Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: Denial of class certification upheld in action by former Apple computer resellers, (Feb 9, 2015)

By Linda O’Brien, J.D., LL.M.

A trial court properly denied a motion to certify a class of former resellers of Apple computers and other products in their action against Apple for allegedly engaging in unfair business practices by opening its own retail stores in order to drive independent resellers out of business, the California Court of Appeals in San Jose has determined in an unpublished opinion (Siechert & Synn v. Apple Inc., February 6, 2015, Mihara, N.).

Backgound. Historically, Apple sold its products to consumers primarily through independent resellers, such as large national chains, regional chains, and small businesses. “Apple Authorized Specialists” were a subset of Apple authorized resellers that specialized in the sale and service of Apple computers. Siechert & Synn, Omnitech Computer, Computer Outlet, Joe Weingarten, and Pamela Rogers were Apple Authorized Specialists and engaged in the business of selling Apple computers and other Apple products.

In 2001, Apple began opening its own retail stores in order to increase its market share for personal computers. In 2009, the plaintiffs sued Apple, asserting claims, in part, for violations of California’s Unfair Practices Act (UPA). Specifically, the plaintiffs alleged that the technology company opened the retail stores as a part of a scheme to drive its independent resellers out of business and induced them to continue doing business with Apple until it could establish its own chain of stores. They also alleged that Apple gave “secret rebates” to favored resellers, such as the large national chains, but not to the Apple Authorized Specialists. The plaintiffs moved to certify a class of all persons in the United States who were Apple Authorized Specialists on January 1, 2001, and January 1, 2004. The trial court denied the plaintiffs’ class certification motion since they failed to show that common questions predominated over individual issues. The plaintiffs timely appealed.

UPA claim. In denying class certification, the trial court properly determined that, with respect to the UPA claim, individual issues would predominate as to whether each class members suffered a competitive injury. The plaintiffs’ contention that the trial court erred in assuming that each class member would have to prove entitlement to relief individually since the UPA excused them from alleging or proving actual damages was rejected. Section 17082 of the UPA provides that it is not necessary to allege or prove actual damages or actual injury to the plaintiff. But, in addition to injunctive relief, a plaintiff is entitled to recover three times the amount of actual damages resulting from a violation of the Act.

According to the appellate court, under the terms of the provision, a plaintiff could bring an action for injunctive relief without proving actual damages but must prove actual damages to be entitled to treble damages. In this case, the plaintiffs sought actual and punitive damages in addition to injunctive relief and therefore must plead and prove competitive injury.

Moreover, there was substantial evidence that supported the trial court’s finding that competitive injury could not be established on a classwide basis. The defendant presented evidence that Specialists located nearby to alleged favored resellers were not necessarily in direct competition with them and had no appreciable impact on their sales. Additional evidence indicated that one alleged favored reseller referred its service business to a nearby Specialist store. Finally, the defendant’s expert economist explained that the question of whether the alleged secret rebates caused Specialists to lose sales or profits could only be done on an individual basis. Thus, the trial court properly found that the plaintiffs’ UPA claim raised predominately individualized issues, the appellate court concluded.

The case is No. H036402.

Attorneys: Anthony Albert Ferrigno (Law Offices of Anthony A. Ferrigno), John David Franklin (Franklin & Franklin), and Alan Roth Plutzik (Bramson, Plutzik, Mahler & Birkhouser LLP) for Siechert & Synn, Joe Weingarten, Pamela Rogers, Omnitech Computer, Inc., Computer Outlet Station, and The Macstation, Inc. Christopher St. John Yates (Latham & Watkins LLP), and Miriam A. Vogel (Morrison & Foerster LLP) for Apple, Inc.

Companies: Omnitech Computer, Inc.; The Macstation, Inc.; Apple, Inc.

Cases: StateUnfairTradePractices CaliforniaNews