Price v. Apple, Inc.

Background

Matthew Price brought a proposed class action challenging Apple’s alleged policy of terminating Apple ID accounts of users who request payment returns from their credit- or debit-card banks for app purchases that do not work. Price asserted eight claims: an unlawful liquidated-damages claim under California Civil Code section 1671; unconscionable-contract and unconscionable-liquidated-damages claims under the California Consumer Legal Remedies Act and California’s Unfair Competition Law; unfair and fraudulent business-practice claims under the Unfair Competition Law; conversion; trespass to chattels, meaning intentional interference with personal property; and unjust enrichment.

Price alleged that Apple directed him to request payment returns after app developers could not help him. After he processed those requests in October 2020, Apple terminated his Apple ID after determining that he had breached Apple’s terms. Price alleged that he then lost access to his Apple ID and to more than $24,000 in app services purchased through that account.

Legal standard

Apple moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. At this stage, the court generally accepts well-supported factual allegations as true and views them favorably to the plaintiff, but it does not accept conclusory allegations or allegations contradicted by the complaint’s exhibits. The court also rejected Apple’s attempts to rely on alleged misconduct that did not appear in the complaint or materials properly considered at this stage.

Court’s analysis

Liquidated damages. Price argued that Apple’s termination provision imposed liquidated damages because the amount of his lost app and service access could be calculated from his spending. The court held that this theory failed because the amount would vary based on when an account was terminated, what the user purchased, and the account balance. The provision therefore did not establish a fixed or readily ascertainable damages amount covered by section 1671. The court granted the motion as to claim 1.

Unconscionability. Under California law, a contract must have both procedural and substantive unconscionability before a court may refuse to enforce it. The court did not decide how procedurally unconscionable Apple’s terms were. Instead, it held that Price had not alleged facts showing that the termination provision was substantively unconscionable—that is, excessively harsh or one-sided in a way that shocked the conscience. The court dismissed claims 2 and 3.

Unfair business practice. Price relied on several tests for determining whether conduct is unfair under California’s Unfair Competition Law. The court held that his claim failed under each. His theory under the test requiring a connection to a legal policy depended on his dismissed liquidated-damages and unconscionability claims. His other allegations asserted that Apple’s conduct was harmful and unfair but did not compare the consumer harm with the usefulness of Apple’s conduct or provide enough facts to support the claimed misconduct. The court granted the motion as to claim 4.

Fraudulent business practice. The court applied the heightened pleading standard for fraud, which requires details about who made the statement, what was said or omitted, when and where it occurred, and how it was misleading. Price did not allege that Apple made a misrepresentation or knew that a representation was false. Allegations that users would not have entered into the agreement if they had known about Apple’s conduct did not substitute for pleading the required elements. The court granted the motion as to claim 5.

Conversion and trespass to chattels. Price alleged that terminating his Apple ID interfered with his ownership or use of purchased apps and services and impaired the operation of his devices. The court held that his consent to Apple’s terms defeated both claims. The termination provision allowed Apple to terminate an account if it determined or suspected that a user had failed to comply with the terms. Because Price accepted that provision, the court concluded that he was on notice that he could lose access to purchased apps and services if Apple took that action. The court granted the motion as to claims 6 and 7.

Unjust enrichment. The court held that an unjust-enrichment claim cannot proceed when an express, binding agreement governs the conduct at issue. Because Apple’s terms addressed the termination of Apple ID accounts and the related payments, the court granted the motion as to claim 8.

Equitable relief. The court held that equitable relief is unavailable when a plaintiff has an adequate remedy under ordinary legal rules. Because Price sought compensation under the Unfair Competition Law and the Consumer Legal Remedies Act for the same conduct underlying his requests for equitable relief, and did not allege that legal remedies were inadequate, the court granted the motion as to those equitable-relief claims.

Disposition and amendment

The court granted Apple’s motion to dismiss all eight claims. It granted the motion without leave to amend as to the section 1671 liquidated-damages claim, the unjust-enrichment claim, and the Unfair Competition Law and Consumer Legal Remedies Act equitable-relief claims. It granted the motion with leave to amend as to the unconscionability claims, the Unfair Competition Law unfair-business-practice and fraudulent-business-practice claims, and the conversion and trespass-to-chattels claims. Any amended complaint was due within 21 days if Price could cure the identified pleading deficiencies.