Judge Halts Symantec ‘Scareware’ Class Action

SAN FRANCISCO (CN) - A federal judge halted a class action accusing Symantec of using "scareware" to induce customers into buying other products, saying the lead plaintiff's complaint failed to make any claims.

James Gross filed the federal class action against Symantec and Irish company PC Tools for violating California's unfair competition law, fraudulent inducement, breach of contract and express warranties, and unjust enrichment in early 2012. Gross claimed that Symantec promises that three products -- PC Tools Registry Mechanic, PC Tools Performance Toolkit and Norton Utilities -- diagnose computer problems and warn consumers "in alarmist fashion" that harmful errors can be fixed by purchasing the full version of the products.

Symantec moved to dismiss the class action, saying that Gross failed to meet heightened requirements of a fraud pleading by never providing specifics of the alleged fraudulent actions. U.S. District Judge Charles Breyer agreed.

"The [first amended complaint] does not provide any allegations indicating what Symantec actually said regarding the functional capabilities of its software," Breyer wrote.

The judge continued: "Plaintiff's allegations are too vague to be actionable in federal court. Without direct quotations from the PC Tools website or other marketing materials, the court cannot determine exactly how Symantec advertised its products. This is critical to the fraud analysis because plaintiff's entire suit turns on how Symantec's representations compare to the actual functionality of its software. This defect, while curable, is fatal to all plaintiff's claims because the same allegations of fraudulent conduct support each claim."

Gross's failure to state particulars of Symantec's fraud is a domino effect on the class's other allegations including the unfair competition law violations, according to Breyer. And while the express warranty claims might stand on their own, the judge also chided Gross for failing to allege plausible breaches of contract in his complaint.

"This is because the allegations pointing to breach concern software performance prior to plaintiff's purchase of the full version of the software. Plaintiff's basis for challenging the functionality of Symantec's software arises from a computer forensic expert's analysis of the Registry Mechanic 'free diagnostic scan,' not the full version of the software. Thus, the factual allegations only support a plausible theory that the free trial version did not function as advertised.

"Unless plaintiff can offer factual allegations establishing that the full version of the software failed to perform the advertised functions, the breach of contract claim must fail, for a breach cannot occur before contract formation," Breyer concluded.

Gross can amend the deficiencies in his complaint and try again, and must also properly serve PC Tools in Ireland before any complaint against it can go forward, Breyer said.

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