Anderson et al v. Apple Inc., No. 3:2020cv02328 - Document 48 (N.D. Cal. 2020)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART 32 MOTION TO DISMISS by Judge William H. Orrick. (jmdS, COURT STAFF) (Filed on 11/16/2020)
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ELAINE ANDERSON, et al., Plaintiffs, 8 9 10 United States District Court Northern District of California 11 Case No. 3:20-cv-02328-WHO ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS v. APPLE INC., Defendant. Re: Dkt. No. 32 12 13 INTRODUCTION 14 The 68 named plaintiffs in this proposed class action claim that defendant Apple Inc. 15 (“Apple”) misled them about the capabilities of one of its smartphones, the iPhone XR. The 16 iPhone XR, like previous generations of iPhones, used a “2x2 MIMO antenna.” The iPhone XS 17 and XS Max, Apple smartphones released around the same time as the iPhone XR, used superior 18 “4x4 MIMO antennas.” The plaintiffs allege that the 2x2 antenna is less capable when it comes to 19 establishing and maintaining cellular and wireless internet connections. Apple, the plaintiffs say, 20 never disclosed the difference in antenna types, so they purchased their iPhone XRs believing they 21 had materially identical cellular and wireless capabilities as the iPhone XS and XS Max. Their 22 claims fall into two broad categories: claims about Apple’s alleged misrepresentations by 23 omission and claims brought under express and implied warranties. 24 Apple moves to dismiss, and I grant the motion in part. I conclude that the plaintiffs’ 25 misrepresentation-based claims largely survive Apple’s challenges. The complaint alleges that 26 Apple made partial representations that obligated it to disclose the information and, even aside 27 from these partial representations, had a duty to disclose the information. The plaintiffs’ claims 28 based on Apple’s duty to disclose—that is, their “pure omissions” claims—are adequately 1 pleaded. The plaintiffs have not, however, adequately alleged that they relied on any partial 2 representations. Separately, they have not shown that they possess standing to pursue injunctive 3 relief or that they can receive equitable restitution under California law. Those problems appear 4 curable in a properly amended complaint. Dismissal is with leave to amend. United States District Court Northern District of California 5 The plaintiffs’ warranty-based claims are more problematic. They have not adequately 6 alleged that Apple violated its express warranty; that warranty does not entitle customers to 7 redress for design choices or defects. Their claim that Apple violated California’s warranty of 8 merchantability fails because Apple validly disclaimed that warranty. And their claim that Apple 9 violated the covenant of good faith and fair dealing is an impermissible attempt to use the express 10 warranty to pursue a design defect-based claim. But because I cannot say that amendment would 11 be futile, dismissal of these claims is also with leave to amend. 12 13 14 BACKGROUND This case is before me on a motion to dismiss so the facts are drawn from the plaintiffs’ First Amended Complaint (“FAC”) [Dkt. No. 23]. 15 Apple is incorporated and has its principal place of business in California. FAC ¶ 376. It 16 designs, manufactures, and sells, among other electronic products, the iPhone. Id. In September 17 2018, it released the iPhone XS and XS Max; in October 2018, it released the iPhone XR. Id. ¶ 18 378. The XS and XS Max were equipped with a “4x4 MIMO antenna” while the XR was 19 equipped with a “2x2 MIMO antenna.” Id. ¶¶ 378–79. According to the FAC, a 2x2 MIMO 20 antenna “is only capable of two streams of data for transmit and receive pathways while [a] 4x4 21 MIMO antenna . . . offers four streams.” Id. ¶ 379. As a result, “a device equipped with a 2x2 22 MIMO antenna does not connect as well [to a cellular networks or Wi-Fi] and suffers from an 23 inferior signal connection compared to a device equipped with the superior 4x4 MIMO antenna.” 24 Id. ¶ 380. The 2x2 MIMO antenna, the plaintiffs allege, is “less capable of obtaining a reliable 25 connection” to a cellular signal. Id. ¶¶ 3, 380. 26 Because the FAC includes allegations of 68 named plaintiffs, I discuss only those 27 experiences of the plaintiffs relevant to resolving this motion. Each plaintiff purchased at least 28 one iPhone XR. See, e.g., id. ¶¶ 12, 17, 22, 27, 32, 39, 44, 49. 64 of the plaintiffs claim that they 2 United States District Court Northern District of California 1 “reviewed marketing materials and advertisements concerning the iPhone XR prior to purchasing” 2 it but “were not made aware of any features of the iPhone XR that would render it less capable of 3 voice, text, and internet connectivity than other iPhone models.” See, e.g., id. ¶¶ 13, 18, 23, 28, 4 33, 40, 45. They claim that, in particular, they were “not made aware of the fact that the iPhone 5 XR was equipped with an inferior 2x2 MIMO antenna.” Id. Four of the named plaintiffs do not 6 allege they reviewed any such materials. See id. ¶¶ 180, 330, 342, 348. Instead, they assert that 7 they were “not made aware of any features of the iPhone XR that would render it less capable of 8 voice, text, and internet connectivity than other iPhone models.” Id. 9 Each plaintiff alleges that, if he or she had “known about the inferior 2x2 MIMO antenna 10 on the iPhone XR,” he or she “would have paid less for the phones, or . . . would have selected a 11 different model or different manufacturer’s phone that did not use an inferior antenna.” See, e.g., 12 id. ¶¶ 13, 18, 23, 28, 33, 40, 45. The plaintiffs claim that they experienced “connectivity issues 13 with [their] iPhone XRs.” See, e.g., id. ¶¶ 14, 19, 24, 29, 34, 41, 46. Some allege that they 14 “complained to Apple” within the period of their warranty. See, e.g., id. ¶ 15. The plaintiffs claim 15 that the difference in quality between the 2x2 and 4x4 MIMO antennas have been widely 16 commented on in the press and that other Apple consumers have had complaints about the iPhone 17 XR’s alleged connectivity problems. See, e.g., id. ¶¶ 381–93. 18 The plaintiffs assert that it was never made clear to them that the iPhone XR had inferior 19 connectivity capabilities than the iPhone XS or XS Max. They argue, in fact, that Apple 20 “concealed, and continues to conceal the fact that the iPhone XR contains an inferior 2x2 MIMO 21 antenna that renders the iPhone XR incapable of performing its central functions as reasonably 22 expected.” Id. ¶ 401. They allege that the iPhone XR had inferior connectivity than other 23 companies’ smartphones “at the same price-point.” Id. ¶ 396. Additionally, the plaintiffs contend 24 that, rather than remedying the problem, Apple would replace iPhone XRs experiencing 25 connectivity problems with others that, by their nature, shared the “defect” of using a 2x2 antenna. 26 Id. ¶ 401. 27 28 The 68 named plaintiffs hale from dozens of states, including California. See id. at 3–58. They filed this proposed class action on behalf of themselves and others similarly situated— 3 1 namely, “[a]ll U.S. persons or entities who own or owned an iPhone XR.” Id. ¶ 414. They also 2 allege a claim on behalf of a nationwide subclass (the “Nationwide Express Warranty Subclass”) 3 consisting of “All members of the Nationwide Class who presented their phone to Apple, an 4 authorized Apple reseller, or an authorized Apple service center for repair of connectivity issues, 5 whose iPhone XRs were not fixed, or were replaced with iPhone XRs.” Id. ¶ 415. They request 6 that, if I determine that California law does not apply to all class members, the claims be split into 7 state subclasses based on those states’ laws. The plaintiffs filed their original Complaint on April 6, 2020, Dkt. No. 1, and filed their United States District Court Northern District of California 8 9 FAC on May 28, 2020, alleging eleven causes of action. Two are for violation of federal law: (1) 10 breach of express warranty under the Magnuson-Moss Warranty Act (“MMWA”) and (2) breach 11 of implied warranty under the MMWA. Five are for violations of California law: (3) violation of 12 the Consumer Legal Remedies Act (“CLRA”), (4) violation of the Unfair Competition Law 13 (“UCL”), (5) fraud by concealment, (6) breach of the implied warranty of merchantability, and (7) 14 breach of the covenant of good faith and fair dealing. The other four are counts brought in the 15 alternative under the laws of the other states in which the plaintiffs reside if I determine that 16 California law cannot apply to the non-California plaintiffs: (8) violation of state consumer 17 protection acts, (9) fraud by concealment, (10) breach of the implied warranty of merchantability, 18 and (11) breach of the covenant of good faith and fair dealing. Apple now moves to dismiss the 19 FAC. See Motion to Dismiss Plaintiffs’ First Amended Class Action Complaint (“Mot.”) [Dkt. 20 No. 32]. I held a hearing on the motion on November 4, 2020.1 LEGAL STANDARD 21 22 I. A motion to dismiss filed pursuant to Federal Rule of Civil Procedure (“FRCP”) 12(b)(1) 23 24 MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION is a challenge to the court’s subject matter jurisdiction. See FED. R. CIV. P. 12(b)(1). “Federal 25 26 27 28 Apple’s unopposed request for judicial notice, Dkt. No. 33, is GRANTED. This includes its One (1) Year Limited Warranty [Dkt. No. 32-2] and its iOS Software License Agreement for iOS 12 for iPhone, iPad, and iPod Touch [Dkt. No. 32-3]. Those documents are referenced in the FAC, see, e.g., FAC ¶¶ 398, 403; are relevant to the claims; and their authenticity is not in dispute, see Dkt. No. 32-1. They are therefore incorporated by reference into the FAC. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). 4 1 1 courts are courts of limited jurisdiction,” and it is “presumed that a cause lies outside this limited 2 jurisdiction.” Kokkonen v. Guardian Life Ins. of Am., 511 U.S. 375, 377 (1994). The party 3 invoking the jurisdiction of the federal court bears the burden of establishing that the court has the 4 requisite subject matter jurisdiction to grant the relief requested. Id. A challenge pursuant to Rule 12(b)(1) may be facial or factual. See White v. Lee, 227 F.3d United States District Court Northern District of California 5 6 1214, 1242 (9th Cir. 2000). In a facial attack, the jurisdictional challenge is confined to the 7 allegations pled in the complaint. See Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir. 2004). 8 The challenger asserts that the allegations in the complaint are insufficient “on their face” to 9 invoke federal jurisdiction. See Safe Air Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th 10 Cir. 2004). To resolve this challenge, the court assumes that the allegations in the complaint are 11 true and draws all reasonable inference in favor of the party opposing dismissal. See Wolfe, 392 12 F.3d at 362. 13 II. MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Under FRCP 12(b)(6), a district court must dismiss a complaint if it fails to state a claim 14 15 upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must 16 allege “enough facts to state a claim to relief that is plausible on its face.” See Bell Atl. Corp. v. 17 Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the plaintiff pleads facts 18 that “allow the court to draw the reasonable inference that the defendant is liable for the 19 misconduct alleged.” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). There 20 must be “more than a sheer possibility that a defendant has acted unlawfully.” Id. While courts 21 do not require “heightened fact pleading of specifics,” a plaintiff must allege facts sufficient to 22 “raise a right to relief above the speculative level.” See Twombly, 550 U.S. at 555, 570. In deciding whether the plaintiff has stated a claim upon which relief can be granted, the 23 24 Court accepts the plaintiff’s allegations as true and draws all reasonable inferences in favor of the 25 plaintiff. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court 26 is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of 27 fact, or unreasonable inferences.” See In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 28 2008). 5 United States District Court Northern District of California 1 If the court dismisses the complaint, it “should grant leave to amend even if no request to 2 amend the pleading was made, unless it determines that the pleading could not possibly be cured 3 by the allegation of other facts.” See Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In 4 making this determination, the court should consider factors such as “the presence or absence of 5 undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previous 6 amendments, undue prejudice to the opposing party and futility of the proposed amendment.” See 7 Moore v. Kayport Package Express, 885 F.2d 531, 538 (9th Cir. 1989). 8 DISCUSSION 9 Apple moves to dismiss on numerous grounds. Because I grant the plaintiffs leave to 10 amend, I address many arguments in the alternative for the sake of efficiency. 11 I. 12 STANDING Apple first challenges the plaintiffs’ standing to bring certain claims and seek certain 13 remedies. Because Article III standing is necessary for my exercise of jurisdiction, I examine 14 those arguments first. 15 16 A. Standing to Bring Fraud and Misrepresentation Claims Apple argues that the plaintiffs lack Article III standing to pursue their fraud and 17 misrepresentation-based claims (Counts III–V, VIII, and IX). Mot. 4–5. Apple’s claim is 18 properly classified as a facial attack under FRCP 12(b)(1). 19 “In a class action, standing is satisfied if at least one named plaintiff meets the 20 requirements.” Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). “[T]he core 21 component of standing is an essential and unchanging part of the case-or-controversy requirement 22 of Article III.” Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). The plaintiffs bear the 23 burden of pleading and showing standing. To do so, they must demonstrate three elements: (1) an 24 “injury in fact,” (2) a “causal connection between the injury and the conduct complained of,” and 25 (3) that it is “likely . . . that the injury will be redressed by a favorable decision.” Id. (internal 26 quotation marks and citations omitted). An injury in fact must be “concrete and particularized” 27 and “actual or imminent,” as opposed to “conjectural or hypothetical.” Id. To show a causal 28 connection, the injury must only be “fairly traceable” to the challenged conduct. Id. 6 In claims involving misrepresentations to consumers, courts have often required that the United States District Court Northern District of California 1 2 consumers plausibly allege that they “actually relied” on an allegedly misleading statement to 3 plead Article III standing. See Phillips v. Apple Inc., No. 15-CV-04879-LHK, 2016 WL 1579693, 4 at *5–*7 (N.D. Cal. Apr. 19, 2016); In re iPhone Application Litig., 6 F. Supp. 3d 1004, 1015 5 (N.D. Cal. 2013); Pirozzi v. Apple, Inc., 966 F. Supp. 2d 909, 919 (N.D. Cal. 2013).2 The theory 6 behind requiring actual reliance is that a consumer’s injury cannot be “fairly traceable” to the 7 defendant’s alleged misrepresentation unless that consumer actually relied on that 8 misrepresentation. See, e.g., Phillips, 2016 WL 1579693, at *5–*6. If a defendant makes a 9 misrepresentation and the plaintiff, without knowing of that misrepresentation, coincidentally 10 purchases the product in question, her injury is not traceable to the misrepresentation. The 11 plaintiffs agree that they must allege actual reliance. Oppo. 5 (“Plaintiffs must plead ‘actual 12 reliance’ for Article III standing[.]”). Apple contends that the FAC lacks allegations that the plaintiffs “actually relied” on 13 14 statements that were misleading. Therefore, Apple argues, the plaintiffs have not adequately 15 alleged causation between Apple’s claimed unlawful conduct and their injuries. Mot. 4–5. I interpret the misrepresentation-based portions of the FAC to allege claims about 16 17 omissions by Apple. See, e.g., FAC ¶¶ 469, 472, 474, 483, 493, 496, 507, 513, 521. In their 18 Opposition, the plaintiffs confirm that interpretation. Oppo. 8 n.6 (“Contrary to Apple’s claims, 19 Plaintiffs do not assert any standalone affirmative misrepresentation claims . . . . To the extent 20 Plaintiffs allege any affirmative representations, they are alleged in support of Plaintiffs’ 21 omission-based fraud claims.”). I proceed on that basis. 22 The FAC sufficiently alleges standing. Apple is correct that the FAC does not contain a 23 specific allegation that any of the plaintiffs relied on a particular omission prior to making their 24 purchases. 64 of the plaintiffs do, however, allege that they “reviewed marketing materials and 25 advertisements concerning the iPhone XR prior to purchasing it.” See, e.g., FAC ¶¶ 13, 18, 23, 26 27 28 2 This Article III requirement is distinct from the requirement of actual reliance to establish statutory standing for California’s Unfair Competition Law. See In re Tobacco II Cases, 46 Cal. 4th 298, 326 (2009). 7 1 28, 33, 40, 45. The plaintiffs claim that, had they known of the difference in antennas, they would 2 not have purchased iPhone XRs at the price they did. See, e.g., id. The plaintiffs also point to two 3 specific representations by Apple that are allegedly misleading. First, Apple’s initial press release 4 announcing the iPhone XR allegedly did not disclose that the iPhone XR used the 2x2 MIMO 5 antenna; instead, it stated the “iPhone XR combines breakthrough technologies from iPhone XS in 6 an all-screen glass and aluminum design.” Id. ¶ 396. Second, a page on Apple’s website allegedly 7 did not disclose “connectivity shortcomings of the 2x2 MIMO antenna in the iPhone XR.” Id. ¶ 8 397. That webpage permits users to make comparisons between different versions of the iPhone 9 and, according to the plaintiffs, this comparison tool presented the iPhone XS and XS Max as 10 having “nearly identical cellular and wireless capabilities” as to the iPhone XR. Id. In the context of an omission-based fraud or misrepresentation claim, a plaintiff “will not United States District Court Northern District of California 11 12 be able to specify the time, place, and specific content of an omission as would a plaintiff in a 13 false representation claim.” MacDonald v. Ford Motor Co., 37 F. Supp. 3d 1087, 1096 (N.D. Cal. 14 2014) (internal quotation marks omitted). “Because such a plaintiff is alleging a failure to act 15 instead of an affirmative act, the plaintiff [sometimes] cannot point out the specific moment when 16 the defendant failed to act.” Baggett v. Hewlett-Packard Co., 582 F. Supp. 2d 1261, 1267 (C.D. 17 Cal. 2007).3 Consequently, when it comes to omissions-based claims, “actual reliance” is 18 somewhat different than in affirmative representation cases. I conclude that it is sufficient for 19 standing purposes at this early stage for the plaintiffs to allege—as they have—that (1) Apple 20 failed to adequately disclose information about the iPhone XR; (2) the plaintiffs reviewed 21 marketing and similar materials about the iPhone XR prior to making their purchase, which leads 22 to a reasonable inference that they would have encountered the disclosure had it been made; and 23 (3) the plaintiffs would not have made the purchases if they knew of the information. To establish 24 standing, they do not need to rely on the two specific examples they cite alone. Accordingly, the 25 plaintiffs have adequately pleaded that their injuries are “fairly traceable” to Apple’s alleged 26 27 28 3 These courts made these statements in the context of challenges to the adequacy of pleading, not to standing. I find them applicable because they describe the structure of an omission-based claim, which sheds light on the type of injury and causation required. 8 1 United States District Court Northern District of California 2 failure to disclose the information. At least one other court in this Circuit has held that analogous allegations plausibly showed 3 causation. See In re Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Practices, & Prod. Liab. Litig., 4 295 F. Supp. 3d 927 (N.D. Cal. 2018). There, the plaintiffs alleged that the defendants 5 intentionally installed software in vehicles that permitted them to “cheat emissions tests.” Id. at 6 952. The defendants were alleged to have “knowingly concealed” that software “from regulators 7 and consumers.” Id. The plaintiffs argued that “they would not have bought or leased the Class 8 Vehicles, or would have paid less to do so, if Defendants had disclosed that the Class Vehicles 9 were equipped with the software.” Id. The court held that this injury was fairly traceable to the 10 claimed misconduct. Id. It concluded, as I have, that “Plaintiffs do not need to identify a 11 [particular] statement on which they relied that was made by the . . . Defendants to plausibly trace 12 their economic injuries to these entities.” Id. (emphasis added). Had the defendants there—and 13 Apple here—adequately disclosed the relevant information, the plaintiffs plausibly claim they 14 would have known of it and made decisions accordingly. See id. 15 Neither of the cases Apple relies on suggests a different conclusion. In Phillips, the 16 “Plaintiffs d[id] not allege that they saw or heard any statements, advertising, terms of use, or 17 other representations by Apple before downloading iOS 9 or using Wi–Fi Assist.” Phillips, 2016 18 WL 1579693, at *7 (emphasis added). Here, 64 of the plaintiffs do. In Phillips, the plaintiffs did 19 allege that one specific statement on Apple’s website was misleading, but they did not allege the 20 date they downloaded the program at issue; it was, therefore, not possible to “determine whether 21 Plaintiffs could have seen Apple’s statement before being injured.” Id. Here, the 64 plaintiffs 22 explicitly allege that they reviewed marketing and other materials prior to purchasing their 23 phones. See, e.g., FAC ¶ 13. And in Phillips, the plaintiffs did “not identify the existence of any 24 advertising or advertising campaign related to iOS 9 or Wi–Fi Assist,” the programs at issue there. 25 Phillips, 2016 WL 1579693, at *8. Nor did they “allege when they read or heard such advertising, 26 or offer any other ‘plausible method’ by which Plaintiffs would have become aware of Apple's 27 alleged partial representations or omissions.” Id. Here, again, the plaintiffs have alleged plausible 28 methods by which they would have become aware of the allegedly misleading representations: 9 1 through Apple’s own marketing channels. Similarly, the plaintiffs in the other case Apple relies 2 on never alleged that they “saw or heard, let alone relied on, any advertisements, offers, or other 3 representations of SeaWorld in advance of their ticket purchases.” Hall v. Sea World Entm’t, Inc., 4 No. 3:15-CV-660-CAB-RBB, 2015 WL 9659911, at *6 (S.D. Cal. Dec. 23, 2015) (emphasis 5 added). 6 7 8 United States District Court Northern District of California 9 At this stage, the plaintiffs needed to plausibly allege that their injuries are fairly traceable to Apple’s alleged omissions. They have done so. B. Standing to Seek Injunctive Relief When a plaintiff seeks injunctive relief, she must have standing to do so. Davidson v. 10 Kimberly-Clark Corp., 889 F.3d 956, 967 (9th Cir. 2018). The basic requirements of Article III 11 standing discussed above apply to all claims, including for injunctive relief. See id. Because 12 injunctive relief is prospective, the Ninth Circuit has emphasized the requirement that “the threat 13 of injury . . . be actual and imminent, not conjectural or hypothetical.” Id. An allegation of 14 “possible future injury” is insufficient; the plaintiff must show an injury that is “certainly 15 impeding.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 (2013) (emphasis in original). 16 Davidson examined injunctive relief in the particular context of allegedly false advertising. 17 The court there held that “a previously deceived consumer may have standing to seek an 18 injunction against false advertising or labeling, even though the consumer now knows or suspects 19 that the advertising was false at the time of the original purchase.” Id. at 969. The court explained 20 that “[k]nowledge that the advertisement or label was false in the past does not equate to 21 knowledge that it will remain false in the future.” Id. A sufficient threat of future harm “may be 22 the consumer’s plausible allegations that she will be unable to rely on the product’s advertising or 23 labeling in the future, and so will not purchase the product although she would like to.” Id. at 24 969–70. Or that threat “may be the consumer’s plausible allegations that she might purchase the 25 product in the future, despite the fact it was once marred by false advertising or labeling, as she 26 may reasonably, but incorrectly, assume the product was improved.” Id. at 970. 27 28 Apple argues that the plaintiffs lack standing to seek injunctive relief because none of them allege “an intent to purchase another iPhone XR in the future.” Mot. 5. The plaintiffs respond 10 United States District Court Northern District of California 1 that they “would consider purchasing other iPhones in the future.” Oppo. 6. If the plaintiffs had 2 plausibly alleged that they are considering purchasing other iPhones in the future, it would likely 3 suffice to create injury. In Davidson, the plaintiff alleged that she had an actual, present desire to 4 repurchase the offending product—there, wipes that were allegedly misleadingly marketed as 5 “flushable.” 889 F.3d at 971. The court described it as a “close question.” Id. It held that the 6 plaintiff had adequately alleged future injury because she alleged “that she would purchase truly 7 flushable wipes manufactured by [the defendant] if it were possible.” Id. She could not, though, 8 trust the characterization of the wipes as “truly flushable” and, accordingly, suffered an imminent 9 future injury. See id. at 971–72. Her injury was likely to repeat because “should Davidson 10 encounter the denomination ‘flushable’ on [the defendant’s] wipes package at the grocery store 11 today, she could not rely on that representation with any confidence.” Id. (internal quotation 12 marks and alterations omitted). 13 The plaintiffs here have made no similar allegations to even that “close question.” Despite 14 the argument in their Opposition, none of them has alleged (in the FAC) a desire to purchase the 15 iPhone XR in the future. None of them has alleged a desire to purchase another smartphone 16 instead of the iPhone XR in the future. And none of them has alleged that such a desire has any 17 imminence. Although the plaintiffs represent in their Opposition that they allege they “would 18 consider purchasing other iPhones in the future,” that contention is insufficient because it is not 19 actually what the FAC says. The allegations the plaintiffs cite in support of that argument are, to 20 take one of the identical examples, “Had she known about the inferior 2x2 MIMO antenna on the 21 iPhone XR, Plaintiff would have paid less for this phone, or she would have selected a different 22 model or different manufacturer’s phone that did not use an inferior antenna.” E.g., FAC ¶ 33; see 23 Oppo. 5–6 (citing this paragraph and others identical to it). The allegations of which this is 24 representative are entirely retrospective. They speak to the plaintiffs’ past desires. The plaintiffs 25 urge that this allegation, “[s]tated differently,” amounts to an allegation that the plaintiffs “have 26 not sworn off Apple products in general and would consider purchasing another iPhone in the 27 future.” Oppo. 5–6. That prospective statement is not what the FAC actually claims. 28 . I GRANT the motion to dismiss the plaintiffs’ request for injunctive relief. Because it is 11 1 more than possible that at least one plaintiff can allege a present, plausible willingness to purchase 2 an iPhone (or competitor phone) in the future, see Lilly v. Jamba Juice Co., No. 13-CV-02998- 3 JST, 2015 WL 1248027, at *3–*4 (N.D. Cal. Mar. 18, 2015), this ruling is without prejudice 4 II. 5 6 United States District Court Northern District of California 7 RESTITUTION Apple argues that the plaintiffs’ claims for restitution under the CLRA and UCL must be dismissed because they have not alleged that they lack an adequate remedy at law. Mot. 6. “[A] federal court must apply traditional equitable principles before awarding restitution 8 under the UCL and CLRA.” Sonner v. Premier Nutrition Corp., 971 F.3d 834, 841 (9th Cir. 9 2020). One well-established equitable principle is that, to obtain an equitable remedy, a plaintiff 10 must lack an “adequate remedy at law.” Mort v. U.S., 86 F.3d 890, 892 (9th Cir. 1996). That 11 principle applies squarely to an award of restitution—an equitable remedy—under the UCL and 12 CLRA. Sonner, 971 F.3d at 844. In Sonner, the court held that the plaintiff’s request for 13 restitution under the UCL and CLRA must be dismissed because “the operative complaint does 14 not allege that Sonner lacks an adequate legal remedy.” 971 F.3d at 844. The court went on to 15 say that, “[m]ore importantly, Sonner concedes that she seeks the same sum in equitable 16 restitution as ‘a full refund of the purchase price’ . . . as she requested in damages to compensate 17 her for the same past harm. Sonner fails to explain how the same amount of money for the exact 18 same harm is inadequate or incomplete, and nothing in the record supports that conclusion.” Id. 19 Under Sonner, the plaintiffs are required, at a minimum, to plead that they lack an adequate 20 remedy at law, which they have not done. Because they also request money damages, it is 21 possible their legal remedy is sufficient; on this record, they have not yet disproven that. See id. 22 (“[The plaintiff] must establish that she lacks an adequate remedy at law before securing equitable 23 restitution for past harm under the UCL and CLRA.”). The plaintiffs’ Opposition is brief and 24 unhelpful on this score. They do not attempt to argue, for instance, that the equitable restitution 25 they request would go beyond the damages available to them. Nor do they make any related 26 argument, such as showing that restitution under the CLRA or UCL would be more certain, 27 prompt, or efficient than the legal remedies they request. See Am. Life Ins. Co. v. Stewart, 300 28 U.S. 203, 214 (1937). 12 United States District Court Northern District of California 1 The plaintiffs make two other responses. First, they argue that Sonner is inapplicable 2 because “the cases are factually distinguishable, as the plaintiff in Sonner, on the eve of trial, 3 voluntarily dismissed her state law damages claim and chose to proceed with only state law 4 equitable claims” while this “case is truly in its pleading stage, and no discovery has taken place.” 5 Oppo. 6–7 n.2. But the plaintiffs have not pleaded inadequate remedies at law to begin with and 6 they offer no reason why the remedies at law they request in the complaint would be adequate. 7 Second, the plaintiffs contend that they are permitted to plead remedies in the alternative. They 8 cite Luong v. Subaru of Am., Inc., No. 17-CV-03160-YGR, 2018 WL 2047646 (N.D. Cal. May 2, 9 2018), which collected cases permitting pleading equitable relief in the alternative, even where 10 legal remedies were available. Id., at *7 n.6. That case and those it referenced predated Sonner. 11 Luong “recognize[d] that there [wa]s a split of authority in the California district courts on the 12 question of whether plaintiffs should be barred from pleading claims for equitable relief under the 13 UCL and CLRA if they have alleged a claim that would provide an adequate remedy at law.” Id. 14 Sonner appears to have resolved that split, and the plaintiffs make no argument to the contrary. It seems entirely possible that the plaintiffs could plead in an amended complaint that they 15 16 lack an adequate remedy at law. Contrary to Apple’s assertion, see Mot. 6, the mere fact that the 17 FAC requests damages is not sufficient to show that restitution is foreclosed. Instead, the 18 plaintiffs must adequately allege that, under usual principles of equity, their remedies at law would 19 be inadequate to what restitution could provide. I GRANT the motion to dismiss the request for restitution under the UCL and CLRA. I 20 21 must GRANT the motion to dismiss Count IV (the UCL count) in its entirety because I have 22 determined that the plaintiffs cannot, at this point, pursue injunctive relief or restitution—the only 23 remedies the UCL authorizes. See Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 24 1146–49 (2003). The dismissals are without prejudice. 25 III. 26 27 28 CHOICE OF LAW Six of the named plaintiffs are from California. Apple argues that, under California’s choice-of-law principles, California law cannot apply to the other 62 named plaintiffs. The plaintiffs first respond that I do not need to resolve this issue now and should defer it 13 1 until class certification. Often, courts will defer the choice-of-law analysis in a proposed class 2 action until the class certification stage. See Frenzel v. AliphCom, 76 F. Supp. 3d 999, 1007 (N.D. 3 Cal. 2014) (collecting cases). This analysis is frequently “a fact-specific inquiry which requires a 4 more developed factual record than is generally available on a motion to dismiss.” Id. The Ninth 5 Circuit’s leading case on this issue, Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 6 2012), was decided on appeal during the class certification phase and, consequently, will often be 7 most easily applied at that stage. But courts are also in agreement that “the principle articulated 8 in Mazza applies generally and is instructive even when addressing a motion to dismiss.” Frezza 9 v. Google Inc., No. 5:12-CV-00237-RMW, 2013 WL 1736788, at *6 (N.D. Cal. Apr. 22, 2013) 10 (collecting cases); accord Frenzel, 76 F. Supp 3d at 1007. To determine whether the choice-of-law analysis should occur on the pleadings or at class United States District Court Northern District of California 11 12 certification, courts generally look to whether discovery would be a meaningful aid to that inquiry. 13 See, e.g., Gerstle v. Am. Honda Motor Co., Inc., No. 16-CV-04384-JST, 2017 WL 2797810, at *4 14 (N.D. Cal. June 28, 2017); Frenzel, 76 F. Supp 3d at 1007. Though the choice-of-law analysis is, 15 in the main, “fact-specific,” the record based on the pleadings can sometimes be sufficient to fully 16 understand the conflict-of-law issues at play. See Frenzel, 76 F. Supp 3d at 1007–08 (citing 17 cases). Here, the plaintiffs concede that if California law does not apply to them, the law of their 18 19 state of residence does.4 They bring alternative claims under the laws of those states should I 20 determine that California law does not apply. Given this concession, it is hard to see what “factual 21 development” the plaintiffs believe is necessary; in their Opposition, they do not indicate what 22 discoverable facts would be useful in resolving the choice-of-law issue. Nonetheless, I will defer this decision. I will not, however, automatically defer it until 23 24 25 26 27 28 It is not clear that the parties’ joint view on this is faithful to Mazza or choice-of-law principles. If, for instance, a plaintiff purchased her iPhone XR in a different state than her current state of residence, the state of residence’s law may not be the controlling one. See Mazza, 666 F.3d at 594 (“Under the facts and circumstances of this case, we hold that each class member’s consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place.”). But because I defer decision on the issue today, there is no need to address this problem now. 14 4 United States District Court Northern District of California 1 class certification; it may be ripe to decide in another round of pleadings motions, depending on 2 the content of any amended complaint. For now, the parties’ briefing on this issue is far too 3 cursory. Each party devotes only a few pages to the question, and much of that space is consumed 4 by argument about whether deferral is proper. Each party’s analysis of the conflict of laws is, 5 consequently, superficial. That is especially true given that this is an unusually complicated 6 choice-of-law question. The parties are arguing over multiple bodies of law—consumer 7 protection, fraud, warranties, and contracts—across 33 jurisdictions. Apple, to its credit, lists 8 several potentially relevant differences in the laws between states, but its citations are almost 9 entirely to one-sentence summaries from a single authority in each state. See, e.g., Mot. 10 n.3. 10 The plaintiffs’ responses—which they do not always provide—are at best equally terse. See, e.g., 11 Oppo. 15 n.14. I will not, without the benefit of robust adversarial briefing, attempt to divine the 12 differences in or conflicts between 33 states’ laws—especially if it does not end up making a 13 difference in the case. If anything, the number of arguments in the briefs, which I narrow in this 14 Order by ruling on many of them, also counsels against deciding this issue now. In the future, the 15 parties’ dispute will, presumably, become more targeted. 16 This Order or any amended complaint may well render at least some of the choice-of-law 17 issues moot. Much of the reasoning in this Order would apply regardless of which state’s law 18 applied. I dismiss the request for injunctive relief on Article III standing grounds. I dismiss the 19 request for restitution under federal equitable principles. The express warranty claim is brought 20 only under federal law in the first place. I am giving leave to amend with respect to all of these 21 issues, so time will tell whether the choice-of-law analysis becomes necessary. The 22 misrepresentation and warranty claims are brought under California law, though the former are 23 largely addressed under Rule 9(b), which would apply regardless of the state law at issue. It is 24 probable that much of my analysis of them would also apply to the laws of at least some of the 25 other jurisdictions. The plaintiffs will, based on this Order, asses their alternative counts when 26 considering how to amend their complaint. If the plaintiffs choose not to continue pursuing any 27 particular claim in an amended complaint—which is, either way, their decision—there would be 28 no need to perform the choice-of-law analysis with respect to that claim and its alternate claim. 15 1 Accordingly, I also do not address the plaintiffs’ “alternate” state-law counts because I 2 have not determined that California law is inapplicable and those counts may be mooted by an 3 amended complaint or removed by a future motion. 4 IV. United States District Court Northern District of California 5 MISREPRESENTATION CLAIMS The plaintiffs’ first group of claims are for violation of the CLRA (Count III), violation of 6 the UCL (Count IV), and fraud by concealment under California law (Count V). Apple argues, 7 and the plaintiffs do not dispute, that these claims all sound in fraud and, therefore, are governed 8 by the heightened pleading standard of FRCP 9(b). Mot. 9; see Oppo 9. Under Rule 9(b), a party 9 must “state with particularity the circumstances constituting fraud or mistake,” including “the 10 who, what, when, where, and how of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 11 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotation marks omitted). However, “Rule 9(b) 12 requires only that the circumstances of fraud be stated with particularity; other facts may be 13 pleaded generally, or in accordance with Rule 8.” U.S. ex rel. Lee v. Corinthian Colls., 655 F.3d 14 984, 992 (9th Cir. 2011). With several exceptions, Apple argues that the plaintiffs’ 15 misrepresentation-based claims all fail to meet Rule 9(b)’s requirements for virtually the same 16 reasons. 17 The last major word on California’s misleading omissions law was Hodsdon v. Mars, Inc., 18 891 F.3d 857 (9th Cir. 2018). Hodsdon follows—and by its own admission, does not 19 authoritatively resolve—some uncertainty about what types of omissions-based misrepresentations 20 are actionable. See, e.g., Hodsdon , 891 F.3d at 863 (describing California state cases as “far from 21 clear,” “vague,” and “somewhat inconclusive”). Nevertheless, Hodsdon and a number of district 22 court decisions applying it reveal at least the proper contours of a misleading omission claim. 23 First, California law does recognize “an omission theory of consumer fraud.” Id. at 861. “[B]ut to 24 be actionable the omission must be contrary to a representation actually made by the defendant, or 25 an omission of a fact the defendant was obliged to disclose.” Id. (internal quotation marks and 26 emphasis omitted). Accordingly, California law recognizes two species of omissions claims: 27 those based on “partial representations” or partial omissions” and those courts often call “pure 28 omissions.” See id.; see also Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824 (2006), 16 United States District Court Northern District of California 1 as modified (Nov. 8, 2006). The requirements for each are discussed below. Although the 2 plaintiffs’ Opposition is somewhat unclear, it and the FAC lead me to conclude that the plaintiffs 3 advance both theories. For the reasons I explain, the plaintiffs’ pure omission claims are 4 adequately pleaded; the partial representation claim is largely adequate, but there is not (yet) a 5 plausible allegation of reliance. 6 A. Sufficiency of Apple’s Disclosures 7 As an initial matter, Apple argues that there are no viable omissions of any kind because it 8 sufficiently “disclosed the differences in cellular capability between the iPhone XR and the iPhone 9 XS/iPhone XS Max” according to the plaintiffs’ own pleading. Mot. 13. The webpage that 10 compares iPhone models, Apple asserts, “expressly disclosed the different cellular capabilities of 11 the respective models.” Id. This “disclosure,” however, was that the iPhone XS and MS Max are 12 listed as having “Gigabit-class LTE” while the iPhone XR is listed as having “LTE Advanced” for 13 each of their respective cellular capabilities. FAC ¶ 397. If there were appropriate evidence that 14 “Gigabit-class LTE” and “LTE Advanced” necessarily implied the use of 4x4 MIMO and 2x2 15 MIMO antennas respectively, the situation might be different. But Apple has not presented any 16 authority that would support that contention—or a conclusion that a reasonable consumer would 17 understand the terms to mean that. 18 That is why Dinan v. Sandisk LLC, No. 18-CV-05420-BLF, 2019 WL 2327923 (N.D. Cal. 19 May 31, 2019), relied on by Apple, is inapplicable. There, the plaintiff argued that the promise 20 that a device had 64 gigabytes of storage was misleading because it had that amount of storage 21 calculated in a “decimal” counting system instead of a “binary” system, as a reasonable consumer 22 would allegedly have thought. Dinan, 2019 WL 2327923, at *1. The court found that a 23 reasonable consumer would have been put on notice by disclosures that the storage was calculated 24 using a decimal system because the device’s package “actually disclose[d]” that fact. Id., at *6–*7 25 (emphasis removed). Similarly, Tomek v. Apple, Inc., does not assist Apple because, there, Apple 26 “expressly disclosed” a disclaimer adequate to render the statement not misrepresentative. No. 27 2:11-CV-02700-MCE, 2012 WL 2857035, at *4 (E.D. Cal. July 11, 2012). 28 Apple also contends that one article cited in the FAC states that the iPhone XS was 17 1 superior to the XR because of its “gigabit-class LTE with 4x4 MIMO.” Mot. 13 (citing FAC ¶ 2 390 n.19). Especially in this procedural posture, a single third-party article online that links these 3 two technologies is not sufficient to transform Apple’s statements into proper disclosures. While 4 widely held consumer knowledge might cure an otherwise misleading omission, a lone online 5 article written by a third party cannot overcome the reasonable inferences that must be drawn in 6 the plaintiffs’ favor. United States District Court Northern District of California 7 Apple also argues that the comparison page shows that the three phones’ Wi-Fi capabilities 8 are identical, which demonstrates that the Wi-Fi technology was adequately disclosed. Mot. 13– 9 14 (citing FAC ¶ 397). That disclosure says that all three phones have “802.11ac Wi-Fi with 10 MIMO.” FAC ¶ 397. The plaintiffs’ claim, however, is that Apple failed to disclose that the 11 difference between MIMO types created an inferior Wi-Fi connection. If anything, that these 12 statements were included but Apple allegedly omitted THE MIMO types bolsters the plaintiffs’ 13 allegations. In any event, it does not amount to an adequate disclosure as a matter of law on a 14 motion to dismiss. 15 B. Partial Representations 16 A partial representation (or “partial omission”) claim is the more straightforward of the 17 two and is well-settled under California law. As noted, the duty to disclose the allegedly omitted 18 information arises from the fact that the omission is “contrary to a representation actually made by 19 the defendant.” Hodsdon , 891 F.3d at 861. Otherwise, defendants could make misleading 20 statements that, in a vacuum, were true while leaving out contradictory information. 21 The alleged “partial representations” that the plaintiffs rely on are in the same Apple 22 product comparison webpage already discussed. Oppo. 15–16. The plaintiffs point to three 23 representations that they argue constitute partial representations. First, Apple represented that the 24 iPhone XS and XS Max used “Gigabit-class LTE” while the iPhone XR used “LTE Advanced.” 25 FAC ¶ 397. Second, Apple stated in a footnote that “speeds are based on theoretical throughput 26 and vary based on site conditions and carrier.” Id. Third, the webpage disclosed that the iPhones 27 had the same Wi-Fi capability without disclosing the difference in antennas or that those antennas 28 could affect their Wi-Fi connections. Id. The plaintiffs argue that, in the absence of the omitted 18 1 2 Apple replies that “these statements are true” and that, therefore, the alleged omission is 3 not contrary to them. Reply 8. This argument is unpersuasive. Merely because a statement by 4 itself is true does not mean that a related omission is not misleading. Indeed, the entire theory of a 5 case based on partial omissions is that what is disclosed is in some sense true but that the whole 6 truth is missing. On Apple’s apparent theory—for which it cites no authority—every omissions 7 claim would also require a statement that, standing alone, is separately actionable as false. 8 United States District Court Northern District of California information about antenna differences, these statements are misleading. Nonetheless, Apple’s broader argument—that there is no contradiction between these three 9 statements and the alleged omissions—is well taken with respect to the two statements about 10 cellular connectivity. On the first statement (the difference in LTE types), the plaintiffs have 11 pointed to no evidence that omission of the difference in antenna types “contradicts” the 12 representations about LTE types. At best for the plaintiffs, on this record, the information about 13 the difference in antennas would be additional information. On the second statement, the 14 disclosure is warning customers about the variability of speeds based on external circumstances 15 such as “site conditions and carrier.” It is not contradictory to say that is true and that the antennas 16 inside the devices are different, which affects their speed. 17 I agree with the plaintiffs, however, that the third statement plausibly contradicts the 18 alleged omissions. That third statement is that all three iPhones have identical Wi-Fi 19 capabilities—“802.11ac Wi-Fi with MIMO.” FAC ¶ 397. Yet the plaintiffs allege that using a 20 2x2 MIMO rather than a 4x4 MIMO antenna causes a difference in Wi-Fi capabilities. See, e.g., 21 id. ¶¶ 379–80. Accordingly, the omission of “2x2” or “4x4” would be contrary to the partial 22 representation. Apple maintains that it is factually false that the difference in antennas matters in 23 this respect, but its representation in a motion must give way at this stage to the FAC’s well- 24 pleaded allegations. As a result, the plaintiffs have plausibly alleged that Apple had a duty to 25 disclose the difference between the antennas. 26 C. Pure Omissions 27 California law on pure omissions claims is less settled. For purposes of this motion, the 28 winding conversation between the Ninth Circuit and California’s state courts is not necessary to 19 United States District Court Northern District of California 1 describe in detail. Hodsdon offers the most recent statement of the law. Previously, courts had 2 been clear that there was sometimes a freestanding “duty to disclose” facts to consumers, even if 3 there had been no partial representation. The classic example is disclosure that a product is likely 4 to threaten consumers’ safety. In Hodsdon, the court thought it unclear when the duty could arise 5 outside of safety hazards. It held, however, that a viable pure omissions claim lies when “[1] the 6 plaintiff alleges that the omission was material; [2] the plaintiff . . . plead[s] that the defect was 7 central to the product’s function; and [3] the plaintiff . . . allege[s] one of the four LiMandri 8 factors.” Hodsdon , 891 F.3d at 863. Those “LiMandri factors” are “(1) when the defendant is in 9 a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of 10 material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact 11 from the plaintiff; and (4) when the defendant makes partial representations but also suppresses 12 some material facts.” LiMandri v. Judkins, 52 Cal. App. 4th 326, 336 (1997). The last LiMandri 13 factor is applicable to a partial, not pure, omission claim. As a result, despite the still-developing 14 state of the law, courts in this District have employed this approach to omissions claims. See, e.g., 15 In re Apple Inc. Device Performance Litig., 386 F. Supp. 3d 1155, 1175–76 (N.D. Cal. 2019); 16 Beyer v. Symantec Corp., 333 F. Supp. 3d 966, 978–80 (N.D. Cal. 2018). 17 I address materiality and centrality to function below because they relate to both partial and 18 pure omissions. The plaintiffs argue that (aside from partial representations) two LiMandri factors 19 are present here: “exclusive knowledge” and “active concealment.” I find that the plaintiffs have 20 adequately alleged that Apple had a duty to disclose the omission based on the former but not the 21 latter. 22 i. Exclusive Knowledge 23 The duty to disclose can arise “when the defendant had exclusive knowledge of material 24 facts not known to the plaintiff.” In re MyFord Touch Consumer Litig., 46 F. Supp. 3d 936, 958 25 (N.D. Cal. 2014); see also Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1147 (9th Cir. 2012); 26 LiMandri, 52 Cal. App. at 336. Courts, however, have not applied this requirement “with 27 rigidity.” Czuchaj v. Conair Corp., No. 13-CV-1901, 2014 WL 1664235, at *4 (S.D. Cal. Apr. 28 18, 2014) (collecting cases). The defendant need not have literally been the sole holder of the 20 1 knowledge. It is generally sufficient for defendants to have had “superior knowledge” and for the 2 information to have not been reasonably discoverable by the plaintiffs. Id. As a result, even the 3 presence of the information from publicly available sources—for instance, online—does not 4 automatically foreclose an exclusive-knowledge claim. See MyFord, 46 F. Supp. 3d at 960. 5 Instead, courts have looked to the nature of the product, the nature of the alleged omission, and the 6 difficulty in reasonably finding the omitted information from sources other than the defendant. 7 See id.; Czuchaj, 2014 WL 1664235, at *4. The plaintiffs have plausibly alleged that Apple had superior knowledge of the alleged 8 United States District Court Northern District of California 9 “defect.” First, Apple is plainly alleged to have knowledge: The “defect” is the design choice to 10 include a 2x2 MIMO antenna rather than a 4x4 antenna. Second, that decision is technical, 11 internal to the phone, and would plausibly not be within the ken of a reasonable consumer. Apple replies that four third-party websites (three of which are referenced in the FAC) 12 13 disclose the relevant information. Mot. 15; Reply 8–9. The existence of these websites does not 14 mean that the plaintiffs’ knowledge is on par with Apple’s. Moreover, as other courts have 15 explained, the mere online availability of the information does not necessarily doom an exclusive 16 knowledge claim. See MyFord, 46 F. Supp. 3d at 960. Given the amount of information available 17 on the internet, that theory would defeat almost any exclusive-knowledge claim unless the 18 knowledge was held as secret by the company. Here, it would be inappropriate to resolve this 19 claim on a motion to dismiss based on the fact that four third-party articles reference the difference 20 in MIMO technology. It is not guaranteed, or even likely, that a reasonable consumer would know 21 to search online for such a difference—especially because Apple, as pleaded, includes numerous 22 other specifications on its website. And, even if consumers searched for this type of information, 23 it is far from clear that they would find these articles. For purposes of a motion to dismiss, the 24 plaintiffs have plausibly alleged that Apple had “exclusive knowledge.”5 25 26 27 28 5 Apple seems to dispute the level of knowledge it had about the 2x2 antenna versus the 4x4 one. See Mot. 26 n.24 (referring to Apple’s knowledge of the 2x2 antenna’s operation as “supposed”); Reply 8–9. It is implausible that Apple would have a poorer understanding of the technical specifications of its products than the average consumer. Apple’s point is especially absurd in light of its other argument, that the plaintiffs would readily have learned that knowledge about Apple’s own product from public sources. See Reply 8. 21 1 2 Active Concealment “Mere nondisclosure does not constitute active concealment.” Czuchaj, 2014 WL 3 1664235, at *6. Instead, a party must take “affirmative acts” that “hide[], conceal[], or cover up[]” 4 the omitted information. Lingsch v. Savage, 213 Cal. App. 2d 729, 734 (1963). 5 United States District Court Northern District of California ii. The plaintiffs have not adequately alleged that Apple actively concealed the difference in 6 antennas. They cannot rely on Apple’s purported nondisclosure alone—the active-concealment 7 exception would otherwise swallow the duty-to-disclose rule. See Czuchaj, 2014 WL 1664235, at 8 *6. They argue that the FAC alleges that “individual Plaintiffs complained about connectivity 9 issues, were given replacement iPhone XRs, and still suffered the same connectivity defect.” 10 Oppo. 17 (citing FAC ¶¶ 118, 135, 287, 333). But that is different than a claim that Apple 11 intentionally concealed that the iPhone XRs used 2x2 MIMO antennas. It is not an allegation that 12 supports an inference that Apple was pretextually taking back these iPhones; even in the best light 13 for the plaintiffs, it only creates a “sheer possibility” of that because it is “merely consistent” with 14 it, but not more. See Iqbal, 556 U.S. at 678; see MyFord, 46 F. Supp. 3d at 931 (finding sufficient 15 allegations that “Ford pretended to fix the problems with” cars’ computer systems (emphasis 16 added)). All that the plaintiffs allege is that their iPhones were replaced when they complained; 17 there are no facts that would demonstrate Apple did so to conceal the fact of 2x2 MIMO antennas. 18 The plaintiffs also contend that “when consumers posted on Apple’s forums to complain about the 19 iPhone XR’s connectivity issues, Apple ‘recommended’ that consumers visit the troubleshooting 20 webpage on Apple’s website or review Apple’s one-year warranty.” Oppo. 17 (citing FAC ¶¶ 21 381–85). These allegations also do not adequately indicate active concealment. A company’s 22 recommendation to visit its troubleshooting page or review a warranty is, by itself, far from an 23 active attempt to hide its products’ specifications. 24 D. Materiality and Centrality to Function 25 As explained, California law requires that the alleged omission be “material” and, in a pure 26 omissions case, that the alleged defect that was concealed be “central to the product’s function.” 27 Hodsdon , 891 F.3d at 863. (The plaintiffs do not argue that there is any safety hazard present 28 here.) The plaintiffs must adequately allege that “members of the public are likely to be 22 1 deceived.” Williams v. Gerber Prod. Co., 552 F.3d 934, 938 (9th Cir. 2008) (internal quotation 2 marks omitted). Whether they are is—absent special circumstances not relevant here—governed 3 by what a “reasonable consumer” would be led to believe. Id. United States District Court Northern District of California 4 The difference in antenna types would plausibly be material to a reasonable consumer. 5 Materiality is a highly fact-bound inquiry. Accordingly, the plaintiffs would only fail at the 6 pleading stage if “the fact misrepresented is so obviously unimportant that the jury could not 7 reasonable find that a reasonable [person] would have been influenced by it.” Rutledge, 238 Cal. 8 App. 4th at 1176 (internal quotation marks omitted). Here, the plaintiffs have alleged that there 9 are significant differences between the 2x2 MIMO and 4x4 MIMO antenna that affect cellular and 10 wireless connectivity. The difference in quality that results from the antennas affects fundamental 11 aspects of the product. 12 Apple cannot reasonably dispute that inferior cellular or wireless connectivity in a cell 13 phone would at least plausibly be material to a reasonable consumer. Instead, it argues that the 14 plaintiffs have not alleged that any of the omissions are material because they have pleaded “no 15 facts to establish any understanding or possible ‘expectation’ regarding the use of 2x2 MIMO 16 versus 4x4 MIMO cellular antennas.” Mot. 16 (emphasis added). It points out that “no prior 17 iPhone model contained 4x4 MIMO antennas” and that, as the plaintiffs allege, the relevant 18 advertising and marketing materials did not reference either the 2x2 or the 4x4 antennas. Id. As 19 the plaintiffs have alleged it, their reasonable expectation was not about the technical details 20 behind antennas—that is, a plaintiff did not have to have an expectation that the product would 21 have four transmit and receive pathways—it was about the ultimate connectivity quality that 22 resulted from the antennas. 23 Apple’s only cited case, In re iPhone 4s Consumer Litig., 637 F. App’x 414 (9th Cir. 24 2016), is far different from this one. There, the court upheld dismissal of claims that Apple’s 25 “Siri” feature had inconsistent performance because the plaintiffs could not “articulate what level 26 of consistent performance Apple fraudulently represented.” Id. at 416. Here, the plaintiffs’ claim 27 is that they expected the level of performance in other iPhones of the same generation. 28 On the facts of this case, the reasons that Apple’s alleged omission would plausibly be 23 United States District Court Northern District of California 1 material to a reasonable consumer and is central to the product’s function are identical. Apple did 2 not challenge the latter, perhaps because it is clear that problems with a smartphone’s cellular and 3 wireless connectivity are central to its function. 4 E. Exposure to and Reliance on Misleading Statements 5 “An essential element for a fraudulent omission claim is actual reliance.” Daniel v. Ford 6 Motor Co., 806 F.3d 1217, 1225 (9th Cir. 2015). Apple argues that the plaintiffs have not 7 sufficiently pleaded that they were exposed to or relied on a misleading omission prior to 8 purchasing their iPhone XRs. Mot. 9–11. It points out that, while all but four of the plaintiffs 9 claim to have “reviewed marketing materials and advertisements concerning the iPhone XR prior 10 to purchasing it,” see supra Section I.A, the plaintiffs do not identify any statement that any of 11 them saw or relied on. Although the plaintiffs also highlight two examples of particular pieces of 12 marketing that they believe are misleading—the comparison webpage and press release—they do 13 not allege that any of them ever reviewed or relied on those statements. The plaintiffs’ response is somewhat puzzling. They claim that they have met Rule 9(b)’s 14 15 heightened pleading standard by pointing to only the comparison webpage and press release but 16 later argue that they can adequately show reliance without identifying “any specific marketing 17 materials or advertisements.” Oppo. 11. It would seem that the plaintiffs are trying to have it both 18 ways: They meet Rule 9(b)’s specificity requirements with particular misleading statements but 19 meet the reliance requirement with unnamed, unidentified other advertising and marketing. This potential contradiction, in concert with the FAC itself, is what leads me to conclude 20 21 that the plaintiffs are advancing both a partial and a pure theory of omission. Put another way, the 22 plaintiffs are arguing that the comparison webpage and press release are misleading due to partial 23 representations; but they are also arguing that Apple had a freestanding duty to disclose because 24 this alleged defect goes to the central function of the product. For the reasons explained below, I 25 conclude that, on this understanding, the plaintiffs have adequately alleged reliance with respect to 26 the pure omissions but not the partial representations.6 27 28 6 For the reasons I explained earlier, the plaintiffs meet the reliance requirement for Article III standing purposes. In a case such as this, I conclude that a plaintiff can show her injury is “fairly 24 i. 1 As explained, “actual reliance” is an “essential element” in an omission claim. Daniel, 806 2 3 F.3d at 1125. “To prove reliance on an omission, a plaintiff must show that the defendant’s 4 nondisclosure was an immediate cause of the plaintiff’s injury-producing conduct. A plaintiff 5 need not prove that the omission was the only cause or even the predominant cause, only that it 6 was a substantial factor in his decision.” Id. Importantly, however, a plaintiff can show this 7 reliance “by simply proving that, had the omitted information been disclosed, one would have 8 been aware of it and behaved differently.” Id. (internal quotation marks omitted). I have already 9 explained that the alleged omission here is plausibly material. When that is so, “[t]hat one would 10 United States District Court Northern District of California Pure Omissions have behaved differently can be presumed, or at least inferred.” Id. 11 Apple argues that the plaintiffs do not satisfy Rule 9(b) because they do not identify with 12 specificity any particular statement by Apple that they relied on prior to purchasing their iPhone 13 XRs. Mot. 9–10. It is true that no plaintiff alleges he or she relied on a specific communication 14 from Apple. The comparison webpage and the press release are the only two statements by Apple 15 that the plaintiffs raise as misleading. None of the plaintiffs allege that they saw or relied on either 16 of those. However, in line with other courts in this District and Daniel, I conclude that the 17 plaintiffs do not, in a pure omission claim, have to plead alleged omissions with the specificity on 18 which Apple insists. Here, the plaintiffs allege that (1) Apple did not disclose material information about the 19 20 iPhone XR; (2) the plaintiffs reviewed marketing and similar materials about the iPhone XR prior 21 to making their purchases7; and (3) the plaintiffs would not have made the purchases if they knew 22 23 24 25 26 27 28 traceable” to the alleged omission(s) generally. 7 Three plaintiffs (Rea, Burst, and Hunt) do not make such an allegation. See FAC ¶¶ 179–83, 329–35, 341–45. The plaintiffs’ Opposition does not attempt to defend the sufficiency of their allegations. These plaintiffs’ misrepresentation-based claims are therefore DISMISSED with leave to amend. Plaintiff Villagran also does not make the same allegation as most plaintiffs, but it is plausible that the information would have been disclosed to him when “he purchased a new iPhone XR from the AT&T store.” See Baranco v. Ford Motor Co., 294 F. Supp. 3d 950 (N.D. Cal. 2018) (finding it plausible that the information would be disclosed when buying from a Ford dealership). 25 United States District Court Northern District of California 1 of the difference in antenna capabilities. These representations satisfy Daniel’s holding that a 2 plaintiff can establish reliance by plausibly alleging she would have behaved differently had the 3 disclosure been made. Daniel, 806 F.3d at 1225. Moreover, other courts have explained, and I 4 agree, that while, “[t]ypically, averments of fraud must be accompanied by ‘the who what when 5 where, and how’ of the misconduct charged,” pure omissions claims “can succeed without the 6 same level of specificity required by a normal fraud claim.” MacDonald, 37 F. Supp. at 1096; 7 accord Overton v. Bird Brain, Inc., No. SACV 11-1054 DOC ANX, 2012 WL 909295, at *4 (C.D. 8 Cal. Mar. 15, 2012); Baggett v. Hewlett-Packard Co., 582 F. Supp. 2d 1261, 1267 (C.D. Cal. 9 2007). This is because, in a pure omissions case, a plaintiff “will not be able to specify the time, 10 place, and specific content of an omission as would a plaintiff in a[n affirmative] false 11 representation claim.” MacDonald, 37 F. Supp. 3d at 1096. The plaintiffs’ allegations here, as in many pure omissions cases, are that Apple had a duty 12 13 to disclose something to consumers. The plaintiffs do not have to point to a hypothetical, 14 counterfactual piece of marketing in which the disclosure would have occurred. Instead, to satisfy 15 the pleading rules and Daniel, the plaintiffs had to plausibly allege that Apple’s pre-purchase 16 disclosure would have altered their purchases. Apple also argues that the plaintiffs have not established a plausible method of disclosure. 17 18 Mot. 11. As discussed, the plaintiffs allege that they reviewed Apple marketing a similar 19 materials. Drawing reasonable inferences in the plaintiffs’ favor, and “given the inherent 20 limitations of an omission claim,” MacDonald, 37 F. Supp. 3d at 1096, it is at least plausible that 21 they would have come across Apple’s disclosure through Apple’s usual marketing and sales 22 channels. See id. (“[T]he ‘where’ is the various channels of information through which Ford sold 23 Class Vehicles”).8 24 25 26 27 28 Apple’s reliance on Colgate v. JUUL Labs, Inc., 402 F. Supp. 3d 728 (N.D. Cal. 2019) (Orrick, J.) is misplaced. See Mot. 11; Reply 6. First, the possible channels of dissemination of information there are different than those Apple is alleged to use. See Colgate, 402 F. Supp. 3d at 746. In Colgate, moreover, the plaintiffs had failed only to adequately allege the “where” of the defendant’s misleading statements. Id. There, however, partial representations were intertwined with the omissions, whereas this case has been litigated, in part, as a pure omission case under Daniel and Hodsdon . To the extent that the FAC here is based on partial representations, it is insufficient for similar reasons to those in Colgate. That case did not raise, let alone disagree 26 8 United States District Court Northern District of California 1 ii. Partial Representations 2 The plaintiffs have not alleged that they saw or relied on the two particular partial 3 representations they cite—the comparison webpage and press release. Unlike in a pure omissions 4 case, in a partial representation case, the plaintiff will “be able to specify the time, place, and 5 specific content of an omission as would a plaintiff in a[n affirmative] false representation claim.” 6 MacDonald, 37 F. Supp. 3d at 1096. This is because what is misleading about a partial 7 representation is that the affirmative representation is not accompanied by the omitted 8 information. Here, the plaintiffs allege there are two partial representations: the press release and 9 the comparison webpage. None of the plaintiffs, however, alleges that he or she viewed either. A 10 plaintiff who never sees the partial misrepresentation has not been misled. The plaintiffs have not 11 met Rule 9(b)’s pleading requirements; not only have they failed to spell out when they 12 encountered these statements, where they did so, or how it affected them, they have not even 13 pleaded if they encountered them. The plaintiffs’ only response is to defend their pleading on the 14 theory of pure omissions described above; for the reasons explained, that type of pleading is 15 inadequate to allege a partial representation claim under these circumstances. 16 To the extent that the FAC is premised on these partial representations, instead of pure 17 omissions, the motion to dismiss is GRANTED. It seems likely that in an amended complaint, at 18 least some plaintiffs can allege that they relied on one or both of the alleged partial 19 representations; dismissal is without prejudice. 20 F. The Economic Loss Rule 21 Apple argues that the “economic loss rule” bars the plaintiffs’ fraud by concealment claim 22 (Count V). As a general matter, the economic loss doctrine dictates that “[w]here a purchaser’s 23 expectations in a sale are frustrated because the product he bought is not working properly, his 24 remedy is said to be in contract alone, for he has suffered only ‘economic’ losses.” Robinson 25 Helicopter Co. v. Dana Corp., 34 Cal. 4th 979, 988 (2004). In other words, the remedy for a 26 purely economic loss in a sale is in contract, not in tort. See id. Where there is physical or 27 28 with, the framework enunciated in MacDonald and related cases. 27 1 United States District Court Northern District of California 2 property injury, however, the buyer can pursue a tort remedy. Id. Whether California’s economic loss rule bars fraudulent omissions claims based on purely 3 economic injury is unsettled. As I explain below, Robinson held that the economic loss doctrine 4 did not prohibit recovering for purely economic injury due to affirmative fraudulent 5 misrepresentations. Id. at 991–92. It explicitly did not address fraudulent concealment or 6 omissions. Id. at 991. California’s federal district courts have split on the issue, though it appears 7 most have held that the economic loss doctrine does bar fraudulent omissions claims based on 8 purely economic loss, and I agree with that assessiment. See Sloan v. Gen. Motors LLC, No. 16- 9 CV-07244-EMC, 2020 WL 1955643, at *23–*24 (N.D. Cal. Apr. 23, 2020) (surveying decisions); 10 N.L.R.B. v. Calkins, 187 F.3d 1080, 1089 (9th Cir. 1999) (“When interpreting state law, we are 11 bound by the decisions of a state’s highest court. In the absence of such a decision, a federal court 12 must predict how the highest state court would decide the issue using intermediate appellate court 13 decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance.” 14 (internal citations and quotation marks omitted)). Robinson’s rationale applies equally well to 15 omissions as to affirmative representations and there is no principled reason, in this context, for 16 distinguishing between the two types of intentional misrepresentations. 17 Robinson explained that “the economic loss rule requires a purchaser to recover in contract 18 for purely economic loss due to disappointed expectations, unless he can demonstrate harm above 19 and beyond a broken contractual promise.” 34 Cal. 4th at 988. The fundamental rationale, the 20 California Supreme Court said, is that the rule “prevents the law of contract and the law of tort 21 from dissolving one into the other.” Id. (internal quotation marks and alteration omitted). A harm 22 “above and beyond” the breach of contract, Robinson states, “becomes tortious only when it also 23 violates a duty independent of the contract arising from principles of tort law.” Id. at 989. 24 Accordingly, the economic loss rule did not bar recovery where, among other situations, the 25 breach “directly causes physical injury,” there was a “wrongful discharge in violation of 26 fundamental public policy,” or “where the contract was fraudulently induced.” Id. at 989–90. In 27 each of those situations, “the duty that gives rise to tort liability is either completely independent 28 of the contract or arises from conduct which is both intentional and intended to harm.” Id. at 990. 28 1 2 generally apply “when (1) the breach is accompanied by a traditional common law tort, such as 3 fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or 4 undue coercion; or (3) one party intentionally breaches the contract intending or knowing that such 5 a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or 6 substantial consequential damages.” Id. The key was intent: “Focusing on intentional conduct 7 gives substance to the proposition that a breach of contract is tortious only when some 8 independent duty arising from tort law is violated.” Id. 9 United States District Court Northern District of California Synthesizing its past cases, the court held that the economic loss doctrine would not The court then turned to the question of the fraudulent misrepresentations and omissions 10 on the facts of that case. There, the breach of contract was the defendant’s provision of faulty 11 “clutches” (for manufacturing helicopters) that ultimately failed. See id. at 985–88, 990. In 12 addition to this breach, the defendant had provided false “certificates of conformance” about the 13 parts, failed to provide the serial numbers of the clutches until months after they failed, and 14 redacted reference to information about the clutches before giving it to the plaintiff. Id. at 990. 15 The court focused only on the provision of the certificates of conformance, the affirmative 16 misrepresentation. Id. at 990–91. It explained that this “tortious conduct was separate from the 17 breach itself, which involved [the defendant’s] provision of the nonconforming clutches.” Id. at 18 991. Therefore, the court held that the economic loss rule did not bar the plaintiff’s fraud and 19 intentional misrepresentation claims. Id. Because that holding was dispositive, the court 20 explained it “need not address the issue of whether [the defendant’s] intentional concealment 21 constitutes an independent tort.” Id. 22 All of the reasons that supported Robinson’s holding about affirmative misrepresentation 23 support finding that fraudulent omissions—at least in the circumstances of this case—are not 24 barred by the economic loss doctrine. A fraudulent omission, no less than an affirmative 25 misrepresentation, falls into several categories to which the court held the rule should generally 26 not apply: Where “breach is accompanied by a traditional common law tort, such as fraud” and 27 “the means used to breach the contract are tortious, involving deceit.” Id. at 990. California, 28 moreover, recognizes that the related claim of fraudulent inducement to contract is tortious in 29 1 nature and not barred by the economic loss rule. Id. at 989–90. A fraudulent omission leading to 2 adopting a contract is just as much “above and beyond” the breach of contract as a fraudulent 3 affirmative misrepresentation. United States District Court Northern District of California 4 A fraudulent omission, additionally, is just as intentional as an affirmatively misleading 5 misrepresentation. Focusing on the touchstone of “intentional conduct,” Robinson teaches, “gives 6 substance to the proposition that a breach of contract is tortious only when some independent duty 7 arising from tort law is violated.” Id. at 990. A mere negligent omission is not, by definition, 8 fraudulent. Indeed, Robinson highlights that the classic elements of “fraud” include “a 9 misrepresentation”—which it defined as including “false representation[s], concealment[s], or 10 nondisclosure[s]”—as well as scienter and intent to defraud. Id. The court explained that, where 11 there is fraud, “a party to a contract cannot rationally calculate the possibility that the other party 12 will deliberately misrepresent terms critical to that contract.” Id. at 993 (internal alteration and 13 quotation marks omitted). That reality is no less true if the deliberate misrepresentation is by 14 omission or affirmative representation. 15 The court also found that “California’s public policy also strongly favors [its] holding.” 16 Id. at 991. It explained that plaintiffs pursuing “valid fraud action[s] . . . advance[] the public 17 interest in punishing intentional misrepresentations and in deterring such misrepresentations in the 18 future.” Id. at 992 (internal quotation marks omitted). A misrepresentation can be either 19 affirmative or by omission, and there is no reason that one is, by its nature, more harmful than the 20 other. The court also explained that California “has a legitimate and compelling interest in 21 preserving a business climate free of fraud and deceptive practices.” Id. And, again, a fraudulent 22 omission is, by its nature, just as deceptive as a fraudulent affirmative misrepresentation. 23 It is true that the court stated that its holding was “narrow in scope and limited to a 24 defendant’s affirmative misrepresentations” and, therefore, its “decision will [not] open the 25 floodgates to future litigation.” Id. at 993. But the safeguards it thought would prevent a flood of 26 litigation—that “fraud must be pled specifically [and] general and conclusory allegations do not 27 suffice”—apply equally to omissions as to affirmative misrepresentations. Id. at 993. 28 Most courts that have held to the contrary have generally explained that Robinson itself 30 United States District Court Northern District of California 1 held only that affirmative misrepresentations survive the economic loss rule and ended their 2 analysis there. See Sloan, 2020 WL 1955643, at *23–24; Zagarian v. BMW of N. Am., LLC, No. 3 CV 18-4857, 2019 WL 6111731, at *3 (C.D. Cal. Oct. 23, 2019); Thompson v. BMW of N. Am., 4 LLC, No. SACV 17-01912, 2019 WL 988694, at *5 (C.D. Cal. Jan. 10, 2019); Stewart v. 5 Electrolux Home Prod., Inc., 304 F. Supp. 3d 894, 904 (E.D. Cal. 2018); Nada Pac. Corp. v. 6 Power Eng'g & Mfg., Ltd., 73 F. Supp. 3d 1206, 1224–25 (N.D. Cal. 2014). It may be that the 7 parties in those cases did not argue for extending Robinson’s reach in line with its reasoning. In 8 any event, Robinson explicitly left the question of omissions unaddressed and, as I have explained, 9 its reasoning compels finding that recovery for fraudulent omissions is not barred by the economic 10 loss rule. I have not found, and Apple does not point to, any case that held that there is anything 11 in Robinson’s rationale that requires treating affirmative misrepresentations and omissions 12 differently. I instead agree with those courts that have held that California’s economic loss rule 13 does not bar actions like this one. See, e.g., In re Ford Motor Co. DPS6 Powershift Transmission 14 Prod. Liab. Lit., No. CV1706656ABFFMX, 2019 WL 3000646, at *6 (C.D. Cal. May 22, 2019). 15 Cf. Finney v. Ford Motor Co., No. 17-CV-06183-JST, 2018 WL 2552266, at *9 (N.D. Cal. June 4, 16 2018) (fraudulent inducement by omission). Here, the plaintiffs claim that Apple committed fraud by concealment “above and beyond” 17 18 any contractual breach. As a result, I find that the plaintiffs’ fraud claim is not foreclosed by the 19 economic loss rule. 20 G. Misrepresentation Claims Conclusion 21 For the reasons explained, the plaintiffs’ misrepresentation-based claims survive many of 22 Apple’s challenges. The plaintiffs have not, however, adequately alleged reliance when it comes 23 to the partial misrepresentations. To that extent only, the motion to dismiss Counts III, IV, and V 24 is GRANTED; it is otherwise DENIED. 25 V. 26 WARRANTY CLAIMS The plaintiffs’ second broad group of claims involve allegations that Apple violated federal 27 and state law by breaching express and implied warranties and the covenant of good faith and fair 28 dealing. 31 A. Express Warranty Claim 1 The plaintiffs9 bring their express warranty claim under the Magnuson-Moss Warranty Act United States District Court Northern District of California 2 3 (“MMWA”), 15 U.S.C. §§ 2301, et seq. Under that statute, “a consumer who is damaged by the 4 failure of a supplier, warrantor, or service contractor to comply with any obligation under this 5 chapter, or under a written warranty, implied warranty, or service contract, may bring suit for 6 damages and other legal and equitable relief.” 15 U.S.C. § 2310(d)(1). 7 The plaintiffs allege that Apple violated the MMWA by breaching its One (1) Year 8 Limited Warranty (the “Warranty”) [Dkt. No. 32-2]. These plaintiffs claim they have “attempted 9 to have their iPhone XRs repaired under the warranty.” FAC ¶ 439. They argue that Apple 10 breached the Warranty by (1) providing iPhone XRs that failed to conform to “its express 11 warranties,” (2) providing iPhone XRs that breach the Warranty “because the defective 12 connectivity technology/systems, including the 2x2 MIMO antennas, were present in the iPhone 13 XR at the time of sale,” (3) failing to “cover the full expenses associated with repairing and/or 14 replacing the defective connectivity technology/systems in Plaintiffs’ and the Subclass members’ 15 defective iPhone XRs,” and (4) either “fail[ing] to repair the iPhone XR or merely replac[ing] the 16 defective iPhone XR with a new or refurbished iPhone XR and [being] unable to successfully 17 repair the defects in Plaintiffs’ and the Subclass members’ iPhone XRs, despite having had 18 reasonable opportunities to do so.” Id. ¶¶ 436–39. I conclude that the plaintiffs have not pleaded that Apple breached the Warranty. As 19 20 relevant here, the Warranty states that Apple “warrants the Apple-branded iPhone . . . hardware 21 product . . . against defects in materials and workmanship when used normally in accordance with 22 Apple’s published guidelines.” Warranty at 2. The plaintiffs’ claims, however, do not relate to 23 “defects in materials [or] workmanship”—that is, manufacturing defects. Instead, the plaintiffs 24 allege that Apple made the choice (that it allegedly concealed) to include the 2x2 MIMO antenna 25 26 27 28 In this section, “plaintiffs” refers to the 13 plaintiffs who bring the express warranty claim on behalf of themselves and a proposed “Nationwide Express Warranty Subclass.” See FAC ¶ 427. The FAC alleges that there are 15 such named plaintiffs. Id. Two of these plaintiffs (Gross and Mallamace) are not named as plaintiffs in the remainder of the FAC, see id. at ECF 1–2, and there are no substantive allegations concerning them. 32 9 1 rather than the 4x4 MIMO antenna. Put another way, the plaintiffs’ complaints all relate to a 2 design choice—in their view, a design “defect”—rather than a manufacturing defect covered by 3 the Warranty. As many courts have held—including about this same Warranty—“[a]n express 4 warranty covering ‘materials and workmanship’ does not include design defects.” Clark v. LG 5 Elecs USA, Inc., 2013 WL 5816410, at *7 (S.D. Cal. Oct. 29, 2013); accord Davidson v. Apple, 6 Inc., No. 16-CV-04942-LHK, 2017 WL 976048, at *11 (N.D. Cal. Mar. 14, 2017); Troup v. 7 Toyota Motor Corp., 545 F. App’x 668 (9th Cir. 2013); Daugherty v. Am. Honda Motor Co., 144 8 Cal. App. 4th 824, 830 (2006), as modified (Nov. 8, 2006). United States District Court Northern District of California 9 In response, the plaintiffs do not dispute that the Warranty covers only manufacturing 10 defects, they argue instead that the FAC actually alleges defects in manufacturing. Oppo. 19–20. 11 The plaintiffs’ attempt to rewrite the FAC in their Opposition is not plausible. See, e.g., Davidson, 12 2017 WL 976048, at *11 (“[T]he plaintiffs’ chosen language is not dispositive in determining 13 whether the alleged defect is a defect in design or a defect in ‘materials and workmanship.’”). 14 Apple’s improper behavior, the plaintiffs allege over and over, is that the “iPhone XR is equipped 15 with a 2x2 MIMO antenna versus the 4x4 MIMO antenna Apple uses in its iPhone XS and iPhone 16 XS Max” and “this difference causes the iPhone XR to have half the signal connectivity and 17 reliability of the iPhone XS and iPhone XS Max and renders the XR far less capable of obtaining a 18 reliable connection.” FAC ¶ 3 (emphasis added). 19 The plaintiffs’ individual claims reflect this reality. See, e.g., ¶ 14 (“It was only recently 20 that Plaintiff first learned that Apple had designed and manufactured the iPhone XR with an 21 inferior 2x2 MIMO antenna instead of the 4x4 MIMO antenna.” (emphasis added)). The plaintiffs 22 state, for instance, that what they were “not made aware of [is] the fact that the iPhone XR was 23 equipped with an inferior 2x2 MIMO antenna” and that the 2x2 MIMO antenna “would prevent it 24 from adequately connecting to voice and data networks such that she could use her iPhone XRs in 25 a reliable manner as expected.” E.g., id. ¶ 13. The plaintiffs allege that what they wished they had 26 known before purchasing is that the iPhone XR was equipped with the 2x2 MIMO antenna. E.g., 27 id. When describing the technology at issue, the FAC is similarly clear about the problem: 28 The 2x2 MIMO antenna in the iPhone XR is only capable of two streams of data for 33 1 2 3 Id. ¶ 379. And: 6 Testing has revealed that the increased pathways of the 4x4 MIMO antenna affects not only download and upload data speeds, but also network connectivity. That is, given the same signal strength from a cellular or WiFi antenna, a device equipped with a 2x2 MIMO antenna does not connect as well and suffers from an inferior signal connection compared to a device equipped with the superior 4x4 MIMO antenna. 7 Id. ¶ 380. As I have discussed throughout this Order, the plaintiffs’ substantive legal claims are of 8 a piece with these allegations. 4 5 United States District Court Northern District of California transmit and receive pathways, while 4x4 MIMO antenna in the XS and XS Max offers four streams. The differences between 2x2 MIMO and 4x4 MIMO affect not just the 4G LTE cellular connection, but also industry standard 802.11ac WiFi connections. 9 Fighting against this current, the plaintiffs point to three specific allegations that they argue 10 show they have been alleging a manufacturing defect the whole time. First, the plaintiffs cite their 11 introductory allegation that “Apple has violated these duties of truthfulness and candor by 12 designing, manufacturing, and selling their iPhone XR with defects that Apple was aware of.” 13 Oppo. 19 (citing FAC ¶ 3) (emphasis in Oppo.). In context, it is clear that the “defect” is the 14 inclusion of the 2x2 MIMO antenna rather than the 4x4—a point the next sentence says explicitly. 15 FAC ¶ 3. The “defect” is not classified here or anywhere else in the FAC as an additional 16 manufacturing problem with the 2x2 antenna itself. Nor does it matter that the plaintiffs’ phrasing 17 is that the iPhone XR was “design[ed], manufactur[ed], and s[old] . . . with defects.” That is a 18 natural way to discuss a design defect. This sentence, in fact, cuts against the plaintiffs’ argument 19 because a manufacturing defect would not be “designed” with that defect—that is the very 20 definition of a manufacturing defect. See McCabe v. Am. Honda Motor Co., 100 Cal. App. 4th 21 1111, 1120 (2002). Moreover, to state obliquely that something was manufactured “with” defects 22 is quite different than an allegation that the manufacturing (as opposed to design) caused the 23 defect. See Troup, 545 Fed. App’x. at 669 (“Despite its scattered references to ‘materials’, the 24 gravamen of the complaint is that the Prius’s defect resulted from the use of resin to construct the 25 gas tanks, which is a design decision.”). 26 Second, the plaintiffs point to one of their class allegations. When discussing whether 27 common questions of law and fact predominate over individual class members’ questions, the 28 plaintiffs allege that one question is “Whether the iPhone XR contains marketing, design, or 34 United States District Court Northern District of California 1 manufacturing defects.” FAC ¶ 421. The problem is that this question is not supported by any 2 substantive allegation in the FAC. In their Opposition, the plaintiffs do not indicate any allegation 3 that implicates the question. Even at best for the plaintiffs, moreover, it is conclusory and, 4 therefore, insufficient. See Gilead, 536 F.3d at 1055. 5 Third and finally, the plaintiffs point to their allegation—repeated by a number of 6 plaintiffs—that they “would often be unable to hear the caller’s voice or they would be unable to 7 hear her voice,” “would have difficulty sending and receiving text messages,” and “would have 8 intermittent or inoperable data connections.” E.g., FAC ¶ 14. Consequently, the plaintiffs argue, 9 they were truly pleading manufacturing defects. Oppo. 20. Again, the plaintiffs take their 10 allegations out of context. To start, the next sentence in the paragraph they cite expands on what 11 is behind these alleged connectivity issues: “It was only recently that Plaintiff first learned that 12 Apple had designed and manufactured the iPhone XR with an inferior 2x2 MIMO antenna instead 13 of the 4x4 MIMO antenna that Apple uses in its iPhone XS and iPhone XS Max.” FAC ¶ 14. 14 Further, as I explained above, the plaintiffs elsewhere repeatedly link these connectivity issues 15 with the choice to include a 2x2 antenna instead of a 4x4 antenna. Nowhere do the plaintiffs state 16 that there is any indication the 2x2 antenna suffers from problems above and beyond those 17 inherent in its design. 18 Aside from their allegations, the plaintiffs also speculate that “Apple’s own behavior 19 suggests that it recognizes a manufacturing defect source because when iPhone XR owners 20 complained about the connectivity issues, Apple would often replace the smartphones with the 21 identical models.” Oppo. 21. That assertion is consistent with a manufacturing defect claims, but 22 (without more) it is “merely consistent” with it. See Gilead, 536 F.3d at 1055. It also cannot save 23 the plaintiffs from their own pleading. 24 At the hearing, the plaintiffs relied on Cabebe v. Nissan of North America, Inc., No. 18- 25 CV-00144-WHO, 2018 WL 5617732 (N.D. Cal. Oct. 26, 2018). There, as here, the warranty 26 covered materials and workmanship defects, not design defects. Id. at *11. There, as here, the 27 defendant argued that the plaintiffs had, at most, alleged a design defect, not a manufacturing one. 28 Id. But there, unlike here, the plaintiffs had plausibly alleged a manufacturing defect. See id. The 35 1 plaintiffs “plausibly alleged that these vehicles differ from the product the manufacturer intended 2 to sell” and, based on the type of defect there, “Nissan could not have intended for the Class 3 Vehicles to operate as described throughout the FAC.” Id. What’s more, the “numerous examples 4 of the alleged . . . Defect in the FAC suggest that these vehicles came off the assembly line in a 5 substandard condition.” Id. (internal quotation marks omitted). Here, as I have explained, the 6 allegations “wholly centered on design decisions.” Id. at *12. Unlike in Cabebe, there is no well- 7 pleaded allegation that shows that the 2x2 MIMO antenna was intended to operate differently than 8 it does or that the iPhones did not live up to the standard they were designed to. Finally, the plaintiffs contend that the connectivity problems may be a manufacturing United States District Court Northern District of California 9 10 defect or a design defect and that only “[d]iscovery will show” which. Oppo. 20.10 If the 11 plaintiffs wished to allege a manufacturing defect, they could have in their complaint. To do so, 12 however, they would need to put forward plausible allegations showing such a defect. For 13 instance, they might allege that the 2x2 antenna did not perform as designed. See McCabe, 100 14 Cal. App. 4th at 1120. But they have not, and they cannot amend their complaint via briefing. I 15 will permit the plaintiffs leave to amend their complaint if they wish to pursue this new theory. I 16 caution them, however, that a manufacturing defect theory cannot simply be an attempt to reframe 17 their design-based theory; they must adequately plead an issue with the 2x2 antennas not inherent 18 in their design, and all other allegations that would show their claims were covered by the 19 Warranty. The motion to dismiss Count I is GRANTED.11 B. Implied Warranty Claims 20 The plaintiffs allege that Apple breached the implied warranty of merchantability under the 21 22 23 24 25 26 27 28 That whether the 2x2 antenna suffers from a manufacturing defect is “peculiarly within [Apple’s] knowledge” is immaterial for purposes of this decision. Oppo. 21. This motion to dismiss does not test the sufficiency of the plaintiffs’ manufacturing allegations because they have not made such allegations in the first place. For the same reason, I do not “shift [the] burden” onto the plaintiffs to identify the source of a manufacturing defect, id. 20, I conclude that the plaintiffs are attempting to rewrite their FAC during briefing. 10 Apple’s point that “the fact that Plaintiffs seek to represent a class of all purchasers of an iPhone XR for all their other claims further shows that they allege a design choice in all iPhone XRs” is well-taken. Mot. 19; see Davidson, 2017 WL 976048, at *11. There is no need to determine if that consideration alone would compel a different result because I find that the FAC, on its own terms, does not allege a manufacturing problem that would be covered by the Warranty. 36 11 1 MMWA (Count II) and California state law (Count VI). Apple contends, and the plaintiffs do not 2 dispute, that the MMWA claim turns on the state-law claim. See Mot. 21 n.16; see also Clemens 3 v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 & n.3 (9th Cir. 2008). 4 California’s statute on the warranty of merchantability provides, “Unless excluded or 5 modified . . . a warranty that the goods shall be merchantable is implied in a contract for their sale 6 if the seller is a merchant with respect to goods of that kind.” CAL. COM. CODE. § 2314(1). There 7 are several requirements for a good to be merchantable, such as its quality and fitness for ordinary 8 purpose. See id. § 2314(2). The parties’ argument about the implied warranty, however, does not 9 concern these requirements, so I do not discuss it in detail. i. 10 United States District Court Northern District of California 11 Adequacy of Disclaimer Apple first argues that the Warranty validly disclaims the implied warranty of 12 merchantability. Warranty at 2; Mot. 21–22. While the plaintiffs do not dispute that the warranty 13 of merchantability can be disclaimed, they assert that the Warranty’s disclaimer is not sufficient to 14 do so. Oppo. 21–24. Under California law, the implied warranty of merchantability can be 15 disclaimed. To do so, the language at issue “must mention merchantability.” CAL. COM. CODE § 16 2316(2). If the disclaimer is a writing, it must be “conspicuous.” Id. A term is “conspicuous” 17 when it is “written, displayed, or presented that a reasonable person against whom it is to operate 18 ought to have noticed it.” Id. § 1201(b)(10). 19 The Warranty properly disclaims the implied warranty of merchantability. It “mentions” 20 merchantability; is near the top of the Warranty document; and is in uppercase letters under an 21 underlined, uppercase heading that reads “Warranty Limitations Subject to Consumer Law.” 22 Warranty at 2. Several other cases have found that this Warranty—or a predecessor warranty, 23 which the plaintiffs do not argue is meaningfully different—validly disclaims the implied 24 warranty of merchantability. Minkler v. Apple, Inc., 65 F. Supp. 3d 810, 819 (N.D. Cal. 2014); 25 Davidson, 2017 WL 976048, at *14–*15 (N.D. Cal. Mar. 14, 2017). Even if that were not so, the 26 plaintiffs have pointed to no authority in which a similarly conspicuous disclaimer was held 27 insufficient. 28 The plaintiffs contend that a disclaimer of an implied warranty must be “litigated, not 37 1 decided on the pleadings.” Oppo. 22. If there were some disputed fact at issue, that would be 2 true, but the plaintiffs do not point to any. Both parties agree on exactly what the relevant 3 disclaimer entails and about the Warranty it is a part of—which was incorporated by reference into 4 the FAC. Consequently, whether that disclaimer is adequate as a matter of law is a proper 5 question at this stage. Scott v. Kuhlmann, 746 F.2d 1377, 1378 (9th Cir. 1984). United States District Court Northern District of California 6 The plaintiffs argue that a question of fact exists as to whether the plaintiffs had actual or 7 constructive knowledge of the Warranty as a whole. The FAC, however, pleads that “Apple 8 issued [the Warranty] to all original purchasers, including Plaintiffs and the other Class members.” 9 FAC ¶ 398. The plaintiffs also assert that “Plaintiffs and the other Class members reasonably 10 relied on Apple’s warranties regarding the quality, durability, and other material characteristics of 11 their iPhone XRs, including, but not limited to, the representation that the iPhone XRs contained 12 no known defects (defects known to Apple) at the time of sale.” Id. ¶ 402. The plaintiffs now say 13 that they allege only that the Warranty was “issued” but there is “no evidence in the record 14 regarding how it delivered the Hardware Warranty to Plaintiffs (e.g., on their iPhone XR during 15 initial setup, in the box containing the iPhone XR, etc.).” Oppo. 22–23. But the plaintiffs admit 16 they were issued the Warranty and “relied” on Apple’s warranties, which must include the only 17 express warranty the FAC speaks of. There is no fact in reasonable dispute because the plaintiffs’ 18 allegations themselves settled that dispute. 19 Neither of the cases cited by the plaintiffs demonstrate that there is an actual dispute of 20 material fact. In one of them, the plaintiff alleged that she had never seen the disclaimer at all, 21 creating a factual dispute. Clark v. LG Elecs. U.S.A., Inc., No. 13-CV-485, 2013 WL 5816410, at 22 *15 (S.D. Cal. Oct. 29, 2013). Here, in contrast, the plaintiffs must have seen the Warranty or 23 they could not have “relied” on it. The other case is wholly inapplicable because there was no 24 “language or conduct” disclaiming the warranty; the only alleged disclaimer was “a drawing on 25 the box and to the notion that golf is a dangerous game.” Hauter v. Zogarts, 14 Cal. 3d 104, 119– 26 20 (1975). 27 28 The plaintiffs next respond that the disclaimer is not sufficiently “conspicuous.” Oppo. 22–24. I agree with those other courts that have upheld this disclaimer. See, e.g., Minkler, 65 F. 38 United States District Court Northern District of California 1 Supp. 3d at 819; Davidson, 2017 WL 976048, at *14–*15. The plaintiffs are correct that much of 2 the Warranty is written in uppercase, making the use of uppercase in the disclaimer less 3 significant. But the disclaimer also appears near the top of the Warranty and is followed by a 4 series of paragraphs that are not in uppercase. A reasonable consumer receiving the Warranty 5 would be put on constructive notice of the disclaimer because, despite the heavy use of uppercase 6 elsewhere, it stands out sufficiently due to its prime position. Disclaimers have been upheld that 7 were more buried than this one because of similar contrasts with the surrounding text. See, e.g., In 8 re Google Phone Litig., No. 10-CV-01177-EJD, 2012 WL 3155571, at *8 (N.D. Cal. Aug. 2, 9 2012) (finding a disclaimer “in the middle of a paragraph on the fourth page of a six-page 10 document” was conspicuous in “light of the contrasting type, size, and font of the heading and the 11 body text”); Inter-Mark USA, Inc. v. Intuit, Inc., No. C-07-04178-CS, 2008 WL 552482, at *8 12 (N.D. Cal. Feb. 27, 2008) (finding a disclaimer on the fourth and fifth pages to “stand out 13 visually” because it used all uppercase and bold).12 ii. 14 Unconscionability of Disclaimer The plaintiffs also assert that the disclaimer is unconscionable. Oppo. 24–25; FAC ¶ 534. 15 16 Unconscionability has two components, procedural and substantive: Under California law, a 17 contract must be both procedurally and substantively unconscionable to be unenforceable. 18 Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal. 4th 83, 114 (2000). The disclaimer is not procedurally unconscionable. Procedural unconscionability 19 20 “focus[es] on ‘oppression’ or ‘surprise’ due to unequal bargaining power.” Id. The plaintiffs 21 argue that there was such a disparity in bargaining power between them and Apple and that, as a 22 result, they had no choice but to sign on to a standardized contract of adhesion or reject it entirely. 23 Oppo. 24. Courts applying California law have generally rejected claims like this when 24 consumers have “reasonably available alternative sources of supply.” Dean Witter Reynolds, Inc. 25 v. Superior Court, 211 Cal. App. 3d 758, 768 (1989), opinion modified (July 21, 1989); see, e.g., 26 27 28 The plaintiffs again argue that, “[a]t the very least,” I should permit discovery prior to making this determination. Oppo. 23. Discovery would not reveal anything because it has been established that the plaintiffs were given the Warranty and the relevant test is whether a reasonable consumer would be put on sufficient notice by the disclaimer. 39 12 United States District Court Northern District of California 1 Davidson, 2017 WL 976048, at *12 (finding that the Warranty here was not procedurally 2 unconscionable because there were alternative sources of smartphones); Berenblat v. Apple, Inc., 3 No. 08-4969-JF, 2010 WL 1460297, at *5 (N.D. Cal. Apr. 9, 2010). The plaintiffs themselves 4 allege that there are alternative sources of smartphones. See, e.g., FAC ¶¶ 13 (“Had she known 5 about the inferior 2x2 MIMO antenna on the iPhone XR, Plaintiff would have paid less for the 6 phones, or she would have selected a different model or different manufacturer’s phone that did 7 not use an inferior antenna.”); 396 (“[T]he iPhone XR would have serious connectivity 8 shortcomings as compared to consumers’ other choices in the marketplace.”). 9 Nor is the disclaimer substantively unconscionable. “The substantive element of 10 unconscionability focuses on the actual terms of the agreement and evaluates whether they create 11 ‘overly harsh’ or ‘one-sided’ results as to ‘shock the conscience.’” Aron v. U-Haul Co. of 12 California, 143 Cal. App. 4th 796, 808 (2006). The disclaimer here does precisely what the law 13 allows: It disclaims the implied warranty of merchantability. If there were a well-pleaded 14 allegation that Apple had adopted the disclaimer in response to the 2x2 MIMO antenna having a 15 defect—that is, to knowingly sell a defective product to consumers and intentionally remove their 16 avenues of recourse—my conclusion might be different. But the disclaimer applies across all 17 versions of the iPhone, including those with 4x4 MIMO antennas. Warranty at 2. It also applies 18 beyond the iPhone, across numerous Apple products. Id. Additionally, the same disclaimer was 19 upheld by courts prior to the release of the iPhone XR. There is, in short, no adequate allegation 20 to support the plaintiffs’ argument that Apple is using the disclaimer to “evade responsibility . . . 21 [for] market[ing] and s[elling] phones that were plagued by connectivity issues.” Oppo. 24; see 22 also id. (arguing that the disclaimer is unconscionable because Apple “disclaim[ed] an implied 23 warranty while knowing that the product contained a defect that made it, essentially, unusable for 24 its intended purpose at the start.”). 25 26 iii. Implied Warranty Conclusion The implied warranty of merchantability was properly disclaimed by Apple’s express 27 Warranty. Therefore, I GRANT the motion to dismiss Count VI. While there is no reason to 28 grant leave to amend with respect to most of the issues discussed, I cannot say that there is no set 40 1 of allegations that could be pleaded to establish unconscionability, so dismissal is without 2 prejudice. Count II is similarly dismissed without prejudice to the extent it is based on California 3 law. Its dismissal is also without prejudice to the plaintiffs’ ability to base that cause of action on 4 the laws of other states, should I eventually hold that California law does not apply to all of them. 5 6 7 United States District Court Northern District of California 8 C. Covenant of Good Faith and Fair Dealing Claim The plaintiffs’ final claim is for violations of the covenant of good faith and fair dealing under California law (Count VII). “It has long been recognized in California that there is an implied covenant of good faith 9 and fair dealing in every contract that neither party will do anything which will injure the right of 10 the other to receive the benefits of the agreement.” Kransco v. Am. Empire Surplus Lines Ins. Co., 11 23 Cal. 4th 390, 400 (2000), as modified (July 26, 2000) (internal alternation and quotation marks 12 omitted). The covenant “is aimed at making effective the agreement’s promises.” Foley v. 13 Interactive Data Corp., 47 Cal. 3d 654, 683 (1988). However, “the scope of conduct prohibited 14 by the covenant of good faith is circumscribed by the purposes and express terms of the contract.” 15 Carma Developers (Cal.), Inc. v. Marathon Dev. California, Inc., 2 Cal. 4th 342, 373, (1992). 16 Accordingly, the covenant “protect[s] the express covenants or promises of the contract, not . . . 17 some general public policy interest not directly tied to the contract’s purpose.” Id. (internal 18 quotation marks omitted). To make out a successful claim, “the allegations which assert such a 19 claim must show that the conduct of the defendant, whether or not it also constitutes a breach of a 20 consensual contract term, demonstrates a failure or refusal to discharge contractual 21 responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a 22 conscious and deliberate act, which unfairly frustrates the agreed common purposes and 23 disappoints the reasonable expectations of the other party thereby depriving that party of the 24 benefits of the agreement.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 25 1395 (1990), as modified on denial of reh’g (Oct. 31, 2001). 26 The plaintiffs allege that they entered into contracts with Apple for the sale of their 27 iPhones. FAC ¶ 539. Apple argues that the plaintiffs seek to use the covenant to “end-run the 28 express agreement that governs their claims—Apple’s Hardware Warranty.” Mot. 27. In 41 1 response, the plaintiffs do not dispute that the Warranty governs their purchases; in fact, they 2 concede as much by referencing the disclaimer as being included in the contract into which the 3 covenant is implied. See Oppo. 26. The plaintiffs’ theory is instead that Apple breached the 4 covenant “by utilizing inferior technology in the iPhone XR that created connectivity issues 5 without informing Plaintiffs, and if a customer later complained, simply replaced the defective 6 device with another iPhone XR with the same connectivity issues.” Oppo. 26 (citing FAC ¶¶ 6, 7 118, 135, 287, 333, 592). 8 United States District Court Northern District of California 9 The plaintiffs’ allegations, as a matter of law, do not amount to a violation of the covenant of good faith and fair dealing. The covenant protects the “express” terms of the contract from 10 conscious, unfair interference. See Careau, 222 Cal. App. 3d at 1395. Here, the express terms of 11 the Warranty do not give the plaintiffs any recourse when it comes to design choices. And the 12 plaintiffs allege only a design defect, not a manufacturing defect. As another court has explained 13 with respect to this same Warranty and a somewhat analogous claim against Apple, the covenant 14 implied in the Warranty cannot be used to create a claim for design defects when the Warranty 15 itself is expressly limited to “materials” and “workmanship” defects. In re MacBook Keyboard 16 Litig., No. 5:18-CV-02813-EJD, 2019 WL 1765817, at *4 (N.D. Cal. Apr. 22, 2019). 17 The plaintiffs’ counterarguments are duplicative of their arguments regarding design 18 defects. See Oppo. 26 (“Apple repeats and reasserts its argument that the defect at issue is a 19 design defect rather than a manufacturing defect. As explained above, Plaintiffs plead both, 20 alternatively, and Plaintiffs plead that the disclaimer is ineffective and/or unconscionable.” 21 (citations omitted)). I have already rejected those arguments. 22 The plaintiffs also rely on Boyd v. Avanquest North America Inc., No. 12-CV-04391- 23 WHO, 2014 WL 7183988 (N.D. Cal. Dec. 16, 2014). There, the plaintiffs alleged that the 24 defendant “acted in bad faith not only in inducing Boyd to enter the alleged contract, but in 25 frustrating the benefits of the contract.” Id., at *4. The defendant was alleged to have 26 “intentionally designed the software [at issue] so it would not honestly and accurately diagnose 27 and meaningfully repair legitimate errors on users’ systems.” Id. (internal quotation marks 28 omitted). It allegedly “falsely represent[ed] the condition of scanned computers and creat[ed] the 42 1 illusion that the benefits were supplied (when in fact, they were not) . . . leading Plaintiff and the 2 Class to believe that their contracts had been fulfilled.” Id. (internal quotation marks omitted). 3 Nothing of that type or magnitude is alleged here. Even in the light most favorable to the 4 plaintiffs, there is no allegation supporting an inference that Apple induced the plaintiffs to agree 5 to the Warranty to purposefully evade liability for the choice to include the 2x2 MIMO antenna. United States District Court Northern District of California 6 At bottom, the plaintiffs are attempting to transform the covenant of good faith and fair 7 dealing into a substantive contractual term that would cut against the express terms and limitations 8 of the contract to which they agreed. I GRANT the motion to dismiss Count VII without 9 prejudice. 10 CONCLUSION 11 The motion to dismiss is GRANTED IN PART and DENIED IN PART with leave to 12 amend. Counts I, VI, and VII are dismissed. Count II is dismissed because, at this point, it relies 13 on California law. Counts III and V are not dismissed, except insofar as they are predicated on 14 partial representations. The FAC is dismissed with leave to amend to the extent it seeks injunctive 15 relief or restitution; as a result, Count IV is also dismissed. I do not address Counts VIII, IX, X, or 16 XI because they are brought in the alternative and I defer the determination of whether California 17 law applies to all of the plaintiffs’ claims. Any amended complaint shall be filed within 30 days. 18 19 IT IS SO ORDERED. Dated: November 16, 2020 20 21 William H. Orrick United States District Judge 22 23 24 25 26 27 28 43