Antitrust Law Daily Wrap Up, PRIVACY—N.D. Cal.: Apple and app developers not liable for misrepresenting privacy settings, (May 15, 2014)

By Jody Coultas, J.D.

The federal district court in San Francisco has dismissed all claims brought by Apple device purchasers against Apple Inc. and app developers for allegedly stealing and disseminating the purchasers’ address books (Opperman v. Path, Inc., May 14, 2014, Tigar, J.).

iPhone, iPod, and iPod Touch purchasers who downloaded apps from Apple’s App Store alleged that Apple and the app developers stole and disseminated contact information stored on the purchasers’ devices without their knowledge. The purchasers also alleged that Apple taught the developers to incorporate forbidden data harvesting functionalities into their Apps that would not be noticed by the iDevice owner. This allegedly contradicted Apple’s representations regarding customer privacy and security.

The purchasers filed California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA) claims against Apple and the app developers. Also included were claims against Apple and/or the app developers under California’s Comprehensive Computer Data Access and Fraud Act (“CDAFA”), Wiretap/Invasion of Privacy Act, Uniform Fraudulent Transfer Act, Texas’ Wiretap Acts, Theft Liability Act, the federal Computer Fraud & Abuse Act, and Electronic Communications Privacy Act (“ECPA”). Apple and the app developers also allegedly engaged in negligent misrepresentation, invasion of privacy, conversion, trespass to personal property and/or chattel, misappropriation, strict product liability, negligence, and secondary and vicarious liability.

Article III standing. The court held that the purchasers had Article III standing based on allegations of overpayment for their devices, but lacked standing for claims based on any injury to their property rights in their address books. To have standing, the purchasers needed to show a concrete and particularized and actual or imminent injury in fact fairly traceable to the challenged action of the defendants that would be redressed by a favorable decision. The purchasers alleged that Apple caused them to overpay for their devices. They contend that they would have paid less for their devices, or not purchased them at all, if Apple had disclosed that it had failed to adequately secure the devices from the alleged intrusion. Apple’s standing arguments went more to the merits of the claims rather than whether the purchasers had standing, in the court’s view. Apple’s alleged misrepresentations were relied on by the purchasers when making their purchasing decisions, and each purchaser overpaid for Apple’s products. The purchasers were also able to establish standing through their statutory claims because an injury can exist solely by virtue of statutes creating legal rights, the invasion of which creates standing.

It was not unconstitutional to allow non-California resident purchasers to assert California statutory claims against Apple based on Apple’s conduct in California, according to the court.

State law claims. The purchasers failed to plead with particularity the specific representations upon which they relied, according to the court. A plaintiff must identify and describe the specific alleged misrepresentations that each plaintiff saw or heard, and upon which each plaintiff relied. The purchasers failed to allege that they actually relied on any of the alleged misrepresentations. Therefore, the court dismissed the California consumer protection law claims.

The California consumer protection law claims could not be based on a long-term and extensive advertising campaign, according to the court. The purchasers alleged that Apple engaged in a long-standing, widespread advertising campaign that created a reputation for safety and reliability. Where a plaintiff alleges a long-term advertising campaign, courts do not require the plaintiffs to allege the specific representations on which they relied. In such cases, a plaintiff must allege that the plaintiff actually saw the advertising campaign, the advertising campaign was so long that it would be unrealistic to require the plaintiff to plead each misrepresentation seen and relied upon, and present a “representative sample” of the advertisement. The purchasers were not able to show they were actually exposed to the advertising campaign, the length of the campaign, or the nature of the campaign.

The court also dismissed the claims against the app developers for the same reasons as noted above.

Additional claims. The court also dismissed Uniform Fraudulent Transfer Ac, common law aiding and abetting, and for successor liability claims against Facebook Inc. and Gowalla, Inc.

The case is No. 13-cv-00453-JST.

Attorneys: Cari Ann Cohorn (Phillips, Erlewine& Given LLP) for Marc Opperman. Gregory J. Casas (Greenberg Traurig, LLP) and Jedediah Wakefield (Fenwick & West LLP) for Path, Inc. Alan D. Albright (Gray Cary Ware & Freidenrich LLP) for Apple Inc. Lori R. Mason (Cooley LLP) for Facebook Inc.

Companies: Apple Inc.; Facebook Inc.; Gowalla, Inc.

Cases: Privacy StateUnfairTradePractices Advertising CaliforniaNews