Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-02233/USCOURTS-cand-3_16-cv-02233-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Petition for Removal

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MICHAEL EDENBOROUGH,

Plaintiff,

v.

ADT, LLC,

Defendant.

Case No. 16-cv-02233-JST 

ORDER GRANTING IN PART AND 

DENYING IN PART MOTION TO 

DISMISS

Re: ECF No. 32

In this putative class action brought on behalf of California residents who have purchased 

wireless home security systems from Defendant ADT, LLC (“ADT”), Plaintiff alleges that ADT 

deceived him by failing to inform him that the wireless home security system he purchased from 

ADT was vulnerable to hacking. Plaintiff asserts claims under California’s Consumers Legal 

Remedies Act and California’s Unfair Competition Law. Before the Court is ADT’s Motion to 

Dismiss the First Amended Complaint. ECF No. 32. The Court grants the motion in part and 

denies it in part. 

I. BACKGROUND1

ADT is a Florida-based business that markets home security systems, some of which are 

wireless. ECF No. 25 ¶¶ 4, 7. Plaintiff Michael Edenborough is a California resident who alleges 

that he has suffered from deceptive business practices committed by ADT in connection with the 

wireless home security systems it sells. Id. ¶ 1. 

On March 30, 2012, Plaintiff entered into an initial contract with ADT. Id. ¶ 3. Before 

 

1

In deciding this motion, the Court accepts as true the factual allegations pleaded in Plaintiff’s 

First Amended Complaint. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).

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entering into that contract, Plaintiff reviewed an ADT advertisement and ADT’s website. Id. ¶ 25. 

Based on the recommendation of an ADT Senior Security Consultant, Plaintiff decided to have 

ADT’s wireless security system installed in his home. Id. ¶ 26. 

Unbeknownst to Plaintiff at the time, ADT’s wireless home security systems utilize “radio 

transmissions . . . transmitted over known frequencies” using “unsecured and unencrypted 

protocols.” Id. ¶¶ 8–9. Plaintiff asserts that these transmissions are “insufficiently protected from 

intrusion and interference by unauthorized third parties who can readily turn the wireless sensors 

off.” Id. ¶ 8. “Such hacking can easily be accomplished by anyone who obtains software and 

electronics that are easily available, in some cases for free.” Id. ¶ 8. In July 2014, these 

vulnerabilities were investigated, and subsequently reported, by Forbes magazine. Id. ¶ 11.

Plaintiff asserts that ADT knew, or at least should have known, that its wireless security 

systems have been vulnerable to such hacking since March 18, 2012 or earlier. Id. ¶¶ 9, 33; see

also ECF No. 1-1 (state court Complaint filed on March 18, 2016). Plaintiff further alleges that 

ADT “actively concealed” this vulnerability. ECF No. 25 ¶ 11. Finally, Plaintiff claims that 

“ADT is under a duty to disclose . . . its wireless home security systems’ lack of encryption, lack 

of authentication, and other severe vulnerabilities” but “never disclosed” these facts to Plaintiff or 

other California consumers. Id. ¶¶ 14, 20. 

Had he known of these vulnerabilities, Plaintiff claims that he “would not have agreed to 

the contract with ADT for monitoring services.” Id. ¶ 27. Because of ADT’s alleged active 

concealment and omissions, “Plaintiff paid a deposit and an installation charge . . . and continues 

to pay a monthly service fee of at least $47.99” to ADT. Id. ¶ 24.

On March 18, 2016, Plaintiff filed his initial complaint in state court. ECF No. 1-1. On 

April 25, 2016, ADT removed the action to this Court. ECF No. 1. On June 17, 2016, Plaintiff 

filed his First Amended Complaint (“FAC”), raising claims for violation of California’s 

Consumers Legal Remedies Act, California Civil Code § 1750, et seq. (“CLRA”), and violation of 

California’s Unfair Competition Law, California Business and Professions Code § 17200, et seq. 

(“UCL”). ECF No. 25 ¶¶ 2, 42–66. Plaintiff seeks to represent a class composed of “[a]ll 

California residents who paid for an ADT wireless home security system in the four years 

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preceding the filing of this action.” Id. ¶ 33. On behalf of the putative class, Plaintiff requests 

monetary and equitable relief. Id. at 16–17. On July 5, 2016, ADT filed a motion to dismiss the 

FAC, ECF No. 32, which motion the Court now considers.

II. JURISDICTION

This Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332. “ADT 

LLC is a citizen of Delaware and Florida because its sole member, ADT U.S. Holdings Inc., is a 

corporation organized under the laws of the State of Delaware, with its principal place of 

business” in Florida. ECF No. 1 ¶ 6. Plaintiff is a resident of Oakland, California and seeks to 

represent a class of similarly-situated California residents. ECF No. 25 ¶ 3, 33.

III. LEGAL STANDARD

A complaint must contain “a short and plain statement of the claim showing that the 

pleader is entitled to relief” in order to “give the defendant fair notice of what the . . . claim is and 

the grounds upon which it rests.” Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 

544, 555 (2007). “To survive a motion to dismiss, a complaint must contain sufficient factual 

matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 

Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “A claim has facial 

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 

inference that the defendant is liable for the misconduct alleged.” Id. “Dismissal under Rule 

12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts 

to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 

1104 (9th Cir. 2008). The Court must “accept all factual allegations in the complaint as true and 

construe the pleadings in the light most favorable to the nonmoving party.” Knievel v. ESPN, 393 

F.3d 1068, 1072 (9th Cir. 2005).

Where a plaintiff pleads fraud, he must “state with particularity the circumstances 

constituting fraud.” Fed. R. Civ. P. 9(b). In general, allegations sounding in fraud must contain 

“an account of the time, place, and specific content of the false representations as well as the 

identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th 

Cir. 2007); Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (Under Rule 

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9(b), plaintiffs must plead “the who, what, when, where, and how of the misconduct charged,” and 

“must set forth what is false or misleading about a statement, and why it is false.”) (quoting In re 

GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994)). “The text of Rule 9(b) requires 

only that in ‘all averments of fraud . . . , the circumstances constituting fraud . . . shall be stated 

with particularity.’” Vess, 317 F.3d at 1104 (9th Cir. 2003) (quoting Rule 9(b)) (emphasis in 

Vess). “The rule does not require that allegations supporting a claim be stated with particularity 

when those allegations describe non-fraudulent conduct.” Id.

“Where the fraud consists of omissions on the part of the defendants, the plaintiff may 

find alternative ways to plead the particular circumstances of the fraud. For example, a plaintiff 

[in such circumstances] cannot plead either the specific time of the omission or the place, as he is 

not alleging an act, but a failure to act.” Washington v. Baenziger, 673 F. Supp. 1478, 1482 (N.D. 

Cal. 1987) (citation omitted). Similarly, “[m]alice, intent, knowledge, and other conditions of a 

person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Finally, this pleading standard 

may be “relaxed as to matters within the opposing party’s knowledge.” Moore v. Kayport 

Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989).

IV. DISCUSSION

Plaintiff raises claims arising under California’s CLRA and UCL. The CLRA prohibits 

“unfair methods of competition and unfair or deceptive acts or practices undertaken by any person 

in a transaction intended to result or which results in the sale or lease of goods or services to any 

consumer.” Cal. Civ. Code § 1770(a). Such acts and practices include representing that goods 

have characteristics that they do not have, representing that goods are of a particular quality when 

they are of another, and representing that goods were supplied in accordance with a previous 

representation when they were not. Cal. Civ. Code §§ 1770(a)(5), 1770(a)(7), 1770(a)(16). 

“Sellers can be liable under CLRA for making affirmative misrepresentations as well as for failing 

to disclose defects in a product.” Baba v. Hewlett-Packard Co., No. C 09-05946 RS, 2010 WL 

2486353, at *3 (N.D. Cal. June 16, 2010). “[A]lthough a claim may be stated under the CLRA in 

terms constituting fraudulent omissions, to be actionable the omission must be contrary to a 

representation actually made by the defendant, or an omission of a fact the defendant was obliged 

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to disclose.” Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824, 835 (2006), as modified

(Nov. 8, 2006).

The UCL prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, 

deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. “An act can be 

alleged to violate any or all of the three prongs of the UCL—unlawful, unfair, or 

fraudulent.” Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554 (2007). Here, 

while Plaintiff alleges he suffers from ADT’s “unlawful, unfair, and deceptive” business practices, 

ECF No. 25 ¶ 1, his Opposition brief only discusses Plaintiff’s claim “under the fraudulent prong 

of the UCL,” ECF No. 39 at 11. A plaintiff may bring a claim under the fraudulent prong of 

the UCL if the defendant’s conduct is “likely to deceive.” Langan v. United Servs. Auto. Ass’n, 

69 F. Supp. 3d 965, 984 (N.D. Cal. 2014). “To state a claim for fraud under the UCL, a plaintiff 

must allege the existence of (1) a duty to disclose, and (2) reliance.” Id.

ADT argues that the both the CLRA and UCL claims in the FAC should be dismissed 

because: (1) Plaintiff fails to sufficiently allege any actionable affirmative representation; and (2) 

Plaintiff fails to sufficiently allege any actionable omission. ECF No. 32 at 8.2

A. Affirmative Representations

Plaintiff alleges that he “reviewed ADT’s website” before signing his contract with ADT. 

ECF No. 25 ¶ 25. According to Plaintiff, the website touted the reliability of ADT’s wireless 

home security systems through the following five statements: 

“Traditional systems can be just as effective as a wireless alarm 

system, but one disadvantage is that they run off electricity supplied 

through electrical wires”; 

“ADT takes pride in using the most advanced technology”; 

“Only ADT has the most security industry experience, is the leader 

in innovative security technology, and can provide you with the 

fastest response times”; 

 

2

In their briefs, the parties generally fail to distinguish between Plaintiff’s UCL and CLRA 

claims, instead assuming that both claims will either survive or fail together. Because the parties 

have not sought to distinguish between these claims, the Court will likewise assume that the two 

claims can be analyzed together. 

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“Our experience, technology and people make the difference in your 

security protection”; and 

“You invest in ADT home security and automation systems to help 

protect your loved ones. Your satisfaction is important to us, and is 

the reason we are committed to providing you with state-of-the-art 

equipment and service.”

Id. ¶¶ 15, 17. ADT argues that Plaintiff fails to plead with particularity that he relied on any 

affirmative representation and that, regardless, the only affirmative representations alleged are 

non-actionable puffery. ECF No. 32 at 11–13. The Court agrees with both arguments.

1. Reliance

ADT correctly notes that Plaintiff does not allege that he actually read any of the above 

statements. Id. at 11; see generally ECF No. 25. As this Court concluded in Opperman v. Path, 

merely alleging a visit to a website does not adequately plead reliance on particular representations 

on that website to state a claim under either the UCL or CLRA. 87 F. Supp. 3d 1018, 1046–47 

(“What the CAC fails to do is connect any specific Plaintiff to any specific representation . . . [by] 

alleg[ing] that any one of them saw any particular representation.”). See also Haskins v. Symantec 

Corp., ___ Fed. App’x ___, No. 14-16141, 2016 WL 3391237, at *1 (9th Cir. June 20, 2016)

(“Because Haskins's complaint did not allege that she read and relied on a specific 

misrepresentation by Symantec, she failed to plead her fraud claims with particularity as required 

by Rule 9(b) of the Federal Rules of Civil Procedure.”). Here, Plaintiff asserts that he reviewed 

unspecified advertisements and “reviewed ADT’s website.” ECF No. 25 ¶ 25. Nowhere does 

Plaintiff allege that he relied on any particular advertisement, website content, or other 

communication. Therefore, Plaintiff has not sufficiently alleged reliance on any affirmative 

representation.

2. Puffery

Additionally, ADT argues that the only affirmative representations in question are nonactionable puffery. ECF No. 32 at 12. “[T]he determination of whether an alleged 

misrepresentation ‘is a statement of fact’ or is instead ‘mere puffery’ is a legal question that may 

be resolved on a Rule 12(b)(6) motion.” Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 

1038, 1053 (9th Cir. 2008). In the Ninth Circuit:

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A statement is considered puffery if the claim is extremely unlikely 

to induce consumer reliance. Ultimately, the difference between a 

statement of fact and mere puffery rests in the specificity or 

generality of the claim. The common theme that seems to run 

through cases concerning puffery in a variety of contexts is that 

consumer reliance will be induced by specific rather than general 

assertions. Thus, a statement that is quantifiable, that makes a claim 

as to the specific or absolute characteristics of a product, may be an 

actionable statement of fact while a general, subjective claim about a 

product is non-actionable puffery.

Id. (internal citations and quotation marks omitted); see also Southland Sod Farms v. Stover Seed 

Co., 108 F.3d 1134, 1145 (9th Cir. 1997) (“Puffing is exaggerated advertising, blustering, and 

boasting upon which no reasonable buyer would rely.”). By contrast, “[a] specific and measurable 

advertisement claim of product superiority based on product testing is not puffery.” Stover Seed, 

108 F.3d at 1145.

There is nothing specific or measurable about the alleged representations that ADT’s 

“innovative” and “most advanced” technologies “make the difference.” ECF No. 25 ¶ 17. Nor is 

there anything measureable about claims that ADT’s equipment and service are “state-of-the-art.” 

Id. In fact, no affirmative representation alleged “makes a claim as to the specific or absolute 

characteristics of a product.” Newcal Indus., 513 F.3d at 1053. These statements are therefore 

non-actionable puffery. Accord Cheatham v. ADT Corp., No. 15-cv-02137, 2016 WL 540832, at 

*10 (D. Ariz. Feb. 11, 2016) (finding similar representations made by ADT to be puffery); Baker 

v. The ADT Corp., No. 15-cv-02038, ECF No. 53, at *15 (C.D. Ill. Oct. 5, 2015) (same). 

Ultimately, the Court concludes that Plaintiff does not sufficiently allege reliance on any 

affirmative representation. Moreover, the only affirmative representations alleged are nonactionable puffery. Accordingly, ADT’s Motion to Dismiss is granted without prejudice as to 

Plaintiff’s claims related to affirmative representations made in violation of the UCL and CLRA.

B. Omissions

1. Duty to Disclose

“A plaintiff may bring a claim under the CLRA for a failure to disclose a material fact if 

the plaintiff shows that the defendant had a duty to disclose such a fact.” Dodson v. Tempur-Sealy 

Int’l, Inc., No. 13-cv-04984-JST, 2014 WL 1493676, at *4 (N.D. Cal. Apr. 16, 2014). Similarly, 

“[t]o state a claim for fraud under the UCL, a plaintiff must allege the existence of . . . a duty to 

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disclose.” Langan, 69 F. Supp. 3d at 984. To establish a duty to disclose under California law, a 

plaintiff must plausibly plead that at least one of the following four circumstances exists: (1) the 

defendant was in a fiduciary relationship with the plaintiff; (2) the defendant had exclusive 

knowledge of material facts not known to the plaintiff; (3) the defendant actively concealed a 

material fact from the plaintiff; or (4) the defendant made partial representations but also 

suppressed some material fact. Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 1095 (N. D.

Cal. 2007) (quoting LiMandri v. Judkins, 52 Cal. App. 4th 326, 336 (1997)).

Here, Plaintiff does not allege that he was in a fiduciary relationship with ADT. Rather, 

Plaintiff asserts that ADT “actively concealed” the vulnerability of its wireless systems from its 

customers. See, e.g., ECF No. 25 ¶¶ 1–2, 11, 15. However, Plaintiff only supports this assertion 

with vague allegations: that ADT “deflect[ed]” questions from Forbes reporters in 2014, more than 

two years after Plaintiff signed his initial contract with ADT, id. ¶ 11; and that ADT “tout[ed] its 

wireless home security systems as safe, reliable, and secure” through the its website and marketing 

materials, id. ¶ 15. Neither of these allegations sufficiently supports Plaintiff’s conclusory 

allegation of “active concealment.” Similarly, Plaintiff does not adequately allege that ADT made 

partial representations about its wireless security systems because Plaintiff does not allege that he 

actually relied on any representation made by ADT. Nonetheless, as discussed further below, the 

Court concludes that Plaintiff sufficiently alleges that ADT owed him a duty to disclose because 

ADT had exclusive knowledge of material facts unknown to Plaintiff.

a. Knowledge

“California federal courts have held that, under the CLRA, plaintiffs must sufficiently 

allege that a defendant was aware of a defect at the time of sale to survive a motion to dismiss.” 

Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1145 (9th Cir. 2012). Plaintiff contends that 

ADT’s knowledge of the vulnerability is sufficiently pleaded through the following allegations: 

“ADT offers business customers certain wireless security systems that utilize encryption to 

prevent transmissions from being read or spoofed,” ECF No. 25 ¶ 10; “[i]t is well recognized 

among radio frequency (‘RF’) engineers, as well as ADT, that the nature of a wireless home 

security system . . . precludes application of traditional security techniques such as encryption and 

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authentication,” as shown by publications dating back as early as 2002, id. ¶ 9; “the manufacturers 

of the home security systems that ADT installs have acknowledged since at least 2012 – and 

disclosed to ADT – that their home wireless systems are vulnerable to disruption,” id.; and, in 

2016, ADT disclosed in a Form 10-Q statement that its “products may be subject to potential 

vulnerabilities of wireless and Internet of Things devices” and that its “service may be subject to 

hacking or other unauthorized access,” id. ¶ 12.

ADT argues that Plaintiff “does not allege with specificity the communications that 

supposedly gave ADT [knowledge of the alleged vulnerability]: which manufacturers, which 

communications, on which dates, on which occasions.” ECF No. 32 at 9. ADT also contends that 

Plaintiff’s allegations “[do] not establish that ADT . . . was aware in 2012 . . . that a hacker could 

intercept and disrupt an unencrypted wireless signal from an alarm sensor to its panel.” Id. at 10. 

ADT further argues that Plaintiff’s allegations of knowledge are inadequate because the FAC does 

not specifically “allege vulnerability to the kind of hacking through the use of software-defined 

radios described in the 2014 Forbes article.” ECF No. 45 at 7.

Plaintiff has the better argument. Plaintiff’s complaint need not specify in detail the exact 

methods of hacking to which ADT knew its devices were vulnerable. Rather, Plaintiff need only 

generally allege that ADT had knowledge of, and withheld, a material fact: that its devices were 

unencrypted and vulnerable to hacking. See Tavares v. Capitol Records, LLC, No. 12-cv-3059-

YGR, 2013 WL 968272, at *4 (N.D. Cal. Mar. 12, 2013) (finding that “Plaintiffs’ general 

allegation of Capitol’s knowledge is permissible” because Rule 9(b) provides that “[m]alice, 

intent, knowledge, and other conditions of a person’s mind may be alleged generally,” and 

denying motion to dismiss UCL claim.); MacDonald v. Ford Motor Co., 37 F. Supp. 3d 1087, 

1095 (N.D. Cal. 2014) (allegations of exclusive knowledge need only meet Iqbal’s plausibility 

standard). 

Plaintiff has done so here. First, the publications cited by Plaintiff in the FAC suggest that 

the industry to which ADT belongs knew of the vulnerability of wireless devices long before 

Plaintiff contracted with ADT. See ECF No. 25 ¶ 9. Second, the FAC alleges that “the 

manufacturers of the home security systems that ADT installs have acknowledged since at least 

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2012—and disclosed to ADT—that their home wireless systems are vulnerable to disruption.” Id.

¶ 10 (emphasis added). Third, the FAC alleges that ADT “admit[ted] in its February 2, 2016 Form 

10-Q statement for the quarter ending December 31, 2015 that its ‘products may be subject to 

potential vulnerabilities of wireless and Internet of Things devices’ and that its ‘service may be 

subject to hacking or other unauthorized access.’” ECF No. 25 ¶ 12. While this admission 

occurred nearly four years after Plaintiff’s purchase, the admission, when combined with the 

previous two allegations tied to 2012, allows the Court to plausibly infer that ADT knew of the 

alleged vulnerability by the time the wireless security system was sold to Plaintiff in 2012. See In 

re MyFord Touch Consumer Litig., 46 F. Supp. 3d 936, 958 (N.D. Cal. 2014) (allegations that 

manufacturer knew of alleged defect after purchase based on “Technical Service Bulletins” issued 

by the manufacturer supported Plaintiff’s assertion at the pleadings stage that manufacturer had 

knowledge at the time of sale); see id. (“While the Court has some doubts whether Plaintiffs will 

actually be able to prove such, that does not mean that Plaintiffs’ case is implausible.”).

b. Exclusivity

To establish ADT’s duty to disclose a material fact to Plaintiff, ADT must have had 

“exclusive knowledge” of that fact. See Falk, 496 F. Supp. 2d at 1095 (quoting LiMandri, 52 Cal. 

App. 4th at 336). “Generally, courts have not defined ‘exclusive’ literally, but have found such 

claims cognizable if the defendant had ‘superior’ knowledge of a defect that was not readily 

apparent and there is no or only a limited publicly available information about the defect.” Daniel 

v. Ford Motor Co., No. 11-cv-02890, 2016 WL 2899026, at *4 (E.D. Cal. May 18, 2016); see also

In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, & Prod. Liab. Litig., 

754 F. Supp. 2d 1145, 1174 (C.D. Cal. 2010) (requiring only allegations of “superior knowledge” 

to survive a motion to dismiss a CLRA claim).

Here, Plaintiff sufficiently alleges that ADT had superior knowledge. Plaintiff asserts that 

“[a]t no time prior to 2016 was [he] aware of the vulnerabilities of [his] wireless home security 

system.” ECF No. 25 ¶ 27. Plaintiff further asserts that “[t]he specific workings and 

technological details of a wireless security system are outside the realm of knowledge of the 

average consumer.” Id. ¶ 19. By contrast, as noted above, Plaintiff has alleged that it was 

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generally known to experts in the field of wireless network security in 2012 that wireless home 

security networks were vulnerable to hacking, jamming, and other techniques, see ECF No. 25 ¶ 9, 

and that ADT was aware that the its wireless security products in particular were vulnerable to 

such attacks, see id.; ECF No. 25 ¶ 12. Accordingly, the Court concludes that Plaintiff has 

sufficiently pleaded exclusivity. See In re Toyota, 754 F. Supp. 2d at 1192 (holding that plaintiff 

had sufficiently pleaded superior knowledge and noting that “[w]hile prospective customers could 

have been tipped off to the possibility of [a defect], many customers would not have performed 

such a search, nor would they be expected to”).

2. Materiality

“An omission is material if a reasonable consumer would attach importance to its existence 

or nonexistence in determining his choice of action in the transaction in question.” Daniel v. Ford 

Motor Co., 806 F.3d 1217, 1225 (9th Cir. 2015) (internal quotation marks and citation omitted). 

“Materiality is judged from the perspective of a reasonable consumer . . . and it is generally a 

question of fact.” Id. (internal quotation marks and citation omitted).

 Plaintiff argues that ADT’s omissions are material to ADT customers because the 

“omissions directly pertain to the primary function” of ADT’s wireless security systems: “to 

provide safety and security.” ECF No. 25 ¶ 22. As a result of ADT’s failure to disclose this 

information, Plaintiff and similarly situated ADT customers “pay for equipment and monitoring 

services that do not provide the level of protection they are lead to believe they are receiving.” Id. 

¶ 14. Plaintiff further asserts that “[he] would not have entered into his contract with ADT for 

monitoring a wireless home security system had he known that the wireless home security system 

that ADT selected and installed in his house could be easily defeated.” Id. ¶ 47.

ADT disputes these allegations, arguing that “[n]o reasonable consumer would find this 

hacking risk material when the sole known instance was achieved by a researcher under controlled 

conditions, with not one corroborating field report of any actual disruption of an ADT customer’s 

wireless alarm system in the two years following the publication of the researcher’s findings.” 

ECF No. 32 at 15. But, as Plaintiff correctly argues in his Opposition, ECF No. 39 at 19, a defect

need not be proximate to be material. It is certainly plausible that a reasonable consumer would 

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attach importance to the fact that their home security system could be easily be hacked and 

bypassed, even absent proven instances of such hacking. This is especially true, as Plaintiff notes, 

“where the risk brings into question the core functionality” of ADT’s wireless systems: to protect 

homes from intrusion. Id. at 19. See Collins v. eMachines, Inc., 202 Cal. App. 4th 249, 258 

(2011), as modified (Dec. 28, 2011) (finding defect to be material when it prevented accurate 

operation of a “floppy disk [that] was central to the function of a computer . . . [b]ecause a floppy 

disk, at the time of the complaint, was integral to the storage, access, and transport of accurate 

computer data”). Accordingly, the Court concludes that Plaintiff has sufficiently alleged 

materiality. See In re Carrier IQ, Inc., 78 F. Supp. 3d 1051, 1113 (N.D. Cal. 2015) (holding that 

plaintiffs sufficiently “alleged materiality by alleging that had they been aware of the installation 

and functionality of the Carrier IQ Software, they would not have purchased their mobile 

devices.”); Opperman v. Path, Inc., 87 F. Supp. 3d 1018, 1046 (N.D. Cal. 2014) (“[M]ateriality is 

therefore ordinarily a question of fact unless the ‘fact misrepresented is so obviously unimportant 

that the jury could not reasonably find that a reasonable man would have been influenced by it.’”) 

(quoting Engalla v. Permanente Med. Grp., Inc., 15 Cal. App. 4th 951, 977 (1997)).

3. Justifiable Reliance

“An essential element for a fraudulent omission claim is actual reliance.” Daniel v. Ford 

Motor Co., 806 F.3d 1217, 1225 (9th Cir. 2015). “That one would have behaved differently can be 

presumed, or at least inferred, when the omission is material.” Id. Plaintiff alleges that he and 

putative class members “had a reasonable belief that . . . the wireless home security systems 

would be secured against outside interference.” ECF No. 25 at 18. Plaintiff further alleges that, 

“[h]ad [he] known that the wireless home security systems could easily be suppressed or 

circumvented, he would not have agreed to the contract with ADT for monitoring services.” Id.

¶ 27. 

ADT argues that any reliance by Plaintiff was not justifiable because the risk of hacking is 

merely a “hypothetical concern.” ECF No. 32 at 15. However, as explained above, the Court has 

already concluded that ADT’s alleged omission was material. Actual reliance can therefore be 

inferred. Daniel, 806 F.3d at 1225; Lilly v. Jamba Juice Co., 308 F.R.D. 231, 242 (N.D. Cal. 

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2014) (“In establishing the elements of a CLRA violation, an inference of common reliance arises 

if representations are material . . . .”). Moreover, for the reasons set forth in the Court’s discussion 

of materiality, the Court concludes that Plaintiff has sufficiently pleaded that his reliance was 

justifiable. 

4. Contractual Terms

Finally, ADT asserts that even if it had a duty to disclose the alleged omission, ADT 

satisfied this duty by placing the following language in its contract with Plaintiff: “ADT may not 

receive alarm signals if communications or power is interrupted for any reason” and “no alarm 

system can provide complete protection or guarantee prevention of loss or injury.” ECF No. 32 at 

7, 16; see also ECF No. 24-2 at 2. That language is not a disclosure of the allegedly omitted fact, 

namely that ADT’s wireless systems are vulnerable to hacking, jamming, and other techniques. 

At the very least, “[t]he Court cannot find, at this stage of the proceedings, that Defendant’s 

disclosure is so unambiguous and express such that a reasonable consumer is unlikely to be 

deceived as a matter of law.” Doe v. SuccessfulMatch.com, 70 F. Supp. 3d 1066, 1078 (N.D. Cal. 

2014). As a result, ADT’s contract with Plaintiff does not bar Plaintiff’s claim based on 

fraudulent omission in violation of the UCL and CLRA.

Ultimately, the Court concludes that Plaintiff has sufficiently stated a claim under the UCL 

and CLRA based on ADT’s alleged omission of the fact that its wireless home security systems 

were vulnerable to hacking.

CONCLUSION

Defendant’s Motion to Dismiss is granted without prejudice as to Plaintiff’s claims for 

affirmative representations made in violation of the UCL and CLRA. Defendant’s Motion to 

Dismiss is denied as to Plaintiff’s claims for a fraudulent omission in violation of the UCL and 

CLRA. Any amended complaint must be filed within 30 days of the issuance of this order.

IT IS SO ORDERED.

Dated: October 24, 2016

______________________________________

JON S. TIGAR

United States District Judge

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