Kapil v. Apple, Inc.

Background

Sandeep Kapil, Kim Sallen, and Gabriela Gomez brought a proposed class action against Apple under California’s Consumers Legal Remedies Act and Unfair Competition Law. They alleged that Apple failed to adequately review cryptocurrency scam apps available through its App Store and represented that App Store apps were legitimate, safe, and trustworthy. The plaintiffs alleged that they downloaded cryptocurrency apps, transferred money through them, and lost money in scams. They also alleged that Apple’s conduct caused them to overpay for Apple products.

The proposed class included people who downloaded or otherwise used Digicoins, SolLuna, or Forex5 from the Apple App Store during the relevant period. The opinion states that the plaintiffs acknowledged the cryptocurrency apps—not Apple—carried out the scams and stole their money.

Standing

Apple moved to dismiss under Rule 12, including for lack of standing. Standing requires a plaintiff to show an injury, a connection between that injury and the defendant’s conduct, and a remedy the court can provide. The court also explained that California’s Unfair Competition Law and Consumers Legal Remedies Act require a similar connection or reliance on a misrepresentation or important omission.

The plaintiffs alleged that they relied on Apple’s representations about the legitimacy, safety, and security of App Store apps. The court found those allegations insufficient because the plaintiffs did not identify the specific Apple statements that affected their decisions to purchase Apple products, download the cryptocurrency apps, or make cryptocurrency purchases. They also did not allege that Apple made those statements—or that the plaintiffs read them—before taking those actions. The court therefore held that the plaintiffs had not adequately connected their injuries to Apple’s conduct and granted the motion to dismiss for lack of standing, with leave to amend.

The court separately ruled that the plaintiffs lacked standing to seek an injunction, which is a court order requiring future conduct. The plaintiffs did not claim that they or the proposed class members intended to download additional apps from Apple or purchase additional devices, so they had not shown a real or immediate threat of future harm.

The court also ruled that the plaintiffs had not established standing to seek restitution, which generally involves returning money or property that the defendant acquired from the plaintiff. The plaintiffs did not allege that they paid Apple to download the cryptocurrency apps or that Apple received the money stolen through the scams. As to the alleged overpayments for Apple products, Sallen and Gomez alleged that they bought the products through a third party and did not adequately allege that Apple received those overpayments.

Failure to State a Claim

The court also considered whether the complaint adequately stated a claim. It concluded that the plaintiffs’ claims sounded in fraud. Federal Rule of Civil Procedure 9(b) requires fraud allegations to describe the misconduct in detail, including who made the statement, what was said or omitted, when and where it occurred, and how it harmed the plaintiff.

The court found that the plaintiffs referred to general Apple statements and marketing messages but did not sufficiently connect particular statements to each plaintiff, the alleged reliance, or the claimed harm. They did not identify which statements each plaintiff relied on, when each plaintiff reviewed the statements, or how the statements influenced the decisions to download the cryptocurrency apps or make purchases through them. The plaintiffs also needed to specify what was false or misleading about each statement or what information Apple allegedly omitted.

The court granted Apple’s motion to dismiss under Rule 9(b), with leave to amend.

Disposition

Judge Wise granted Apple’s motion to dismiss with leave to amend. The plaintiffs were ordered to file an amended complaint within 21 days of the order. The opinion does not state that the court entered a final judgment or dismissed the action with prejudice.