Antitrust Law Daily Wrap Up, ADVERTISING—9th Cir.: Apple’s advertising of iPhone Siri feature was not misleading, (Feb 26, 2016)

By Jody Coultas, J.D.

iPhone purchasers failed to plead fraud or plausible claims under California’s Unfair Competition Law, Consumers Legal Remedies Act, and False Advertising Law regarding Apple’s advertising of the Siri feature of the device, the U.S. Court of Appeals in San Francisco has held (In re iPhone 4S Consumer Litigation, February 25, 2016, per curiam).

Apple manufactures the iPhone 4S mobile telephone and marketed its voice-activated personal assistant feature named “Siri” through press conferences, press releases, emails, and on the company website. At product demonstrations and in advertisements, the feature was shown answering a series of questions and performing various tasks, including making appointments, searching the Internet, finding local businesses, sending text messages, and getting directions.

Purchasers who purportedly bought iPhones in reliance on Apple’s representations regarding the Siri feature filed a class action against Apple, alleging violations of the California consumer protection laws. Specifically, the purchasers alleged that the Siri feature did not perform as advertised, even when the feature was posed the same questions depicted in the product advertisements. They claimed that they paid a premium for the mobile phone based on the utility of the Siri feature and would not have done so if they had not relied on Apple’s allegedly false and misleading statements.

In July 2013, Apple’s motion to dismiss the complaint was granted by the federal district court in Oakland. In February 2014, the court dismissed the purchasers’ amended complaint. The purchasers appealed.

Rule 9(b). The district court did not err in finding that purchasers failed to meet the heightened pleading requirements of Rule 9(b), according to the court. The purchasers failed to describe how and why Apple’s statements were fraudulent or misleading. Merely pointing to product demonstrations of Siri in Apple’s general advertising campaign was insufficient to show that Apple fraudulently misled purchasers into believing Siri would perform consistently. There was no defined level of consistency expected based on the representations. Also, the purchasers did not present evidence of how often Siri actually performed or that Siri never worked. Failure to meet undefined expectations of consistency did not render Apple’s representations misleading.

Rule 8(a). Dismissal for failure to meet the pleading requirements of Rule 8(a) was also proper, according to the court. Complaints alleging fraud must also meet the plausibility requirement of Rule 8(a). The “reasonable consumer” test requires a showing that members of the public are likely to be deceived. There was insufficient evidence to allow the court to determine whether a reasonable consumer would be misled by Apple’s representations. The purchasers failed to articulate what level of consistent performance Apple fraudulently represented, and failed to define the level of consistency a reasonable consumer would expect.

Dissent. Taking the specific allegations in the light most favorable to the purchasers, the dissent would have denied the motion to dismiss. The dissent took issue with the majority’s finding that the purchasers failed to present specific evidence to support the allegation that “Siri did not work as consistently as they expected.” Contrary to the majority’s opinion, the purchasers set forth, in great detail, the specific functions that the Apple commercials claimed that Siri will do and that Siri did not actually do those specific things. This was sufficient to state a claim, according to the dissent.

Apple argued that the purchasers failed to plead that the commercials specifically stated that Siri will work “consistently.” However, according to the dissent, no commercials specifically state that the advertised product will work consistently. A reasonable person would understand that such performance is implied, especially when the function is demonstrated in a commercial. Plaintiffs are entitled to the benefit of the reasonable inferences that can be drawn from the detailed facts they alleged in their complaint, especially when the cause of action merely require proof that the claims are misleading.

The case is No. 14-15487

Attorneys: Ben Barnow (Barnow and Associates, PC) for Frank M. Fazio. Aimee Marie Halbert (Gibson, Dunn & Crutcher LLP) for Apple Inc.

Companies: Apple Inc.

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