united-states consumer-protection
Can a company be sued if they allow their electronic product to completely stop working?
<p>The Olio Model One is a smartwatch sold from 2015 to 2016 by Olio Devices, Inc. The Olio watches were rather expensive, with a price range from $595 to $1,395. Furthermore, to work, the Olio needs to be able to talk to a specific API server; without this API server, the companion smartphone app will not function, and without the smartphone app the watch itself will not function.</p>

<p>Olio Devices was acquired by Flex, Ltd. in early 2017, after which they never sold anymore Olio watches; apparently Flex acquired Olio Devices just to use Olio's technology in their own products. In addition to ceasing the sale of Olio watches, Flex also shut down the API server I mentioned above later in 2017, resulting in most Olio watches losing almost all of their functionality. Neither the former employees of Olio Devices nor Flex gave any solution to this; customers were expected to live with their $595-$1395 paperweights.</p>

<p>Under United States consumer protection law (Olio Devices was founded and headquartered in California and Flex has offices throughout the US), can Flex be sued for this, either for payouts or for a solution to make the Olio watch work again? If so, is there a time frame in which such lawsuits would need to be filed?</p>

<p>There are multiple thorny legal questions and factual questions that would need to be resolved to get an answer. An effective remedy for the consumers against Olio Devices would be challenging, but not impossible to prevail in, and an effective remedy against Flex would be considerably harder to prevail in.</p>
<p>The first thing you would need to know is how the sale of Olio Devices to Flex was structured. If Flex truly merged as a corporate entity with Olio Devices, or if Olio Devices purchased the Flex entity and then changed its name to Flex, there would be liability from the consumer to Flex is a cause of action could be established.</p>
<p>But, if Flex merely purchased selected assets from Olio Devices for cash, any liability would run from the consumer to Olio Devices, and would be limited to the cash received by Olio Devices in the deal.</p>
<p>If that cash was insufficient to pay liabilities owed by Olio Devices to its consumers, in order to prevail against Flex, the consumers would have to establish that the sale to Flex of its assets was a &quot;fraudulent transfer&quot; which doesn't necessarily require proof that there was an actual intent to defraud, but does require a showing that (1) the total liabilities of Olio Devices (including contingent future liabilities) exceeded the value of its assets at the time of the sale, (2) that Olio Devices did not receive &quot;substantially equivalent value&quot; for the assets it sold to Flex, (3) that the sale was not ratified by a bankruptcy court if Olio Devices was in bankruptcy, and (4) that the sale of assets from Olio Devices to Flex took place more than four years before the lawsuit seeking to set aside the fraudulent transfer. Alternately, the statute of limitations could be longer, the threshold of proof could be lower, and punitive damages up to 50% of the recovery otherwise available, if there was an actual intent to defraud the consumers of Olio Devices in the sale of assets transaction that could be established.</p>
<p>It is also possible that Olio Devices was kept intact as an entity, whose shareholders were now a parent company, and the parent company didn't take any assets out of the subsidiary, which would make it hard to sue the parent company.</p>
<p>Of course, all of this hinges on whether there is an underlying case against Olio Devices.</p>
<p>Assuming that the watches were sold in 2015 and 2016 without an intent to defraud at that time, one would have to determine what the nature of the contractual arrangement for post-sale service by Olio Devices was with respect to those watches. This would not be an elementary matter and would take review of relevant documents (e.g. warranties and license agreements) and consideration of case law in other circumstances that might be relevant regarding implied contractual terms. The outcome of that would be a close question. If the contract didn't have such a term, or expressly disavowed such liability, then the next question would be whether the absence of such term would render the contract unconscionable causing a term like that to be implied in law.</p>
<p>Assuming that the consumers established that there was an implied contractual term that the watches would be supported by Olio Devices indefinitely, the next question would be when the statute of limitations started to accrue. Generally speaking, this happens when there is a breach of the contract and that breach is known to the consumer, which would probably happen in late 2017. The <a href="https://statelaws.findlaw.com/california-law/california-civil-statute-of-limitations-laws.html" rel="nofollow noreferrer">statute of limitations in California</a> for a breach of a written contract is four years, and for an oral contract is two years, but I don't know what the relevant statute of limitations would be in the case of a contractual term implied in law or in fact.</p>
<p>There might be a consumer protection law specific provision, intertwined with the implied contractual term, but my guess is that this is unlikely.</p>
<p>All of the relevant questions would arise primarily under state law. The law that would apply would again be fact specific. Normally a contract to enter into a sale of goods is governed by the state where the sale takes place and runs between the seller and the buyer, who would often not be the underlying manufacturer, so the warranty or license or service contract from the underlying manufacturer might be the controlling document and would usually have a choice of law provision which would probably choose California law as the governing law.</p>
<p>It is also conceivable that this issue could be framed as a product liability issue with the product being defective because it relied upon a service that could be discontinued. This liability would run directly from the consumer to Olio Devices. The statute of limitations in California for a products liability lawsuit involving personal property is generally three years.</p>
<p>Realistically, the only economic way to bring any economic lawsuit would be via a class action lawsuit, but if any contract or license running from Olio Devices directly to the consumer contained an arbitration clause (which it is quite likely that it would) then a class action lawsuit would probably be barred and an arbitration proceeding would have to be commenced instead.</p>
<p>So, there are facts not present in the question that are necessary to provide an accurate answer, but the clock is definitely ticking and many theories of relief are likely to be barred some time in 2020 or 2021 depending upon the theory, and some causes of action may already be time barred.</p>
<p>Of course, if this happened in 2017, it is very likely that someone already did bring a lawsuit, which may have been settled, resolved in arbitration proceedings, or resolved in a class action proceedings that was concluded or is still pending. If there was a class settlement of such a lawsuit, it may still be possible to apply to receive a payment under that settlement. It would be surprising for someone to wait until now to sue, if there were many thousands of units sold that were rendered useless and there was a viable litigation option. Somebody would almost surely have investigated the matter before then and there are multiple law firms in California that specialize in these kinds of lawsuits and usually figure out opportunities for lawsuits first and recruit clients second.</p>
<h1>Other Factual Background</h1>
<p>Factual background <a href="https://www.soft32.com/blog/platforms/another-one-bites-dust-long-olio/" rel="nofollow noreferrer">here</a> and <a href="https://www.soft32.com/blog/platforms/update-another-one-bites-dust-long-olio/" rel="nofollow noreferrer">here</a>.</p>
<p>Data on the sale of the company/assets <a href="https://pitchbook.com/profiles/company/97958-44" rel="nofollow noreferrer">here</a>.</p>
<p>The most valuable asset of Olio Devices was probably <a href="https://news.microsoft.com/2016/01/25/microsoft-and-olio-devices-announce-patent-licensing-agreement/" rel="nofollow noreferrer">its patent license revenues from Microsoft</a>.</p>
<p>It appears that the purchase price was <a href="https://www.crunchbase.com/organization/olio-devices#section-overview" rel="nofollow noreferrer">$14 million.</a></p>
