Appeals court hears HP arguments on class certification

Justices on the Ninth Court of Appeals heard arguments on Thursday, Sept. 27, from lawyers representing Hewlett-Packard Co. and Gateway US Retail Inc. as to whether or not the 58th Judicial District abused its discretion in certifying a statewide class action.

HP's lawyers argued the plaintiffs' class definition "was overly broad and fatally flawed because it potentially would award relief to class members who suffered no injury." HP is represented by Gene Williams of Shook, Hardy & Bacon.

Gateway is not a party in the suit but argued on HP's behalf via amicus curiae, Latin for "friend of the court."

The case in question, Muzette Alvis et al vs. HP, was originally filed on Oct. 31, 1999, in the U.S. District Court for the Eastern District of Texas, and centers around allegedly defective floppy disk controllers installed in HP computers. The case also brings up the issue of whether a class of plaintiffs should be certified to pursue a declaratory judgment of warranty rights or alternative claim for damages.

"A few days after Alvis purchased her HP computer, her daughter's boss, Hal LaPray (who is the class representative in the identical litigation filed against Compaq Computer Corporation) came to Alvis' residence with other 'FDC class counsel' to 'test' her new computer. Alvis was told her computer 'had a problem,' and within a few days she agreed to act as the class representative in the federal action," said an appeals brief filed by HP lawyers in 2005.

Arguing before the justices on the third floor of the Jefferson County Courthouse, defense attorney Williams said the alleged FDC malfunction never manifested itself, and that it would be impossible for HP to provide cure for a class of plaintiffs who were never injured and whose computers became obsolete a decade ago.

The class action petition has been amended three times since the bulk of the lawsuit was transferred to the Jefferson County 58th Judicial District sometime in 2001. Former Judge James Mehaffy presided over that case.

According to the lawsuit's documents, between the years of 2002 and 2005, HP filed around a dozen motions to seal records sought by plaintiffs' lawyers Wayne Reaud, Gary Reger and Gilbert Low, arguing the records "fall out of the scope of discovery" and contain sensitive financial information not meant for public eyes.

Reaud was also one of the plaintiffs' attorneys in a 1999 class action suit against Toshiba over alleged defects in floppy disks. Toshiba settled the case for more than $2 billion.

In 2005, HP appealed Judge Mehaffy's ruling allowing the class action to proceed, claiming the "trial court erred by permitting plaintiffs to sustain their breach of express warranty claims without proving that the alleged (floppy disk) error actually manifested itself."

"With all due respect to my good friend, Judge Mehaffy got it wrong," Williams said.

HP lawyers wrote in their brief that "proof of malfunction requires individual inquires that preclude class certification under (Texas law)."

"The Trial Court certified a Texas-wide class of HP computer owners, who allege that HP breached its express warranty by selling computers containing floppy disk controller (FDC) chips that are 'defective in the box,'" court documents said.

"In certifying this Texas-wide class, the Trial Court concluded that it was unnecessary for class members to prove that their computers ever malfunctioned because of the alleged defect at issue� According to the Trial Court, whether each class member's HP computer actually operates correctly is irrelevant; the computer is 'defective in the box' if the FDC fails to meet certain 'industry standards and specifications' that are undefined and unknown by Plaintiffs."

HP lawyers assert the 58th Court's ruling created a "windfall" for plaintiffs and their lawyers. "As far as HP, plaintiffs, or the Trial Court is aware, no consumer has ever experienced the alleged FDC error."

On the other hand, plaintiffs' lawyer Reger argued that a piece of the HP FDC controller chip was left out, rendering the FDC's design inherently flawed � a flaw that, in his opinion, could cause "silent data corruption."

"Our experts and their experts agree, there was a part left out," Reger said. "We have a chip that is missing parts."

Reger also said that Judge Mehaffy wrote in his finding of facts judgment that there is evidence that HP consumers complained of the alleged FDC malfunction. "HP did receive huge amounts of complaints."

However, Williams fired back by saying HP did not log one single FDC malfunction complaint in Texas, and that the plaintiffs were attempting to lump a variety of normal computer malfunctions, such as freeze ups and blue screens, as a FDC problem.

Background

According to suit documents, "Plaintiff Alvis purchased an HP Pavilion 6530 in October 1999 and used her computer for approximately eight days before filing a lawsuit against HP. The federal action alleged, inter alia, that the alleged FDC error violated the Computer Fraud and Abuse Act. In March 2003, the federal action was dismissed with prejudice."

On Sept. 18, 2007, Gateway lawyers filed a brief of amicus curiae, asking justices if it is reasonable for plaintiffs to ask for punitive damages "when they can establish neither a legally cognizable claim nor a concrete injury."

The current lawsuit tied up in the Appeals Court is patterned after a 1998 California lawsuit, Phillips Adams vs. HP. In May 2000, Adams entered in to a Master Agreement with HP to provide a solution to HP's FDC defect and was paid $27.5 million for technical services related to detecting and patching the FDC defect, suit documents said.

Adams had filed his suit under the False Claims Act, and was proceeding as a qui tam plaintiff, which allows for a private individual, or whistleblower with knowledge of past or present fraud committed against the U.S. federal government, to bring suit on its behalf, the suit and Britannica Online Encyclopedia said.

According to the Britannica Online Encyclopedia, information introduced by means of amicus curiae may be a legal opinion in the form of a brief - testimony that has not been solicited by any of the parties - or a learned treatise on a matter that bears on the case. The decision whether to admit the information lies with the discretion of the court. Amicus curiae refers to someone who volunteers to offer information on a point of law to assist the court in deciding a matter before it.

After hearing the arguments Sept. 27, it may take months before justices reach a decision.