Smith v. Apple, Inc.

Background

Plaintiffs brought a putative class action on behalf of Apple Watch purchasers. They alleged that First Generation, Series 1 through Series 6, and Series SE Apple Watches contained an undisclosed and unreasonably dangerous safety hazard. According to the allegations, battery swelling could cause the screen to detach, crack, or shatter, exposing sharp edges, causing operational failure, and creating risks of cuts, lacerations, abrasions, and other injuries. Plaintiffs alleged that Apple knew batteries could swell but did not provide enough space inside the watches to prevent the screen problem.

The operative complaint asserted claims under California’s Unfair Competition Law, the California Consumers Legal Remedies Act, state-law fraud by omission theories, the Song-Beverly Consumer Warranty Act, and consumer-protection and unfair-competition laws in New York, Texas, and Florida.

Settlement Terms

The parties negotiated a settlement after a full-day mediation. The proposed settlement class includes natural persons residing in the United States who owned a First Generation, Series 1, Series 2, or Series 3 Apple Watch for personal or household use and whose reported covered issues appear in Apple’s records. The relevant period runs from April 24, 2015, through February 6, 2024.

Apple will make a non-reversionary payment of $20 million. The fund will cover court-approved attorneys’ fees and costs, settlement-administration expenses, incentive payments, and class-member payments. Eligible class members who make a payment selection by the deadline, or whose valid current payment information is confirmed by the settlement administrator, will receive $20 per covered device or, if necessary, a pro rata amount below $20. If more than $50,000 remains after costs are allocated, payments may increase to as much as $50 per covered device. Remaining funds would go to the Rose Foundation’s Consumer Products Fund.

The settlement releases claims against Apple and its subsidiaries that arise from or relate to the claims in the lawsuit. Class members who do not opt out cannot sue or continue suing Apple over released matters. The agreement permits the lead plaintiff to seek an incentive award of up to $5,000 and each of ten other named plaintiffs to seek up to $2,000. It does not set a specific attorneys’ fee amount, although plaintiffs’ counsel stated that it would seek no more than $5 million plus costs and expenses.

Provisional Class Certification

The court found that the proposed settlement class met Federal Rule of Civil Procedure 23(a)’s requirements of numerosity, commonality, typicality, and adequate representation. The court estimated that the class could include more than 600,000 people, making individual lawsuits impracticable. Common questions included whether the covered devices were defective, whether the alleged defect caused device failures, and whether Apple knew about the alleged defect but failed to disclose it.

The court also found that common issues predominated and that a class action was superior to other methods under Rule 23(b)(3). The court explained that the settlement class was narrower than the claims in the operative complaint because it covered only First Generation through Series 3 watches. Plaintiffs’ counsel stated that discovery showed a substantially lower incidence of potentially battery-related symptoms in later models, and the court found that explanation reasonable at the preliminary-approval stage.

The court appointed the plaintiffs as class representatives and appointed Cunningham Bounds LLC, Morgan & Morgan Complex Litigation Group, and Kilborn Law, LLC as class counsel.

Preliminary Settlement Approval

The court applied the heightened review required for a settlement reached before class certification. It found that the proposed settlement appeared to result from serious, informed, non-collusive negotiations; did not improperly favor certain class members; fell within the possible range of approval; and had no obvious deficiencies.

The court did not find problematic fee arrangements, a promise by Apple not to object to attorneys’ fees, or a return of unclaimed funds to Apple. It also concluded that the proposed incentive awards did not prevent preliminary approval, while reserving the question of whether those awards were reasonable for the final approval stage. The court found the settlement amount reasonable after considering plaintiffs’ damages analyses and the risks of continued litigation, including Apple’s denial of liability and its anticipated defense.

Notice Plan and Order

The court found that the proposed notice process was reasonably calculated to inform class members. Angeion Group, the settlement administrator, would send email or postcard notice using information supplied by Apple, update physical addresses through the National Change of Address database, maintain a settlement website, and provide a toll-free telephone number. The parties also proposed supplemental mail notice if the initial process reached fewer than 90% of the class.

The court required changes to the email and postcard notices so they specifically explain that class members may object to the attorneys’ fees motion and the request for incentive awards, identify the relevant deadlines, and explain how to access the motions and supporting materials. The court also required the full notice to correct inconsistent statements about the percentage and amount of attorneys’ fees and the incentive-award amounts.

The court GRANTED the motion for preliminary approval. It directed the parties to meet and confer and submit a schedule within seven days, to implement the notice plan with the required edits, and to include a joint proposed order and joint proposed judgment with their motion for final approval. The order granted preliminary, not final, approval of the settlement.