Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: iTunes customer states valid unfair competition claim over “Breaking Bad” season pass, (Sep 3, 2014)

By Greg Hammond, J.D.

An Apple, Inc. customer who purchased an iTunes season pass for the television show “Breaking Bad” stated a valid claim under California’s Unfair Competition Law (UCL), after he was granted access to only eight out of 16 episodes. In partially denying Apple’s motion for judgment on the pleadings, the federal district court in San Jose determined that the issue of whether Apple’s representations were likely to deceive a reasonable consumer was a question of fact, not suitable to be decided as a matter of law (Lazebnik v. Apple, Inc., August 29, 2014, Davila, E.).

Background. AMC Networks, Inc. sold its “Breaking Bad” television program through Apple’s iTunes platform. Season 5 of the television show was referred to as the “Final Season,” and was slated to include 16 episodes. Around the time the first episode of Season 5 was released on iTunes, Apple began offering a season pass for the program, and allegedly promised that the “season pass includes all current and future episodes of Breaking Bad, Season 5.” However, when the second half of Season 5 began airing, consumers learned that they did not have access to the new episodes, and were told by Apple that the company considered the new episodes to be the “Final Season,” not part of Season 5. Dr. Noam Lazebnik, M.D. filed suit against Apple, alleging violations of California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA). Apple moved for judgment on the pleadings.

UCL claim. In support of its motion for judgment on the pleadings, Apple argued that Dr. Lazebnik failed to allege standing for his UCL claim and that a reasonable consumer would not believe that he would receive 16 episodes for the purchase price of $21.99. The court first determined that Dr. Lazebnik established standing to bring his UCL claim, as (1) it can be reasonably inferred that Lazebnik gave another individual permission to use his credit card for the purchase of the season pass; (2) a jury could reasonably find that Apple had reason to expect that its representations regarding the season pass would be transmitted to others; (3) because Lazebnik’s credit card was used to make the purchase, he allegedly suffered an economic injury-in-fact; and (4) the injury was “fairly traceable” to Apple’s conduct, because its statement regarding the season pass induced Lazebnik to make the purchase.

The issue of whether Apple’s representations regarding the season pass were likely to deceive a reasonable consumer could not be decided as a matter of law, as the complaint: (1) sufficiently alleged that Apple advertised the season pass would include “every episode in [Season 5] and at a better price than if you were to purchase it one at a time” and (2) set forth a number of consumer complaints posted on a discussion board on Apple’s website demonstrating consumers believed their season pass would include all 16 episodes of Season 5. Consequently, Lazebnik’s could pursue its UCL claim.

CLRA claim. Apple also argued that the consumer’s CLRA claim should be dismissed, because a season pass is not considered a “good.” Under the CLRA, liability is imposed for “unfair methods of competition and unfair or de captive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” The court sided with Apple on this claim, finding that a season pass is not a “good” or tangible chattel within the meaning of the CLRA, but is rather software or a license. Consequently, Lazebnik’s CLRA claim was dismissed.

The case number is 5:13-CV-04145-EJD.

Attorneys: Daniel Frech (Spangenberg Shibley and Liber LLP) for Dr. Noam Lazebnik. Matthew David Powers (O'Melveny & Myers LLP) for Apple, Inc.

Companies: Apple, Inc.; AMC Networks, Inc.

Cases: StateUnfairTradePractices CaliforniaNews