Barrett v. Apple Inc.

Background

Carl Barrett, Michel Polston, Nancy Martin, Douglas Watson, Eric Marinbach, Michael Rodriguez, Maria Rodriguez, Guanting Qiu, and Andrew Hagene brought a proposed class action against Apple Inc., Apple Value Services LLC, and unidentified defendants. They alleged that scammers induced consumers to buy Apple App Store and iTunes gift cards and give the scammers the redemption codes. The scammers allegedly used the codes through Apple’s systems, while Apple retained at least part of the resulting value.

The plaintiffs asserted claims under the California Consumers Legal Remedies Act, the California Unfair Competition Law, and the California False Advertising Law. They also asserted claims for receiving, retaining, withholding, or concealing stolen property under California Penal Code section 496, conversion, aiding and abetting intentional torts, and declaratory judgment. Apple moved to dismiss under Rule 12(b)(6), which tests whether a complaint states a legally sufficient claim. Apple separately sought a protective order to stop a deposition of an Apple representative until the court ruled on the dismissal motion.

Rule 12(b)(6) Rulings

The court ruled that only Martin, Marinbach, Qiu, and Hagene adequately pleaded claims under California Penal Code section 496 and for conversion. The court concluded that the plaintiffs had not alleged that the property was stolen before Apple received the gift-card funds, but held that the four plaintiffs who promptly notified Apple and were refused refunds adequately pleaded that Apple concealed or withheld stolen property. The same allegations adequately supported conversion claims based on Apple’s alleged refusal to return the funds. The court dismissed Claims 8 and 9 with prejudice as to Barrett, Polston, Watson, Michael Rodriguez, and Maria Rodriguez.

The court dismissed with prejudice the portions of Claims 1–7 and 10 based on Apple’s alleged liability for third-party conduct, including aiding and abetting the scammers. It held that payment processing, Apple’s alleged financial benefit, and offering gift cards in larger denominations did not adequately plead substantial assistance or encouragement of the scams.

The court also dismissed with prejudice the portions of Claims 1–2 and 5–7 based on affirmative misrepresentation or omission. It found that the plaintiffs did not adequately plead reliance and resulting harm for statements that Apple representatives allegedly made after the scams. It further held that the alleged failure to warn about gift-card scams did not concern a defect affecting the cards’ central function, and that the alternative omission theory also lacked adequately pleaded reliance and causation.

The court dismissed with prejudice the portions of Claims 1, 2, and 11 challenging Apple’s disclaimer of responsibility for third-party conduct. But it held that the plaintiffs adequately pleaded that the disclaimer was unconscionable—both unfairly one-sided and procedurally oppressive—insofar as it purported to avoid responsibility for Apple’s own alleged withholding or conversion of property. The related declaratory-judgment claim therefore survived. The court also held that the plaintiffs adequately stated the CLRA and UCL claims based on unlawful conduct, including theories relying on section 496 and the alleged unconscionability of the disclaimer as applied to Apple’s own conduct.

Protective Order and Disposition

Because the court found that some claims remained viable, it denied Apple’s motion for a protective order as moot. Overall, Judge Edward J. Davila granted in part and denied in part Apple’s motion to dismiss, dismissed specified portions of the claims with prejudice, denied dismissal as to the surviving theories, and ordered Apple to file its answer by June 24, 2022. The parties were also ordered to submit a joint case-management statement and attend an initial case-management conference.