Taylor v. Apple, Inc.

Background

Rebecca Taylor and her minor son, C.T., brought a putative class action against Apple, Inc. They alleged that Apple distributed game apps through the Apple App Store containing loot boxes that were legally equivalent to slot machines prohibited by California law. C.T. owned and played Brawl Stars, a game developed, owned, and sold by Supercell, which was not a party to the case. C.T. downloaded the game from the App Store onto an iPad and an iPhone.

Loot boxes offered randomized chances to obtain weapons, costumes, player appearances, or other in-game items. Players bought game-specific virtual currency, which could be used to obtain loot boxes and other virtual items. The complaints alleged that loot boxes used visual and sound features designed to exploit addictive psychological behavior and cited reports concerning possible harm to children.

The original complaint asserted claims under California’s Unfair Competition Law (UCL), California’s Consumers Legal Remedies Act (CLRA), and a common-law unjust-enrichment theory. The amended complaint divided the UCL claim into separate claims under the statute’s “unlawful” and “unfair” provisions. The original complaint had been dismissed with permission to amend.

Legal standard

The court applied Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. A complaint must include enough factual allegations to make liability plausible, rather than merely possible. In deciding the motion, the court accepted material allegations as true and interpreted them favorably to the plaintiffs.

Standing

The court had previously concluded that the plaintiffs lacked standing to bring the UCL claims because they had not alleged a qualifying economic injury. California’s UCL requires economic injury. The earlier ruling reasoned that C.T. received what he paid Apple for—virtual currency that he could use as he wished, including to buy items other than loot boxes.

The amended complaint added no substantive facts supporting a different conclusion. The plaintiffs instead asserted that they lost money when C.T. bought virtual coins and lost property when he used those coins to buy chances to obtain loot boxes. The court found these assertions insufficient and declined to reconsider its earlier conclusion. The court also stated that, even assuming the UCL injury requirement did not automatically control the CLRA claim, the plaintiffs had not adequately alleged damages under the CLRA or unjust-enrichment theory.

Merits of the claims

The court held that neither amended UCL claim stated a viable claim. The “unlawful” claim remained based on the argument that loot boxes violated California statutes regulating gambling devices. The plaintiffs had expanded their arguments but had not supplied new substantive facts distinguishing the amended complaint or supporting reconsideration.

The plaintiffs also argued that the alleged harmful effects of loot boxes supported claims under the UCL’s “unfair” provision, the CLRA, and common-law unjust enrichment, even without a clear violation of an existing statute. The court rejected that argument. It reasoned that the plaintiffs’ own allegations showed that legislatures were addressing and considering the policy questions surrounding loot boxes. The court concluded that existing statutory law did not plainly prohibit loot boxes and that extending the UCL’s “unfair” provision to the alleged conduct was unavailing. If the alleged harms were accurate, the court said, legislative remedies were likely the appropriate avenue.

Communications Decency Act argument

Apple renewed its argument that Section 230 of the Communications Decency Act, 47 U.S.C. § 230, barred the claims. The court again rejected the argument that Section 230 would shield Apple from a viable claim based on Apple’s participation in marketing and distributing an illegal gambling device. But the court found the issue moot because the plaintiffs had not stated a viable claim.

Disposition

The court granted the motion to dismiss. Although the plaintiffs requested another opportunity to amend, they did not explain how additional factual refinements would change the analysis. The court therefore dismissed the amended complaint without further leave to amend, directed that a separate judgment enter, and ordered the Clerk to close the file.

Classification note

This is classified as a procedural order because the court acted on a Rule 12(b)(6) motion to dismiss, which is a gatekeeping ruling about whether the complaint adequately states claims. The court also discussed standing and the alleged legal theories, but the governing classification rule treats a Rule 12 dismissal as procedural.