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Schacter v. Circuit City-Class Action Defense Cases: Massachusetts Federal Court Denies Defense Motion To Dismiss Class Action Arising From Allegedly Premature Termination Of Product Warranty Plan

Massachusetts Federal Court Denies Defense Motion to Dismiss “Marginal” Claims at Pleading Stage

Circuit City customers brought a putative class action asserting various state law claims arising out of the allegedly premature termination of product warranties, and the defense filed a motion to dismiss. Schacter v. Circuit City Stores, Inc., 433 F.Supp.2d 140 (D. Mass. 2006). Specifically, plaintiffs purchased a telephone from Circuit City, together with an additional two-year warranty from Circuit City; the telephone failed and the store gave them a gift card for the full amount of the purchase price, including taxes. The store did not give them any credit for the “unused” portion of their two-year warranty because reimbursement or replacement terminated the warranty. Id., at 142. Plaintiffs’ class action complaint alleged breach of contract, promissory estoppel, unjust enrichment, conversion, and violation of the Massachusetts Consumer Protection Act. Id., at 141. Defense attorneys moved to dismiss the complaint. The district court summarized the positions of the defense and plaintiffs at page 143 as follows:

Circuit City contends that the claims against it should be dismissed on the grounds that 1) the terms of the Service Guide were incorporated by reference into plaintiffs’ Warranty Plan, 2) plaintiffs received precisely what they contracted for and, therefore, 3) plaintiffs lack any viable claims . . . . In support of its position that an enforceable contract exists where terms are incorporated by reference and not made available to the purchaser until after the sale (i.e., “money now, terms later”), defendant cites several cases involving the enforceability of “shrinkwrap” or “clickwrap” computer software license agreements and a case involving the purchase of cellular phone service.

[Plaintiffs] respond that their claims should survive dismissal at this juncture because 1) the terms of the Service Guide were not incorporated into the Warranty Plan they purchased, 2) the terms set forth in the Service Guide constitute an attempt of defendant to alter plaintiffs’ contract unilaterally and 3) ambiguities exist between the terms set forth in the Receipt and those set forth in the Service Guide. . . . They also contend that the cases relied upon by defendant are distinguishable.

The district court denied the motion to dismiss. While it agreed with Circuit City that a “money now, terms later” contract may be enforceable, at the pleading stage the federal court was unwilling to discount plaintiffs’ claim that they had not received the Service Guide and the contract did not explicitly state that use of the telephone constituted acceptance of the terms and conditions set forth in the Service Guide. Schacter, at 144. The district court further found plaintiffs’ Massachusetts Consumer Protection Act allegation to be “a marginal claim,” id. (italics added), but concluded that it was sufficient under Massachusetts law to survive a motion to dismiss.

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