In re Apple And AT&T Ipad Unlimited Data Plan Litig.

• Decision Date: 18 July 2011
• Docket Number: No. C–10–02553 RMW.,C–10–02553 RMW.
• Citation: 802 F.Supp.2d 1070
• Court: U.S. District Court — Northern District of California
• Parties: In re APPLE AND AT & T IPAD UNLIMITED DATA PLAN LITIGATION.

802 F.Supp.2d 1070

In re APPLE AND AT & T IPAD UNLIMITED DATA PLAN LITIGATION.

No. C–10–02553 RMW.

United States District Court, N.D. California,San Jose Division.

July 18, 2011.

Michael W. Sobol, Allison Stacy Elgart, Roger Norton Heller, Roger Norton Heller, Lieff Cabraser Heimann & Bernstein LLP, Willem F. Jonckheer, Schubert Jonckheer & Kolbe LLP, San Francisco, CA, Gregory Steven Weston, The Weston Firm, San Diego, CA, John Joseph Fitzgerald, IV, Santa Clara, CA, for Plaintiffs.

Penelope Athene Preovolos, Andrew David Muhlbach, Heather A. Moser, Stuart Christopher Plunkett, Suzanna Pacht Brickman, Morrison & Foerster LLP, Joel Dashiell Smith, Kevin Patrick O'Brien, Martha Kay Martin, Crowell & Moring LLP, San Francisco, CA, Archis Ashok Parasharami, Mayer Brown LLP, Kathleen Taylor Sooy, Crowell & Moring LLP, Washington, DC, Donald M. Falk, Mayer Brown LLP, Palo Alto, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS THE MASTER CONSOLIDATED COMPLAINT AND DENYING DEFENDANT'S MOTION TO STRIKE

[Re Docket No. 76

]

RONALD M. WHYTE, District Judge.

Defendant AT & T Mobility LLC (“ATTM”) moves to dismiss the master consolidated complaint (“MCC”). On March 25, 2011, the court held a hearing to consider defendant's motion. Having considered the papers submitted by the parties and the arguments of counsel, and for the reasons set forth below, the court grants in part and denies in part ATTM's motion to dismiss and denies ATTM's motion to strike.

I. BACKGROUND

Plaintiffs Adam Weisblatt (“Weisblatt”), Joe Hanna (“Hanna”), David Turk (“Turk”), and Colette Osetek (“Osetek”) (collectively “plaintiffs”) allege that defendants ATTM and Apple Inc. (“Apple”) perpetrated a classic “bait and switch” fraud scheme in connection with the sale of 3G capable iPads ¹ for which ATTM was the exclusive 3G service provider. MCC ¶ 1.

A. iPad 3G

On or around April 30, 2010, Apple began selling 3G-enabled iPads, with ATTM as the exclusive 3G data provider. Id. ¶ 25. The 3G-enabled iPads were priced approximately $130 higher than the equivalent Wifi iPad models without 3G capability. Id. ¶ 26. Between April 30, 2010 and June 7, 2010, ATTM offered two 3G data plan options: (1) 250 MB of data for $14.99 per month, with additional data available in 250 MB increments for an added charge; or (2) unlimited 3G data for $29.99 per month. Id. ¶¶ 30, 32. Plaintiffs claim that ATTM and Apple made representations that customers would be able to sign up for, and change, their data plans each month as their data needs demanded, including upgrading or switching in and out of the unlimited data plan on a monthly basis in the future. Id. ¶¶ 34, 35. Plaintiffs allege that the flexible, unlimited 3G data plan was heavily promoted, including during the time before the 3G-enabled iPad was actually available for sale, as a key feature that made the $130 price difference worthwhile. Id. ¶¶ 30–36. During a presentation, Apple CEO Steve Jobs made the following statements regarding the wireless data plans for the 3G-enabled iPad:

Now, what does it cost for the data plans? Well, in the U.S., telecom companies usually charge about $60 a month for a data plan for a laptop. We've got a real breakthrough here. We've got two awesome plans for iPad owners. The first one gives you up to 250 megabytes of data per month. That's a fair bit of data. Most people will get by on that. Up to 250 megabytes of data per month, just $14.99. $14.99. And if you feel you need more, we have an unlimited plan just for $29.99. So these are real breakthrough prices. We've got a breakthrough deal with AT & T. It's providing the service. $14.99 for up to 250 megabytes, $29.99 for unlimited data .... And, there's no contract, it's prepay.

Id. ¶ 30. Apple's website also advertised to prospective 3G-enabled iPad customers that they could “choose the amount of data per month ... 250 MB or unlimited” and “decide whether to turn off 3G or upgrade to the unlimited plan.” Id. ¶ 30, Exh. C. Likewise, ATTM posted similar content on its website:

AT & T offers two data plan options—250 MB or unlimited data, with recurring monthly charge and no long-term contract. To help you manage data with a 250 MB plan, iPad will notify you at 20%, 10%, and when there's no more data available, so you can decide if you want to add more data or upgrade to an unlimited data plan.

Id. ¶ 35, Exh. B. In sum, plaintiffs allege that:

Defendants marketed and advertised the unlimited data plan, and the ability to switch in and out of the unlimited data plan, to induce consumers to purchase iPads with 3G capability. The iPads with 3G capability cost significantly more than the equivalent iPads without 3G capability, but they were seen as worth the added cost by consumers who wanted the flexibility and option of getting unlimited 3G data for a fixed cost when needed.

Id. ¶ 39.

Plaintiffs further allege that defendants continued to promote their flexible and unlimited data plan options up to June 2, 2010, when defendants announced that as of June 7, 2010 they would no longer provide an unlimited data option. ² Id. ¶ 42. Consequently, iPad purchasers who initially opted for the limited data plan no longer have the option to switch in and out of an unlimited plan. Id. ¶ 44. Even so, customers who were signed up for an unlimited data plan as of June 7, 2010 were allowed to maintain an unlimited data plan. Id. However, if those customers ever discontinue subscribing to the unlimited data plan ( e.g., by changing to a different data plan or eliminating the data plan altogether), they cannot switch back to the unlimited data plan. Id. In other words, plaintiffs allege that the defendants touted the availability of an unlimited 3G data plan and the option to switch in and out of the unlimited data plan, but subsequently withdrew the unlimited data plan option one month after Apple began selling the 3G-enabled iPad. Plaintiffs contend that defendants' misleading statements and omissions regarding the availability of the unlimited data plan induced them to buy the 3G-enabled iPad rather than the less expensive WiFi only model. Id. ¶¶ 37–39. Plaintiffs also point out that the defendants' decision to eliminate the unlimited data plan option was made after the 14 day return window had ended for many initial iPad purchasers. Id. ¶ 48.

B. Plaintiffs

Plaintiff Weisblatt, a New York resident, purchased a 3G-enabled iPad at an Apple store in New York on April 30, 2010. Id. ¶¶ 11, 53, 55. On May 2, 2010, Weisblatt activated 3G service for his iPad. Id. ¶ 49. Plaintiff Hanna, a California resident, purchased a 3G-enabled iPad on April 30, 2010 at a Best Buy store in California. Id. ¶¶ 12, 61. Hanna has not activated a 3G data plan for his iPad and appears to have generally been either home or in another place where he has had WiFi access. Id. ¶ 64. Hanna claims to have “anticipated using the unlimited data plan in some months and not in others.” Id. On April 30, 2010, plaintiff Turk, a Washington resident, purchased two 3G-enabled iPads at an Apple store in Washington. Id. ¶¶ 13, 68. On May 18, 2010, Turk purchased a third 3G-enabled iPad. Id. ¶ 69. All three of Turk's iPads were activated for 3G service. Id. ¶¶ 72, 74. In fact, Mr. Turk signed up for unlimited data plans for two of his iPads on June 20, 2010 because, as a result of defendants' June 7, 2010 policy change, he believed that this was his only chance to obtain an unlimited 3G data plan. Finally, plaintiff Osetek, a Massachusetts resident, purchased a 3G-enabled iPad at an Apple store in Braintree, Massachusetts on April 30, 2010. Id. ¶¶ 14, 78. On May 7, 2010, Osetek signed up for the unlimited 3G data plan. Id. ¶ 81.

All four named plaintiffs claim that they purchased 3G-enabled iPads believing that they would have the flexibility of switching in and out of an unlimited data plan based upon their monthly needs. Id. ¶¶ 57, 64, 74, 81. Plaintiff also allege that had they known that defendants would pull the flexible unlimited data option, they would not have purchased 3G-enabled iPads. Id. ¶¶ 59, 66, 76, 83.

C. Claims

Plaintiffs assert seven claims against defendants: (1) intentional misrepresentation; (2) false promise/fraud; (3) negligent misrepresentation; (4) violation of California's Consumer Legal Remedies Act (“CLRA”), Cal. Civ.Code. §§ 1750 et seq. ; (5) violation of California's unfair competition law (“UCL”), Cal. Bus. & Prof.Code §§ 17200 et seq. ; (6) violation of California's false advertising law (“FAL”), Cal. Bus. & Prof.Code §§ 17500 et seq. ; and (7) unjust enrichment. Id. ¶¶ 93–175. Plaintiffs bring this action on behalf of all customers in the United States who purchased iPad 3Gs prior to the June 7, 2010 data plan change.

Defendant ATTM now moves to dismiss all claims against it as well as strike plaintiff Osetek's claims against it.

II. ANALYSIS

A motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) tests the legal sufficiency of the claims in the complaint. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). A claim has facial plausibility “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

A. Rule 9(b)

ATTM contends that all the claims in the MCC fail because plaintiffs allegations do not satisfy Fed.R.Civ.P. 9(b). Under Rule 9(b), all “[a]verments of fraud must be accompanied by the who, what, when, where, and how of the misconduct charged.” Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003) (quotation omitted). Moreover, Rule 9(b) requires plaintiffs to “state the time, place, and specific content of the false representations as well as the identities of the parties to...