December 12, 2011

Federal Court Authorizes Plaintiffs To Tune Into iPod Antitrust Class Action Against Apple

Federal Judge James Ware of the Northern District of California has certified a class of iPod purchasers, allowing an antitrust class action to proceed against Apple Computer, Inc. (“Apple”). 

The plaintiffs in The Apple iPod iTunes Antitrust Litigation contend that Apple violated state and federal antitrust laws by monopolizing markets for digital music downloads and portable digital media players, excluding competing portable digital media devices, and charging supracompetitive prices for iPods. 

The amended consolidated class action complaint, filed on January 26, 2010, charges that Apple engaged in these alleged suppressions of competition by: (1) offering protected music files encoded with FairPlay, Apple’s proprietary software, thereby rendering music files sold by iTunes inoperable on competitors’ portable digital media devices; and (2) making Apple’s portable digital media devices (e.g., iPod) incapable of playing protected music content sold by competing digital music stores.

On May 19, 2011, the court granted summary judgment for Apple on plaintiffs’ claims relating to iTunes 4.7 and denied summary judgment for Apple on plaintiffs’ claims relating to iTunes 7.0. 

The court’s certification order dealt with the issue of whether to certify a putative class consisting of “[a]ll persons or entities in the United States (excluding [certain individuals and entities]) who purchased an iPod directly from Apple between September 12, 2006 and March 31, 2009.”  Specific models of iPods covered by the class definition are provided in the court’s November 22, 2011 Order and include iPod Standard, Classic, and Special Models; iPod shuffle Models; iPod touch Models; and iPod nano Models. 

Quoting the recent Supreme Court opinion in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), Judge Ware applied the applicable – albeit ambiguous – standard for deciding a motion for class certification: “A trial court’s ‘rigorous analysis’ under Rule 23 will frequently ‘entail some overlap with the merits of the plaintiff’s underlying claim.’”  Judge Ware held that the court’s earlier decisions that the plaintiffs met the certification requirements of Rules 23(a) and 23(b)(3) still stand.  Therefore, the balance of the certification order focused on two issues: (1) whether the plaintiffs provided sufficient evidence to establish that antitrust impact and damages may be shown through accepted class-wide methodologies; and (2) whether resellers—as opposed to end-user consumers—should be included in the class.  

First, with respect to the plaintiffs’ methodologies to prove impact and damages on a class-wide basis, the court considered whether the plaintiffs intended to use “generalized proof common to the class” and whether the common issues would “predominate.”  The court relied on its previous determination that the plaintiffs offered an adequate method of proof and, in particular, found the three methodologies offered by plaintiffs sufficient, at least for class certification purposes. 

Second, with respect to the inclusion of resellers, the court was persuaded by plaintiffs’ arguments that resellers should be included in the certified class.  The court relied on Meijer, Inc. v. Abbot Labs., 251 F.R.D. 431, 433 (N.D. Cal. 2008) and Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 489-92 (1968) for the proposition that a reseller’s ability to raise prices and effectively pass the overcharge to its customers is irrelevant as to whether the reseller suffered an injury.  Since the possibility that resellers may pass on any overcharge was found to be irrelevant to the issue of injury, the court included resellers in the class.

Categories: Antitrust Law and Monopolies, Antitrust Litigation

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