Ohanian v. Apple Inc.

Background

Tigran Ohanian and Regge Lopez sued Apple Inc. and T-Mobile USA, Inc., individually and on behalf of a proposed class. They asserted claims under New York General Business Law §§ 349 and 350, fraudulent misrepresentation, and unjust enrichment. Apple moved to dismiss the claims brought by Lopez.

The complaint alleged that Apple marketed the iPhone, iMessage, FaceTime, and iOS as private and secure. It also alleged that, from 2010 or 2011 onward, a flaw could cause iMessage messages and FaceTime calls intended for a new user of a recycled phone number to be sent to the prior user. The complaint alleged that Ohanian received communications intended for Lopez after T-Mobile assigned Lopez Ohanian’s former phone number.

For purposes of the motion to dismiss, the court accepted well-pleaded factual allegations as true and drew reasonable inferences for Lopez, while disregarding conclusory allegations and legal conclusions.

New York Consumer-Protection Claims

New York General Business Law §§ 349 and 350 prohibit materially misleading consumer-oriented conduct. The court held that some of Apple’s statements were non-actionable promotional claims, or “puffery,” including statements about its design process, advanced or stringent security features, and privacy philosophy. The court also found that statements about encryption were not material because the complaint did not allege that an encryption flaw injured Lopez.

The court nevertheless held that the complaint adequately alleged that more specific statements—such as claims that iOS kept users’ information private and protected sensitive information—could mislead reasonable consumers. The complaint also adequately alleged that Apple knew about the security flaw, based on allegations involving an Apple Store employee and reporting by Ars Technica.

The court therefore denied Apple’s motion to dismiss Lopez’s New York General Business Law claims. The court held, however, that those statutes apply only to transactions occurring in New York. Because the proposed class definition had no geographic limitation, the court dismissed Lopez’s New York General Business Law claims to the extent they were based on transactions outside New York.

Fraudulent Misrepresentation

A fraudulent-misrepresentation claim requires a material false statement, knowledge that it was false, an intent to cause reliance, justifiable reliance, and damages. Federal Rule of Civil Procedure 9(b) additionally requires fraud to be pleaded with particularity, including the statement, speaker, place and time of the statement, and why it was fraudulent.

The court held that Lopez’s allegations did not satisfy Rule 9(b). The complaint identified various Apple statements made between approximately 2011 and 2017, but generally did not state where the statements were made or the context in which Lopez encountered them. It also did not state when Lopez bought his iPhone or when he discovered the alleged fraud. The court therefore granted Apple’s motion to dismiss Lopez’s fraudulent-misrepresentation claim.

Unjust Enrichment

The court dismissed the unjust-enrichment claim with prejudice. It held that the claim merely duplicated the other claims because it relied on the same alleged misrepresentations and omissions concerning Apple’s advertising, marketing, distribution, and sale of iPhones. The court explained that unjust enrichment is not a substitute claim for defects in other causes of action.

Leave to Amend and Disposition

The court stated that, if Lopez had additional facts that could cure the deficiencies in the fraudulent-misrepresentation claim, he could send the court a letter seeking permission to replead and attach a proposed amended complaint showing the changes. The deadline for that letter was November 30, 2021. The court entered the overall disposition as GRANTED IN PART and DENIED IN PART: the New York General Business Law claims survived for New York transactions and were dismissed for transactions outside New York; the fraudulent-misrepresentation and unjust-enrichment claims were dismissed. Judge Schofield directed the Clerk of Court to close the motion at Docket Number 42.