Court Opinion

ID: 9894642
Source: CourtListenerOpinion
Date Created: 2023-11-02 17:00:53.061507+00
Date Added: 2024-06-11T09:10:24.325327
License: Public Domain

NOT FOR PUBLICATION                            FILED
                    UNITED STATES COURT OF APPEALS                         NOV 2 2023
                                                                       MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

In re: INTEL CORP. CPU MARKETING,                No.   22-35652
SALES PRACTICES AND PRODUCTS
LIABILITY LITIGATION,                            D.C. No. 3:18-md-02828-SI
______________________________

JIMAYA GOMEZ; et al.,                            MEMORANDUM*

                Plaintiffs-Appellants,

 v.

INTEL CORPORATION, a Delaware
corporation,

                Defendant-Appellee.

                   Appeal from the United States District Court
                            for the District of Oregon
                   Michael H. Simon, District Judge, Presiding

                     Argued and Submitted October 17, 2023
                               Portland, Oregon

Before: KOH and SUNG, Circuit Judges, and EZRA,** District Judge.

      Plaintiffs appeal the district court’s dismissal of their claims brought against

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable David A. Ezra, United States District Judge for the
District of Hawaii, sitting by designation.
Intel Corporation (“Intel”) on behalf of a nationwide class.1 In three orders from

2021 to 2022, the district court first dismissed Plaintiffs’ omission-based claims,2

and later dismissed their unfair conduct claims.3 We have jurisdiction under 28

U.S.C. § 1291. We review de novo, see Moore v. Mars Petcare US, Inc., 966 F.3d

1007, 1016 (9th Cir. 2020), and we affirm.

      1. Omission-Based Claims. Under California law, a claim will lie for a

fraudulent omission only where the defendant was under a duty to disclose the

omitted fact. See Hodsdon v. Mars, Inc., 891 F.3d 857, 861 (9th Cir. 2018) (citing

Daugherty v. Am. Honda Motor Co., 51 Cal. Rptr. 3d 118, 126 (Ct. App. 2006)). In

Hodsdon v. Mars, Inc., we held that a duty to disclose arises where (1) the

omission is material, (2) “the defect was central to the product’s function,” and (3)

one of the four factors discussed in LiMandri v. Judkins, 60 Cal. Rptr. 2d 539 (Ct.

1
 As Plaintiffs did not discuss any of the state subclass claims in their Opening
Brief, those claims are forfeited on appeal. Friends of Yosemite Valley v.
Kempthorne, 520 F.3d 1024, 1033 (9th Cir. 2008).
2
  These claims were raised under California’s Consumers Legal Remedies Act
(“CLRA”), Cal. Civ. Code § 1750; False Advertising Law (“FAL”), Cal. Bus. &
Prof. Code § 17500; the “fraud prong” of the Unfair Competition Law (“UCL”),
Cal. Bus. & Prof. Code § 17200; and common law fraud by concealment and
omission.
3
 These consisted of a claim under the “unfair” prong of the UCL, and a quasi-
contract/unjust enrichment claim. The latter claim is predicated on the same
conduct as Plaintiffs’ UCL claim, and the two claims therefore rise or fall together.
See Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015).

                                          2
App. 1997), is present. Hodsdon, 891 F.3d at 863.

      The district court concluded that Plaintiffs failed to plausibly allege that the

defects were central to the function of Intel’s processors. The court observed that

“[t]he fact that Intel’s chips have for years allegedly been vulnerable to novel

[security] attacks, that were never exploited, does not go to the central function of

the microprocessors.” We agree. There is no allegation that Plaintiffs’ processors

ever stopped operating as “the ‘brains’ of the computing device[s], performing all

necessary computations for each application . . . and each peripheral.” Although

the processors’ level of security may well be material to consumers, the security

risk presented by the defects alleged in this case does not make these defects

central to the processors’ function. See id. at 864 (finding alleged defect material,

but not central).

      Because we agree that Plaintiffs’ allegations fail to cross Hodsdon’s central

functionality threshold, Plaintiffs have not established that Intel was under a duty

to disclose the defects. As such, the district court properly dismissed Plaintiffs’

omission-based claims.

      2. Unfair Conduct Claims. California’s “balancing test,” applicable to

Plaintiffs’ unfair conduct claims, “weigh[s] the utility of the defendant’s conduct

against the gravity of the harm to the alleged victim.” Epic Games, Inc. v. Apple,

Inc., 67 F.4th 946, 1000 (9th Cir. 2023) (alteration in original) (quoting

                                           3
Progressive W. Ins. Co. v. Super. Ct., 37 Cal. Rptr. 3d 434, 452 (Ct. App. 2005)).

The district court initially dismissed Plaintiffs’ unfair conduct claims for Intel’s

conduct prior to September 1, 2017, reasoning that Plaintiffs’ allegations regarding

this time period were coextensive with those of the previously dismissed omission-

based claims. This conclusion was sound. Any allegations that Intel sold its

processors while knowing them to be defective is simply another way of advancing

Plaintiffs’ fraud-by-omission argument, which, as discussed above, was not well

pleaded. As Intel was under no duty to disclose the defects, this conduct cannot

have been “substantially injurious” for purposes of an unfair conduct claim.

Hodsdon, 891 F.3d at 867; see Hauck v. Advanced Micro Devices, Inc., 816 F.

App’x 39, 43 (9th Cir. 2020) (mem.).

      Plaintiffs’ allegations regarding Intel’s conduct after September 1, 2017, fare

no better. To the extent Plaintiffs allege that Intel took advantage of an

“information asymmetry” between Intel and its customers, and that it continued

selling its processors despite knowing of the defects, these allegations are

indistinguishable from the dismissed omission-based claims.

      The allegations regarding the impact of Intel’s patches are similarly

unavailing. Plaintiffs simultaneously allege that Intel failed to disclose that “there

were pending security mitigations that could impact security and performance,” but

also that Intel made such a disclosure by “advis[ing] consumers not to download its

                                           4
patches until better versions were deployed.” Aside from these internal

inconsistencies, Plaintiffs do not plausibly allege that the utility of the patches (that

is, at least partial protection from security attacks) was outweighed by the alleged

harm to Plaintiffs by way of reduced processor performance. Cf. Hauck, 816 F.

App’x at 43 (“Plaintiffs have not plausibly alleged . . . that the harm represented by

the theoretical risk of a cybersecurity flaw that has not yet been successfully

exploited outweighs the other benefits of AMD’s processor design.”).

      In addition, Plaintiffs’ allegation regarding Intel’s imposition of a licensing

restriction is limited to a single, conclusory sentence in the operative Second

Amended Complaint. See Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009) (conclusory

allegations are “not entitled to be assumed true”).

      Finally, Plaintiffs argue that Intel’s unfair conduct is further evidenced by its

statement to a media outlet that the exploits “were an industry-wide problem and

not unique to Intel.” However, given that Plaintiffs also allege that this statement

was publicly denied by AMD, one of Intel’s competitors, Plaintiffs fail to plausibly

show that a reasonable consumer would have been misled by Intel’s statement. Cf.

Ebner v. Fresh, Inc., 838 F.3d 958, 965–66 (9th Cir. 2016) (affirming Rule

12(b)(6) dismissal of California statutory claims where plaintiffs failed to plausibly

allege “that the reasonable consumer would be deceived” by product’s label).

Moreover, Plaintiffs fail to allege that they actually relied on this statement. See In

                                            5
re Tobacco II Cases, 207 P.3d 20, 26 (Cal. 2009) (“[A plaintiff] proceeding on a

claim of misrepresentation as the basis of his or her UCL action must demonstrate

actual reliance on the allegedly deceptive or misleading statements[.]”). Taken in

their totality, none of Plaintiffs’ allegations state a plausible claim that Intel

engaged in unfair business practices.4

      AFFIRMED.

4
 Because we agree that Plaintiffs did not state plausible claims for unfair conduct,
we also conclude that the district court did not abuse its discretion in granting
Intel’s motion for reconsideration.

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