Well, this is a little awkward. I mean, it's the New Year . . . Christmas is over . . . and I didn't get you anything. I got a Nano and a couple of gift cards for iTunes. But what to get you . . .
I know! A boxed set of three decisions involving Apple, circa December 2009!
In Hovespian v. Apple, Inc., 2009 WL 5069144 (N.D. Cal. Dec. 17, 2009), the court granted Apple's motion to dismiss and its motion to strike class allegations. (It was a good holiday for Apple, too, apparently.) Plaintiff -- a Florida resident -- had brought a class action in California federal court, purporting to represent all people who bought iMAC G5 personal computers. Plaintiff alleged that the display screen was prone to developing vertical lines that ultimately rendered the screen unusable, that Apple knew of this fact and concealed it, refusing to repair the machines because the lines developed after the one year express warranty had run on the machine. (Plaintiff bought his Mac in October 2006, but the lines did not appear until March 2008.) Plaintiff's Second Amended Complaint ("SAC") pled causes of action under California's Consumer Legal Remedies Act, the Unfair Competition Law, for fraudulent omission, for unjust enrichment, and for a declaration that the one-year warranty limitation was unenforceable.
The court dismissed plaintiff's CLRA claim without leave to amend because it failed to state with particularity -- as required by Rule 9(b) -- "when and where Apple made an affirmative misrepresentation, if any, that contradicts its alleged omissions." Id. at *3. The complaint contained only generalized allegations that Apple had exclusive knowledge of the problem and concealed it. This was insufficient -- without affirmative statements that contradict the omitted information -- to state a CLRA claim.
The court also granted dismissal of the UCL claim without leave to amend. Citing to Clemens v. DaimlerChrysler Corp., 534 F.3d 1017 (9th Cir. 2008), the court held that an alleged defect that may shorten the life span of a product that performs as warranted throughout the express warranty term does not cause a substantial injury to consumers and cannot serve as the basis for a UCL claim.
The court granted dismissal of the common law fraudulent omission claim for the same reason it dismissed the CLRA claim, but it made the dismissal without prejudice to give plaintiff leave to re-plead to elaborate on what duty to speak Apple had that it allegedly had violated.
The court also dismissed the unjust enrichment claim with prejudice, holding that an unjust enrichment claim that is premised on the same course of conduct that underlies the statutory and common law tort claims cannot stand alone as an independent claim for relief. Id. at *5. It fails for the same reason the other claims fail.
The court also granted Apple's motion to strike the class allegations, citing its authority under Federal Rules of Civil Procedure 23(c)(1)(A), 23(d)(1)(D), and 12(f). Plaintiff defined the class as all persons who purchased iMAC G5 personal computers from Defendant Apple, Inc. The court held that the complaint failed to state a valid class action claim against Apple:
First, the class is not ascertainable because it includes members who have not experienced any problems with their iMAC display screens. Such members have no injury and no standing to sue. Second, the class is not maintainable under Rule 23(b)(3) because it includes members who can have no claim against Apple. For example, the putative class includes members who (a) did not purchase the particular iMac model or the type of iMac screen that Hovespian alleges is defective and (b) experienced the alleged defect after their warranty expired. Finally, the class is not maintainable under Rule 23(b)(1) or Rule 23(b)(2). These types of class actions are not suitable for actions where recovery of money damages is the primary relief sought by the plaintiff.
Id. at *6. The court struck the class allegations without prejudice, thus allowing amendment after plaintiff amended his fraudulent concealment claim.
The second case in our Apple boxed set was well reported on: Birdsong v. Apple, Inc., 2009 WL 5125776 (9th Cir. Dec. 30, 2009). Birdsong involved a class action challenge to Apple's iPod based on the potential for hearing loss. Plaintiffs alleged that the iPod was defective in that it could achieve sounds of 115 decibels, the long battery life allows those sounds to be played over long periods of time, the ear buds are designed to be placed deep in the ears (rather than over the ears), the ear buds lack noise cancelling properties, and the iPod lacks a volume meter that tells users they are listening at dangerous levels.
Apple includes this warning with each iPod:
Warning: Permanent hearing loss may occur if earphones or headphones are used at high volume. You can adapt over time to a higher volume of sound, which may sound normal but can be damaging to your hearing. Set your iPod's volume to a safe level before that happens. If you experience ringing in your ears, reduce the volume or discontinue use of your iPod.
Id. at *1.
The Ninth Circuit affirmed dismissal of the implied warranty of merchantability count, observing that nothing in the complaint says the iPod is defective for its ordinary purpose of listening to music. Rather, the statements in the complaint merely suggest that users have the option of using the iPod in a risky manner, but it does not suggest the product lacks any minimum level of quality. Where, as here, the complaint merely seeks additional features to make the product safer, it fails to allege the sort of lack of baseline utility that would support a breach of the implied warranty of merchantability claim. Id. at *2-*3.
Plaintiffs abandoned the breach of express warranty and breach of the implied warranty of fitness for a particular purpose claims on appeal.
The Ninth Circuit also affirmed dismissal of the Unfair Competition Law claim because they failed to allege the requisite injury to have standing to bring the claim. To begin with, the complaints did not allege that the plaintiffs themselves ever suffered hearing loss or were at risk of imminent hearing loss. Nor did they allege that plaintiffs themselves ever used their iPods in a way that exposed them to a risk of hearing loss. Rather, they cast their allegations as potential impacts on unidentified users. This was insufficient to meet the injury requirement for Article III standing. Id. at *4.
The court also held that plaintiffs failed to allege an economic harm (lost money or property) that would confer standing to sue under the UCL because "the alleged loss in value does not constitute a distinct and palpable injury that is actual or imminent because it rests on a hypothetical risk of hearing loss to other consumers who may or may not choose to use their iPods in a risky manner." Id. at *5. And the court rejected plaintiffs' "benefit of the bargain" theory, holding that the "plaintiffs' alleged injury in fact is premised on the loss of a 'safety' benefit that was not part of the bargain to begin with." Id.
The third case in our boxed set is a lump of coal: Owens v. Apple, Inc., 2009 WL 5126940 (S.D. Ill. Dec. 21, 2009). Plaintiffs brought a putative nationwide class action, alleging that Apple breached a contract and violated various consumer fraud statutes when it sold gift cards to people with the representation that songs cost $.99 a song, and then on April 7, 2009 raised the price of certain songs to $1.29.
Apple moved to dismiss, asserting a privity defense to the breach of contract claims. The court rejected it outright, where the gift card at issue was marketed by Apple and could be used only on Apple's website.
The court also held that there was nothing vague about the representation: "Songs are 99 cents, and videos start at $1.99." The complaint alleged plaintiffs relied on the price guarantee as part of the basis of the bargain, and that plaintiffs were damaged as a result of the price increase. The court refused to dismiss the breach of contract counts.
The court also refused to dismiss the consumer fraud counts. Apple had argued that the statement "Songs are 99 cents," did not mean that the price of all songs was 99 cents, but rather that some songs were 99 cents. Plaintiffs argued that this interpretation was a "slippery slope" that would allow Apple to market its gift cards in the same way so long as one song was 99 cents. The court refused to find that the phrase was not deceptive as a matter of law.
So that's it. A boxed set of Apple decisions for you. If they don't fit and you want to exchange them for a sweater vest I received this Christmas, just let me know.