Donohue v. Apple, Inc.
| Decision Date | 10 May 2012 |
| Docket Number | No. 11–cv–05337 RMW.,11–cv–05337 RMW. |
| Citation | 871 F.Supp.2d 913 |
| Court | U.S. District Court — Eastern District of California |
| Parties | Daniel DONOHUE, individually and on behalf of all others similarly situated, Plaintiff, v. APPLE, INC., Defendants. |
OPINION TEXT STARTS HERE
Kathryn S. Diemer, Diemer Whitman & Cardosi, LLP, San Jose, CA, Kevin K. Eng, Co-Lead Counsel, San Francisco, CA, Alex Stepick, IV, Mark Anthony Bulgarelli, Progressive Law Group, LLC, Chicago, IL, for Plaintiff.
Stuart Christopher Plunkett, Penelope Athene Preovolos, Morrison & Foerster LLP, San Francisco, CA, for Defendants.
ORDER GRANTING MOTION TO DISMISS
Plaintiff Daniel Donohue (“plaintiff”), on behalf of himself and a class of similarly situated consumers, asserts claims against defendant Apple, Inc. (“Apple”) related to a defect in the Apple iPhone that caused its “signal meter” to inaccurately reflect the strength of the device's cellular network connection. Apple moves to dismiss the First Amended Complaint (“FAC”) under Fed.R.Civ.P. 12(b)(6) and Fed.R.Civ.P. 9(b). For the reasons below, the court grants Apple's motion. With the exception of plaintiff's California law-based warranty claim and claim for restitution, which are dismissed with prejudice, the court dismisses all claims with thirty days' leave to amend.
The Apple iPhone is a wireless “smartphone” that enables users to make phone calls, text message, email, check voicemail, use the internet, listen to music, watch videos and use software applications. FAC ¶ 15. The ability to use such features is contingent on the strength of the iPhone's connection to a wireless network, which varies depending on a user's location and other factors. Id. ¶ 16. Most cell phones, including the iPhone, contain a “signal meter” that informs the user of the strength of the phone's network connection. Id. ¶ 17.
The iPhone signal meter consists of a graphic showing one to five “bars.” Id. The number of bars appearing at any given time purports to correspond to the strength of the phone's connection to the wireless network. Id. When the iPhone has no network connection, the bars are replaced with the phrase: “No Signal.” Id. ¶ 21. The iPhone signal meter is “prominently” displayed in the upper left hand corner of the screen at virtually all times while the device is in use. Id. ¶ 18.
The iPhone “User Guide” is an instructional manual that describes the product's “capabilities, specifications and functionality.” Id. ¶ 20. An online version of the User Guide “come[s] with the purchase” of an iPhone. Id. The User Guide “indicates that the signal meter ... ‘shows whether you're in range of the cellular network and can make and receive calls.’ ” Id. ¶ 21. For example, the User Guide instructs consumers who are having trouble making a phone call or accessing an internet website to Id. ¶¶ 22–23.
Cell phone signal meters employ various formulas to calculate how many bars to display for a given signal strength. Id. ¶ 46. While some smartphone manufacturers incorporate formulas recommended by wireless network providers, Apple opted to use its own “secret” formula in its design of the iPhone signal meter. Id. ¶¶ 32, 45, 46. In developing this formula, Apple conducted testing in “anechoic chambers where no waves (sound or electromagnetic) can reflect off anything, so there is absolutely no interference.” Id. ¶ 34. Apple concealed its use of this testing process, which “manifests an artificial environment for signal strength.” Id. Apple also spent less time testing the iPhone than other smartphone vendors before releasing the product. Id. ¶ 33. As a result of these alleged inadequacies, the formula underlying the iPhone signal meter was flawed, and often “misled consumers as to the quality of their connection by inflating the apparent strength-of-connection beyond the actual strength-of-connection.” Id. ¶ 25.
On July 2, 2010, after receiving a “flurry of complaints” about the recently released iPhone 4, id. ¶ 37, Apple issued a public letter addressed to “iPhone 4 Users” (the “July 2 Letter”). See Dkt. No. 31–1. The July 2 letter indicated that “the formula we use to calculate how many bars of signal strength to display is totally wrong ... For example, we sometimes display 4 bars when we should be displaying as few as 2 bars.” Id. The letter further acknowledged that the “mistake” had been present since the release of the original iPhone. Id. “To fix this,” the letter stated, “we are adopting [wireless provider] AT & T's recently recommended formula for calculating how many bars to display for a given signal strength.” Id. Apple assured consumers that a free software update incorporatingthe corrected formula would be available to users of the iPhone 4, iPhone 3GS and iPhone 3G “within a few weeks.” Id. Apple released the promised update on or about July 15, 2010. FAC ¶ 45.
Plaintiff purchased an iPhone at an Apple retail store in Seattle, Washington in January 2010. Id. ¶ 51. At the time of his purchase, the sample iPhone displayed at the store “appeared” to accurately represent signal strength. Id. After his purchase, plaintiff used the iPhone signal meter to provide him with information about whether he could expect to rely on a signal when making or answering calls and using email or the internet. Id. ¶ 52. He asserts that he experienced “dropped” calls that he did not expect to be dropped, and that he would have “refrained from making such calls or expected a higher likelihood of such calls being dropped if he had known that his connectivity was less that was apparent on the iPhone display.” Id. ¶ 54.
According to plaintiff, the defective nature of the iPhone signal meter, which “substantially inflate[ed] customer perception of signal strength,” would be “important to know [about] in deciding [whether] to purchase [an] iPhone or return it within 30 days after purchase,” the period during which consumers can return the device for a full refund. Id. ¶¶ 60, 29. Plaintiff claims that he had been “seriously considering buying a competing phone before electing to purchase his iPhone,” and that knowledge of the iPhone's signal meter flaw would have “materially affected” his decision to purchase the iPhone or return it within 30 days. Id. ¶ 60. Plaintiff claims that his lack of knowledge was a consequence of Apple's failure to disclose information that the company knew, or reasonably should have known, would be of interest to potential iPhone purchasers. Id.
Plaintiff also alleges that the value of an iPhone that inaccurately reports signal strength is less than the value of the same iPhone without the flaw. Id. ¶ 57. In addition, plaintiff claims that the strength-of-signal flaw diminished the resale value of any iPhone purchased prior to July 14, 2010. Id. ¶ 61. Finally, plaintiff notes that because the software update could only be installed on the iPhone 3G, 3GS and 4G models, consumers with older models were left “without a ‘fix’ for the signal strength flaw.” Id. ¶ 50.1
On November 3, 2011, plaintiff filed the instant action on behalf of (1) himself; (2) a class of “all persons who purchased an iPhone at retail in the United States at any time on or before July 14, 2010” (the “class”); and (3) a subclass of “all persons who purchased an iPhone at retail in the State of Washington at any time on or before July 14, 2010” (the “Washington subclass”). Id. ¶ 9. The FAC, which forms the operative pleading for purposes of this motion, alleges claims for (1) breach of contract and the duty of good faith and fair dealing; (2) breach of implied warranty; (3) breach of express warranty; (4) violations of the Magnuson Moss Warranty Act (“MMWA”); (5) violations of Cal. Bus. & Prof.Code § 17200 (“UCL”); (6) violations of the Consumer Legal Remedies Act (“CLRA”); (7) violations of the Washington Consumer Protection Act (“WCPA”); and (8) restitution.
Apple first argues that plaintiff lacks standing to sue because the defective performance of the iPhone signal meter did not cause him any cognizable injury. In order to confer standing under Article III of the federal constitution, a plaintiff's injury must constitute “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (internal citations and quotation marks omitted). Injury is particularized if it affects the plaintiff in a “personal and individualized way.” Id. at 561 n. 1, 112 S.Ct. 2130. The injury may be minimal. Preminger v. Peake, 552 F.3d 757, 763 (9th Cir.2008). When standing is challenged on the basis of the pleadings, the court “accept[s] as true all material allegations of the complaint, and ... construe[s] the complaint in favor of the complaining party.” Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975).
Standing to sue under the UCL requires plaintiff to demonstrate that he or she has personally suffered “ economic injury.” Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 323, 120 Cal.Rptr.3d 741, 246 P.3d 877 (Cal.2011) (emphasis added). The requirement that injury be economic renders standing under the UCL “substantially narrower than federal standing ... which may be predicated on a broader range of injuries.” Id. at 324, 120 Cal.Rptr.3d 741, 246 P.3d 877.2 Economic injury may result from unfair competition if a plaintiff: (1) surrenders in a transaction...
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