A class-action lawsuit over "false water purifier certification" labeling that domestic home appliance corporations Cuckoo are fighting in the United States is expected to resume. The court accepted Cuckoo's argument that the complaint filed by consumers did not meet legal requirements and gave them a chance to amend it. The consumers then submitted a revised complaint, and with the court finding it meets the requirements, follow-up proceedings appear likely.
On the 12th, according to reporting by ChosunBiz, the Los Angeles County Superior Court in California recently denied Cuckoo Rental America and Cuckoo Electronics America's claim that "the consumers' (plaintiffs') first amended complaint does not satisfy legal requirements." Cuckoo asked the court to end the case, pointing to deficiencies in the complaint, but the court found that the conditions to continue the suit were met.
The case first surfaced last year. Cuckoo Holdings(192400) sells home appliances in the U.S. through its American unit, Cuckoo Electronics America. CUCKOO Homesys(284740)'s U.S. unit, Cuckoo Rental America, lends and sells water purifiers and air purifiers. Local consumers filed suit last year, saying "Cuckoo labeled and sold or lent water purifiers as if they met required standards without having completed the relevant certifications and registrations."
Under local rules, to sell a water purifier with the ability to reduce "health-related contaminants," a product must be certified by an accredited body such as the Water Quality Association (WQA). Consumers argued at the time that Cuckoo's products were not included on the certification lists of the Water Quality Association or the California State Water Resources Control Board.
Cuckoo said, "This is an issue that can be resolved by providing some supplementary explanation; all registrations and certifications necessary for our local operations have been completed," adding, "This is not a lawsuit related to product defects."
After the suit was filed, Cuckoo countered that "the lawsuit is not legally viable." On Jan. the court accepted Cuckoo's argument but did not dismiss the case, giving consumers an opportunity to amend and resubmit their complaint.
The consumers supplemented their claims and legal bases and filed a first amended complaint. Cuckoo again asked the court to end the case, arguing that "even the supplemented complaint still does not state a legally cognizable claim," but the court found that the amended complaint met the minimal legal requirements to proceed. With the court not accepting Cuckoo's argument, the case is expected to move into subsequent procedures.
A legal industry source said, "A claim framed only in abstract terms like 'Cuckoo deceived consumers' is unlikely to be viable," adding, "If the complaint specifically describes the products and certification labeling, the circumstances of purchase or lending, the grounds for alleging falsity, and the damages consumers suffered, it can be viewed as meeting the threshold to continue the lawsuit."
Facing a class action, Cuckoo's U.S. operations are also sluggish. As of the first quarter of this year, Cuckoo Rental America had liabilities of about 75.7 billion won and assets of 67.2 billion won, putting it in a capital impairment state. Revenue was around 8.2 billion won, and total comprehensive loss, reflecting exchange rates and changes in asset values in net results, was 1.3 billion won. Last year as well, it posted revenue of 33.7 billion won but recorded a total comprehensive loss of 5.4 billion won.
Cuckoo Electronics America is not in a capital impairment state, but its losses are significant. In the first quarter of this year, it recorded revenue of 10.9 billion won but posted a total comprehensive loss of 6 billion won.