Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Apple dropped from unfair competition, false advertising suit, (Jun 21, 2016)

By Greg Hammond, J.D.

Consumers lacked standing to pursue injunctive relief against Apple, Inc., based on an error that allegedly rendered their devices "completely unusable and inoperable," because Apple has already released a software update and has agreed to cover repair and replacement costs, according to the federal district court in San Francisco. The California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) claims were also dismissed because they were based on fraud, and the complaint lacked sufficient particularity to give Apple notice of the particular misconduct alleged to have violated California’s laws (Lusson v. Apple Inc., June 20, 2016, Chhabria, V.).

Injunctive relief. The court first concluded that the consumers lacked standing to seek injunctive relief. In particular, the court found: (1) to the extent consumers seek injunctive relief in the form of a software update preventing the error from rendering devices completely inoperable, consumers did not establish a real and immediate threat of repeated injury because Apple already released such a software update; (2) to the extent consumers seek an injunction requiring Apple to cover repair and replacement costs, Apple has already agreed to do that; and (3) to the extent consumers seek an injunction that would prohibit Apple from engaging in misleading advertising, there is no danger that the consumers would be misled in the future because they are now aware of the alleged deception.

Misrepresentation. The economic loss rule also prohibited the consumers from recovering damages under a negligence and negligent misrepresentation theory because the economic loss rule prevents tort plaintiffs from recovering damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits. The consumers had sought damages for the loss of their devices, the cost of any services utilized in an attempt to remedy the inoperability of their devices, and the cost of purchasing a replacement device.

UCL, FAL, CLRA claims. Lastly, the court dismissed the California UCL, FAL, and CLRA claims, which were premised on the allegations that Apple knowingly and intentionally concealed information about iPhones’ susceptibility to the error; that Apple made misrepresentations and omissions regarding the safety, reliability, functionality, and compatibility of Apple’s operating systems and iPhones; and that Apple made numerous representations concerning the benefits, efficiency, and seamlessness of its operating system updates and iPhones. These allegations sound in fraud, the court stated, which required that the facts be pleaded with particularity. The allegations, however, were not specific enough to give Apple notice of the particular misconduct that was alleged to have constituted the fraud charged so that Apple could defend itself, the court found. In particular, the court concluded that the complaint failed to explain how Apple’s statements were actually misleading and there were insufficient details about how or when the consumers actually relied on them.

The case is No. 16-cv-00705-VC.

Attorneys: Darrell L. Cochran (Pfau Cochran Vertetis Amala PLLC) for Nicholas Lusson. Matthew David Powers (O'Melveny & Myers LLP) for Apple Inc.

Companies: Apple Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews