`
`Case: 22-35652, 12/21/2022, ID: 12615703, DktEntry: 15, Page 1 of 92
`Docket No. 22-35652
`In the United States Court of Appeals
`For the Ninth Circuit
`
`In re: INTEL CORP. CPU MARKETING, SALES PRACTICES
`AND PRODUCTS LIABILITY LITIGATION:
`
`JIMAYA GOMEZ, RYAN CLARK, LOUISA FERRER, PAMELA GREEN, CARLO GARCIA,
`BRUCE BODOFSKY, LINDA PHILLIPS, SCHWARTZ EYE ASSOCIATES, P.A., JUBAL MALAY,
`JOSEPH PHILLIPS, KENNETH WOOLSEY, CLAUDE VOGEL, JUSTIN WHIPPO, DAVID
`COPELAND, KOTTEMANN ORTHODONTICS, P.L.L.C., ALLIANCE HEALTHCARE SYSTEM, INC.,
`KEVIN CRAWFORD, EMILIO RODRIGUEZ, AMY STOREY, GEORGE APPLE, KORY JENO,
`ZACHARY RICHARD, CITY OF NEW CASTLE, MARGARITE SAMPSON, CASSANDRA PAYNE,
`ALMA JENNINGS, JAMES BRADSHAW, JORDAN ROBBINS, VICTORIA BELLE DUNN,
`ROBERT KEY, JAMAL ELAKRAH, KATHLEEN GREER, HIBBITS INSURANCE, JERRY PEACOCK,
`CAROL MARZIALE, BLUE PEAKS HOSTING, LLC, MICHAEL NELSON, JACK MEZZELL,
`TITI RICAFORT, ANDREW EAST, BARRY WAYNE BROWNING, MICHAEL STRAUB,
`ZOG, INC., ARTESIA GENERAL HOSPITAL, and DK SYSTEMS, INC.,
`Plaintiffs-Appellants,
`
`v.
`
`INTEL CORPORATION, a Delaware Corporation,
`
`Defendant-Appellee.
`
`
`
`_______________________________________
`Appeal from a Decision of the United States District Court for the District of Oregon, Portland,
`No. 3:18-md-02828-SI ∙ Honorable Michael H. Simon
`APPELLANTS’ OPENING BRIEF
`CHRISTOPHER A. SEEGER
`ROSEMARY M. RIVAS
`DIOGENES P. KEKATOS
`GIBBS LAW GROUP LLP
`CHRISTOPHER L. AYERS
`1111 Broadway, Suite 2100
`SEEGER WEISS LLP
`Oakland, California 94607
`55 Challenger Road, 6th Floor
`(510) 350-9700 Telephone
`Ridgefield Park, New Jersey 07660
`rmr@classlawgroup.com
`(212) 584-0700 Telephone
`cseeger@seegerweiss.com
`dkekatos@seegerweiss.com
`cayers@seegerweiss.com
`Attorneys for Plaintiffs-Appellants
`Additional Counsel Listed on Inside cover
`
`
`COUNSEL PRESS ∙ (213) 680-2300
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`PRINTED ON RECYCLED PAPER
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`Case: 22-35652, 12/21/2022, ID: 12615703, DktEntry: 15, Page 2 of 92
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`
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`JENNIFER L. JOOST
`KESSLER TOPAZ MELTZER
`& CHECK LLP
`One Sansome Street, Suite 1850
`San Francisco, California 94104
` (415) 400-3000 Telephone
`jjoost@ktmc.com
`
`STUART A. DAVIDSON
`ROBBINS GELLER RUDMAN
`& DOWD LLP
`120 East Palmetto Park Road, Suite 500
`Boca Raton, Florida 33432
`(561) 750-3000 Telephone
`sdavidson@rgrdlaw.com
`
`CHARLES E. SCHAFFER
`LEVIN SEDRAN & BERMAN LLP
`510 Walnut Street, Suite 500
`Philadelphia, Pennsylvania 19106
`(215) 592-1500 Telephone
`cschaffer@lfsblaw.com
`
`STEVE D. LARSON
`JENNIFER S. WAGNER
`STOLL STOLL BERNE LOKTING
`& SHLACHTER P.C.
`209 SW Oak Street, Fifth Floor
`Portland, Oregon 97204
`(503) 227-1600 Telephone
`slarson@stollberne.com
`jwagner@stollberne.com
`
`GAYLE M. BLATT
`CASEY GERRY SCHENK FRANCAVILLA
`BLATT & PENFIELD LLP
`110 Laurel Street
`San Diego, California 92101
`(619) 238-1811 Telephone
`gmb@cglaw.com
`
`ADAM J. LEVITT
`DICELLO LEVITT LLC
`Ten North Dearborn Street, Sixth Floor
`Chicago, Illinois 60602
`(312) 214-7900 Telephone
`alevitt@dicellolevitt.com
`
`MICHAEL R. CASHMAN
`HELLMUTH & JOHNSON PLLC
`8050 West 78th Street
`Edina, Minnesota 55439
`(952) 941-4005 Telephone
`mcashman@hjlawfirm.com
`
`
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`Attorneys for Plaintiffs-Appellants
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`Case: 22-35652, 12/21/2022, ID: 12615703, DktEntry: 15, Page 3 of 92
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`CORPORATE DISCLOSURE STATEMENT
`
`Plaintiffs-Appellants Alliance Healthcare System, Inc., Artesia
`
`General Hospital, Blue Peaks Hosting, LLC, City of New Castle, DK
`
`Systems, Inc., Hibbits Insurance, Kottemann Orthodontics, P.L.L.C.,
`
`Schwartz Eye Associates, P.A., and Zog, Inc. are not publicly traded
`
`corporations and no publicly held corporation owns 10% or more of their
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`stock.
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`Case: 22-35652, 12/21/2022, ID: 12615703, DktEntry: 15, Page 4 of 92
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`TABLE OF CONTENTS
`
`Page
`TABLE OF AUTHORITIES ..................................................................... iv
`INTRODUCTION ...................................................................................... 1
`JURISDICTIONAL STATEMENT ........................................................... 4
`ISSUES PRESENTED FOR REVIEW ..................................................... 4
`STATEMENT OF THE CASE .................................................................. 5
`A. Background of the Litigation .................................................. 5
`1. Fundamental Processor Security Requires That
`Different Users Are “Isolated” from Each Other ........... 6
`Intel Removes Fundamental Security, Thereby
`Allowing Unauthorized Access ...................................... 8
`Intel Conceals the Defects ........................................... 10
`The Defects Uniquely Expose Intel CPUs
`to Numerous Exploits .................................................. 11
`Intel Conceals the Exploits .......................................... 12
` The Intel CPU Exploits Are Genuine,
`Not Theoretical............................................................. 13
`Intel’s Mitigations Do Not Genuinely Fix
`the Defects .................................................................... 14
`Proceedings in the District Court ......................................... 16
`1.
`The District Court Contingently Sustains
`Several of Plaintiffs’ Claims ........................................ 16
`2. On Materially Identical Allegations, the
`District Court Then Rejects Claims It
`Had Determined to Be Cognizable .............................. 18
`
`2.
`
`3.
`4.
`
`5.
`6.
`
`7.
`
`B.
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`
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`i
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`

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`3.
`
`4.
`
`The District Court Then Upholds Some
`Claims but Trims Them to Cover Only Seven
`Plaintiffs Who Purchased Intel-Powered
`Equipment on or After September 1, 2017 .................. 19
`The District Court Again Changes Course
`and Dismisses Even the Claims That It
`Had Pared Down .......................................................... 21
`STANDARD OF REVIEW ...................................................................... 23
`SUMMARY OF ARGUMENT ................................................................. 24
`ARGUMENT ........................................................................................... 30
`PLAINTIFFS AMPLY PLEADED UNFAIR
`I.
`CONDUCT-BASED CLAIMS ....................................................... 30
`A. The District Court’s March 2021 About-Face on
`Plaintiffs’ Unfair Conduct-Based Claims After Having
`Previously Held That Those Claims Were Viable Was
`Marred by Legal and Factual Error ..................................... 31
`The District Court’s Subsequent Rejection of Plaintiffs’
`Unfair Conduct-Based Claims as Overlapping with
`Their Omission-Based Claims Also Rested on Legal
`and Factual Error ................................................................. 40
`C. At a Minimum, the District Court Abused Its Discretion
`in Granting Reconsideration and Dismissing the Unfair
`Conduct-Based Claims That It Had Pared Down ................ 48
`II. PLAINTIFFS AMPLY PLEADED
`OMISSION-BASED CLAIMS ........................................................ 53
`A. Applicable Standards ............................................................ 54
`B. Plaintiffs Satisfied the LiMandri Test ................................. 57
`1.
`Intel Had Knowledge of the Defects as Early
`as 2006 .......................................................................... 57
`Plaintiffs Did Not Know About the Defects Before
`January 2018 and Could Not Reasonably Have
`Discovered Them .......................................................... 64
`ii
`
`B.
`
`2.
`
`
`
`

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`3.
`
`Intel’s Omissions Were Material to Reasonable
`Consumers .................................................................... 68
`Intel’s Omissions Concerned a Central Functional Defect .. 69
`C.
`CONCLUSION ........................................................................................ 74
`CERTIFICATE OF COMPLIANCE ........................................................ 77
`STATEMENT OF RELATED CASES .................................................... 78
`CERTIFICATE OF SERVICE ................................................................ 79
`
`
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`iii
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`

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`Case: 22-35652, 12/21/2022, ID: 12615703, DktEntry: 15, Page 7 of 92
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`
`
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`
`
`
`TABLE OF AUTHORITIES
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
` Page(s)
`
`
`Cases
`
`389 Orange Street Partners v. Arnold,
`179 F.3d 656 (9th Cir. 1999) ................................................................. 49
`
`
`Adams v. Starbucks Corporation,
`No. SACV 20-00225 JVS(KESx), 2020 WL 4196248
`(C.D. Cal. July 9, 2020) ......................................................................... 41
`
`
`Allen v. Hylands, Inc.,
`773 F. App’x 870 (9th Cir. 2019) ..................................................... 34, 35
`
`
`Anderson v. Apple Inc.,
`500 F. Supp. 3d 993 (N.D. Cal. 2020) ............................................. 64, 71
`
`
`Backus v. General Mills, Inc.,
`122 F. Supp. 3d 909 (N.D. Cal. 2015) ............................................. 34, 43
`
`
`Bettles v. Toyota Motor Corporation,
`No. 2:21-cv-07560-ODW (AFMx), 2022 WL 1619337
`(C.D. Cal. May 23, 2022) ................................................................. 71, 72
`
`
`Beyer v. Symantec Corporation,
`333 F. Supp. 3d 966 (N.D. Cal. 2018) ........................... 57, 59, 60, 68, 71
`
`
`Briseño v. Henderson,
`998 F.3d 1014 (9th Cir. 2021) ............................................................... 23
`
`
`Casey v. Albertson’s Inc,
`362 F.3d 1254 (9th Cir. 2004) ............................................................... 23
`
`
`Cel-Tech Communications, Inc. v. Los Angeles
`Cellular Telephone Co.,
`973 P.2d 527 (Cal. 1999) ....................................................................... 33
`
`
`
`
`
`iv
`
`

`

`Case: 22-35652, 12/21/2022, ID: 12615703, DktEntry: 15, Page 8 of 92
`
`Cepelak v. HP Inc.,
`No. 20-cv-02450-VC, 2021 WL 5298022
`(N.D. Cal. Nov. 15, 2021) ................................................................ 70, 71
`
`
`Colangelo v. Champion Petfoods USA, Inc.,
`No. 6:18-CV-1228 (LEK/ML), 2020 WL 777462
`(N.D.N.Y. Feb. 18, 2020) ....................................................................... 32
`
`
`Collins v. eMachines, Inc.,
`134 Cal. Rptr. 3d 588 (Cal. Ct. App. 2011) ........................................... 55
`
`
`Concept Chaser Co. v. Hoyu America Co.,
`No. CV08-07702 ODW (PLAx), 2009 WL 10673192
`(C.D. Cal. Apr. 3, 2009) ......................................................................... 42
`
`
`Daniel v. Ford Motor Company,
`806 F.3d 1217 (9th Cir. 2015) ............................................................... 68
`
`
`Daugherty v. American Honda Motor Co., Inc.,
`51 Cal. Rptr. 3d 118 (2006) ................................................................... 54
`
`
`Davis v. HSBC Bank Nevada, N.A.,
`691 F.3d 1152 (9th Cir. 2012) ............................................................... 34
`
`
`Deem v. William Powell Company,
`33 F.4th 554 (9th Cir. 2022) ................................................................. 23
`
`
`Drum v. San Fernando Valley Bar Association,
`106 Cal. Rptr. 3d 46 (Cal. Ct. App. 2010) ............................................. 34
`
`
`Edenborough v. ADT, LLC,
`No. 16-cv-02233-JST, 2016 WL 6160174
`(N.D. Cal. Oct. 24, 2016) ................................................................. 59, 60
`
`
`Edwards v. FCA US LLC,
`No. 22-cv-01871-WHO, 2022 WL 1814144
`(N.D. Cal. June 2, 2022) ....................................................................... 65
`
`
`
`v
`
`

`

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`
`Elias v. Hewlett-Packard Company,
`No. 12-CV-00421-LHK, 2014 WL 493034
`(N.D. Cal. Feb. 5, 2014) ............................................................ 32, 33, 64
`
`
`Ellsworth v. U.S. Bank, N.A.,
`908 F. Supp. 2d 1063 (N.D. Cal. 2012) ................................................. 53
`
`
`Falk v. General Motors Corporation,
`496 F. Supp. 2d 1088 (N.D. Cal. 2007) ........................................... 32, 55
`
`
`Graham v. VCA Animal Hospitals, Inc.,
`729 F. App’x 537 (9th Cir. 2018) ........................................................... 34
`
`
`Hauck v. Advanced Mirco Devices, Inc.,
`816 F. App’x 39 (9th Cir. 2020) ..................................................... passim
`
`
`Hauck v. Advanced Micro Devices, Inc.,
`No. 18-CV-00447-LHK, 2019 WL 1493356
`(N.D. Cal. Apr. 4, 2019) ................................................................ passim
`
`
`Herskowitz v. Apple Inc.,
`940 F. Supp. 2d 1131 (N.D. Cal. 2013) ................................................. 34
`
`
`Hodsdon v. Mars, Inc.,
`891 F.3d 857 (9th Cir. 2018) ..................................................... 42, 56, 70
`
`
`Horvath v. LG Electronics Mobilecomm U.S.A., Inc.,
`No. 3:11-cv-01576-H-RBB, 2012 WL 2861160
`(S.D. Cal. Feb. 13, 2012) ....................................................................... 40
`
`
`In re Adobe Systems, Inc. Privacy Litigation,
`66 F. Supp. 3d 1197 (N.D. Cal. 2014) ................................................... 34
`
`
`In re Agricultural Research & Technology Group, Inc.,
`916 F.2d 528 (9th Cir. 1990) ................................................................. 23
`
`
`In re Apple Inc. Device Performance Litigation,
`386 F. Supp. 3d 1155 (N.D. Cal. 2019) ........................................... 68, 71
`vi
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`
`
`

`

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`
`In re Apple, Inc. Device Performance Litigation,
` 366 F. Supp. 3d 1103 (N.D. Cal. 2019) .................................................. 46
`
`In re Apple Inc. Device Performance Litigation,
`347 F. Supp. 3d 434 (N.D. Cal. 2018) ................................................... 68
`
`
`In re Apple Processor Litigation,
`832 F. App’x 507 (9th Cir. 2020) ........................................................... 46
`
`
`In re Apple Processor Litigation,
`No. 18-cv-00147-EJD, 2022 WL 2064975
`(N.D. Cal. June 8, 2022) ................................................................. 44, 46
`
`
`In re MacBook Keyboard Litigation,
`No. 5:18-cv-02813, 2019 WL 1765817
`(N.D. Cal. Apr. 22, 2019) ................................................................ 64, 72
`
`
`In re MyFord Touch Consumer Litigation,
`46 F. Supp. 3d 936 (N.D. Cal. 2014) ................................... 59, 60, 64, 67
`
`
`In re Porsche Cars North America, Inc.,
`880 F. Supp. 2d 801 (S.D. Ohio 2012) .................................................. 40
`
`
`In re Tobacco II Cases,
`207 P.3d 20 (Cal. 2009) ......................................................................... 57
`
`
`In re Toyota Motor Corp. Unintended Acceleration Marketing,
`Sales Practices, and Products Liability Litigation,
`754 F. Supp. 2d 1208 (C.D. Cal. 2010) ................................................. 31
`
`
`In re Toyota Motor Corp. Unintended Acceleration Marketing,
`Sales Practices, and Products Liability Litigation,
`754 F. Supp. 2d 1145 (C.D. Cal. 2010) ................................................. 64
`
`
`In re Toyota RAV4 Hybrid Fuel Tank Litigation,
`534 F. Supp. 3d 1067 (N.D. Cal. 2021) ................................................. 55
`
`
`
`
`
`vii
`
`

`

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`
`Kanfer v. Pharmacare US, Inc.,
`142 F. Supp. 3d 1091 (S.D. Cal. 2015) .................................................. 41
`
`
`Kona Enterprises, Inc. v. Estate of Bishop,
`229 F.3d 877 (9th Cir. 2000) ................................................................. 49
`
`
`Lacey v. Maricopa County,
`693 F.3d 896 (9th Cir. 2012) ................................................................. 54
`
`
`Letizia v. Facebook Inc.,
`267 F. Supp. 3d 1235 (N.D. Cal. 2017) ................................................. 43
`
`
`LiMandri v. Judkins,
`60 Cal. Rptr. 2d 539 (Cal. Ct. App. 1997) ................................. 55, 56, 57
`
`
`Lorentzen v. The Kroger Co.,
`532 F. Supp. 3d 901 (C.D. Cal. 2021) ................................................... 41
`
`
`Love v. Marriott Hotel Services, Inc.,
`40 F.4th 1043 (9th Cir. 2022) ............................................................... 23
`
`
`McDonald v. Coldwell Banker,
`543 F.3d 498 (9th Cir. 2008) ................................................................. 38
`
`
`Mui Ho v. Toyota Motor Corporation,
`931 F. Supp. 2d 987 (N.D. Cal. 2013) ............................................. 60, 61
`
`
`Norcia v. Samsung Telecommunications America, LLC,
`No. 14-cv-00582-JD, 2018 WL 4772302 (N.D. Cal. Oct. 1, 2018) ........ 72
`
`
`Oddo v. United Technologies Corp.,
`No. 8:15-cv-01985-CAS (Ex), 2022 WL 577663
`(C.D. Cal. Jan. 3, 2022) ......................................................................... 73
`
`
`Painters & Allied Trades District Council 82 Health Care Fund v.
`Takeda Pharmaceuticals Company Limited,
`943 F.3d 1243 (9th Cir. 2019) ............................................................... 23
`
`
`
`
`
`viii
`
`

`

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`
`Palm v. Los Angeles Department of Water and Power,
`889 F.3d 1081 (9th Cir. 2018) ............................................................... 24
`
`
`Robinson Helicopter Company, Inc. v. Dana Corporation,
`102 P.3d 268 (Cal. 2004) ....................................................................... 55
`
`
`Rose v. Seamless Financial Corporation Inc.,
`916 F. Supp. 2d 1160 (S.D. Cal. 2013) .................................................. 41
`
`
`Rubio v. Capital One Bank,
`613 F.3d 1195 (9th Cir. 2010) ............................................................... 34
`
`
`Rutledge v. Hewlett-Packard Company,
`190 Cal. Rptr. 3d 411 (Cal. Ct. App. 2015) ........................................... 56
`
`
`Smith v. Chase Mortgage Credit Group,
`653 F. Supp. 2d 1035 (E.D. Cal. 2009) ................................................. 43
`
`
`Sonner v. Premier Nutrition Corporation,
`971 F.3d 834 (9th Cir. 2020) ................................................................. 47
`
`
`Sosenko v. LG Electronics U.S.A., Inc.,
`No. 8:19-cv-00610-JKS-ADS, 2019 WL 6118355
`(C.D. Cal. Aug. 29, 2019) ...................................................................... 59
`
`
`South Bay Chevrolet v. General Motors Acceptance Corporation,
`85 Cal. Rptr. 2d 301 (Cal. Ct. App. 1999) ............................................. 38
`
`
`Stafford v. Rite Aid Corporation,
`No. 3:17-cv-1340-AJB-JLB, 2018 WL 4680043
`(S.D. Cal. Sept. 28, 2018) ...................................................................... 41
`
`
`Trader Joe’s Company v. Hallatt,
`835 F.3d 960 (9th Cir. 2016) ................................................................. 24
`
`
`Wildin v. FCA US LLC,
`No. 3:17-cv-02594-GPC-MDD, 2018 WL 3032986
`(S.D. Cal. June 19, 2018) ................................................................ 57, 58
`ix
`
`
`
`

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`
`Williams v. Gerber Products Company,
`552 F.3d 934 (9th Cir. 2008) ........................................................... 43, 54
`
`
`Wilson v. Hewlett-Packard Company,
`668 F.3d 1136 (9th Cir. 2012) ......................................................... 36, 55
`
`
`Yumul v. Smart Balance, Inc.,
`733 F. Supp. 2d 1134 (C.D. Cal. 2010) ................................................. 32
`
`
`Zlotnik v. U.S. Bancorp,
`No. C 09-3855 PJH, 2009 WL 5178030
`(N.D. Cal. Dec. 22, 2009) ...................................................................... 41
`
`
`
`Statutes
`
`28 U.S.C. § 1291 ....................................................................................... 4
`
`28 U.S.C. § 1332(d)(2)(A) ........................................................................... 4
`
`28 U.S.C. § 2017(a) .................................................................................... 4
`
`
`Rules
`
`Fed. R. Civ. P. 9(b) ................................................................................... 58
`
`
`Other Authorities
`
`Hauck v. Advanced Micro Devices, Inc.,
`No. 18-CV-00447-LHK, 2018 WL 10704693
`(N.D. Cal. Dec. 6, 2018) ........................................................................ 63
`
`
`
`
`
`x
`
`

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`Case: 22-35652, 12/21/2022, ID: 12615703, DktEntry: 15, Page 14 of 92
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`INTRODUCTION
`Plaintiffs-Appellants
`(“Plaintiffs”), who
`
`include
`
`ordinary
`
`consumers and private and governmental entities, appeal the dismissal
`
`of the consolidated class action complaints they filed against Defendant-
`
`Appellee Intel Corporation (“Intel”) in multidistrict litigation centralized
`
`in the United States District Court for the District of Oregon (Hon.
`
`Michael H. Simon, J.). Plaintiffs alleged that Intel knowingly designed,
`
`produced, marketed, and sold central processing units (“CPUs” or
`
`“processors”) with critical security vulnerabilities that made users’
`
`private information accessible to unauthorized access—all in an effort to
`
`boost its CPUs’ speed, and thus beat out rivals and charge premium
`
`prices. Unbeknownst to Plaintiffs, but known to Intel, the security
`
`vulnerabilities allow myriad exploits to steal confidential data stored on
`
`their computers. In January 2018, when it was forced to publicly
`
`acknowledge the exploits capitalizing on its processors’ hardware
`
`vulnerabilities, Intel began issuing a number of mitigations, which have
`
`materially degraded the performance of Plaintiffs’ Intel-powered
`
`devices—performance for which they had paid a premium price.
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`
`
`1
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`

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`In four decisions spanning a two-year period, the district court
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`pivoted back and forth. In 2020, it held that if they established Article
`
`III standing, then Plaintiffs asserted several viable claims based on
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`unfair conduct. But a year later, it did a 180-degree turn on materially
`
`identical factual allegations and concluded those same claims failed for
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`lack of a material omission because, although there was no allegation
`
`they had seen them, Plaintiffs conceivably had access to industry experts’
`
`white papers and other technical writings about other vulnerabilities in
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`Intel’s processors—even though none disclosed the unique combination
`
`of the below-defined Defects at issue here, about which only Intel knew.
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`After Plaintiffs further amended their complaint, the court then
`
`rendered a third decision in January 2022, sustaining certain unfair
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`conduct-based claims and identifying a laundry-list of allegations
`
`supporting its ruling, but only as to Plaintiffs who bought Intel-powered
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`equipment more than ninety days after Intel was informed in mid-2017
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`of specific exploits capitalizing on the security vulnerabilities. That
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`limited upholding, however, proved short-lived. Just months later, the
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`court granted Intel’s motion for reconsideration. Without explaining how
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`Intel had met the high standard for such relief, the court simply changed
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`2
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`its view of Plaintiffs’ allegations, if not ignored them altogether (even
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`those it had identified in its prior opinion) and, instead, relied on Intel’s
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`mischaracterization of statements made in Plaintiffs’ briefs that were
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`taken out of context to find that the unfair conduct-based claims
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`overlapped with the omission-based claims. In doing so, the court
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`misread Plaintiffs’ papers and its own prior decision, and it gave an
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`internally inconsistent explanation as to why one theory was cognizable
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`whereas the other was not. Indeed, the court’s January 2022 opinion
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`demonstrated the plausibility of Plaintiffs’ allegations.
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`Aside from that, the court wrongly analyzed Plaintiffs’ omission-
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`based claims. The security vulnerabilities were known to Intel and were
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`not information that Plaintiffs could reasonably have learned before they
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`made their purchases. Moreover, this was information that was material
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`to any reasonable purchaser and, inasmuch as the vulnerabilities and
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`how they were exploited impacted core features of processor security and
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`performance, they concerned a central function—thereby mandating
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`Intel’s duty to disclose.
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`Because the district court’s rejection of Plaintiffs’ claims—marked
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`by these successive turnabouts—rests on incorrect legal standards,
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`3
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`inferences wrongly drawn against Plaintiffs on facial challenges to their
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`complaints, disregard or misreading of allegations, out-and-out
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`conjecture, and irreconcilable reasoning, it should be reversed.
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`JURISDICTIONAL STATEMENT
`The district court had jurisdiction over the subject matter of this
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`appeal pursuant to 28 U.S.C. § 1332(d)(2)(A) because the case is a
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`proposed class action in which the matter in controversy exceeds $5
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`million, exclusive of interest and costs, and Intel is a citizen of a state
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`different from that of at least one class member. 2-ER-318. This Court
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`has appellate jurisdiction pursuant to 28 U.S.C. §§ 1291 and 2107(a)
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`because this appeal, filed on August 8, 2022 (6-ER-1467-71), was timely
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`taken from a final judgment entered on July 7, 2022 (1-ER-3) that
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`disposed of all of Plaintiffs’ claims.
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`ISSUES PRESENTED FOR REVIEW
`1. Whether the district court erred in dismissing Plaintiffs’
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`claims based on unfair conduct where (a) Plaintiffs detailed plausible
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`allegations that Intel knowingly designed processors plagued by security
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`vulnerabilities and later abused, in multiple ways, information embargo
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`periods after learning of specific exploits of those vulnerabilities; and (b)
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`the court wrongly treated those claims as dependent upon the pleading of
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`a material omission.
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`2. Whether the district court erred in dismissing Plaintiffs’
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`omission-based claims, where (a) Intel long knew of the vulnerabilities in
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`its processors’ 2006 redesign that compromised their security, (b)
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`Plaintiffs lacked such knowledge and could not reasonably have acquired
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`it, (c) Intel’s omissions were material to any reasonable purchaser, and (d)
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`Intel’s omissions concerned severe impacts on core features of security
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`and performance and thus central functions of its processors.
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`STATEMENT OF THE CASE
`A. Background of the Litigation
`This multidistrict litigation arose from Intel’s deliberate design,
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`production, marketing, and sale of CPUs with security vulnerabilities.
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`The security vulnerabilities—defined below as the Unauthorized Access
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`Defect and Incomplete Undo Defect (collectively, “the Defects”)—are the
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`root causes of an ever-increasing number of side-channel exploits that
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`allow unauthorized third parties to take advantage of Intel’s processor
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`vulnerabilities to gain access to confidential information (the “Intel CPU
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`Exploits” or “Exploits”)—contrary to fundamental design principles. 2-
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`ER-307-09, 311; 3-ER-482-83, 496, 507, 511-12, 517-20.1
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`1. Fundamental Processor Security Requires That
`Different Users Are “Isolated” from Each Other
`CPUs are the “brains” of every computing device and control every
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`essential application, including the handling of confidential information.
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`2-ER-305. Ensuring the security of confidential information and
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`guaranteeing that different users or programs are “isolated” from each
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`other is a fundamental function of all CPUs. 2-ER-305; 3-ER-505-06.
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`Indeed, many users, such as the Enterprise Plaintiffs, have legal
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`duties to keep data in their possession confidential. 3-ER-488-90, 598-
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`600.
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` Enterprises—which include businesses, local governments,
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`educational institutions, and sundry other organizations—represent
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`roughly 60% of Intel CPU sales. 3-ER-596. They operate complex IT
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`systems on which they store sensitive third-party data. 3-ER-596-97. To
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`fulfill their legal obligations and given the sensitive nature of the
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`information they store, Enterprises place paramount importance on the
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`security of their IT infrastructure. 3-ER-600-01. Intel understood that
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`
`1 Except where otherwise noted, internal citations and quotation
`marks are omitted from case and Excerpts of Record quotations.
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`security of the utmost importance to Enterprises, and the risk to their
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`existence if it is compromised. 3-ER-489-90; see also 3-ER-605-09.
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`In promoting its CPUs’ security as a “top priority” (3-ER-495), Intel
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`represented that its “processors with hardware-based security features
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`help keep [users’] system[s] and data free from malware, hacking,
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`viruses, and prying eyes” (id.); that it had designed “hardware-enabled
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`security capabilities” directly into its processor, thereby allowing the
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`CPU to protect the computing ecosystem “against evolving and modern
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`threats” (3-ER-496); and its awareness that a user’s “network[s are] made
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`up of multiple layers that have unique attack surfaces. Compromise at
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`one layer can propagate through the operating system and applications.”
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`3-ER-601.
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`Recognizing that security is mission-critical, Intel marketed the
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`security of its CPUs as a foundational feature. 3-ER-605-06. For
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`instance, in 2016, Intel touted “ENHANCED SECURITY” as a reason to
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`upgrade to its 6th-generation Intel Core vPro processors. 3-ER-606.
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`That same year, Intel also urged Enterprises to “STEP UP SECURITY”
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`because cyberattacks leave “business[es] ... vulnerable,” with “breaches
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`averaging costs of $5.9 million to business.” 3-ER-608. Intel even
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`targeted its promotions to Enterprises in specific regulated industries
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`such as healthcare. It represented that “[p]rotection of personal health
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`information is a critical priority. Intel®-based technologies can support
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`the need for compliance with local regulation of health care information
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`such as the HIPAA [the federal Health Insurance Portability and
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`Accountability Act] privacy and security rule.” 3-ER-609.
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`2.
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`Intel Removes Fundamental Security, Thereby
`Allowing Unauthorized Access
`Intel released its Core processors in 2006, after it had lost the speed
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`crown to its principal competitor, AMD. 3-ER-480. Research, however,
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`revealed that, unlike its older P6 architecture, Intel’s Core architecture
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`permitted unauthorized access to protected memory during speculative
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`execution. 2-ER-306-08; 3-ER-476, 482-83. Speculative execution allows
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`a CPU to run instructions from software programs or applications before
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`knowing whether the instructions are required or access to information
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`is authorized. 2-ER-306.
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`In other words, in its Core architecture, in the interest of gaining
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`speed that its designs otherwise lacked, Intel knowingly and purposely
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`implemented the Unauthorized Access Defect to allow programs
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`unauthorized access to data by permitting instructions to access the read
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`value (instead of, like Intel’s former P6 architecture and AMD’s CPUs,
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`returning a random number) without first determining whether a user
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`has the “permission” or “privilege” to access that data. Id. Relatedly,
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`when its processors speculatively execute instructions, the Incomplete
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`Undo Defect that Intel implemented allows protected data to remain in
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`its CPUs’ unsecure subsystems (in other words, those instructions are
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`not completely undone) when a speculative instruction is wrong. 2-ER-
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`307; 3-ER-507.
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`Only Intel designed its processors and speculative execution in this
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`manner, which is why its processors are uniquely vulnerable to exploit.
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`2-ER-308, 311; 3-ER-507, 553. CPUs are supposed to ensure that
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`privileged data remains inaccessible to other programs unless expressly
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`authorized to share the data. 3-ER-487-88, 626. Intel knew that
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`removing well-accepted security ensuring memory isolation and leaving
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`confidential information accessible to unauthorized access violated
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`fundamental CPU design principles. Id. It also knew of the substantial
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`risks of allowing unauthorized access to protected information—which is
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`why both it and its comp