Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Class certification denied in action for misrepresentation of Apple service plan, (Jan 6, 2016)

By Michael Menzhuber, J.D., LL.M.

In an action for misrepresentations and omissions in connection with Apple Inc.’s service plans, class certification was denied by the federal district court in San Francisco. The court determined that none of the theories of liability provided a viable basis for a certifiable class and that adequacy of counsel was not established (English v. Apple Inc., January 5, 2016, Orrick, W.).

After cracking the screen on her iPhone, Fabrienne English purchased an Apple service plan (ASP) and a discounted replacement iPhone. At the time of her purchase, the Apple employee told her that: (1) she would have “two incidents,” such as cracked screens, for an iPhone replacement; and (2) the replacement iPhone would be new. An Apple employee also allegedly told English that the phone she was receiving was new and Apple submitted a declaration from one of its directors that the phone was new.

A few months later, the phone stopped working and English used an “incident” under her ASP to get another replacement phone. When the screen on that phone cracked, English went back to get another replacement. She was told that she had already used up both “incidents” under her ASP and was not entitled to another replacement.

Prior to going in to get the second replacement phone, she met an attorney, who filed a class action lawsuit including her and two others as named plaintiffs. The other two dropped out, as did another later-named plaintiff, leaving English as the only named plaintiff. In addition to alleging fraud, her third amended complaint alleged violations of the Consumer Legal Remedies Act (CLRA); the False Advertising Law (FAL); the Unfair Competition Law (UCL); and the Secondhand Merchandize Labeling Law (SMLL).

English moved to certify a class, representing consumers who had purchased the ASP, or its predecessor plan, at a retail location, online, or over the telephone. She also proposed two subclasses: (1) persons who received a refurbished, remanufactured, used, or secondhand replacement phone; and (2) persons who purchased an ASP and had their contemporary purchase of an iPhone treated as a replacement pursuant to an incident.

Theories of Liability. English’s first theory of liability was that Apple misrepresented that the purchase of an ASP, along with a replacement iPhone, would not count as an “incident” under their service plan. Apple, however, offered evidence that it followed through on its policy not to treat the initial purchase of a replacement iPhone as an “incident” and that it allowed consumers an additional two “incidents” under the plan. Because English could not cite anyone, other than herself, that was not allow two additional “incidents,” the requirement that “a class be so numerous that joinder of all members is impractical” was not met.

English’s second theory was that Apple improperly packaged refurbished replacement iPhones without any indicators that they were not new. The court determined that, because English received new iPhones, she was atypical with respect to this theory. Consequently, serious questions regarding her ability to establish standing to pursue claims based on this theory had the potential of becoming the focus of the litigation.

The court also determined that her third theory—that Apple employees misrepresent that all replacement iPhones will be new—failed because she did not present the sort of allegations and evidence necessary to certify a class based on alleged oral misrepresentations. Specifically, there were no allegations or evidence to support a plausible inference that there was a “standardized protocol” of misrepresenting that all replacement iPhones were new or that Apple had perpetuated a “centrally organized scheme” of oral misrepresentations to this effect.

English’s theory that Apple misrepresented, in the terms and conditions of the ASP, that the replacement iPhones would be “new or equivalent to new” and “functionally equivalent” to the original product also failed because she did not view or rely on the ASP’s terms and conditions in making her purchase. Although she argued to the contrary, the court determined that she was required to establish reliance to the UCL’s unfair prong.

Finally, English’s theory that Apple fraudulently omitted that replacement iPhones could be refurbished iPhones also failed. This theory failed because she did not show that the way in which Apple employees talk about service plans was sufficiently uniform to support an inference of classwide reliance or materiality.

Inadequacy of Counsel. Although the defects in English’s theories of liability were sufficient to preclude certification of the classes, the court noted that an additional reason for denying certification was the manner in which the lawsuit was originated and litigated. The court noted that: (1) two of the three original named plaintiffs worked for the class counsel; (2) one was the class counsel’s paralegal; (3) they both purchased ASP’s a few days prior to filing the lawsuit with money they received as “gifts” from the class counsel; and (4) one of them recorded her transaction with the Apple. Additionally, the class counsel lacked experience with class litigation and failed to comply with federal and local rules, as well as court orders.

The case is No. 14-cv-01619-WHO.

Attorneys: John R. Parker, Jr. (Kershaw Cutter & Ratinoff, LLP) for Fabrienne English. Purvi Govindlal Patel (Morrison & Foerster LLP) for Apple Inc., Applecare Service Co. Inc., and Apple CSC Inc.

Companies: Apple Inc.; Applecare Service Co. Inc.; Apple CSC Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews