iPhone Class Action Defense Cases–Apple and AT&T Mobility Antitrust Litigation: California Federal Court Certifies Nationwide Class Action Against Apple And AT&T On iPhone Antitrust Claims

Jul 12, 2010 | By: Michael J. Hassen

Class Action Complaint Against Apple and AT&T for Antitrust Violations in Connection with Sale and Marketing of iPhone Warranted Class Action Treatment California Federal Court Holds

Plaintiffs filed a putative nationwide class action against Apple and AT&T Mobility (ATTM) alleging federal antitrust violations; specifically, the class action complaint alleged “monopolization in violation of Section 2 of the Sherman Act, violation of the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301, et seq., and violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.” In re Apple & ATTM Antitrust Litig., ___ F.Supp.3d ___ (N.D.Cal. July 8, 2010) [Slip Opn., at 1]. The district court summarized the allegations underlying the class action complaint at page 1 as follows: “Plaintiffs allege that although they were required to purchase a two-year service agreement with ATTM when they purchased their iPhones, Apple and ATTM had secretly agreed to technologically restrict voice and data service in the aftermarket for continued voice and data services for five years, _i.e._, after Plaintiffs’ initial two-year service period expired. Plaintiffs also allege that Apple monopolized the aftermarket for third party software applications for the iPhone, and that Apple caused the iPhone to become unusable if it detected that a customer had “unlocked” their iPhone for use with other service providers.” Defense attorneys for Apple moved for summary judgment with respect to the class action’s iPhone Operating System Version 1.1.1 claims, which the district court granted. _Id._, at 2. We do not here discuss that portion of the court order. Rather, as part of the same order, the district court considered plaintiffs’ motion to certify the litigation as a class action; the district court granted class action treatment to the lawsuit. _Id._ It is the class action certification portion of the decision that we discuss below.

Plaintiff’s class action certification motion sought to certify the litigation on behalf of a nationwide class defined as follows: “All persons who purchased or acquired an iPhone in the United States and entered into a two-year agreement with Defendant AT&T Mobility, LLC for iPhone voice and data service any time from June 29, 2007, to the present.” In re Apple, at 12-13. (The motion additionally sought certification of a sub-class defined as “All iPhone customers whose iPhones were ‘bricked’ by [Apple] at any time during the Class Period.” Id., at 13. However, the district court granted Apple’s motion for summary judgment on the “bricking” claim, so the court did not address the sub-class. Id.) The federal court noted that with respect to Rule 23(a)’s requirements for class action certification, Apple and ATTM did not contest numerosity, see id., at 13-14, nor did they contest adequacy of representation, see id., at 21-22. But defendants argued that the commonality and typicality requirements of Rule 23(a) had not been met, and that Rule 23(b) had not been met.

With respect to Rule 23(a)(2)’s commonality requirement, defendants argued class action treatment would be inappropriate because “(1) each class members’ state of mind is critical to an adjudication of the Sherman Act claims, (2) antitrust damages will require a highly individualized inquiry, and (3) Plaintiffs’ expert did not perform an analysis adequate to show antitrust impact on the class.” In re Apple, at 14. The district court rejected each of these claims. Defendants argued that “whether each class member ‘knowingly’ gave [them] market power by entering into a de facto five year commitment to purchase voice and data service from ATTM requires an individualized inquiry that destroys commonality, and (2) that even if there are common questions of liability, damages will require an individual inquiry into what each consumer would have done if they had known of the five year commitment.” Id., at 14-15. Plaintiffs countered that “(1) the question of whether iPhone purchasers ‘knowingly’ gave Defendants market power can be resolved on a class-wide basis by looking to the fact that purchasers signed a two year contract while Defendants maintained a uniform policy of failing to disclose their five year agreement to purchasers at the time of sale, and (2) Plaintiffs can prove damages by analyzing ‘market level’ factors, such as the value of being able to switch service providers.” Id., at 15. The district court noted that it had previously held that the class action complaint adequately alleged the existence of two iPhone aftermarkets: (1) the aftermarket for voice and data service, and (2) the aftermarket for applications.” Id. And the federal court explained also that federal law did not require individual, rather class-wide, inquiry be made “into whether consumers ‘knowingly’ entered into de facto commitments to be monopolized.” Id., at 16. And as for defendants’ claim that the opinions of plaintiffs’ expert should be excluded because she “offer[ed] a flawed analysis of damages that does not track Plaintiffs’ theory of antitrust harm,” id., at 17, the federal court performed the analysis required under the recent Ninth Circuit decision in Dukes v. Wal-Mart Stores, Inc., ___ F.3d ___, 2010 WL 1644259, at *14 (9th Cir. Apr. 26, 2010), and found the expert’s opinion adequately tracked “the overall challenged practice of the monopolization of the voice and data aftermarket,” _id._, at 19.

With respect to Rule 23(a)(3)’s typicality requirement, defense attorneys argued in part that “‘the diversity of information and understanding [Plaintiffs] and class members had in purchasing their iPhones, particularly because the information available changed over time,’ destroys typicality,” In re Apple, at 20. The federal court disagreed, finding “Plaintiffs’ claims are reasonably co-extensive with those of the class” and “reject[ing] ATTM’s contention that the individualized knowledge of each class member precludes certification.” Id.

With respect to certification of a Rule 23(b)(2) class, defense attorneys argued that monetary relief was the primary focus of the complaint. In re Apple, at 22-23. Plaintiffs disagreed, arguing that “ending the challenged practices is important relief for the class because it would provide freedom to use their iPhone with the applications of their choice and without unwittingly agreeing to a five year service commitment with ATTM.” Id., at 23. The federal court found that the requirements of Rule 23(b)(2) had been met. Id., at 23-24. And the district court further found that class action certification under Rule 23(b)(3) was appropriate because defendants’ arguments to the contrary merely tracked their objections to commonality and typicality under Rule 23(a). Id., at 24. Accordingly, the court granted plaintiffs’ motion for class certification, id., at 24-25.

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