Li Xi v. Apple Inc.

• Decision Date: 13 March 2009
• Docket Number: No. CV 07-4005(LDW)(ETB).,CV 07-4005(LDW)(ETB).
• Citation: 603 F.Supp.2d 464
• Court: U.S. District Court — Eastern District of New York
• Parties: LI XI, Derrick Semeneh, Tony Tran, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. APPLE INC.; Steve Jobs, Chief Executive Officer of Apple Inc.; AT & T Inc.; AT & T Mobility LLC, Defendants.

Page 464

603 F.Supp.2d 464

LI XI, Derrick Semeneh, Tony Tran, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, v. APPLE INC.; Steve Jobs, Chief Executive Officer of Apple Inc.; AT & T Inc.; AT & T Mobility LLC, Defendants.

No. CV 07-4005(LDW)(ETB).

United States District Court, E.D. New York.

March 13, 2009.

COPYRIGHT MATERIAL OMITTED

Chunyu Jean Wang, Flushing, NY, for Plaintiffs.

Morrison & Foerster LLP by Michael B. Miller, Crowell & Moring LLP by Timothy J. Fierst, New York, NY, for Defendants.

MEMORANDUM AND ORDER

WEXLER, District Judge.

Plaintiffs Li Xi, Derrick Semeneh, and Tony Tran bring this putative class action against defendants Apple Inc. and Steve Jobs (collectively, "Apple") and AT & T Inc. and AT & T Mobility LLC (collectively, "ATTM") under 15 U.S.C. §§ 13, 13a, 14 and 45(a)(1) and 47 U.S.C. § 202. Both Apple and ATTM move to dismiss the Amended Class Action Complaint (the "Amended Complaint") pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiffs oppose the motions.

I. BACKGROUND

For purposes of this motion, the Amended Complaint can be summarized as follows: On June 29, 2007, Apple began selling its newest product, the "iPhone," in two models—an 8 gigabyte ("GB") and a 4GB. Amended Complaint ¶ 24. Plaintiffs each bought a 4GB iPhone from an Apple retail store days after the iPhone was first introduced. Id. ¶¶ 8-10, 93. After plaintiffs purchased their iPhones, they activated them by subscribing to personal, two-year wireless service contracts with ATTM, the exclusive iPhone wireless service provider. Id. ¶ 26.

On September 5, 2007, Apple announced that it would no longer produce the 4GB iPhone and was cutting the price of the 8GB iPhone from $599 to $399. Id. ¶¶ 30-31, 38. Pursuant to Apple's "price protection policy," consumers who purchased the iPhone within 14 days of the price cut were eligible to receive a refund or credit of the difference between the price they paid and the current selling price, meaning those who purchased on or between August 22 and September 4, 2007 would receive $200 back. Id. ¶ 44. Consumers who purchased more than 14 days before the price cut received a $100 store credit. Id. ¶ 45.

According to plaintiffs, the class members include all those who purchased iPhones "between June 29, 2007 and September 5, 2007." Id. ¶ 3. Each class member purportedly purchased an iPhone "intending on reselling" it. Id. ¶¶ 3, 18. Apple's decision to lower the price of the iPhone purportedly hurt these early purchasers because they "cannot resell [their iPhones] for as low a price as later purchasers may. Id. ¶ 36; see also ¶ 100 (alleging plaintiffs "cannot resell [their iPhones] for as high a profit as they could have before the price cut").

Plaintiffs assert the following claims: (1) first claim, for price discrimination in violation of § 2(a) of the Robinson-Patman Act ("RPA"), 15 U.S.C. § 13; (2) second claim, for discrimination in rebates in violation of RPA § 3, 15 U.S.C. § 13a; (3) third claim, for underselling in violation of RPA § 3, 15 U.S.C. § 13a; (4) fourth claim, for sale on agreement not to use competitors' goods in violation of § 3 of the Clayton Act, 15 U.S.C. § 14; (5) fifth claim, for unfair and deceptive acts and practices in violation of § 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a); (6) sixth claim, for discrimination regarding telecommunications charges or service in violation of § 202 of the Communications Act, 47 U.S.C. § 202; and (7) seventh claim, for deceptive acts and practices in violation of New York General Business Law ("GBL") § 349. Defendants move to dismiss all claims.¹

II. DISCUSSION

A. Motion to Dismiss Standard

In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court rejected the "oft quoted" standard set forth in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that a complaint should not be dismissed, "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 45-46, 78 S.Ct. 99. The court discarded the "no set of facts" language in favor of the requirement that plaintiff plead enough facts "to state a claim to relief that is plausible on its face." Bell Atl., 127 S.Ct. at 1974.

The "plausibility" language used by the Supreme Court in Bell Atlantic has not been interpreted by the Second Circuit to require a "universal standard of heightened fact pleading," but to require a complaint to "amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007) (emphasis in original). Further, courts have noted that while heightened factual pleading is not the new order of the day, Bell Atlantic holds that a "`formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above a speculative level, on the assumption that all allegations in the complaint are true (even if doubtful in fact).'" Williams v. Berkshire Fin. Group, Inc., 491 F.Supp.2d 320, 324 (E.D.N.Y.2007) (quoting Bell Atl., 127 S.Ct. at 1959).

On a motion to dismiss, the court must, as always, assume that all allegations in the complaint are true and draw reasonable inferences in favor of the nonmoving party. Watts v. Servs. for the Underserved, No. 06-CV-2156, 2007 WL 1651852, *2 (E.D.N.Y. June 6, 2007). The court must ensure, however, that the complaint sets forth "enough facts to state a claim to relief that is plausible on its face." Bell Atl., 127 S.Ct. at 1974.

B. First Claim: Price Discrimination

Plaintiffs argue that Apple discriminated in price between plaintiffs (and the other class members) and later purchasers of the 8GB iPhone because of the price reduction, in violation of RPA § 2(a), 15 U.S.C. § 13(a). Apple argues that this claim fails because the Amended Complaint does not sufficiently allege price discrimination within the meaning of § 2(a).

Section 2(a) provides, in relevant part:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them . . . .

15 U.S.C. § 13(a). To establish a claim under § 2(a) a plaintiff has the burden of establishing four facts: (1) that seller's sales were made in interstate commerce; (2) that the seller discriminated in price as between the two purchasers; (3) that the product or commodity sold to the competing purchasers was of the same grade and quality; and (4) that the price discrimination had a prohibited effect on competition.

George Haug Co. v. Rolls Royce Motor Cars Inc., 148 F.3d 136, 141 (2nd Cir.1998). Section 2(a) "addresses price discrimination in cases involving competition between different purchasers for resale of the purchased product." Volvo Trucks North Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 169-70, 126 S.Ct. 860, 163 L.Ed.2d 663 (2006); Herndon v. Rite Aid Corp., No. 04-0300-CG-B, 2007 WL 2712978, at *5 (S.D.Ala. Sept. 14, 2007). Absent actual competition between a disfavored purchaser and a favored purchaser, a plaintiff cannot establish the requisite injury. Volvo Trucks North Am., Inc., 546 U.S. at 177, 126 S.Ct. 860; United Magazine Co. v. Murdoch Magazines Distrib., Inc., 279 Fed.Appx. 14, 17 (2d Cir.2008). To have standing under § 2(a), a private plaintiff must "make some showing of actual injury attributable to something the antitrust laws were designed to prevent." J. Truett Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 562, 101 S.Ct. 1923, 68 L.Ed.2d 442 (1981); United Magazine, 279 Fed.Appx. at 17. "To establish an antitrust injury, a plaintiff must show `(1) an injury in fact; (2) that has been caused by the violation; and (3) that is the type of injury contemplated by the statute.'" United Magazine, 279 Fed.Appx. at 17 n. 4 (quoting Blue Tree Hotels, Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 220 (2d Cir.2004)).

Plaintiffs assert that they were injured because they could not resell their iPhones for as high a profit as later purchasers. However, plaintiffs do not allege that they are competitors engaged in the business of reselling iPhones, that they are in actual competition with a favored purchaser, or that they even resold or attempted to resell their iPhones. Moreover, the Amended Complaint incorporates by reference the sales agreement between Apple and plaintiffs, in which plaintiffs expressly acknowledged and agreed that they were "end user customers," and that Apple's retail customers "may not purchase for resale." See Amended Complaint ¶ 44. Thus, plaintiffs fail to allege actual competition with a favored purchaser or antitrust injury.

Moreover, plaintiffs allege that the purchasers of an iPhone prior to September 5, 2007 paid identical prices and received identical terms of sale. Apple subsequently reduced the price to all purchasers, so that all later purchasers paid the identical price and received identical terms of sale. Plaintiffs' allegations do not describe any price discrimination, only a reduction in the price of the iPhone after their purchase. Indeed, "a seller is free to change its prices as much and as often as it wants, provided it charges the same price to all competing customers at the same time." K-S Pharmacies, Inc. v. American Home Prods. Corp., 962 F.2d 728, 733 (7th Cir.1992); see also A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d...