: (1) when the defendant is the plaintiff’s fiduciary; (2) when the 8 defendant has exclusive knowledge of material facts not known or reasonably accessible to the 9 plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; or (4) when 10 the defendant makes partial representations that are misleading because some other material fact 11 has not been disclosed.5 Id. 12 Here, Plaintiffs’ UCL fraud claim is predicated on Defendants’ failure to disclose that App 13 support for the Flir cameras was contingent on Defendants’ contract with OzVision, and that there 14 was no guarantee OzVision would continue to provide service for Defendants and the Flir 15 cameras. (FAC ¶ 56.) Plaintiffs allege that had Defendants disclosed such a fact, Plaintiffs would 16 not have purchased their Flir cameras at all or on the same terms. (Id. ¶ 66.) Accordingly, 17 Plaintiffs have sufficiently pled the content of Defendants’ omission and have alleged materiality 18 by pleading they would not have purchased the cameras had the information regarding OzVision’s 19 contingent contract with Defendants been disclosed. See In re Carrier IQ, Inc., 78 F. Supp. 3d at 20 1113. Plaintiffs allege that Defendants made no mention of OzVision’s contingent servicing of 21 cameras on their packaging, or that OzVision could or might discontinue service at any time. 22 (FAC ¶ 66.) 23 The Court agrees with Defendants, however, that the FAC’s allegations do not plausibly 24 support an inference that at the time they sold the cameras—and allegedly omitted to disclose if 25 OzFunction discontinued service consumers would be out of luck—that Defendants knew that the 26 5 A fact is deemed material and “obligates an exclusively knowledgeable defendant to disclose it [] 27 if a ‘reasonable consumer’ would deem it important in determining how to act in the transaction at 1 functionality issue existed. The FAC alleges that they knew it existed at the time the problem 2 arose, but it does not make any allegations regarding Defendants’ knowledge at the time the 3 cameras were sold to Plaintiffs.6 Accordingly, all of Plaintiffs’ fraud-based claims must be 4 dismissed. 5 B. Unjust Enrichment 6 The Ninth Circuit has recognized that while “there is not a standalone cause of action for 7 ‘unjust enrichment’” in California, the term “describe[s] the theory underlying a claim that a 8 defendant has been unjustly conferred a benefit through mistake, fraud, coercion, or request.” 9 Astiana v. Hain Celestial Group, Inc., 783 F.3d 753, 762 (9th Cir. 2015) (internal quotations and 10 citations omitted). As such, “[w]hen a plaintiff alleges unjust enrichment, a court may construe the 11 cause of action as a quasi-contract claim seeking restitution.” Id. (internal quotations and citations 12 omitted). Under California law, a cause of action for unjust enrichment may be pled as an 13 independent claim—no underlying contract claim is required. Gasser v. Kiss My Face, LLC, No. 14 17-CV-01675-JSC, 2017 WL 4773426, at *9 (N.D. Cal. Oct. 23, 2017). Nonetheless, there must 15 be an actionable wrong to furnish a basis for relief. See Hill v. Roll Internat. Corp., 195 Cal. App. 16 4th 1295, 1307 (2011). 17 Plaintiffs allege that Defendants have been unjustly enriched by retaining revenues from 18 6 As with the UCL, omissions are cognizable under New York’s CPA, which requires a plaintiff to 19 plead sufficient factual content to illustrate that: (1) the defendant has engaged in an act or practice that is deceptive or misleading in a material way; (2) the plaintiff has suffered injury by reason 20 thereof; and (3) the deceptive act or practice is consumer oriented.” In re Sling Media Slingbox Advertising Litigation, 202 F. Supp. 3d 352, 359 (S.D.N.Y. 2016) (internal quotations and 21 citations omitted). A plaintiff may state a claim under the FAL by satisfying the same elements. See Orlander v. Staples, Inc., 802 F.3d 289, 300 (2d Cir. 2015); see also Quiroz v. Beaverton 22 Foods, Inc., No. 17CV7348NGGJO, 2019 WL 1473088, at *6 (E.D.N.Y. Mar. 31, 2019). “Both affirmative representations and omissions may qualify as deceptive or misleading acts or 23 practices,” and omissions are actionable where “[a] business alone possesses material information that is relevant to the consumer and fails to provide this information.” In re Sling Media Slingbox 24 Advertising Litigation, 202 F. Supp. 3d at 359. As with the UCL, a material claim “is one that involves information that is important to consumers and, hence, likely to affect their choice of, or 25 conduct regarding, a product.” Bildstein v. MasterCard Intern. Inc., 329 F. Supp. 2d 410, 414 (S.D.N.Y. 2004). Further, a deceptive practice “need not reach the level of common-law fraud to 26 be actionable under section 349.” Boule v. Hutton, 328 F.3d 84, 94 (2d Cir. 2003) (internal quotations and citations omitted). Nonetheless, Plaintiffs fail to state a claim under the CPA or 27 FAL for the same reason Plaintiffs’ UCL claim failed: the FAC’s allegations do not plausibly 1 Plaintiffs’ purchased Flir cameras, whose retention is “unjust and inequitable” because Defendants 2 rendered the Flir cameras non-functional. (FAC ¶ 50.) Taking Plaintiffs’ factual allegations as 3 true, the failure of Defendants’ replacement program to properly compensate Plaintiffs for the lost 4 value of their cameras with adequate replacement cameras or a comparable store credit may 5 sustain a claim for unjust enrichment at the motion to dismiss stage.7 (FAC ¶ 51.) 6 C. Trespass to Chattel 7 Under California law, trespass to chattels lies “where an intentional interference with the 8 possession of personal property has proximately caused injury.” Intel Corp. v. Hamidi, 30 Cal. 4th 9 1342, 1350–51 (2003). Regarding computer systems or “similar device[s],” California law 10 requires that plaintiffs plead with factual particularity that the purported trespass: “(1) caused 11 physical damage to the personal property, (2) impaired the condition, quality, or value of the 12 personal property, or (3) deprived plaintiff of the use of personal property for a substantial time.” 13 Fields v. Wise Media, LLC, 2013 WL 5340490, at *4 (N.D. Cal. Sept. 24, 2013). 14 Defendants argue that Plaintiffs have not sufficiently pled a trespass to chattels claim on 15 the basis that it is OzVision, rather than Defendants, who rendered Plaintiffs’ cameras 16 nonfunctional. However, for reasons discussed earlier, reading the FAC in the light most 17 favorable to Plaintiffs, the FAC alleges sufficiently that Defendants’ conduct animates its causes 18 of action, including the claim for trespass of chattels because Defendants intentionally eliminated 19 App support for the Flir cameras. (FAC at ¶ 59.) 20 Grace, 2017 WL 3232464, at *11, is instructive. In Grace, the plaintiffs alleged that the 21 loss of FaceTime on older-model iPhones “substantially harmed the functioning” of the iPhone 22 devices, which “significantly impaired the devices’ condition, quality, and value.” Id. at *11. 23 Grace found that the complaint sufficiently alleged that FaceTime was integral to the intended 24 function of the iPhone 4 and 4S devices given the alleged prominence FaceTime enjoyed as both a 25 heavily advertised feature of the iPhone models, as well as how the plaintiffs themselves used 26 FaceTime on a “daily basis.” Id. Because Apple revoked FaceTime as a functionality from 27 1 iPhone 4 and 4S users, the court held that the plaintiffs suffered a “significant decrease in the 2 ‘condition, quality, or value’” of their iPhones that supported a trespass claim. Id. at *12-13. 3 As Apple disabled FaceTime in Grace, Defendants changed the Flir cameras’ technology 4 providers and robbed users of the cameras’ Rapid Reshot and cloud storage functionalities. As 5 Grace’s iPhone owners were given a choice between continuing to use an outmoded iOS or 6 transition to iOS7 and “regain FaceTime but suffer lost functionality in other significant ways,” 7 Plaintiffs were confronted with an incomparable camera replacement or insufficient 8 reimbursement, and as such suffered injury. For this reason, Plaintiffs’ claim for trespass to 9 chattels survives at the motion to dismiss stage.8 10 D. Nationwide Class Allegations 11 The two named plaintiffs reside in New York and California and thus were harmed in 12 those states. They nonetheless bring all of their claims—common law, New York specific and 13 California specific—on behalf of a nationwide class. Defendants argue that Plaintiffs do not have 14 standing to bring state law claims on behalf of residents of the other 48 states “because Soo and 15 Lauinger do not and cannot allege that they suffered any injury under the laws of a state where 16 they do not reside and did not purchase a camera.” (Dkt. No. 33 at 21.) 17 While the Ninth Circuit has not definitively answered whether named plaintiffs have 18 standing to pursue class claims under the common laws of states to which the named plaintiffs 19 have no connection, district courts in this Circuit routinely hold that they do not. See, e.g., In re 20 Glumetza Antitrust Litig., No. C 19-05822 WHA, 2020 WL 1066934, at *10 (N.D. Cal. Mar. 5, 21 2020); Schertzer v. Bank of Am., N.A., 445 F. Supp. 3d 1058, 1073 (S.D. Cal. 2020); Sponchiado 22 v. Apple, Inc., No. 18-CV-07533-HSG, 2019 WL 6117482, at *7 (N.D. Cal. Nov. 18, 2019); Van 23 8 Under New York law, “[t]he essential elements of trespass to chattels are (1) intent, (2) physical 24 interference with (3) possession (4) resulting in harm.” DeAngelis v. Corzine, 17 F. Supp. 3d 270, 283 (S.D.N.Y. 2014) (internal quotations and citations omitted). A trespasser is liable when the 25 trespass “diminishes the condition, quality, or value of personal property.” Register.com, Inc. v. Verio, Inc., 126 F. Supp. 2d 238, 250 (S.D.N.Y. 2000), aff'd as modified, 356 F.3d 393 (2d Cir. 26 2004) (citing EBay, Inc. v. Bidder's Edge, Inc., 100 F. Supp. 2d 1058, 1071 (N.D. Cal. 2000)). “The quality or value of personal property may be ‘diminished even though it is not physically 27 damaged by defendant's conduct.’” Id. Given the similarity in the standards applied to a trespass 1 Mourik v. Big Heart Pet Brands, Inc., No. 3:17-CV-03889-JD, 2018 WL 1116715, at *1-2 (N.D. 2 Cal. Mar. 1, 2018); see also Corcoran v. CVS Health Corp., 169 F.Supp.3d 970, 990 (N.D. Cal. 3 2016) (noting that “[c]ourts routinely dismiss claims where no plaintiff is alleged to reside in a 4 state whose laws the class seeks to enforce”) (internal quotation marks and citation omitted); 5 United Food & Commercial Workers Local 1776 & Participating Emp'rs Health & Welfare Fund 6 v. Teikoku Pharma USA, 74 F. Supp. 3d 1052, 1078 (N.D. Cal. 2014) (collecting cases). 7 As the In re Glutmetza court reasoned, “‘the injury a plaintiff suffers defines the scope of 8 the controversy he or she is entitled to litigate.’” 2020 WL 1066934, at *10 (quoting Melendres v. 9 Arpaio, 784 F.3d 1254, 1261 (9th Cir. 2015)). There the alleged injury was the overcharge of each 10 purchase of Glumetza; “[s]o, the scope of standing [was] limited to the locations of the 11 purchases.” Id. Here, the alleged injury is the overcharge of each camera purchase or/and the 12 offer of an inadequate remedy; the scope of standing is therefore limited to the locations of the 13 camera purchases or the offer of an inadequate remedy. For the named plaintiffs those locations 14 are California and New York. 15 Plaintiffs do not explain how they have standing to pursue claims under other states’ laws; 16 instead, their opposition merely objects to the Court deciding the standing issue at this juncture. 17 When to address this issue—at the pleadings stage or class certification—is one of discretion. See 18 Hindsman v. Gen. Motors LLC, No. 17-CV-05337-JSC, 2018 WL 2463113, at *15 (N.D. Cal. 19 June 1, 2018). As this Court has noted: “Resolving the question now as a matter of case 20 management is consistent with Federal Rule of Civil Procedure 1 which requires the courts to 21 construe the Rules of Civil Procedure ‘to secure the just, speedy, and inexpensive determination of 22 every action and proceeding.’” Id. at 16; see also Sponchiado, 2019 WL 6117482, at *7 (noting 23 that deferring consideration of the standing analysis until the class certification stage would permit 24 the plaintiffs lengthy and costly nationwide discovery). Plaintiffs do not identify any discovery 25 that might permit them to bring claims under the laws of states to which they have no connection; 26 to defer ruling and permit nationwide discovery would therefore merely waste time and money. 27 Plaintiffs’ reliance on Melendres, 784 F.3d 1254, does not persuade the Court otherwise. 1 Unlike the instant case, Melendres did not confront a situation where named plaintiffs brought claims under the laws of multiple states 2 where they did not reside and where they were not injured: in Melendres, all plaintiffs alleged that they suffered the same 3 constitutional injury, only in different factual circumstances. Here, because Plaintiffs bring claims under the laws of multiple states (some 4 antitrust and some not), Plaintiffs technically invoke different legally protected interests. See Restatement (Second) of Torts § 7 cmt. a 5 (1965) (noting that injury involves an actionable invasion of a legally protected interest, while harm denotes personal loss or detriment). 6

7 The Court is here called upon to examine whether the named Plaintiffs have standing to bring certain claims, not standing “to 8 obtain relief for unnamed class members” for the same injury. See id. at 1261-62; see also DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 9 352, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) (Article III must be measured claim-by-claim). Plaintiffs must show they have standing 10 for each claim they raise, and Plaintiffs do not have standing to bring claims under the laws of states where they have alleged no injury, 11 residence, or other pertinent connection.

12 Jones v. Micron Tech Inc., 400 F. Supp. 3d 897, 909 (N.D. Cal. 2019); see also In re Glumetza, 13 2020 WL 1066934, at *10 (explaining why Melendres does not require the trial court to delay 14 deciding whether a named plaintiff has standing to bring claims under the laws of states to which 15 the plaintiff has no connection). Accordingly, to the extent Plaintiffs bring claims under the laws 16 of any state other than California and New York, the claims are dismissed. 17 In their opposition to the motion to dismiss, Plaintiffs argue that the California UCL claim 18 applies to camera purchases outside of California. As Defendants’ motion to dismiss argued only 19 that the named plaintiffs lacked standing to bring claims under the laws of states other than where 20 they resided, and Defendants did not argue that it was improper for Plaintiffs to sustain a 21 nationwide class under the UCL until their reply brief, the Court will not address the issue at this 22 time. See, e.g., Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007) (“The district court need not 23 consider arguments raised for the first time in a reply brief.”) (citation omitted). 24 CONCLUSION 25 For the reasons stated above, Defendants’ motion to compel arbitration and stay discovery 26 is denied. Because Plaintiffs do not oppose dismissal of their New York unjust enrichment claim, 27 1 fraud-based claims with leave to amend. The common law claims brought under the laws of states 2 other than California and New York are dismissed for lack of standing. The motion to dismiss is 3 otherwise denied. 4 Any amended complaint shall be filed within 21 days of this Order. Further, if Plaintiffs 5 amend their complaint they should specify which California and New York claims they bring on 6 behalf of a nationwide class. While the FAC states that it is all claims, Plaintiffs’ opposition 7 suggests they may only be bringing the UCL claim on behalf of a nationwide class. 8 The Court will hold an initial case management conference on Thursday, September 24 at 9 1:30 p.m. An updated joint case management conference statement is due one week in advance. 10 This order disposes of Docket Nos. 33 and 34. 11 IT IS SO ORDERED. 12 Dated: September 8, 2020 13 14 JACQUELINE SCOTT CORLEY 15 United States Magistrate Judge 16

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