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Shane Robert Hughes, et al., On Behalf of Himself and All Others Similarly v. Panasonic Consumer Electronics Company

July 21, 2011

SHANE ROBERT HUGHES, ET AL., ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
PANASONIC CONSUMER ELECTRONICS COMPANY, A DIVISION OF PANASONIC CORPORATION OF NORTH AMERICA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Wigenton, District Judge.

NOT FOR PUBLICATION

OPINION

Before the Court is the motion of defendants Panasonic Consumer Electronics Company ("Panasonic Consumer") and Panasonic Corporation of North America ("Panasonic Corporation") (sometimes collectively "Panasonic") to dismiss the Amended Complaint for failure to state a claim, pursuant to FED. R. CIV. P. 12(b)(6), and for failure to plead with sufficient particularity pursuant to FED. R. CIV. P. 9(b). (Dkt. Entry 18). Alternatively, Panasonic moves to strike all of the class allegations in the Amended Complaint pursuant to FED. R. CIV. P. 12(f) and 23(d)(1)(D). (Dkt. Entry 19). Plaintiffs Shane Hughes ("Hughes"), Franklin Donahue ("Donahue"), Brad Stowers ("Stowers"), Frank Newell ("Newell"), and Eric Hagans ("Hagans"), individually, and on behalf of a putative national class of consumers (sometimes collectively "plaintiffs") oppose both motions.

This Court has jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d). Venue is proper, pursuant to 28 U.S.C. § 1391(a). The motions are decided without oral argument pursuant to FED. R. CIV. P. 78. For the reasons stated below, the Court grants Panasonic's motion to dismiss plaintiffs' consumer fraud claims (Counts I and II), breach of warranty claims (Counts III and IV), and unjust enrichment claims (Count V). These claims will be dismissed without prejudice, with a right to re-plead. As the Court dismisses the Amended Complaint in its entirety, Panasonic's motion to strike the class allegations is dismissed as moot.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs purchased allegedly defective Panasonic Viera model Plasma Televisions ("Televisions") in 2008 and 2009. (Am. Compl., at ¶ 3). Plaintiffs putatively represent a class defined as "individuals and entities who own or purchased any 2008/2009 model Panasonic Viera Plasma Television[sic]." (Id. at ¶ 103).

A. Allegations Common To All Plaintiffs

Defendant Panasonic Corporation is a Delaware corporation with its corporate headquarters and principal place of business in Secaucus, New Jersey. (Id. at ¶¶ 14, 21). Defendant Panasonic Consumer is a division of Panasonic Corporation. (Id.) Together, they research, design manufacture, advertise, market, sell and distribute nationwide a large variety of consumer and professional electronic products, including the Televisions at issue here. (Id. at ¶ 1).

The Televisions suffer from increased "voltage adjustments"*fn1 causing a rapid deterioration in the Televisions' picture quality (the "Defect"). (Am. Compl., at ¶¶ 3, 7, 83-85, 92-93). Specifically, the Defect in programming and/or design "results in lower contrast ratios and less desirable image quality as the color detail, depth and tone are no longer of the same quality as when purchased." (Id. at ¶ 3). The Defect causes "prevalent Image Retention beyond that expected from a properly functioning plasma television," thereby causing the Televisions' "Infinite Black feature" ("black levels") to function improperly.*fn2 (Id. at ¶ 7). According to plaintiffs, the Defect materializes after only "approximately 400 hours of use." (Id.)

According to plaintiffs, Panasonic knew or should have known of the Defect but failed to disclose it to the public. (Id. at ¶¶ 4, 95, 119). Instead, Panasonic falsely represented to plaintiffs and the class members, through the use of advertising, marketing materials, warranties product guides, and its display of plasma television models in retail stores, that the Televisions "featured industry leading black levels and contrast ratios" and excellent picture quality. (Id. at ¶¶ 5, 118). Panasonic also falsely advertised that the Televisions "reached the point of half-brightness after 100,000 hours of use." (Id. at ¶ 8). Additionally, Panasonic's website represents that:

[a] pre-discharge control system, the Real Black Drive system combines with NeoPDP technology to achieve next-generation black reproduction. When you're watching movies, VIERA renders images just the way the director intended, even in scenes where it's difficult to achieve a proper balance of light and dark.

(Id. at ¶ 87).

Panasonic knew or had to know that Plasma television experts and the consumer electronic media would report favorably on the Televisions based on Panasonic's marketing and their own observations of the Televisions' superb picture quality. (Id. at ¶¶ 5-6, 8-9). Indeed, the Televisions received favorable reviews from the industry experts and consumers. (Id. at ¶ 6). In turn, consumers, such as plaintiffs and the class members, read these reviews, relied on Panasonic's representations concerning the industry leading black levels and contrast ratios, and/or personally observed the Televisions' excellent picture quality on models displayed in retail stores. (Id.) Yet, Panasonic concealed the Televisions' design defect. (Id. at ¶¶ 7, 118).

At some point, industry experts at CNET contacted Panasonic about the alleged Defect. (Id. at ¶ 92). In response, Panasonic provided a statement, confirming that the problem was caused by an "automatic control which adjusts an internal driving voltage at predetermined intervals of operational hours . . . [and that] as a result of this automatic voltage adjustment, background brightness will increase from its initial value." (Id. at ¶¶ 92, 118). Plaintiffs contend that Panasonic's alleged statement is an admission of the Defect, which Panasonic had previously failed to disclose to consumers. (Id. at ¶¶ 93, 94).

As described in more detail below, plaintiffs contend that they complained to Panasonic about the presence of the Defect within their first year of using the Televisions. (Id. at ¶ 94). Yet, Panasonic made no efforts to correct the Defect. Rather, Panasonic continued to intentionally misrepresent that the Televisions were "functioning properly and as designed" so that plaintiffs and the class members would rely on such misrepresentations and omissions to purchase the defective Televisions to the exclusion of competitors' brands. (Id. at ¶¶ 90, 95, 118, 119).

The Defect and Panasonic's unlawful acts and omissions have deprived plaintiffs and the proposed class members of the benefit of their bargains within the first year of the Televisions' useful life. (Id. at ¶ 96). Plaintiffs, on behalf of themselves and as proposed class representatives, seek "damages and/or refunds from Panasonic" for violations of the New Jersey Consumer Fraud Act ("NJCFA"), N.J. STAT. ANN. § 56:8-1 et seq.; other states' consumer protection acts; and express and implied warranties as well as for unjust enrichment. (Id. at ¶ 104). Plaintiffs allege that, at the time of the June 2010 filing of the Amended Complaint, they all still owned the Televisions, and all plaintiffs, except Hughes, expressly allege that they still continued to use the Televisions. (Id. at ¶¶ 31, 43, 54, 61, 64, 73).

B. The Named Plaintiffs

1. Shane Hughes

Hughes resides in Alabama. (Id. at ¶ 10). On June 17, 2009, Hughes purchased one of the Televisions (model number TC-P50G10) for use in his home. (Id. at ¶¶ 31-32).

Before purchasing the Television, Hughes researched Panasonic plasma televisions and the particular model that he eventually purchased. (Id. at ¶ 33). Hughes viewed Panasonic's internet website, www.panasonic.com, and tech product review materials both on the internet and in print. (Id. at ¶¶ 33, 34) On its website, Panasonic stated that the CNET website gave the Televisions a "4.5 out of 5" rating. (Id.) Panasonic's website further represented that the Televisions were designed to "achieve next-generation black reproduction." (Id.) Its website also represented, "[w]hen you're watching movies, VIERA renders images just the way the director intended, even in scenes where it's difficult to achieve a proper balance of light and dark." (Id.) Panasonic marketed the Televisions as having "industry leading black levels and native contrast ratios." (Id. at ¶ 34).

Hughes also visited a Best Buy store in Alabama, where he observed the Televisions' "significantly greater black levels than televisions manufactured by [Panasonic's] competitors," such as Samsung and Sony. (Id. at ¶ 36). In June 2009, Hughes purchased the Television from the internet website, www.amazon.com. (Id. at ¶ 37).

Hughes used the Television at his residence until July 2009, when he observed that the "black level" increased dramatically. (Id. at ¶ 38). He performed "measurements" on the Television, which revealed that "said measurements had degraded . . . after less than 400 hours" of use. (Id.)

In September 2009, three months after purchasing the Television, Hughes contacted Panasonic to repair his television. (Id. at ¶ 39). Panasonic documented Hughes' complaint and notified him that Panasonic would address the problem. (Id.) At the time, Panasonic's express Limited Warranty (hereinafter referred to as the "Limited Warranty") was in effect. (Id. at ¶ 41).

The Limited Warranty states, in relevant part:

If your product does not work properly because of a defect in materials or workmanship, Panasonic . . . will, for the length of the period indicated on the chart below, which starts with the date of original purchase ("Limited Warranty period"), at its option either (a) repair your product with new or refurbished parts, or (b) replace it with a new or a refurbished product."*fn3

(James Orr Cert., at ¶¶ 3-5 and Exhs. B-D). It also states, in relevant part:

THERE ARE NO EXPRESS WARRANTIES EXCEPT AS LISTED UNDER 'LIMITED WARRANTY COVERAGE.' * * * ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING THE LIMITED WARRANTY OF MERCHANTABILITY, ARE LIMITED TO THE PERIOD OF THE LIMITED WARRANTY.

(Id.)

After two months passed without Panasonic having addressed Hughes' complaint, he again contacted the company. (Id. at ¶¶ 39-40). Panasonic informed Hughes that his complaint had been forwarded to the "display engineering department." (Id.) At the time plaintiffs filed their Amended Complaint, Panasonic had not yet responded to his complaint or repaired the Defect. (Id.)

2. Franklin Donahue

Donahue resides in California. (Id. at ¶ 11). On December 31, 2009, Donahue purchased one of the Televisions (model number TC-P58V-10) for use in his home. (Id. at ¶¶ 42, 43).

Before purchasing the Television, Donahue researched Panasonic plasma televisions and the particular model that he eventually purchased. (Id. at ¶ 44). Like Hughes, Donahue viewed Panasonic's website and tech product review websites, such as the CNET website. (Id. at ¶¶ 44-45). Furthermore, on Panasonic's website, Donahue read similar representations about the Televisions having "industry leading black levels and native contrast ratios," resulting in more accurate and detailed colors in the Television's picture quality. (Id. at ¶ 44).

As discussed more fully herein, the Court considers the three versions of Panasonic's Limited Warranty in analyzing Panasonic's motion to dismiss because the Amended Complaint explicitly refers to and relies on such documents.

Donahue visited a Best Buy store in Thousand Oaks, California where he observed the Televisions' "significantly greater black levels than other televisions manufactured by [Panasonic's] competitors." (Id. at ¶ 46). On an undisclosed date, Donahue purchased the Television from U.S. Appliance's internet website, www.us-appliance.com. (Id. at ¶ 47).

When Donahue first installed the Television, he used a calibrator to test it, and did not notice any problems with the picture quality. (Id. at ¶ 48). After two months of use, Donahue read complaints about the Televisions on the internet. (Id. at ¶ 49). He then re-tested his Television, which recorded levels that were only slightly higher than on the date of purchase. (Id.) Donahue again did not notice any difference in the picture quality. (Id.) At that time, he had been using the Television for 400 hours. (Id.)

After two more months of use, in April 2010, Donahue re-tested the picture quality. (Id. at

¶ 50). The recorded levels were significantly higher than at the time of purchase. (Id.) He also plainly observed that the picture quality had degraded after 800 hours of use. (Id.)

On an unspecified date, Donahue contacted Panasonic about the Defect, who has refused to make any repairs. (Id. at ¶ 51). At the time, Panasonic's Limited Warranty was in effect.*fn4 (Id. at ¶ 52).

3. Brad Stowers

Stowers resides in West Virginia. (Id. at ¶ 12). On December 17, 2008, Stowers purchased one of the Televisions (model number TH42PX80U) for use in his home. (Id. at ¶¶ 53, 54).

Before purchasing the Television, Stowers researched Panasonic plasma televisions and the particular model that he eventually purchased. (Id. at ¶ 55). Like Hughes and Donahue, Stowers viewed tech product review websites, including the CNET website. (Id. at ¶¶ 55, 58). Stowers read the following review on the CNET website: "Relatively inexpensive; produces a deep shade of black; accurate initial color temperature. . . ." (Id. at ¶ 55). Stowers alleges that Panasonic's website contains representations about the Televisions' "incredible black reproduction . . . [that] results in impressive contrast and beautiful, natural colors. . . . For color that's as rich and bold as life itself, look to a Panasonic Plasma TV." (Id. at ¶ 56). However, unlike Hughes and Donahue, Stowers does not expressly allege that he read this representation on Panasonic's website. (See id. at ¶¶ 56, 57).

Stowers visited Best Buy and Sears stores in Barboursville, West Virginia where he observed the Televisions' "significantly greater black levels, contrast and picture quality than other televisions manufactured by [Panasonic's] competitors." (Id. at ¶ 59). In December 2008, Stowers purchased the Television from the internet website, www.Sears.com. (Id. at ¶ 60). He took delivery of the Television from the Sears retail store in Barboursville, West Virginia. (Id.)

At the time of purchase, Stowers noticed the Television's "superior picture quality." (Id. at ¶ 62). However, after using the Television for an unspecified period of time, he noticed problems with the picture quality. (Id. at ¶ 61). Specifically, he observed a "worsening of black level and contrast." Id. At some point, Stowers consulted the CNET website, whereupon he learned of the problems concerning the Televisions' voltage adjustments and degrading picture quality. (Id.)

The Amended Complaint does not allege whether he ever contacted Panasonic about the Defect. (See generally Am. Compl.) It also fails to allege whether Panasonic's Limited Warranty was in effect when the Defect surfaced.*fn5 (See id.)

4. Frank Newell

Newell resides in New Jersey. (Id. at ¶¶ 13, 64). In February 2009, Newell purchased one of the Televisions (model number TH50PX80U) for use in his home. (Id. at ¶¶ 63, 64).

Before purchasing the Television, Newell researched Panasonic plasma televisions and the particular model that he eventually purchased. (Id. at ¶ 66). His research consisted of reading the Consumer Reports Magazine. (Id. at ¶ 65). Consumer Reports recommended the Televisions. (Id.)

Newell visited a Boscov's store in Deptford, New Jersey where he observed the Televisions' "significantly greater black levels, contrast and picture quality than other televisions manufactured by [Panasonic's] competitors." (Id. at ¶ 67). In February 2009, Newell purchased the Television from Boscov's. (Id. at ¶ 68).

Newell did not immediately install or use the Television after his purchase. (Id. at ¶ 69). Instead, he waited two months, until May 2009, to install and use the Television. (Id.) From the time he began using the Television until the filing date of the Amended Complaint in June 2010, Newell estimates that his Television was in use for six hours per day from Monday through Friday. (Id.) He further estimates that the Television was on "all day long" on the weekends. (Id.)

At the time of installation, Newell noticed the Television's "superior picture quality." (Id. at ¶ 70). However, after using the Television for an unspecified period of time, Newell noticed problems with the picture quality. (Id. at ¶ 71). Specifically, he observed a "graying of the blacks" a fuzziness of images on the screen. (Id.)

The Amended Complaint is silent as to whether Newell ever contacted Panasonic about the Defect. (See generally Am. Compl.) It also contains no allegations that Panasonic's Limited Warranty was in effect when the Defect first surfaced.*fn6 (See id.)

5. Eric Hagans

Hagans resides in New Jersey. (Id. at ¶¶ 13, 73). In February 2009, Hagans purchased one of the Televisions (model number TH-42-PZ80U) for himself and his girlfriend, Tracey Daleus ("Daleus"), in their Cherry Hill, New Jersey home. (Id. at ¶¶ 72, 77).

Before purchasing the Television, Hagans researched Panasonic plasma televisions and the particular model that he eventually purchased from his home. (Id. at ¶ 55). Like Hughes, Donahue, and Stowers, Hagans viewed tech product review websites, such as the CNET website. (Id. at ¶ 74). Hagans also visited several New Jersey based retail stores that displayed the Televisions. (Id.) Like the other plaintiffs, Hagans noticed that the Televisions displayed a superior picture quality. (Id. at ¶ 75). The Sears salespeople recommended the Television model that he eventually purchased based on the picture quality and its excellent reviews from the consumer electronic industry. (Id. at ¶ 76).

In February 2009, Hagans purchased the Television from the Sears store. (Id. at ¶ 77). Like Newell, Hagans did not immediately install or use the Television after his purchase. (Id. at ¶ 78). Rather, Hagans waited more than a month to use the Television. (Id.) When Hagans installed the Television, he noticed the excellent picture quality. (Id.) From the time they began using the Television until the filing date of the Amended Complaint, Hagans and Daleus estimate that they used the Television seven hours daily. (Id. at ¶ 79).

However, at some point in time, both Hagans and Daleus noticed degradation in the picture quality. (Id. at ¶ 80). They allege similar problems as the other plaintiffs. (Id.)

Like Stowers and Newell, Hagans does not allege how long the Television was in use before the Defect surfaced. Hagans also does not allege that he ever contacted Panasonic to report the Defect. (See generally Am. Compl.) Finally, Hagans fails to allege whether Panasonic's Limited Warranty was in effect at the time.*fn7 (See id.)

C. Procedural History

On February 10, 2010, plaintiff Hughes filed this putative class action before this Court. He asserted claims for: (1) violations of the NJCFA; (2) breach of express and implied warranty under New Jersey common law; and (3) unjust enrichment under New Jersey common law.

On April 27, 2010, Panasonic filed a motion to dismiss the complaint for failure to state a claim, pursuant to FED. R. CIV. P. 12(b)(6), and for failure to plead with sufficient particularity, pursuant to FED. R. CIV. P. 9(b), along with a motion to strike the class action allegations pursuant to FED. R. CIV. P. 12(f) and 23(d)(1)(D).

On May 18, 2010, Hughes filed a motion to amend the complaint to add Donahue, Stowers, Newell, and Hagans as class representatives, to plead additional facts, and alternatively to assert violations of the consumer protection statutes of New Jersey, California, Alabama, and West Virginia.*fn8 Under Fed. R. Civ. P. 15(a), plaintiffs had an automatic right to ...


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