iPad customers' claims over termination of unlimited data access survive

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 9^th 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.