Somers v. Apple, Inc., No. 11-16896 (9th Cir. 2013)
Annotate this CasePlaintiff filed suit against Apple alleging federal and state antitrust claims. Plaintiff alleged that Apple encoded iTS music files with its proprietary Digital Rights Management (DRM), called FairPlay, which rendered iTS music and the iPod compatible only with each other. Plaintiff also alleged claims that through certain software updates, Apple excluded competitors and obtained a monopoly in the portable digital media player (PDMP) and music download markets, which inflated Apple's music prices and deflated the value of the iPod. On appeal, plaintiff challenged the district court's July 2009 order denying her motion to certify a class of indirect purchasers of the iPod under Rule 23(b)(3). The court concluded that, because plaintiff abandoned the individual claim for which she sought class certification, the issue of whether the district court erred in denying her motion to certify that claim for class treatment was waived. The court also concluded that the district court properly dismissed plaintiff's monopolization claim for damages based on the theory of diminution in iPod value on the ground that it was barred by Illinois Brick Co. v. Illinois; properly dismissed plaintiff's claim for damages based on supracompetitive music prices; and properly dismissed plaintiff's claims for injunctive relief where plaintiff's alleged inability to play her music freely was not an "antitrust injury" that affected competition and could, therefore, not serve as the basis for injunctive relief. Accordingly, the court affirmed the district court's denial of class certification and dismissal of plaintiff's complaint with prejudice.
Court Description: Antitrust. The panel affirmed the district court’s dismissal of a putative class action against Apple, Inc., alleging antitrust violations in connection with Apple’s iPod and iTunes Music Store. The panel held that the plaintiff waived review of the district court’s order denying certification of a class of indirect purchasers of the iPod because she abandoned her underlying individual claim under § 2 of the Sherman Act based on inflated iPod prices. The panel also held that the plaintiff failed to allege sufficient facts to state antitrust claims for damages and injunctive relief. The plaintiff alleged that Apple encoded iTunes Music Store music files with its proprietary Digital Rights Management (DRM), called FairPlay, which rendered the music files and the iPod compatible only with each other. She alleged that through certain software updates, Apple excluded competitors and obtained a monopoly in the portable digital media player and music download markets, which inflated Apple’s music prices and deflated the value of the iPod. The panel held that a monopolization claim for damages based on the theory of diminution in iPod value was barred by Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), because the plaintiff was an indirect purchaser of the iPod. In addition, she lacked standing to bring this claim because she alleged that she purchased her iPod after Apple’s purported anti-competitive conduct began. The panel concluded that because Apple used FairPlay from the beginning, when it first launched the iTunes Music Store, its use of subsequent software updates only served to maintain the status quo at the time of purchase, and therefore could not plausibly be the basis for diminishing the value of the iPod. The panel held that the plaintiff failed to state a monopolization claim for damages based on overcharged music downloads because she failed to plead sufficient facts to state a plausible antitrust injury. The panel concluded that the fact that Apple continuously charged the same price for its music irrespective of the absence or presence of a competitor rendered implausible the plaintiff’s assertion that Apple’s software updates affected music prices. Finally, the panel held that the plaintiff failed to state a claim for injunctive relief in the form of DRM-free music files because her alleged inability to play her music freely, on non-iPods, was not an “antitrust injury” that affected competition.
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