Williams v. Apple, Inc.

Background

Andrea M. Williams and James Stewart filed a proposed class action on behalf of United States iCloud subscribers who paid for iCloud during the alleged class period beginning August 20, 2015. They alleged that Apple’s iCloud agreement said Apple was the service provider and that users’ content would be sent to and stored by Apple. According to the complaint, Apple instead sent users’ files to other entities, including Amazon and Microsoft, for storage. Plaintiffs alleged that they paid more than they would have paid for other cloud-storage services because of Apple’s alleged statements.

The complaint asserted three claims: breach of contract, violations of California’s False Advertising Law (FAL), and violations of California’s Unfair Competition Law (UCL). Plaintiffs sought money damages and injunctive relief. Apple moved to dismiss all claims, arguing that plaintiffs lacked constitutional standing and had not adequately pleaded their claims.

Standing for Monetary Damages

The court rejected Apple’s argument that plaintiffs lacked constitutional standing to seek monetary damages for the alleged contract breach. The court held that the complaint sufficiently alleged an economic injury because plaintiffs claimed they paid for Apple to store their data and would not have subscribed, or would not have paid as much, had Apple disclosed that other entities stored the data.

The court therefore denied Apple’s motion to dismiss the breach-of-contract claim on the ground that plaintiffs lacked standing for monetary damages. The court separately addressed standing for injunctive relief.

Injunctive Relief

The court held that plaintiffs had not alleged a sufficiently likely future injury to seek an injunction. The complaint did not say that Williams or Stewart was currently paying for iCloud storage or intended to purchase paid iCloud storage again. Alleging that plaintiffs continued to store data on iCloud was not enough because the alleged injury concerned overpaying for paid storage, not using iCloud’s free storage.

The court granted Apple’s motion to dismiss plaintiffs’ claims for injunctive relief and granted plaintiffs leave to amend. Leave to amend means plaintiffs were permitted to try to correct the deficiency in an amended complaint.

Breach of Contract

The court held that plaintiffs adequately pleaded the existence of a contract even though they did not identify when Williams and Stewart entered into the iCloud agreement or which specific version they accepted. The complaint identified the contractual language allegedly breached and alleged that the language was identical across the relevant versions.

The court also held that the agreement’s language was reasonably capable of Apple’s interpretation—that Apple merely made the service available—and plaintiffs’ interpretation—that Apple itself promised to store users’ data. Because the language was ambiguous, the parties’ intent presented a factual question that could not be resolved on a motion to dismiss.

The court further held that plaintiffs adequately alleged resulting damages. The complaint sought compensatory damages based on the alleged price premium and claimed that plaintiffs would not have subscribed or would not have paid as much if they had known the alleged truth. The court denied Apple’s motion to dismiss the breach-of-contract claim on the grounds that plaintiffs had not adequately alleged a contract, a breach, or resulting damages.

False Advertising and Unfair Competition Claims

The court held that Rule 9(b), which requires fraud-based claims to describe the alleged misconduct with particularity, applied to the FAL and UCL claims because they were based on alleged misrepresentations. The court denied Apple’s Rule 9(b) challenge to the UCL claims because the UCL claims pleaded during the alleged class period were not shown to be untimely on the face of the complaint.

The court granted Apple’s motion to dismiss the FAL claim under Rule 9(b). The complaint did not state when Williams or Stewart viewed the alleged misrepresentations, so the court could not determine whether the FAL claim was timely. The court granted plaintiffs leave to amend the FAL claim.

The court also held that the complaint did not adequately plead actual reliance for either the FAL or UCL claims. Plaintiffs did not allege that they read or relied on Apple’s alleged statements. Clicking an agreement button, without allegations that plaintiffs actually read the statements, was not enough. The court therefore granted Apple’s motion to dismiss the FAL and UCL claims for failure to plead reliance and also granted dismissal of those claims for lack of constitutional standing. The court granted plaintiffs leave to amend.

Disposition

The court granted in part and denied in part Apple’s motion to dismiss. Specifically, it granted with leave to amend the motion as to plaintiffs’ claims for injunctive relief and the FAL and UCL claims. It denied the motion as to the breach-of-contract claim. Plaintiffs were given 30 days to file any amended complaint. The order stated that failure to amend, or failure to cure the identified deficiencies, would result in dismissal of the deficient claims with prejudice.

Judge and Review Note

The opinion is signed by United States District Judge Lucy H. Koh. The supplied metadata identifies Laurel Beeler as the judge, which conflicts with the signed opinion.