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Intel Class Action Defense Cases-Barbara’s Sales v. Intel: Illinois Supreme Court Applies Illinois Law To Fraud Class Action And Reverses Certification Of Class Action Against Intel

Trial Court Properly Held Illinois Law Applied to Class Action Certification Motion but Improperly Certified Statewide Fraud Class Action Against Intel because Company’s Allegedly Deceptive Statements were not Actionable Illinois Supreme Court Holds

Purchasers of computers run by Intel’s Pentium 4 processors filed a putative nationwide class action in Illinois state court alleging claims for unfair business practices under California law and Illinois law based on the allegation that, contrary to its billion-dollar marketing campaign that “4 is better than 3,” the Pentium 4 performed no better than the Pentium III. Barbara’s Sales, Inc. v. Intel Corp., 879 N.E.2d 910 (Ill. 2007) [Slip Opn., at 1-2]. The class action complaint essentially alleged that the Pentium 4 was not “better” than its predecessor and did not necessarily make programs run faster than its predecessor, id., at 5-6. Defense attorneys opposed class certification in part on the grounds that Illinois law applied and further argued that the decision to purchaser a Pentium 4 was not made “simply based on the number 4 being higher than the number 3.” Id., at 7. The parties’ experts disagreed on whether Pentium 4 outperformed the Pentium III, id., at 6-8. The trial court agreed that Illinois law applied and denied class certification on the California-law claims. The trial court also found that Illinois law could not be applied to a nationwide class action and so certified only a statewide class under the Illinois Consumer Fraud and Deceptive Business Practices Act claim, id., at 8. Our previous article summarizing the July 2006 Illinois appellate court opinion that had reversed the trial court statewide class certification order – holding that California law applies and a nationwide class action should have been certified – may be found here. Defense attorneys appealed to the Illinois Supreme Court, which held that Illinois law applied and that class action treatment should have been denied.

The Supreme Court explained that it certified review only of (1) whether Illinois or California law applied to the nationwide class action complaint, and (2) whether the lawsuit should have been certified as a class action. Intel, at 10. The class action sought relief on behalf of ‘a nationwide class of consumers who have made purchases and received representations in all 50 states and the District of Columbia,” and the Illinois High Court recognized “substantial differences” among the fraud laws of the 50 states, id., at 11. As “the masters of their complaint,” however, plaintiffs limited the class action to “relief only under Illinois or California,” id. After a detailed analysis, see id., at 11-20, the Supreme Court concluded that Illinois law applied, id., at 20-21. The Court noted also that plaintiffs did not argue that Illinois law should be applied to a nationwide class, so the only remaining inquiry was whether a statewide class action should have been certified, id., at 21.

The Illinois Supreme Court found the class action certification analysis to be comparatively simple, holding that “the representation identified by the plaintiffs does not form the basis of an actionable claim under the Consumer Fraud Act.” Intel, at 21. Specifically, a private cause of action under Illinois law “requires proof of ‘actual damage’” proximately caused by the allegedly deceptive act or practice. Id. (citations omitted). As the Court summarized at page 22, “Plaintiffs argue that the uniform representation implicit in the name ‘Pentium 4’ – allegedly that this processor was the best and fastest on the market – was sufficient to afford recovery under the Consumer Fraud Act. Intel response that this implicit representation is nothing more than puffery, and therefore is not a ‘deceptive act’ within the purview of the Act. We agree with Intel.” While the experts disagreed, the Supreme Court found “nothing in the ‘4 is better than 3’ marketing formulation that presents more than a vague promise of something better.” Id., at 23-24. Because Intel’s statements were not actionable under Illinois law, the trial court should have denied the motion to certify a class action. Id., at 24-25.

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