Apple's misleading use of "episode" to describe promo clips could lead to liability (w/o its contract)

Zaragoza v. Apple Inc., 2019 WL 1171161, No. 18-cv-06139-PJH (N.D. Cal. Mar. 13, 2019)

Plaintiffs sued Apple for how it sells TV seasons on its iTunes store. The home page for each season “provides general information about the season and three purchasing options,” which include buying individual episodes, buying an existing full season, and buying all current and future episodes of an as-yet-to-be-completed season (Season Pass). Apple represents the number of “Episodes” available in a season on each season’s home page, with individual video clips in a horizontally scrolling list along the bottom, with cost information and text along with a thumbnail image.

Plaintiffs alleged that Apple delivers fewer than the advertised number of episodes with its “Buy Season” or “Season Pass” options, because Apple counts both promotional videos and what consumers allegedly understand the word “episode” to mean—plot-based episodes of a television show—in its advertised number of episodes. Plaintiffs thus received fewer episodes than they believed they were purchasing, and also received a smaller discount by buying the entire season than they believed they were getting compared to buying individual episodes. For example, plaintiff Zaragoza purchased a season of “Genius: Edison” that advertised “13 Episodes” at the time of purchase, but only six of those 13 were plot-based episodes, and seven were promotional videos. By season’s end, Zaragoza received only four more plot-based episodes and iTunes was advertising “22 Episodes,” which included ten plot-based episodes and 12 promotional videos. Likewise, iTunes ultimately advertised “17 Episodes” for the first season of “Killing Eve,” but only eight of those videos were actually “episodes,” as plaintiffs allegedly understood the term.

Each “episode” can also be selected, which then presents more detail about it, including a title, the “episode number,” the length of the video clip, its individual price, and a written description.

Apple argued that plaintiffs’ interpretation of “episode” was implausible and that a reasonable consumer had to understand that “episode” includes advertisements, trailers, promotional videos, and other videos that are not part of the show’s narrative. Apple contended that its scrollable list of videos appearing immediately below the word “Episode” provided context that necessarily dispels any belief to the contrary.

This was not the “rare situation” where plaintiffs’ alleged understanding of the word “Episodes” was implausible as a matter of law. “It is plausible that consumers understand the word ‘Episode’—particularly in the context of a description of a season of a television series—to mean an episode that is part of the television show’s season, and not a commercial for the show or another type of promotional or behind-the-scenes video. Reviewing the word’s definition in readily-available dictionaries confirms that plaintiffs’ alleged understanding could be found reasonable by a trier of fact.” [Notably, those dictionary definitions didn’t suggest that Apple’s interpretation was also reasonable.] Though context does matter, the court wasn’t willing to hold that, as a matter of law, a reasonable consumer must scroll through the list of videos in sufficient detail to view the curative information. Moreover, there was a factual issue about what consumers of the Season Pass feature would be able to view in the list of videos when making their purchases. “The Apple TV appears to make no representation about how many future episodes there will be, but rather reports only on the total number of video clips associated with a show’s season at the time the consumer views that season’s home page.” If it said there were 10 episodes at the time of purchase and there were 5 narrative episodes and 5 promo videos at the time, a reasonable consumer might expect that 10 episodes was the total number of narrative episodes in the season. Moreover, there were factual questions “concerning how much a consumer would have to investigate into the Apple TV menu structures to be exposed to much of the allegedly-curative information Apple describes.”

Apple also argued that it didn’t sell “goods or services” within the meaning of the CLRA, but only licenses to view content. The CLRA definitions say “(a) “Goods” means tangible chattels bought or leased for use primarily for personal, family, or household purposes, ... (b) “Services” means work, labor, and services for other than a commercial or business use….” And it provides that it “shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.” The complaint alleged that the “Season Pass” was a service, including a promise to offer current and future episodes for viewing on an ongoing basis as the season progresses. The court refused to take judicial notice of the alleged contract between the parties. Though these purchases weren’t “tangible chattels,” plaintiffs plausibly alleged a purchase of services and there was at least a factual dispute. [We call VOD a service, even if it inherently involves “licenses” as well.]

Warranty claims survived for similar reasons, though the California U.C.C. applies only to contracts for the sale of “goods.” Unlike under the CLRA, goods are “all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale[.]” Courts look to the “essence of the agreement” and “have generally found that ‘mass-produced, standardized, or generally available software, even with modifications and ancillary services included in the agreement, is a good that is covered by the UCC.’ ” Plaintiffs adequately alleged that the essence of the agreement concerned the sale of the episodes. (See also the “Buy Now” button and this very helpful article by Aaron Perzanowski & Chris Jay Hoofnagle.) “Episode” could be an affirmation of fact or promise relating to the goods sold and therefore a warranty.