|
|
IN RE APPLE IN-APP PURCHASE LITIGATION
855 F.Supp.2d 1030 (2012)
In re APPLE IN-APP PURCHASE LITIGATION.
This Document Relates To: All Actions.
Case No. 5:11-CV-1758 EJD.
United States District Court, N.D. California, San Jose Division.
March 31, 2012.
Patrick Howard, Simon Bahne Paris, Saltz Mongeluzzi Barrett & Bendesky, Roberta D. Liebenberg, Fine Kaplan and Black, RPC, Jonathan Shub, Philadelphia, PA, Anthony David Phillips, Berman Devalerio, San Francisco, CA, Benjamin Gordon Edelman, Attorney of the Law, Cambridge, MA, Christopher T. Heffelfinger, Berman Devalerio, Palm Beach Gardens, FL, Joshua D. Snyder, Michael J. Boni, Boni & Zack LLC, Bala Cynwyd, PA, for Plaintiff.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS
EDWARD J. DAVILA, District Judge. I. INTRODUCTIONPresently before the court is Defendant Apple Inc.'s ("Apple") motion to dismiss Plaintiffs' Consolidated Class Action Complaint ("Complaint") pursuant to Rule 12(b)(6). See Docket Item No. 37. Apple, a Delaware corporation with its headquarters and principal place of business in California, is a leading seller of software applications ("apps") that users can download onto their mobile computing devices. See Complaint, Docket Item No. 28, at ¶¶ 1, 14-18, 42. Plaintiffs bring the instant class action on behalf of themselves and other similarly situated parents or guardians who (a) downloaded or permitted their minor children to download a supposedly free app from Apple and (b) then incurred charges for game-related purchases made by their minor children, without the parents' and guardians' knowledge or permission. Id. at ¶ 2. II. FACTUAL AND PROCEDURAL BACKGROUNDOn April 11, 2011, Plaintiff Garen Meguerian filed a complaint, individually and on behalf of others similarly situated, alleging that Plaintiffs' minor children were able to purchase "game currencies" without their parents' knowledge or authorization while playing game applications ("apps"), provided by Apple and advertised as free. See Docket Item No. 1. An "app" is a software application that a customer can download from Apple's App Store onto a mobile computing device. "Game currencies" are virtual objects, such as supplies, that are used in connection with gameplay in certain apps. Id. at ¶ 1-2.
1. Apple argues that there is no legal basis for inferring a contract where the alleged offer is made to one party but accepted by another party, and where the consideration is paid by the original offeree, rather than the party who accepted the alleged offer. See Docket Item No. 37, at 17. Plaintiffs contend that their complaint alleges sufficient facts to establish the existence of a contract and that, pursuant to Cal. Civ.Code § 1605, consideration for a contract can be conferred upon the promisor by any person, not only the offeree.
2. This court may properly consider the Terms & Conditions on a Rule 12(b)(6) motion to dismiss since the document's contents are alleged in the complaint and no party questions its authenticity, even though the document is not physically attached to the pleadings. See Rubio v. Capital One Bank, 613 F.3d 1195, 1199 (9th Cir.2010) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir.2002)); Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006).
3. The Terms & Conditions, which Plaintiffs accepted and agreed to when they opened iTunes accounts, state, "[y]ou are solely responsible for maintaining the confidentiality and security of your Account and for all activities that occur on or through your Account.... Apple shall not be responsible for any losses arising out of the unauthorized use of your account." See Docket Item No. 37, at 15.
4. Cal. Civ.Code § 1556 states that minors are not capable of contracting. A minor's lack of capacity to contract affects only the ability of the other party to enforce the contract against the minor, not the minor's ability to enforce the contract against the other party. Under Cal. Fam.Code § 6710, minors may avoid liability on contracts, subject to certain exceptions. However, only the minor, and not the other party, may disaffirm a contract. The court has found no cases in California that have decided whether a minor's contract may be disaffirmed by someone other than the minor (such as a parent or guardian), except in the case of minor's death.
5. In Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir.2003), the Ninth Circuit found that plaintiff's claims of non-disclosure were not based in fraud. However, the court in Vess derived its elements of fraudulent misrepresentation from the California Court of Appeals case Hackethal v. National Casualty Co., 189 Cal.App.3d 1102, 234 Cal.Rptr. 853 (1987) (stating the first element of a fraud claim under California law as "false representation"). The elements have since been changed by the Supreme Court of California to encompass false representation, concealment, and nondisclosure. Engalla v. Permanente Med. Group, Inc., 15 Cal.4th 951, 974, 64 Cal.Rptr.2d 843, 938 P.2d 903 (1997); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir.2009). As such, claims based non-disclosure must meet the heightened pleading standard of Rule 9(b).
6. Plaintiffs allege that Apple violated three provisions of the CLRA: (1) representing that goods have uses or characteristics they do not have, Cal. Civ.Code § 1770(a)(5); (2) representing that goods are of a particular standard or quality when they are of another, Cal. Civ.Code § 1770(a)(7); and (3) representing that a transaction confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law, Cal. Civ.Code § 1770(a)(14).
7. Under the "unlawful" prong, the UCL makes violations of other laws actionable under the UCL. In re Actimmune Marketing Litig., 2009 WL 3740648, at *15 (N.D.Cal. Nov. 6, 2009). Under this prong, "it is not necessary that plaintiffs allege violation of the predicate laws with particularity; they must at a minimum, however, identify the statutory or regulatory provisions that defendants allegedly violated." Id.
8. The definition of an unfair business practice in consumer cases has been unsettled since the California Supreme Court ruling in Cel-Tech, which provided a definition in the context of an antitrust case, but did not address unfairness in the consumer context. See Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tele. Co., 20 Cal.4th 163, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999). After Cel-Tech, California appellate courts applied three different tests to determine "unfairness" in the consumer context, but the Supreme Court has not yet ruled on the issue. Where the state's highest court has not decided an issue, the task of the federal court is to determine how the state high court would decide it. Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir. 1986). Accordingly, the federal court must look to decisions of state intermediate appellate courts for guidance as to how the high court would decide. Id.; see also Lyons v. Bank of America, NA, 2011 WL 3607608 (N.D.Cal. Aug. 15, 2011).
In 2006, the appellate court in Camacho v. Automobile Club of So. Calif., 142 Cal.App.4th 1394, 48 Cal.Rptr.3d 770 (2006), used the Federal Trade Commission Act as guidance for the definition of unfairness. "(1) The consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided." Id. at 1403, 48 Cal.Rptr.3d 770. Several appellate courts and district courts have accepted Camacho's test. See Davis v. Ford Motor Credit Co., 179 Cal.App.4th 581, 596-97, 101 Cal.Rptr.3d 697 (2009); Daugherty v. American Honda Motor Co., Inc., 144 Cal.App.4th 824, 839, 51 Cal.Rptr.3d 118 (2006); Lyons, 2011 WL 3607608, at *10; Tietsworth v. Sears, Roebuck and Co., 2009 WL 3320486 (N.D.Cal. Oct. 13, 2009). As such, this court will apply the test used in Camacho.
9. In In re Tobacco II Cases, 46 Cal.4th 298, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009), the California Supreme Court held that for a fraudulent business practices claim, section 17204 of the UCL mandates that plaintiff demonstrate "actual reliance" upon the defendant's misrepresentation or omission. Actimmune, 2009 WL 3740648, at *8. Reliance can be demonstrated by showing that but-for defendant's conduct, plaintiff would not, in all reasonable probability, have engaged in the injury-producing conduct. Id. Plaintiffs must allege with specificity that defendant's alleged misrepresentations: (1) were relied upon by the named plaintiffs; (2) were material; (3) influenced the named plaintiffs' decision to purchase the product; and (4) were likely to deceive members of the public. Tietsworth, 2009 WL 3320486, at *8.
10. To state a claim for fraudulent marketing or advertising, "a plaintiff need merely allege that `members of the public are likely to be deceived' by defendants' conduct." Actimmune, 2009 WL 3740648, at *7 (quoting Committee on Children's Television, Inc. v. General Foods Corp., 35 Cal.3d 197, 211, 197 Cal.Rptr. 783, 673 P.2d 660 (1983)). This is a distinct standard from common law fraud, where deception must be actually false. Id.
11. Plaintiffs argue that, in the alternative, this claim should survive at least with respect to allegations concerning the fifteen-minute window during which users could make an in-app purchase without re-entering the password. See Docket Item No. 44, at 27 n. 14.
12. In Carma, the California Supreme Court rejected an implied covenant claim where the contract at issue permitted the lessor to terminate the lease if the lessee asked to sublet. When this occurred, the lessor terminated, and the lessee sued for breach of the implied covenant, but the court upheld the termination because it was expressly permitted by the agreement. Carma, 2 Cal.4th 342, 6 Cal.Rptr.2d 467, 826 P.2d 710.
|
|