Lenovo Wins Second Motion to Dismiss in Adware Class Action

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By Jay Repko

A California district court recently dismissed—for the second time—consumer claims that technology giant Lenovo Inc. violated New York’s Deceptive Acts and Practices Statute by selling laptops with preinstalled VisualDiscovery software that allegedly invades users’ privacy and exposes users to security breaches.  In reaching this decision, Judge Haywood S. Gilliam, Jr. concluded that dismissal was warranted for two reasons: (i) the plaintiffs lacked standing and (ii) the plaintiffs failed to adequately allege actual damages.

By its very terms, New York’s Deceptive Acts and Practices Statute prohibits only those deceptive acts and practices that occur in the state.  However, the named plaintiffs did not allege that they were New York residents, nor did the plaintiffs allege that any of the deceptive conduct at issue occurred in New York.  As a result, the plaintiffs were left to argue that they had standing based on the New York choice-of-law provisions in the sales agreements for the affected laptops.  The Court disposed of this argument stating that the plaintiffs had “improperly conflate[d] choice-of-law with statutory standing.”

The Court then concluded that even if the plaintiffs had statutory standing, the plaintiffs’ claims could not survive Lenovo’s motion to dismiss because the plaintiffs had not pled sufficient facts to establish actual damages.  While the plaintiffs argued that they overpaid for the laptops and “did not receive the full value of their purchase, i.e., a laptop free of malware,” the Court found these arguments insufficient because the plaintiffs had not alleged (i) that their laptop performance was actually degraded or (ii) what their performance expectations were pre-purchase.

Judge Gilliam’s second without-prejudice dismissal of the plaintiffs’ New York statutory claims is the latest ruling in a consolidated class action against Lenovo and the developer of the VisualDiscovery software, Superfish, Inc.  According to the plaintiffs, the VisualDiscovery software allows Superfish to monitor its users’ online behavior so that it can effectively tailor advertisements to their interests.  Despite their allegations, however, the plaintiffs will be unable to move forward with their New York statutory claims unless they can cure their standing and damages flaws in a second amended complaint by February 28.

The case is In re: Lenovo Adware Litigation, No. 5:15-md-02624, Northern District of California.