In re Apple, AT&T iPad Unlimited Data Plan Litigation,
2012 WL 2428248 (N.D. Cal.)
AT&T Mobility moved to strike class allegations from
plaintiffs’ or to deny class certification; the court denied the motion to
strike. The plaintiffs alleged that
AT&T perpetrated a classic bait and switch in selling 3G-capable iPads for
which AT&T was the exclusive 3G service provider. They initially promoted a flexible, unlimited
3G data plan but announced weeks after the iPad’s release that this plan was
discontinued. Plaintiffs alleged that
the initial representations were false and made without the intent to follow
through. As a result of the
misrepresentations, plaintiffs alleged that customers were induced to buy iPads
with 3G capability for $130 extra.
The court ordered a number of plaintiffs to arbitrate their
claims, but plaintiff Joe Hanna, who never signed up for any data plan for his
3G-capable iPad, didn’t have to do so.
When he bought his iPad, he planned to sign up for the unlimited data
plan in certain months, when he was away from home or WiFi access, but he
hasn’t needed to do so yet.
Motions to strike class allegations are disfavored. AT&T argued that after Wal-Mart, plaintiff couldn’t show
commonality. The central question, it
contended, was whether each class member purchased a 3G-capable iPad “because
of” the availability of the unlimited data plan, a necessarily individualized
inquiry. Hanna rejoined that there were
numerous common questions, including the falsity of the representations made to
the class, AT&T’s knowledge that the unlimited data plan would be cancelled
almost immediately, whether the misrepresented or concealed information was
material to a reasonable consumer, and whether class members paid an inflated
price as a result of AT&T’s conduct.
“Unlike an employment discrimination claim, for which the Supreme Court
was able to identify a single crucial question, fraud-based claims consist of
multiple elements—such as falsity, materiality, intent, reliance, damages—that
are each central to the validity of the claim.”
That plaintiffs must have suffered the same injury doesn’t mean that the
necessary common question must relate to a specific element such as causation
or damages. Wal-Mart reaffirmed that even a single common question will
suffice. Here, the allegations satisfied
commonality.
AT&T then challenged predominance, since the class
included people who might never have been exposed to the allegedly false
statements or who might have bought the product for different reasons. However, plaintiffs alleged that defendants
made their misrepresentations to all members of the class, with examples
including on defendants’ websites and in Apple stores. AT&T argued that the misrepresentations
materially differed because some were oral and some written. But that alone isn’t enough to defeat
certification. Hanna alleged that the
key misrepresentation—“that purchasers of a 3G-capable iPad could later upgrade
to the unlimited data plan and switch in and out of the plan”—was made consistently
to everyone. If that’s proven true, there might be no need to inquire into what
channels purchasers used.
AT&T argued that materiality would also have to be
individually proven, because different data plans were available. Hanna rejoined that, because the product
class members bought sold at a $130 premium compared to the non-3G version, it
could be presumed that they found the data plans to be material. California uses an objective materiality
standard: if a reasonable person would attach importance to a misrepresentation
in choosing an action. As such,
materiality may be subject to common proof.
“Here, the class is sufficiently narrow to suggest that
misrepresentations or omissions about the unlimited data plan's availability
would always be material.” The court
noted that the unlimited plan was one of only two plan options available during
the class period, and it’s possible that a reasonable person would have
considered them both, particularly for a product s/he’d never used before. Because of the arbitration wrinkle, the class
includes only people who never signed up for any data plan but that doesn’t
imply that they’d never need an unlimited data plan; Hanna alleged that one
feature of the plan was its flexibility—the ability to turn it on and off as
needed. Unlike other cases finding too
many individualized issues, the court here had the benefit of a “controlled
experiment,” since Apple sold iPads that allegedly differed only with respect
to 3G capability. “[T]he universe of
possible motivations is sufficiently narrowed so that, at the pleadings stage,
the court cannot conclude that materiality would require individualized
inquiry.”
AT&T argued that it reserved the right to change its
data plans at any time, “but this statement appeared in a service agreement
that was presented to customers activating their iPads for wireless data
service. By definition, no class member ever activated his iPad. Moreover,
there is no evidence at this stage that such information was available to
consumers before they purchased an iPad.”
Next, AT&T argued that an individualized inquiry would
be necessary to determine reliance. But
an inference of reliance arises where material misrepresentations have been
made to the entire class. Given Tobacco II’s approval of a claim based
on exposure to a long-term ad campaign, “some degree of variation or
imprecision with respect to specific statements is allowed.” Whether the representations allegedly made by
defendants were sufficiently similar was a factual question.
And next, AT&T argued that there could be no presumption
of reliance because the case involved both affirmative misrepresentations and
omissions. The court noted that the
cases cited were securities cases, in which the 9th Circuit has held
a presumption of reliance should be limited to cases primarily alleging
omissions. But California law governs
here, and an inference of reliance applies to both affirmative
misrepresentations and omissions.
The last major argument was that Hanna improperly sought to
represent a nationwide class under California law. Hanna argued that California had significant
contacts with the claims because the claims involve “a common scheme
perpetrated in connection with the sale of a California product” and AT&T
allegedly conspired in California with Apple, including California negotiations
between the defendants and statements emanating from California. At the pleading stage, this was sufficient to
support applying California law to a nationwide class. While the need to engage in 50 different
choice-of-law analyses could in itself render a class action unmanageable, it
was impossible to resolve the issue at this stage of the case.
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