1. What does a plaintiff need to establish in order to prove a breach of warranty of merchantability on a smart phone?

2. Does Samsung’s knowledge of the problem result in a breach of warranty?

Amy Rothbaum (plaintiff) and others brought suit against Samsung Telecommunications (defendant) because they alleged that Samsung knowingly sold its 4G phones with a design defect that causes the phones to shut down randomly (the Random Shutdown Defect). Rothbaum had purchased a Samsung Captivate phone from an AT&T Store in Holyoke, Massachusetts. “Within months” of her purchase, the phone “began shutting down randomly.” The phone first shut down randomly in mid-December 2010. During a three-week period in December 2010, her phone shut down at least three times.

When her phone unexpectedly shut down while in sleep mode, Rothbaum was required to press and hold the “On” button to restart the phone. She did not, however, have to remove and reinsert the battery before turning the phone back on.

Rothbaum went to an AT&T service center in late December 2010 to complain about this problem. The representative performed a factory reset and gave her a phone number to call in case the problems persisted. Rothbaum’s phone again shut down on or about January 3, 2011, while “it was powered on and was in sleep mode.” Rothbaum then called AT&T, which sent her a replacement battery, which she received in mid-January. Even after she replaced the battery, the phone “continued to shut down” from January 17 to January 21, 2011. She described these shutdowns as “annoying.”

On March 1, 2011, Rothbaum went to the AT&T store where she had purchased the phone and reported that her problems were persisting. An AT&T representative gave her the Replacement Phone, which was the same model. “Within a day or two” the Replacement Phone shut down randomly while in sleep mode. As with the original phone, Rothbaum only had to press the “On” button to restart the Replacement Phone. Rothbaum testified that such shutdowns occurred “no more frequently than once a month.” She never needed to remove and reinsert the battery to turn the phone back on.

Rothbaum continued to use the phone for about 18 months, from March 2011 to September 2012, when she gave the Replacement Phone to her attorneys for testing in connection with this case. Rothbaum also loaded on the Replacement Phone and used several applications (“apps”) that were not created by Samsung, including Facebook, Twitter, and Words with Friends. She also used several preloaded applications, such as Gmail.

After negotiating with Rothbaum for the opportunity to test the Replacement Phone, Samsung had it inspected by one of its senior engineers in Korea. Through a variety of tests, the phone did not randomly shut down, either in sleep mode or during active use. The engineer concluded that the phone did not suffer from any shutdown defect and that the reported problems might be attributable to installed apps, such as Words with Friends.

Between July 2010 and June 2011, Samsung produced at least 985,000 i897 Samsung phones at issue in this case. In a technical service memo to AT&T, Samsung stated that “[a] small percentage of SGH–I897 handsets [the ‘Captivate’ model of Samsung phone] may exhibit a condition where the handset will power off after going to sleep mode.” The bulletin explained that this problem occurred only in phones within a certain range of IMEI numbers. The service bulletin also explained that phone servicers should remove and replace certain capacitors to remedy the problem.

There was a steady increase in the return rate for the Samsung “Captivate” model between August 2010 and January 2011. In January 2011, 51.97 percent of returns were categorized under “Powers On/Off.”

This document also stated that, “[d]ue to growing concern” about these power-related issues, Samsung sampled 200 of the returned phones to determine the cause. It found that 43 units, or 22 percent, reproduced the powering-off symptom, and that all of these units had been produced before the “corrective action” was implemented on November 6, 2010. Overall, Samsung’s internal documents indicate that less than 5 percent of Samsung phones produced before November 2010 were returned for any power-related reason and that less than 1.25 percent of phones produced after the November 2010 remedy were returned for any power-related reason.

Rothbaum alleges that Samsung was aware of this defect but continued to sell the defective phones, and her suit alleged that Samsung breached its implied warranty of merchantability. Samsung moved for summary judgment.  ……………………………..