Barrett v. Apple Inc.

Background

Plaintiffs Michel Polston, Nancy Martin, Michael Rodriguez, Maria Rodriguez, and Andrew Hagene brought a proposed class action against Apple Inc. and Apple Value Services, LLC. The plaintiffs alleged that scammers induced people to buy Apple App Store and iTunes gift cards and give the scammers the redemption codes. The scammers could then sell the codes or add them to Apple accounts and use the stored value in Apple’s stores or in apps. The plaintiffs alleged that Apple knew or should have known about the scams and could have suspended related accounts, withheld payments to involved Apple developers, or issued refunds.

The First Amended Complaint asserted several claims, including claims under California’s consumer-protection laws, California Penal Code section 496, conversion, aiding and abetting intentional torts, and for a declaration of rights. The court’s earlier order granted in part and denied in part Apple’s motion to dismiss. As relevant here, the court held that plaintiffs who contacted Apple after discovering the scam had stated a section 496 claim for withholding stolen property, but no plaintiff had stated a section 496 claim based on Apple’s receipt of stolen property.

Motion for Reconsideration

The plaintiffs asked the court to reconsider only the ruling concerning receipt of stolen property under section 496. They relied on the California Supreme Court’s July 2022 decision in Siry Investment, L.P. v. Farkhondehpour, arguing that it clarified the meaning of “receipt” under section 496.

The court explained that reconsideration is an extraordinary remedy generally available only when there is a material difference in facts or law, clear error or manifest injustice, or new material facts or a material change in law. The plaintiffs did not argue that the earlier order was clearly erroneous or manifestly unjust.

In the earlier order, the court interpreted section 496’s reference to property “that has been stolen” to mean that the property must have been stolen before a defendant such as Apple received it. Based on the complaint’s allegations, the court concluded that the theft was not complete until the scammers obtained the redemption codes and redeemed the funds for their own purposes. Therefore, the complaint did not allege that Apple received property after it had already been stolen.

Court’s Analysis

The court determined that Siry did not create a material change in the law. According to the court, Siry addressed a situation in which the defendant alleged to have violated section 496 had also committed the underlying theft. In that circumstance, the property did not need to have been stolen before the defendant’s own theft. The plaintiffs, however, did not allege that Apple stole their property; their claims arose from scams conducted by third parties.

The court therefore concluded that Siry did not establish that a defendant who legitimately receives property and later has that property rendered stolen by a third party can be liable for receiving stolen property. The court also rejected the plaintiffs’ arguments that the stolen property was their money or that the theft occurred when they bought the gift cards, finding that the First Amended Complaint did not support those theories.

Disposition

The court found that plaintiffs had not stated a claim for Apple’s receipt of stolen property under section 496. It declined the plaintiffs’ request to amend the complaint at that stage, noting that the request came a year after the earlier order on Apple’s motion to dismiss. Judge Edward J. Davila denied the plaintiffs’ Motion for Partial Reconsideration of the amended order on the motion to dismiss.