The California court of appeals has upheld class certification of claims that Hewlett Packard laptops were defective because an allegedly flawed component caused the screens to dim. Hewlett-Packard Co. v. Superior Court of Santa Clara County (Rutledge), 2008 WL 4368563 (Cal.App. 6 Dist. 9/26/08).

Plaintiffs alleged violations of the California Bus. & Prof. Code Section 17200, the unfair competition law; and the Consumer Legal Remedies Act, Civ. Code Section 1750; and also made claims for breach of express warranty. In August 2005, plaintiffs filed a motion for certification of a class consisting of all persons and entities who own or owned certain HP computers, listed by product number, “who contacted HP about a lack of visibility of the display screen.”  HP opposed the motion, contending plaintiffs had not shown either that common issues of fact and law predominated or that there was an ascertainable class. Specifically, HP presented evidence that of the approximately 118,514 class model computers sold under the Pavilion brand name, only approximately 4,716 were reported to need repairs due to display screen problems. And that the causes were individual.

In November, 2005, the court determined that the proposed class definition was flawed, but that it would consider a subsequent motion should plaintiffs cure the defect. On August 30, 2006, plaintiffs filed a supplemental memorandum in support of their motion for class certification. Plaintiffs re-defined their proposed class as “[a]ll persons or entities who own or owned one or more of the following HP Pavilion notebook models: [model numbers]; [a]nd the computer contained or contains [a certain specific] inverter, [part numbers].”  The crux of the plaintiffs’ claim was that the HP notebook computers contained types of inverters that would likely fail and cause the screens to dim and darken at some time before the end of the notebooks’ “useful life,” according to the court.  Inverters regulate electricity flowing to the display screen.

At the November, 2006 hearing on the supplemental motion, the court asked the parties to provide briefing on the effect of Daugherty v. American Honda Motor Co., Inc., 144 Cal.App.4th 824, 51 Cal.Rptr.3d 118 (2006), a case involving express warranties that had just been decided in October, 2006.

Eventually, the trial court certified the class. In its order certifying the class, the court stated that it was not ruling on the effect of the principles set forth in the Daugherty case. Following the California Supreme Court’s denial of the petition for review in Daugherty, HP filed a motion for decertification on February 27, 2007, requesting the trial court rule on the effect that Daugherty had on the class certification. The court denied the motion in March, 2007, saying it was premature, so HP filed a petition for peremptory writ of mandate with the appeals court, which stayed the matter.

In Daugherty, the California Court of Appeal, Second District, held there can be no claim for breach of express warranty or unfair competition law violations arising from proof that “the manufacturer knew at the time of the sale that the component part might fail at some point in the future.” HP focused on its holding that an express warranty does not extend the claims of defect beyond the warranty period. HP asserted Daugherty’s rationale specifically limits its potential liability for the allegations set forth by plaintiff, making the issues individual, rather than subject to common proof. Moreover, HP argued the trial court erred in refusing to apply the principals of Daugherty to the determination of class certification.

In Daugherty, the plaintiffs were owners of Honda automobiles with an allegedly defective engine. The plaintiffs alleged that Honda had actual notice that the engines were experiencing severe mechanical problems due to oil leaks, but failed to provide adequate notice of the defect to owners of affected models. The plaintiffs first discovered the defects in their cars after the express warranty term of three years or 36,000 miles. The plaintiffs contended that “because the language of Honda’s express warranty did not state that the defect must be ‘found,’ ‘discovered’ or ‘manifest’ during the warranty period, the warranty covers any defect that ‘exists’ during the warranty period, no matter when or whether a malfunction occurs.” But the Daugherty court held: “[w]e agree with the trial court that, as a matter of law, in giving its promise to repair or replace any part that was defective in material or workmanship and stating the car was covered for three years or 36,000 miles, Honda did not agree, and plaintiffs did not understand it to agree, to repair latent defects that lead to a malfunction after the term of the warranty.”

Thus, Daugherty holds that failure of a component part after the expiration of the express warranty does not support a claim for relief under an express warranty claim. Daugherty holds there can be no claim for breach of express warranty or UCL violations arising from proof that the manufacturer knew at the time of the sale that the component part might fail at some point in the future. This would seem to cover plaintiffs’ claim that certain HP notebook computers contained types of inverters that HP knew would likely fail and cause the screens to dim and darken at some time after warranty but before the end of the notebook’s “useful life.”

However, the court of appeals found that while Daugherty may have implications for the merits of the underlying HP action, and indeed may serve to bar claims by plaintiffs that occurred outside the warranty period, it does not affect a determination of class certification. Daugherty was distinguished from the present action because it related to a substantive question on demurrer rather than a procedural question as here on a motion for class certification.

The court felt that if it were to accept HP’s argument regarding the application of Daugherty to the present action, it would be considering the merits of the underlying action. And the question of class certification “does not ask whether an action is legally or factually meritorious.”

The court of appeals seemed to miss the point. While a court generally should not determine the merits of a claim at the class certification stage, it is appropriate to consider the merits of the case to the degree necessary to determine whether the requirements of class action rule will be satisfied. It may be necessary to analyze the plaintiff’s factual allegations, the record evidence pertinent to class issues, and the applicable law in order to understand and evaluate the propriety of the class device. A court should look past the pleadings in order to determine whether a plaintiff’s case meets the technical requirements for class certification. A court does not probe the merits when it probes behind a plaintiff’s allegations because it is necessary to determine whether, if the class were certified, the issues presented could fairly and efficiently be resolved with respect to all the absent class members, based on the proof offered on behalf of only the named plaintiffs. Some inquiry into the substance of the plaintiff’s case may be necessary for identifying the issues in the case and determining whether the complaint meets the requirements of commonality, typicality, and adequacy of representation, and what California calls community of interest. Evidence relevant to the class issues is often intertwined with the merits.