Reilly v. Apple Inc.

Background

Thomas M. Reilly alleged that he developed Konverti, an app that facilitated person-to-person exchanges of small amounts of currency. Apple allegedly approved and placed Konverti in the App Store in June 2017, then removed it weeks later. According to the complaint, Apple said the app was unsafe and violated App Review Guideline 5.0, which requires apps to comply with applicable laws and rejects apps that solicit, promote, or encourage criminal or clearly reckless behavior.

Reilly alleged that he unsuccessfully appealed the removal several times between June 2017 and 2020. He claimed that Apple’s initial approval led him to pay Apple money and spend more than $150,000 developing and marketing Konverti. He sought damages, an injunction restoring the app to the App Store, a declaration, and restitution.

Claims and Motion

Reilly asserted five counts: three federal antitrust theories under Sections 1 and 2 of the Sherman Act, a claim under California’s Cartwright Act, and a claim under California’s Unfair Competition Law. He alleged that Apple maintained monopoly power in a market for distributing apps compatible with iOS devices, denied access to an essential facility, and imposed unreasonable restraints through its developer agreement and App Store guidelines.

Apple moved to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). On that type of motion, the court accepts well-pleaded factual allegations as true but requires enough factual detail to make liability plausible rather than merely possible.

Antitrust Claims

The court granted Apple’s motion to dismiss Counts 1 through 4. It identified two threshold problems with all of Reilly’s antitrust theories.

First, the court held that Reilly had not plausibly defined either a product market or a geographic market. He proposed a product market consisting exclusively of Apple’s App Store and a worldwide geographic market. The court explained that a product market must include reasonable substitutes and that single-brand markets are extremely unusual. Reilly’s complaint did not explain why alternatives—including the Google Play Store, where Konverti was available for Android users, and web-based apps accessible through a browser on an iOS device—were not substitutes. The complaint also did not analyze whether products or services were interchangeable based on demand.

The court further held that the complaint did not support a worldwide geographic market. It did not allege that users in every country accessed the same App Store storefront, could download the same apps, or faced the same commercial conditions for developing, marketing, distributing, and supporting apps.

Second, the court held that Reilly did not plead antitrust injury. Antitrust injury means harm to competition in the market as a whole, rather than merely harm to one competitor. The court found that Reilly’s theory focused on the rejection of his own app and did not connect that rejection to marketwide harm such as reduced output or increased prices. The court also found that Reilly’s general allegations of higher costs, reduced innovation, reduced service quality, and lower output were conclusory. Because Reilly failed to plead a plausible market and antitrust injury, the court did not analyze the substantive elements of his particular antitrust theories.

Unfair-Competition Claim

The court dismissed Count 5, Reilly’s California Unfair Competition Law claim, for failure to state a claim. To the extent the claim depended on the antitrust allegations, it failed along with those claims. To the extent Reilly asserted an independent fraud-based theory, the court held that the complaint did not satisfy Federal Rule of Civil Procedure 9(b), which requires fraud allegations to identify the who, what, when, where, and how of the alleged misconduct.

The complaint referred generally to an unidentified Apple representative, at an unidentified time and in an unidentified manner, allegedly saying that Konverti complied with Apple’s policies. The court found that this allegation did not adequately plead a misrepresentation, knowledge that it was false, an intent to induce reliance, justifiable reliance, or resulting damage.

Equitable Relief

The court also held that the claims seeking equitable relief—such as an injunction, declaration, and restitution—failed because Reilly did not adequately allege that he lacked an adequate remedy at law. The complaint sought recovery for a lost investment and lost profits, but it did not explain why money damages could not address those alleged injuries. The court stated that all claims seeking equitable relief were dismissed on this additional ground.

Disposition

The court granted Apple’s motion to dismiss the complaint. It dismissed all of Reilly’s claims but granted him leave to amend because this was his first complaint. The court cautioned that it appeared doubtful he could cure the fundamental defects, but allowed amendment under the liberal policy favoring amendment. Reilly’s amended complaint was due within 30 days of the order. The opinion does not state that the dismissal was with or without prejudice.