Margolis v. Apple Inc.

Background

Fern Margolis and other plaintiffs brought a putative class action against Apple Inc. They allege that Apple encouraged iPhone 7 users to download iOS 15 without disclosing that the update would degrade the devices’ performance. The alleged effects included slower applications and functions, lag, glitches, freezes, sudden reboots, and poorer battery health. Plaintiffs allege that the resulting harm included reduced device value, expenses related to performance problems, battery-replacement or replacement-device costs, and loss of the benefit of their bargain.

The plaintiffs asserted claims under the federal Computer Fraud and Abuse Act; California’s Comprehensive Computer Data Access and Fraud Act, False and Misleading Advertising Law, and Unfair Competition Law; California common-law trespass to chattels; New York consumer-protection statutes; North Carolina’s Unfair Trade Practices Act; and Virginia’s Consumer Protection Act. Apple moved to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not allege enough facts to state a legally valid claim.

Computer Fraud and Abuse Act

The court dismissed the plaintiffs’ Computer Fraud and Abuse Act claim. The court had previously held that plaintiffs needed to plausibly allege that Apple had a conscious desire to damage their iPhone 7 devices, rather than merely knowing that the update might cause harm. The amended complaint alleged that Apple had a profit motive and had previously intentionally slowed older iPhones, but the court found those allegations insufficient to support the required inference of intent. The court therefore granted the motion as to this claim and dismissed it with prejudice and without leave to amend.

State consumer-protection claims

The court held that the state consumer-protection claims were subject to heightened pleading requirements because they involved alleged deception or fraudulent omissions. Most plaintiffs adequately alleged reliance by identifying Apple statements they viewed and considered before downloading iOS 15, and by alleging that they would not have installed the update had Apple disclosed its harmful effects. Elizabeth Guidice, Earl McFarland, and Ferdinand Metz did not identify specific Apple statements they relied on, so the court dismissed their state consumer-protection claims. Because McFarland was the only Virginia plaintiff, the court dismissed all claims under Virginia’s Consumer Protection Act. Those dismissals were with prejudice and without leave to amend.

The court also found that the remaining plaintiffs adequately alleged that Apple had a duty to disclose because Apple allegedly had exclusive access to pre-launch testing results showing that iOS 15 severely impaired iPhone 7 devices. The court rejected plaintiffs’ theories that Apple actively concealed the information or made misleading partial statements because the complaint did not allege the required affirmative concealment or reliance on the relevant partial statements.

California claims for equitable relief

For the California Unfair Competition Law and False and Misleading Advertising Law claims, the court held that the plaintiffs had not alleged standing to seek an injunction. They did not allege that they would download future iOS updates, would purchase another iPhone, or currently had or would soon have an iPhone exposed to similar future harm. The court therefore granted the motion as to these California claims and dismissed them without prejudice and with leave to amend.

New York claims

The court denied dismissal of the remaining New York consumer-protection claims. It held that the iOS 15 summary page shown before installation could qualify as advertising under New York’s false-advertising law because it functioned like a product label. New York plaintiffs Padilla, Lewinson, and Aranibar adequately alleged reliance on misleading advertising. The court dismissed Elizabeth Guidice’s New York consumer-protection claims for failure to plead reliance.

Disposition

The court granted in part and denied in part Apple’s motion to dismiss. It dismissed the federal Computer Fraud and Abuse Act claims, the California Unfair Competition Law and False and Misleading Advertising Law claims, the Virginia Consumer Protection Act claims, and Elizabeth Guidice’s New York consumer-protection claims. The California Unfair Competition Law and False and Misleading Advertising Law claims were dismissed without prejudice and with leave to amend; the other stated dismissals were with prejudice and without leave to amend. The court denied the motion as to the remaining New York and North Carolina consumer-protection claims. Plaintiffs may file an amended complaint consistent with the order within 21 days.