"The Apple iPod iTunes Anti-Trust Litigation"

Filing 201

MOTION to Certify Class and MOTION to Appoint Class Counsel filed by Stacie Somers. Motion Hearing set for 6/1/2009 09:00 AM in Courtroom 8, 4th Floor, San Jose. (Haeggquist, Alreen) (Filed on 2/25/2009) Modified on 3/2/2009,(counsel failed to select multiple motions.) (cv, COURT STAFF).

"The Apple iPod iTunes Anti-Trust Litigation" Doc. 201 1 ZELDES & HAEGGQUIST, LLP HELEN I. ZELDES (220051) 2 ALREEN HAEGGQUIST (221858) 655 West Broadway, Suite 1410 3 San Diego, CA 92101 Telephone: 619/955-8218 4 Fax: 619/342-7878 helenz@zhlaw.com 5 alreenh@zhlaw.com 6 MEHRI & SKALET, PLLC STEVEN A. SKALET (admitted pro hac vice) 7 CRAIG L. BRISKIN (admitted pro hac vice) 1250 Connecticut Ave NW, Suite 300 8 Washington, DC 20036 Telephone: 202/822-5100 9 Fax: 202/822-4997 sskalet@findjustice.com 10 cbriskin@findjustice.com 11 Attorneys for Plaintiff Stacie Somers 12 UNITED STATES DISTRICT COURT 13 NORTHERN DISTRICT OF CALIFORNIA 14 SAN JOSE DIVISION 15 16 THE APPLE IPOD ITUNES ANTI-TRUST ) LITIGATION, ) ) 17 This Document Relates To: ) ) 18 Somers v. Apple, Inc., Case No. C 07-6507 JW, ) ) 19 ) 20 ) 21 22 23 24 25 26 27 28 Case No. C 07-6507 JW NOTICE OF MOTION AND MOTION FOR CLASS CERTIFICATION AND APPOINTMENT OF CO-LEAD CLASS COUNSEL; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION JUDGE: DATE: TIME: CTRM: The Honorable James Ware June 1, 2009 9:00 a.m. 8, 4th Floor Dockets.Justia.com 1 2 3 I. 4 II. 5 III. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. 2. d. c. b. B. C. TABLE OF CONTENTS Page INTRODUCTION ...............................................................................................................1 PLAINTIFF'S CLAIMS......................................................................................................3 PLAINTIFF READILY MEETS THE STANDARDS FOR CERTIFICATION ...............4 A. Rule 23(a) Is Satisfied..............................................................................................5 1. 2. 3. 4. Numerosity...................................................................................................5 Commonality................................................................................................5 Typicality .....................................................................................................6 Adequacy of Representation ........................................................................6 Plaintiff Satisfies the Requirements of Rule 23(b)(2)..............................................6 Plaintiff Satisfies the Requirements of Rule 23(b)(3)..............................................8 1. Common Questions of Law and Fact Predominate Over Individual Issues............................................................................................................8 a. Plaintiff's Tying Claim ....................................................................8 (1) (2) Coercion May Be Proven at the Market Level ..................10 Coercion Can Be Found Where Two Products Are Not Purchased Simultaneously ..........................................13 Plaintiff's Monopolization and Attempted Monopolization Claims ............................................................................................15 Plaintiff's California State Law Claims.........................................16 (1) (2) California Business and Professions Code §17200 ...........16 The Consumer Legal Remedies Act ..................................17 Antitrust Damages Can Be Proven on a Class-Wide Basis ...........17 A Class Action Is the Superior Method to Resolve Plaintiff's Claims ........................................................................................................19 Choice of Law Issues Do Not Defeat Predominance of the Cartwright Act Damages Claim......................................................................................................20 1. 2. California's Laws Do Not Conflict with Those of Other States................20 No Other State Has an Interest in Applying Its Own Law ........................21 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW -i- 1 2 3 4 IV. 5 6 V. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW Page 3. Other State Laws Will Not Be Impaired If California's Laws Were Applied to All Class Members...................................................................22 THE COURT SHOULD APPOINT ZELDES & HAEGGQUIST, LLP AND MEHRI & SKALET, PLLC AS CLASS COUNSEL .......................................................23 CONCLUSION..................................................................................................................25 - ii - 1 2 3 CASES TABLE OF AUTHORITIES Page 4 Abed v. A. H. Robins Co., 693 F.2d 847 (9th Cir. 1982) ...............................................................................................8 5 Advance Bus. Sys. & Supply Co. v. SCM Corp., 6 415 F.2d 55 (4th Cir. 1969) ...............................................................................................14 7 Am. Ad Mgmt., Inc. v. Gen. Tel. Co., 190 F.3d 1051 (9th Cir. 1999) ...........................................................................................15 8 Amchem Products, Inc. v. Windsor, 9 521 U.S. 591 (1997).........................................................................................................3, 8 10 Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483 (8th Cir. 1992) ...........................................................................................13 11 Anderson Foreign Motors, Inc. v. New England Toyota Distrib., Inc., 12 475 F. Supp. 973 (D. Mass. 1979) .....................................................................................12 13 Apple Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D. Cal. 2008) ...............................................................................9 14 Austin v. McNamara, 15 979 F.2d 728 (9th Cir. 1992) .............................................................................................15 16 B.W.I. Custom Kitchen v. Owens-Illinois, 191 Cal. App. 3d 1341 (1987) .....................................................................................16, 18 17 Bafus v. Aspen Realty, 18 236 F.R.D. 652 (D. Idaho 2006) ..................................................................................11, 15 19 Bernhard v. Harrah's Club, 16 Cal. 3d 313 (1976) ........................................................................................................22 20 Blackie v Barrack, 21 524 F.2d 891 (9th Cir 1975) ................................................................................................4 22 Bogosian v. Gulf Oil Corp., 561 F. 2d 434 (3d Cir. 1977)..............................................................................................12 23 Bruno v. Superior Court, 24 127 Cal. App. 3d 120 (1981) .............................................................................................17 25 Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163 (1999) .......................................................................................................16 26 Chun-Hoon v. McKee Foods Corp., 27 No. C-05-620-VRW, 2006 WL 3093764 (N.D. Cal. Oct. 31, 2006)...................................4 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - iii - 1 2 Page 3 Clothesrigger, Inc. v. GTE Corp., 191 Cal. App. 3d 605 (1987) .................................................................................20, 21, 22 4 Collins v. Int'l Dairy Queen, Inc., 5 168 F.R.D. 668 (M.D. Ga. 1996) ...........................................................................11, 13, 15 6 Confederated Tribes of Siletz Indians of Or. v. Weyerhaeuser Co., 411 F.3d 1030 (9th Cir. 2005) ...........................................................................................15 7 Datagate Inc. v. Hewlitt Packard Co., 8 60 F.3d 1421 (9th Cir. 1995) ...............................................................................................8 9 Digidyne Corp. v. Data General Corp., 734 F.2d 1336 (9th Cir. 1984) .............................................................................................9 10 Dukes v. Wal-Mart, Inc., 11 474 F.3d 1214 (9th Cir. 2007) .............................................................................................5 12 Dunleavy v. Nadle, 213 F.3d 454 (9th Cir. 2000) ...............................................................................................4 13 Eastman Kodak Co. v. Image Tech. Servs., Inc., 14 504 U.S. 451 (1992).............................................................................................................8 15 Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088 (N.D. Cal. 2007) .............................................................................17 16 Fortner Enterprises v. U.S. Steel Corp., 17 394 U.S. 495 ........................................................................................................................9 18 Gregory v. Albertson's, Inc., 104 Cal. App. 4th 845 (2002) ............................................................................................16 19 Hanlon v. Chrysler Corp., 20 150 F.3d 1011 (9th Cir. 1998) ...............................................................................5, 6, 8, 20 21 Hanon v. Dataproducts Corp., 976 F.2d 497 (9th Cir. 1992) ...............................................................................................6 22 Hardy v. City Optical, Inc., 23 39 F.3d 765 (7th Cir. 1994) ...............................................................................................12 24 Harmsen v. Smith, 693 F.2d 932 (9th Cir. 1982) .............................................................................................20 25 Havlicek v. Coast-To-Coast Analytical Servs. Inc., 26 39 Cal. App. 4th 1844 (1995) ............................................................................................22 27 Hawaii v. Standard Oil Co. of California, 405 U.S. 251 (1972).............................................................................................................4 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - iv - 1 2 Page 3 Hurtado v. Superior Court, 11 Cal. 3d 574 (1974) ........................................................................................................20 4 Image Tech Servs., Inc. v. Eastman Kodak Co., 5 Nos. C 07-1686, 94-0524, 94-1070, 1994 WL 508735 (N.D. Cal. Sept. 2, 1994) ............................................................................................11, 15 6 In re Abbott Labs. Norvir Anti-Trust Litig., 7 No. Civ. 04-1511 CW, 2007 U.S. Dist. LEXIS 44459 (N.D. Cal. June 11, 2007) ....................................................................................................7 8 In re Citric Acid Antitrust Litig., 9 No. 95-1092, 1996 WL 655791 (N.D. Cal. Oct. 2, 1996) .................................................18 10 In re Dynamic Random Access Memory (DRAM) Antitrust Litig., No. M 02-1486 PJH, 2006 WL 1530166 (N.D. Cal. June 5, 2006)...............................3, 18 11 In re General Data Corp. Antitrust Litig., 12 490 F. Supp. 1089 (N.D. Cal. 1980) ..................................................................................13 13 In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D 12 (D.D.C. 2001)................................................................................................4 14 In re MDC Holdings Sec Litig., 15 754 F. Supp. 785 (S.D. Cal. 1990).....................................................................................20 16 In re OSB Antitrust Litig., No. 06-826, 2007 U.S. Dist. LEXIS 56584 (E.D. Pa. Aug. 3, 2007) ..................................7 17 In re Pizza Time Theatre Sec. Litig., 18 112 F.R.D. 15 (N.D. Cal. 1986)...................................................................................21, 22 19 In re Playmobil Antitrust Litig., 35 F. Supp. 2d 231 (E.D.N.Y. 1998) ...................................................................................3 20 In re Polypropylene Carpet Antitrust Litig., 21 178 F.R.D. 603 (N.D. Ga. 1997)..........................................................................................4 22 In re Rubber Chemicals Antitrust Litig., 232 F.R.D. 346 (N.D. Cal. 2005)...................................................................................4, 18 23 In re S. Cent. States Bakery Prods. Antitrust Litig., 24 86 F.R.D. 407 (M.D. La. 1980) .........................................................................................19 25 In re Seagate Techs. Sec. Litig., 115 F.R.D. 264 (N.D. Cal. 1987).......................................................................................22 26 In re Tableware Antitrust Litig., 27 241 F.R.D. 644 (N.D. Cal. 2007).........................................................................................3 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW -v- 1 2 Page 3 In re Visa Check/Mastermoney Antitrust Litig., 192 F.R.D. 68 (E.D.N.Y. 2000), aff'd, 280 F.3d 124 (2d Cir. 2001) ..........................15, 19 4 In re Warfarin Sodium Antitrust Litig., 5 214 F.3d 395 (3d Cir. 2000).................................................................................................7 6 Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984)...........................................................................................................9, 13 7 Jefferson v. Ingersoll Int'l Inc., 8 195 F.3d 894 (7th Cir. 1999) ...............................................................................................7 9 Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979 (9th Cir. 2000) .............................................................................................15 10 Lerwill v. Inflight Motion Pictures, Inc., 11 582 F.2d 507 (9th Cir.1978) ................................................................................................6 12 Little Caesar Enters., Inc. v. Smith, 172 F.R.D. 236 (E.D. Mich.1997) .....................................................................................15 13 Macmanus v. A.E. Realty Partners, 14 195 Cal. App. 3d 1106 (1988) .............................................................................................8 15 Molski v. Gleich, 318 F.3d 937 (9th Cir. 2003) ...............................................................................................7 16 Moore v. Jas. H. Matthews & Co., 17 550 F.2d 1207 (9th Cir. 1977) .................................................................................9, 11, 12 18 Murphy v. Business Cards Tomorrow, Inc., 854 F.2d 1202 (9th Cir. 1988) ...........................................................................................13 19 N. Pac. R.R. v. United States, 20 356 U.S. 1 (1958)...............................................................................................................14 21 Paladin Assocs., Inc. v. Montana Power Co., 328 F.3d 1145 (9th Cir. 2003) ...........................................................................................12 22 People ex rel. Lockyer v. Fremont Life Ins. Co., 23 104 Cal. App. 4th 508 (2002) ............................................................................................16 24 Probe v. State Teachers' Retirement Sys., 780 F.2d 776 (9th Cir. 1986) ...............................................................................................7 25 Quelimane Co. v. Stewart Title Guar. Co., 26 19 Cal. App. 4th 26 (1998) ................................................................................................16 27 Reiter v. Sonotone Corp., 442 U.S. 330 (1979).............................................................................................................4 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - vi - 1 2 Page 3 Santa Cruz Med. Clinic v. Dominican Santa Cruz Hosp., No. C93 20613 RMW, 1995 WL 853037 (N.D. Cal. Sept. 7, 1995).................................14 4 SC Manufactured Homes, Inc. v. Liebert, 5 162 Cal. App. 4th 68 (2008) ............................................................................................8, 9 6 Slattery v. Apple Comp., Inc., No. C 05-00037 JW, 2005 WL 2204981 (N.D. Cal. Sept. 9, 2005) ..................................11 7 Spectrum Sports v. McQuillan, 8 506 U.S. 447 (1993)...........................................................................................................15 9 Sullivan v. Chase Inv. Servs., Inc. 79 F.R.D. 246 (N.D. Cal. 1978)...........................................................................................5 10 Tucker v. Apple Comp., Inc., 11 493 F. Supp. 2d 1090 (N.D. Cal. 2006) .........................................................................1, 11 12 Union Carbide Corp. v. Superior Court, 36 Cal. 3d 13 (1984) ..........................................................................................................17 13 United States v. Microsoft Corp., 14 253 F.3d 34 (D.C. Cir. 2001) ...................................................................................3, 13, 17 15 Valentino v. Carter-Wallace, 97 F.3d 1227 (9th Cir. 1997) .............................................................................................19 16 Washington Mut. Bank v. Superior Court, 17 24 Cal. 4th 906 (2001) ...........................................................................................20, 21, 22 18 Ways & Means v. IVAC Corp., 506 F. Supp 697 (N.D. Cal. 1979), aff'd, 638 F.2d 143 (9th Cir. 1981) ...........................13 19 Wershba v. Apple Computer, Inc., 20 91 Cal. App. 4th 224 (2001) ..............................................................................................21 21 Wong v. Tenneco, Inc., 39 Cal. 3d 126 (1985) ........................................................................................................22 22 23 STATUTES, RULES AND REGULATIONS 24 15 United States Code §26....................................................................................................................................2, 7 25 California Business and Professions Code 26 §16720..................................................................................................................................2 §17200..............................................................................................................3, 5, 8, 16, 17 27 §17200................................................................................................................................16 §1770(a)(19) ......................................................................................................................17 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - vii - 1 2 Page 3 California Civil Code §1770................................................................................................................3, 5, 8, 16, 17 4 Federal Rules of Civil Procedure 5 Rule 23(a).....................................................................................................................4, 5, 6 Rule 23(a)(1)........................................................................................................................5 6 Rule 23(a)(2)........................................................................................................................5 Rule 23(a)(3)........................................................................................................................6 7 Rule 23(b) ............................................................................................................................4 Rule 23(b)(2)................................................................................................................5, 6, 7 8 Rule 23(b)(3).............................................................................................................. passim Rule 23(g) ..........................................................................................................................23 9 SECONDARY AUTHORITIES 10 6 Herbert B. Newberg & Alba Conte, 11 Newberg on Class Actions (4th ed. 2002) §3:10 ....................................................................................................................................5 12 §18:1 ....................................................................................................................................3 13 Manual for Complex Litigation (1977) §1.43...................................................................................................................................19 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - viii - 1 TO: 2 ALL PARTIES AND THEIR ATTORNEYS OF RECORD PLEASE TAKE NOTICE that on June 1, 2009, at 9:00 a.m., in Courtroom 8, 4th Floor of the 3 above-entitled Court, located at 280 South 1st Street, San Jose, California, plaintiff Stacie Somers on 4 ("plaintiff") behalf of herself and all others similarly situated will, and hereby does, respectfully 5 move the Court for class certification, and the appointment of the law firms of Mehri & Skalet, 6 PLLC and Zeldes & Haeggquist, LLP as Co-Lead Counsel for the Class. 7 I. 8 INTRODUCTION The Court is well-aware of the facts of this case. They are virtually identical to those of the 9 related Tucker action, in which this Court has already certified an injunctive relief and damages class 10 of direct purchasers of the iPod. Here, plaintiff Stacie Somers seeks to represent the corresponding 11 class of indirect purchasers of Apple's iPods; that is, class members who purchased Apple's iPod 12 from any retailer other than Apple. Plaintiff alleges that Apple violated federal and state antitrust 13 laws by encoding iTunes files so they could only be played on the iPod, and not any competing 14 portable digital media player. As the Court concluded in the direct purchaser case, these claims are 15 well-suited for class certification.1 Indeed, this Court held that the direct purchaser plaintiffs 16 satisfied all of the requirements for class certification, and requested additional briefing on just one 17 element of one claim (tying).2 The sole remaining issue left to be decided by this Court is whether 18 coercion can be proved on a class-wide (or market-level) basis under §1 of the Sherman Act. As this 19 Court has already decided on two occasions, coercion can indeed be shown at the market level. 20 The elements of Apple's coercive tie are evident in Apple's public statements, and in the 21 products themselves. Apple's market share is so high in the tying market that Apple's CEO Steve 22 23 24 1 Plaintiff the briefing by the direct purchaser plaintiffs in the related case 25 and incorporatesSomers concurs with class certification by reference as if set forth herein. their arguments for 26 See Order Granting Plaintiffs' Motion for Class Certification as to Counts Two, Three, Four, Five, Six and Seven Only and Appointing Class Counsel; Sua Sponte Order Reconsidering 27 Defendant's Motion to Dismiss Count One and Requiring Further Briefing ("12/22 Order"), Docket 28 No. 196 (filed Dec. 22, 2008). NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 2 -1- 1 Jobs proudly calls Apple's Online Music Store "the Microsoft of music stores."3 Jobs states that the 2 "only option to play music from Apple's Music Store is the iPod."4 Not surprisingly, Apple's 3 attorneys now try to distance Apple from such claims urging that consumers can circumvent Apple's 4 deliberate efforts to lock its files through a process called "ripping and burning," ­ a possibly illegal 5 activity that Apple itself apparently has never made known to its customers. Notwithstanding 6 counsel's valiant efforts, it remains clear that Apple designed the iTunes store and downloads for 7 direct use on the iPod, and nothing else. Direct use is an essential characteristic of the iPod. 8 Hypothetical "ripping and burning" does not cure the anticompetitive conduct alleged herein but 9 rather proves the point: consumers are locked-in to the iPod and have no option but the iPod to 10 directly play their iTunes digital media files. This is not mere "inconvenience" or "enhanced utility" 11 rather the inability to use the product as it was intended. 12 If Apple required iTunes purchasers to burn and rip every download before they could upload 13 them to the iPod, with reduced sound quality, it is fair to say that Apple would be at a competitive 14 disadvantage to music stores that allowed seamless transfer. Plaintiff here has set forth a 15 methodology that will show that Apple's efforts to lock in its customers worked as it was intended: 16 consumers bought iPods, and paid more for them, because of the DRM lock-in. As a result, class 17 members are tied to the iPod, which they are forced to purchase at supracompetitive prices. Even 18 those iPod purchasers who had not previously purchased iTunes music paid supracompetitive prices 19 as a result of Apple's monopolistic activities. 20 In order to remedy Apple's behavior, plaintiff Somers seeks certification of the following 21 class, pursuant to the Clayton Act (15 U.S.C. §26), the Cartwright Act (Cal. Bus. & Prof. Code 22 23 24 Complaint for Violations of Sherman Antitrust Act, Cartwright Act, California Unfair Competition Law, Consumer Legal Remedies Act and Monopolization of Business Practices, ¶12 25 ("Complaint"), filed Dec. 31, 2007. All paragraph citations are to the Complaint, unless otherwise 26 noted. 4 See, e.g., Steve Jobs, "Thoughts on February 6, 2007, attached to the Declaration of 27 Alreen Haeggquist in Support of Plaintiff'sMusic," for Class Certification and Appointment of Class Motion 28 Counsel ("Haeggquist Decl.") as Ex. 5. NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 3 -2- 1 §16720 et seq.), California's Unfair Competition Law (Cal. Bus. & Prof. Code §17200 et seq. 2 ("UCL")), and the Consumer Legal Remedies Act (Cal. Civ. Code §1770 et seq. ("CLRA")): 3 4 5 6 7 8 All persons and entities in the United States (excluding federal, state and local governmental entities, Apple, its directors, officers and members of their families) that from December 31, 2003 to the present ("Class Period") purchased an Apple iPod indirectly from Apple for their own use and not for resale. The Supreme Court and numerous other courts have recognized that few cases are better 9 candidates for class-wide resolution than antitrust actions.5 As this Court held in the related direct 10 purchaser action, Plaintiff's claims should similarly be certified here. 11 II. 12 PLAINTIFF'S CLAIMS Plaintiff alleges that Apple has established an illegal tie between its Online Videos and 13 Online Music, and the iPod. Apple enjoys monopoly power in the download markets, it deliberately 14 abuses that power. See United States v. Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir. 2001). A 15 consumer who purchases music and video files from Apple's Online Music Store is forced to 16 purchase Apple's iPod in order to play the music or videos on a portable digital music player. ¶14. 17 Purchasers of Online Videos from Apple also are precluded from using rival video-enabled portable 18 digital music players. ¶¶16, 67-72. This conduct causes substantial antitrust injury to consumers, 19 because it allows Apple to charge supracompetitive prices for its iPod and reduces innovation by 20 foreclosing competition. ¶¶54-58. 21 Plaintiff also alleges that Apple willfully acquired and exploits its monopoly power in the 22 market for portable music players, by placing technological restrictions on its products that serve 23 24 25 26 27 28 See Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625 (1997) ("Predominance is a test readily met in certain cases alleging . . . violations of the antitrust laws."); In re Playmobil Antitrust Litig., 35 F. Supp. 2d 231, 238 (E.D.N.Y. 1998) ("Antitrust claims are well suited for class actions."). And, in turn, class actions "play a particularly vital role in the private enforcement of antitrust [laws]." In re Tableware Antitrust Litig., 241 F.R.D. 644, 648 (N.D. Cal. 2007); accord In re Dynamic Random Access Memory (DRAM) Antitrust Litig., No. M 02-1486 PJH, 2006 WL 1530166, at *3 (N.D. Cal. June 5, 2006) ("DRAM") (same); see generally 6 Herbert B. Newberg & Alba Conte, Newberg on Class Actions, §18:1, at 3-6 (4th ed. 2002) ("Newberg"). NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 5 -3- 1 only to exclude potential competitors. ¶¶13-16. Apple does this by "crippling" third-party supplied 2 components in its iPod that otherwise would enable the iPod to play music and videos downloaded 3 from Online Music stores that compete with Apple. ¶¶38-40. Apple further protects its monopolies 4 by placing unneeded technological restrictions on the music and video files it sells at its Online 5 Music Store, iTMS, making the files incompatible with rival portable digital music players. ¶41. 6 III. 7 The Supreme Court has long recognized that antitrust class actions play an important role in 8 the enforcement of the antitrust laws. See Reiter v. Sonotone Corp., 442 U.S. 330, 344 (1979); 9 Hawaii v. Standard Oil Co. of California, 405 U.S. 251, 266 (1972). Because of this critical 10 enforcement role, "courts resolve doubts in these actions in favor of certifying the class." In re 11 Rubber Chemicals Antitrust Litig., 232 F.R.D. 346, 350 (N.D. Cal. 2005). 12 In addition, "[o]n a motion for class certification, the court `is bound to take the substantive 13 allegations of the complaint as true.'" Chun-Hoon v. McKee Foods Corp., No. C-05-620-VRW, 14 2006 WL 3093764, at *1 (N.D. Cal. Oct. 31, 2006) (quoting Blackie v Barrack, 524 F.2d 891, 901 15 n.17 (9th Cir 1975)). The certification inquiry is not a merits inquisition. Neither the plaintiff nor 16 the plaintiff's expert must prove or show that defendant's conduct violated the law. "[R]ather, they 17 must demonstrate that their attempt to evidence impact will involve common issues that 18 predominate." In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D 12, 29 (D.D.C. 2001). 19 See also In re Polypropylene Carpet Antitrust Litig., 178 F.R.D. 603, 618 (N.D. Ga. 1997) 20 (explaining that "at the class certification stage, plaintiffs must show that antitrust impact can be 21 proven with common evidence on a class wide basis; plaintiffs need not show antitrust impact in 22 fact occurred on a class-wide basis.") (emphasis in original). 23 To certify a class action, plaintiff must set forth prima facie facts that support the four 24 requirements of Rule 23(a): (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of 25 representation. Dunleavy v. Nadle, 213 F.3d 454, 462 (9th Cir. 2000). The court must then consider 26 whether the class is maintainable under one or more of the three alternatives set forth in Rule 23(b). 27 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW PLAINTIFF READILY MEETS THE STANDARDS FOR CERTIFICATION -4- 1 Plaintiff seeks certification of an injunctive relief class under Rule 23(b)(2) and a damages class 2 under Rule 23(b)(3). 3 4 A. Rule 23(a) Is Satisfied The Court has already held that Rule 23(a)'s requirements of numerosity, commonality, 5 typicality and fair and adequate representation were met by the Direct Purchasers. See 12/22 Order 6 at 3-6. The same reasoning is applicable here, and little additional analysis is required. 7 8 1. Numerosity The numerosity requirement is satisfied if the class "is so numerous that joinder of all 9 members is impracticable." Rule 23(a)(1). As this Court already held, "[a] class of one thousand 10 members `clearly satisfies the numerosity requirement.'" 12/22 Order at 3 (quoting Sullivan v. 11 Chase Inv. Servs., Inc. 79 F.R.D. 246, 257 (N.D. Cal. 1978)). The numerosity of Apple's iPod sales 12 is not a point in serious dispute. Apple has sold millions of iPods to indirect purchasers during the 13 class period. See Affidavit of Gary L. French, Ph.D. ¶27 ("French Aff.") (citing Apple's 14 interrogatory response), attached to the Haeggquist Declaration as Ex. 1. As this Court held in 15 certifying the direct purchaser classes, "Given that the volume of relevant purchasers during the 16 Class Period is undisputedly in the millions, the Court finds that plaintiffs have satisfied the 17 numerosity requirement of Rule 23(a)." 12/22 Order at 5. The numerosity requirement is easily 18 satisfied here as well. 19 20 2. Commonality Commonality requires "questions of law or fact common to the class." Rule 23(a)(2). The 21 commonality requirement is generally construed liberally; the existence of only a few common legal 22 and factual issues may satisfy the requirement. Dukes v. Wal-Mart, Inc., 474 F.3d 1214, 1225 (9th 23 Cir. 2007) (citing Newberg §3:10 at 271; Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998)). 24 As this court has already concluded, "there are numerous common questions of law and fact 25 involving Defendant's allegedly anti-competitive conduct." 12/22 Order at 8. Plaintiff's tying, 26 monopolization, attempted monopolization, UCL and CLRA claims are essentially identical to the 27 claims that the Court has already certified with regard to the direct purchasers. The only issues that 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW -5- 1 differ are those specific to the certification of a class of indirect purchasers. These issues, too, are 2 common. Thus, this requirement is satisfied. 3 4 3. Typicality The typicality requirement requires that "the claims or defenses of the representative parties 5 are typical of the claims or defenses of the class[.]" Rule 23(a)(3). "[R]epresentative claims are 6 `typical' if they are reasonably co-extensive with those of absent class members; they need not be 7 substantially identical." Hanlon, 150 F.3d at 1020. The typicality requirement is satisfied when 8 "other members have the same or similar injury, whether the action is based on conduct which is not 9 unique to the named plaintiffs, and whether other class members have been injured by the same 10 course of conduct." Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). In this case, 11 plaintiff's and the proposed class members' claims all arise from Apple's alleged tying of iTunes 12 music with the iPod and its monopolization of the market for portable media players. Plaintiff's 13 claim is identical to that of absent class members, which is far more than Rule 23(a) requires. 14 15 4. Adequacy of Representation To satisfy the requirement of adequacy of representation, "First, the named representatives 16 must appear able to prosecute the action vigorously through qualified counsel, and second, the 17 representatives must not have antagonistic or conflicting interests with the unnamed members of the 18 class." Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir.1978). 19 Plaintiff's counsel has invested considerable time since the initiation of the litigation 20 gathering evidence, formulating legal theories, reviewing documents, and working with an economic 21 expert. Haeggquist Decl. ¶3. Plaintiff's counsel is experienced in antitrust and consumer law, and 22 class action litigation, as set forth in the declaration and firm resumes submitted herewith. See 23 Haeggquist Decl. Exs. 3-4 and §IV below. As an iPod purchaser, plaintiff has interests that are 24 aligned with and are in no way antagonistic to those of absent class members. Plaintiff has served 25 well as a representative for the proposed class. Thus, this requirement is satisfied. 26 27 B. Plaintiff Satisfies the Requirements of Rule 23(b)(2) Plaintiff also satisfies the requirements of Rule 23(b)(2), which is that "the party opposing 28 the class has acted or refused to act on grounds that apply generally to the class, so that final NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW -6- 1 injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole[.]" 2 As the Court did with respect to direct purchasers, it also should certify the proposed nationwide 3 indirect purchaser class for injunctive relief under federal law. 4 Defendant has acted on grounds generally applicable to the class. Its alleged anticompetitive 5 conduct is and has been market-wide, and it does not require reference to the actions of individual 6 consumers. Injunctive relief is available to these consumers pursuant to §16 of the Clayton Act (15 7 U.S.C. §26). 12/22 Order at 10; see also In re Warfarin Sodium Antitrust Litig., 214 F.3d 395, 400 8 (3d Cir. 2000). Defendant's anticompetitive conduct has enabled it to overcharge for iPods. While 9 Apple has announced its intention to remove DRM from future iTunes downloads, it still will charge 10 a fee to remove DRM from existing purchases, which is roughly equivalent to one third of the 11 purchase price. Haeggquist Decl. Ex. 1, French Aff. ¶34. An injunction would force Apple to stop 12 charging consumers for removal of DRM from iTunes downloads, which would remove the lock-in 13 that DRM represents. This will result in lower prices for iPods, and allow purchasers of iTunes 14 music to choose freely among products in the market for portable media players. 15 Therefore, the Court should certify a Rule 23(b)(2) class in addition to the Rule 23(b)(3) 16 class as set forth below. See Jefferson v. Ingersoll Int'l Inc., 195 F.3d 894, 898 (7th Cir. 1999) ("It is 17 possible to certify the injunctive aspects of the suit under Rule 23(b)(2) and the damages aspects 18 under Rule 23(b)(3), achieving both consistent treatment of class-wide equitable relief and an 19 opportunity for each affected person to exercise control over the damages aspects."); Probe v. State 20 Teachers' Retirement Sys., 780 F.2d 776, 780 n.3 (9th Cir. 1986). See also In re Abbott Labs. Norvir 21 Anti-Trust Litig., No. Civ. 04-1511 CW, 2007 U.S. Dist. LEXIS 44459, at *22-*23 (N.D. Cal. 22 June 11, 2007) (same). Moreover, plaintiff's injunctive relief is based on a federal law, while her 23 claim for damages is based only on state law. Thus, the federal antitrust claim is not one that 24 "relates exclusively or predominantly to money damages." See In re OSB Antitrust Litig., No. 0625 826, 2007 U.S. Dist. LEXIS 56584, at *47-*48 (E.D. Pa. Aug. 3, 2007) (agreeing with plaintiffs 26 "that I need not even consider this issue because the claims for damages and injunctive relief are 27 entirely separate" noting that the claims "arise under different statutes (Clayton Act versus state 28 statutes)"); see also Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003). NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW -7- 1 2 C. Plaintiff Satisfies the Requirements of Rule 23(b)(3) The court may certify a class under Rule 23(b)(3), which requires "that the questions of law 3 or fact common to the members of the class predominate over any questions affecting only 4 individual members, and that a class action is superior to other available methods for the fair and 5 efficient adjudication of the controversy . . . ." Certification under Rule 23(b)(3) is proper 6 "whenever the actual interests of the parties can be served best by settling their differences in a 7 single action." Hanlon, 150 F.3d at 1022 (internal quotations omitted). The Court must balance 8 concerns regarding the litigation of issues common to the class a whole with questions affecting 9 individual class members. Abed v. A. H. Robins Co., 693 F.2d 847, 856 (9th Cir. 1982). 10 11 The "predominance inquiry tests whether proposed classes are sufficiently cohesive to 12 warrant adjudication by representation." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997). 13 As the Supreme Court has stated, "predominance is a test readily met in certain cases alleging . . . 14 violations of the antitrust laws." Id. at 625. Here, plaintiff alleges antitrust claims for tying, 15 monopolization, attempted monopolization, and violation of the UCL and CLRA. As shown above 16 and as demonstrated by Dr. French, each element of plaintiff's claims can and will be proved 17 through common evidence applicable to every member of the proposed classes. 18 a. 19 The practice of tying has long been forbidden as a per se illegal practice under Section 1 of 20 the Sherman Act. See Datagate Inc. v. Hewlitt Packard Co., 60 F.3d 1421, 1423 (9th Cir. 1995); see 21 also Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 461-62 (1992) (affirming rule of 22 per se liability). The per se analysis also applies to tying claims under the Cartwright Act. See SC 23 Manufactured Homes, Inc. v. Liebert, 162 Cal. App. 4th 68, 86 (2008) (stating that a tie exists if "the 24 buyer can[not] simply walk away and turn to another seller"); Macmanus v. A.E. Realty Partners, 25 195 Cal. App. 3d 1106, 1110 (1988). The Supreme Court notes that "the essential characteristic of 26 an invalid tying arrangement lies in the seller's exploitation of its control over the tying product to 27 force the buyer into the purchase of a tied product that the buyer either did not want at all, or might 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 1. Common Questions of Law and Fact Predominate Over Individual Issues Plaintiff's Tying Claim -8- 1 have preferred to purchase elsewhere on different terms." Jefferson Parish Hosp. Dist. No. 2 v. 2 Hyde, 466 U.S. 2, 12 (1984). 3 4 5 6 7 8 9 10 The prerequisites of a per se tying arrangement under the Cartwright Act are [the existence] of a tying agreement, arrangement or condition [] whereby the sale of the tying product was linked to the sale of the tied product or service; (2) the party had sufficient economic power in the tying market to coerce the purchase of the tied product; (3) a substantial amount of sale was affected in the tied product; and (4) the complaining party sustained pecuniary loss as a consequence of the unlawful act. 11 SC Manufactured Homes, 162 Cal. App. 4th at 86 (internal citations and quotations omitted). The 12 requirements for a per se tying claim under the §1 of the Sherman Act are virtually identical.6 Most 13 notably, none of the elements of plaintiff's tying claim turn on individual class members' 14 circumstances but rather on common class-wide evidence. 15 Here, plaintiff alleges that Apple tied its iTunes Music Store (the tying product) to sales of 16 the iPod (the tied product). ¶¶12, 55, 67-72. These products belong to separate product markets ­ 17 the Online Music and Online Video markets, and the Digital Music Player market. ¶68. Thus, as 18 Apple proudly admits, the consumer's only option to play music from Apple's Music Store is the 19 iPod.7 As a result, Apple can and does sell the iPod at prices far above those that would prevail in a 20 competitive market. ¶¶14, 71. In addition, Apple made affirmative efforts to ensure that iTunes 21 music was not interoperable with other portable music players, by disabling its operating chip 22 through software commonly known as "crippleware." ¶38. Limiting consumer choices for music 23 24 Digidyne Corp. v. Data General Corp., 734 F.2d 1336 (9th Cir. 1984), overruled on other grounds by Illinois Tool Works v. Independent Ink, Inc., 547 U.S. 28 (2006), as recognized in Apple 25 Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D. Cal. 2008) (citing Fortner Enterprises v. U.S. Steel Corp., 394 U.S. 495, 499, Moore v. Jas. H. Matthews & Co., 550 F.2d 1207, 1212 (9th Cir. 26 1977)). 27 See, e.g., Steve Jobs, Thoughts on Music, February 6, 2007, http://www.apple.com/hotnews/ thoughtsonmusic/ (Haeggquist Decl. Ex. 5). 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 7 6 -9- 1 and video downloads has further strengthened Apple's anticompetitive tie. Proof of this claim 2 clearly goes to Apple's anticompetitive behavior at the market level, and does not reference any 3 inquiry into the circumstances of individual purchasers. For this reason, the claim is amenable to 4 resolution on a class-wide basis. 5 This Court rightfully held that all but one of the elements of the direct purchasers' tying 6 claim were satisfied by class-wide or market level proof. Specifically, in its Class Certification 7 Order, this Court held that establishing the relevant markets set forth in plaintiff's complaint and 8 determining whether Apple possessed market power in each of those markets "do not depend in any 9 way upon individualized proof." 12/22 Order at 6. This Court also held that "Apple's use of 10 technological restrictions and the amount of commerce affected by these restrictions are both 11 questions that do not require individual proof." Id. at 7. For the same reasons, the Court should so 12 hold here. 13 The only remaining element of plaintiff's tying claim to be determined by this Court is 14 whether the sale of the tying product (iTMS) was linked to the sale of the tied product (iPod). As to 15 whether such a tie exists, this Court sought additional briefing on the issues of (1) whether market16 level coercion is a sufficient basis to bring plaintiffs' allegations within the ambit of a §1 tying 17 claim, and (2) "whether, as a matter of law, coercion can be found where there is no requirement that 18 the tying and tied products be purchased together."8 19 20 (1) Coercion May Be Proven at the Market Level Market-level proof of coercion is sufficient and appropriate, because it is at the market level 21 that tying operates. Indeed, while many or most consumers in a tied market may have been coerced, 22 even those that are not are injured by the tie in the form of higher prices and reduced consumer 23 choice and quality. In addition, while there may be some conceivable way in which a consumer 24 could circumvent a market tie, it is the actual behavior of buyers and sellers in the marketplace that 25 26 12/22 Order at 4. While certifying Counts Two through Seven of the direct purchasers' claims, the Court invited the parties to provide additional briefing on Count One, the tying claim, as 27 to these two points. On February 13, 2009, Apple filed its Motion for Judgment on the Pleadings as 28 to Plaintiffs' Tying Claim ("MJP"), arguing that plaintiffs' tying claim is invalid. NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 8 - 10 - 1 is the concern of antitrust law, which is why econometric, market-level analysis is the appropriate 2 way of discerning whether an illegal tie has been established to the detriment of competition. 3 As this Court has already held on two occasions, coercion may be alleged and proven at the 4 market, rather than the individual, level: 5 6 7 8 9 10 11 [T]here is no requirement that individual purchaser plaintiffs must allege coercion at the individual level, rather than at the market level, to state a Section 1 tying claim. In the Ninth Circuit, "[t]he essence of an antitrust tying violation is not the seller's unilateral refusal to deal with a buyer who refuses to buy the tied product, but the use by the seller of its `leverage' to force a purchaser to do something that he would not do in a competitive market." 12 Tucker v. Apple Comp., Inc., 493 F. Supp. 2d 1090, 1097 (N.D. Cal. 2006); see also Slattery v. 13 Apple Comp., Inc., No. C 05-00037 JW, 2005 WL 2204981, at *3 (N.D. Cal. Sept. 9, 2005). These 14 rulings are correct: it is well-settled that the Ninth Circuit "does not require any showing of [] actual 15 coercion in tying claims." Bafus v. Aspen Realty, 236 F.R.D. 652, 657 (D. Idaho 2006); see also 16 Moore, 550 F. 2d at 1217 ("Although some cases in other circuits have required a showing of actual 17 coercion . . . our reading of the Supreme Court's opinions supports the view that coercion may be 18 implied from a showing that an appreciable number of buyers have accepted burdensome terms, such 19 as a tie-in, and there exists sufficient economic power in the tying product market . . . ."). 20 Thus, to the extent coercion need be shown at all, plaintiff only needs to show that "an 21 appreciable number of buyers" have been coerced, which is a market-level showing made on a class22 wide basis. See, e.g., Bafus, 236 F.R.D. at 657 (following Moore, 550 F.2d 1207); Image Tech 23 Servs., Inc. v. Eastman Kodak Co., Nos. C 07-1686, 94-0524, 94-1070, 1994 WL 508735, at *3 24 (N.D. Cal. Sept. 2, 1994) (same); see also Collins v. Int'l Dairy Queen, Inc., 168 F.R.D. 668, 675-76 25 (M.D. Ga. 1996) (rejecting argument that coercion must be proved individually, so as to preclude 26 class certification). Therefore, proof of market coercion ­ i.e., that "an appreciable number of 27 buyers have accepted" the tie-in, and that Apple holds "sufficient economic power in the tying 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - 11 - 1 product market" does not require individual "state-of-mind" testimony from every class member so 2 as to preclude class certification.9 3 While such a showing need not be proven on the merits at the class certification stage, 4 Apple's own testimony confirms that Apple coerces and locks buyers of iTunes products into 5 purchasing its iPods by restricting their choice of portable digital music players to the iPod. Indeed, 6 Apple has proudly announced that "music purchased from Apple's iTunes store will only play on 7 iPods." See, e.g., Haeggquist Decl. Ex. 5 (see supra, Jobs, Thoughts on Music) ("[Apple] envelopes 8 each song purchased from the iTunes store in special and secret software so that it cannot be played 9 on unauthorized devices."). "Today, Apple's own iPod compressed audio players are the only 10 devices on the market capable of playing iTunes music, though the company has licensed FairPlay to 11 Motorola, which plans to launch an iTunes compatible handset this year. This policy is consistent 12 with Apple's stated goal of driving iPod compressed audio player sales with iTunes Music 13 Store . . . ."10 Apple iTunes owners are effectively coerced, on a class-wide basis, in to purchasing 14 iPods because they cannot directly play their iTunes downloads on any other digital music player. 15 Moreover, because of Apple's technological tie, which it is undisputed that every class member is 16 subjected to, coercion can be shown on a class-wide or market level basis. 17 It is well-settled that inferring coercion on a class-wide basis is permissible. See Paladin 18 Assocs., Inc. v. Montana Power Co., 328 F.3d 1145, 1161 (9th Cir. 2003) (suggesting that evidence 19 of tie-in requirement sent to customers at large would allow inference of coercion); Hardy v. City 20 Optical, Inc., 39 F.3d 765, 770-71 (7th Cir. 1994) (coercion may be proved on a class-wide basis 21 with evidence of a "blanket policy"), Moore, 550 F.2d at 1217 ("coercion may be implied from a 22 23 Moore, 550 F. 2d at 1217; accord Bogosian v. Gulf Oil Corp., 561 F. 2d 434, 449-50 (3d Cir. 1977) ("The issue is whether the seller acted in a certain way, not what the buyer's state of mind 24 would have been absent the seller's action."); Anderson Foreign Motors, Inc. v. New England (D. Mass. Court's per se 25 Toyota Distrib., Inc., 475 F. Supp. 973, 988inquiries of1979) ("The Supreme be required to test is designed to eliminate detailed evidentiary the type that would prove individual buyer coercion. . . . It is the nature of the test that it focuses not on the buyer's state of 26 mind but rather on the seller's actions."). 27 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 10 9 See Haeggquist Decl. Ex. 1, French Aff. ¶47 (emphasis added). - 12 - 1 showing that an appreciable number of buyers have accepted burdensome terms. . . . [In Siegel] we 2 refused to accept appellant's individual coercion theory and we were not troubled by the fact there 3 was no evidence to show that each [class member] had been required to purchase the equipment, 4 mixes, and packaging"); Collins, 168 F.R.D. at 675-76 (certifying tying claim where proof of 5 coercion focused on the defendants' conduct common to the putative class). 6 7 Plaintiff need not show that a consumer was required to buy the two products, the tied and 8 tying product, together at the same time in order to prove a tie. An illegal tying claim may be 9 established absent an explicit refusal by the defendant to sell the tying product unless the buyer also 10 agrees to buy the tied product. Ways & Means v. IVAC Corp., 506 F. Supp 697, 701 (N.D. Cal. 11 1979), aff'd, 638 F.2d 143 (9th Cir. 1981); see also Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 12 1500 (8th Cir. 1992). The Ninth Circuit and several other circuits have ruled that a consumer can 13 show coercion when there is no other viable economic way but to purchase the tying and tied 14 products. In Ways & Means, 506 F. Supp at 701, the court held that "separate availability will not 15 preclude antitrust liability where a defendant has established its pricing policy in such a way that the 16 only viable economic option is to purchase the tying and tied products in a single package." See also 17 In re General Data Corp. Antitrust Litig., 490 F. Supp. 1089, 1110-11 (N.D. Cal. 1980) (fact that 18 computer manufacturer technically offered buyers the option to purchase its computer and memory 19 separately did not preclude liability for tying because the products essentially were required to be 20 purchased together). The case of Murphy v. Business Cards Tomorrow, Inc., 854 F.2d 1202 (9th Cir. 21 1988), overruled on other grounds, 914 F.2d 1136 (9th Cir. 1990) (overruling portion of decision 22 concerning Rule 11 sanctions), set forth the appropriate standard in the Ninth Circuit for what 23 constitutes an illegal tying arrangement. "The essence of an antitrust tying violation is not the 24 seller's unilateral refusal to deal with a buyer who refuses to buy the tied product . . . but the use by 25 the seller of its `leverage to force a purchaser to do something that he would not do in a competitive 26 market."` Id. at 1204 (quoting Jefferson Parish, 466 U.S. at 14 n.20; U.S. v. Microsoft Corp., 253 27 F.3d 34, 45 (D.C. Cir. 2001) (tying claim permitted where tying product, a computer operating 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW (2) Coercion Can Be Found Where Two Products Are Not Purchased Simultaneously - 13 - 1 system, was used for purposes other than internet access for which the tied product, Internet 2 Explorer, was created). And in Santa Cruz Med. Clinic v. Dominican Santa Cruz Hosp., No. C93 3 20613 RMW, 1995 WL 853037, at *13 (N.D. Cal. Sept. 7, 1995), the court utilized the "viable 4 economic option" standard, i.e., whether the tying product is "truly available" without purchase of 5 the tied products. Although in Santa Cruz the court found plaintiffs ultimately failed to adequately 6 plead sufficient facts to maintain a tying cause of action, the standard is instructive in this case, 7 nonetheless. "Tie-ins are non coercive, and therefore legal, only if the components are separately 8 available to the customer on a basis as favorable as the tie-in arrangement." Advance Bus. Sys. & 9 Supply Co. v. SCM Corp., 415 F.2d 55, 62 (4th Cir. 1969). 10 Here, it is clear that neither the iPod nor the iTunes music sold by Apple's Music Store are 11 separately available to consumers on a basis as favorable as through the current tied arrangement. In 12 N. Pac. R.R. v. United States, 356 U.S. 1 (1958), the Supreme Court found an illegal tying 13 arrangement even though the plaintiffs could purchase the tying and tied products separately. 14 Defendant Northern Pacific leased land to the plaintiffs under the express condition that plaintiffs 15 "ship over its [defendant's railroad] lines all commodities produced or manufactured on the land, 16 provided that its rates . . . were equal to those of competing carriers." Id. at 3. Thus, the contract 17 permitted plaintiffs to lease land from the defendant railway company and still utilize transportation 18 services purchased from competitors, provided the competitors' services were priced lower. 19 Plaintiffs were not required to demonstrate that they were coerced to lease the land and purchase 20 defendant's transportation services. Rather, the Court found the defendant's "preferential routing" 21 caused an unlawful restraint on trade because the defendant exploited its substantial economic power 22 by virtue of its extensive land holdings "to induce large numbers of purchasers and lessees to give it 23 preference, to the exclusion of its competitors, in carrying goods or produce from the land 24 transferred to them." Id. at 7. The Supreme Court held that the defendant's "preferential routing" 25 clause constituted an unlawful tying arrangement even though it technically allowed the lessee26 plaintiffs the option of purchasing transportation services separately from the defendants' land lease. 27 Id. at 8, 12. Here, Apple is effectively forcing consumers to buy the tied and tying products, even if 28 not simultaneously. NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - 14 - 1 None of the elements of plaintiff's tying claim turns on the individual circumstances of a 2 particular product purchaser. Courts both within and outside of the Ninth Circuit have consistently 3 certified similar tying claims for class-wide resolution.11 4 5 Similarly, plaintiff's monopolization and attempted monopolization claims will be proven 6 with reference to evidence that is completely common to the class. A monopolization claim requires 7 (1) possession of monopoly power in the relevant market, (2) willful acquisition or maintenance of 8 that power, and (3) antitrust injury. See Austin v. McNamara, 979 F.2d 728, 739 (9th Cir. 1992). 9 The Ninth Circuit has explained that there are four requirements to show antitrust injury: 10 "(1) unlawful conduct, (2) causing an injury to the plaintiff, (3) that flows from that which makes the 11 conduct unlawful, and (4) that is of the type the antitrust laws were intended to prevent." 12 Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 987 (9th Cir. 2000) (quoting Am. Ad Mgmt., 13 Inc. v. Gen. Tel. Co., 190 F.3d 1051, 1055 (9th Cir. 1999)). See ¶¶54-60 (plaintiff's allegations of 14 antitrust injury). 15 To show attempted monopolization, a plaintiff must ultimately prove (1) a specific intent to 16 monopolize; (2) predatory or anticompetitive conduct; and (3) a dangerous probability of success in 17 18 As this Court has already found, "common questions of law and fact predominate over 19 individual questions as to plaintiff's monopolization and attempted monopolization causes of 20 action." 12/22 Order at 5. "Questions surrounding the willfulness of Apple's behavior are 21 undoubtedly common to the class, as are questions of antitrust injury, especially if the injury alleged 22 is that Apple uniformly charged consumers supracompetitive prices based on its purported monopoly 23 24 See, e.g., Bafus, 236 F.R.D. 652 (certifying tying claims); see generally Image Tech., 1994 WL 508735 (same); In re Visa Check/Mastermoney Antitrust Litig., 192 F.R.D. 68 (E.D.N.Y. 2000), 25 aff'd, 280 F.3d 124 (2d Cir. 2001) (same); Little Caesar Enters., Inc. v. Smith, 172 F.R.D. 236 (E.D. 26 Mich.1997) (same); Collins, 168 F.R.D. 668 (same). 12 Spectrum Sports v. McQuillan, 506 of 27 IndiansSeeOr. v. Weyerhaeuser Co., 411 F.3d U.S. 447, 459 (1993); Confederated Tribeson Siletz of 1030, 1041-45 (9th Cir. 2005), overruled other grounds sub nom. Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007). 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW 11 b. Plaintiff's Monopolization and Attempted Monopolization Claims achieving monopoly power.12 - 15 - 1 position." 12/22 Order at 5. Like the direct purchaser plaintiffs, here, Plaintiff also alleges that the 2 antitrust injury caused by Apple's monopoly power is that Apple was able to charge 3 supracompetitive prices for its iPods. And, Dr. French has set forth an economic methodology to 4 demonstrate that proof of impact and damages is possible on a class-wide basis. See Haeggquist 5 Decl. Ex. 1, French Aff. 17, 35-69. 6 Accordingly, plaintiff has met the predominance requirement of Rule 23(b)(3) for her 7 monopolization and attempted monopolization claims. 8 9 10 basis. 11 12 (1) California Business and Professions Code §17200 c. Plaintiff's California State Law Claims Plaintiff's other state law claims also will be proven with common evidence on a class-wide Business and Professions Code §17200, also known as the Unfair Competition Law ("the 13 UCL"), defines "unfair competition" to "mean and include any unlawful, unfair or fraudulent 14 business act or practice." Id. Because "section 17200 `is written in the disjunctive, it establishes 15 three varieties of unfair competition ­ acts or practices [which] are unlawful, or unfair, or 16 fraudulent.'" Gregory v. Albertson's, Inc., 104 Cal. App. 4th 845, 851 (2002). 17 Plaintiff alleges that Apple engaged in unfair competition under each of the three prongs. 18 ¶¶108-115. Plaintiff need only prove a violation of one these three prongs to prevail. Cel-Tech 19 Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). 20 Under the "unlawful" prong, the UCL "borrows" violations of other laws and treats them as 21 independently actionable practices. Cel-Tech, 20 Cal. 4th at 180. "With respect to the unlawful 22 prong, `[v]irtually any state, federal or local law can serve as the predicate for an action' under 23 section 17200." People ex rel. Lockyer v. Fremont Life Ins. Co., 104 Cal. App. 4th 508, 515 (2002) 24 (emphasis omitted). Violations of state and federal antitrust statutes and the CLRA constitute 25 violations under the unlawful prong of the UCL. Quelimane Co. v. Stewart Title Guar. Co., 19 Cal. 26 App. 4th 26 (1998) (violations of the Cartwright Act); B.W.I. Custom Kitchen v. Owens-Illinois, 191 27 Cal. App. 3d 1341, 1348 n.6 (1987) ("Violations of the Cartwright Act are also unlawful business 28 NOTICE OF MOTION & MOTION FOR CLASS CERT AND APPT OF CO-LEAD CLASS COUNSEL; MEMO OF POINTS & AUTHORITIES IN SUPPORT OF MOTION - C 07-6507 JW - 16 - 1 practices under the unfair competition statutes."); Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 2 1095-1096 (N.D. Cal. 2007) (violations of the CLRA). 3 Accordingly, the same common evidence that will be used to prove Apple violated state and 4 federal laws against monopolization and tying will be used to prove Apple violated the UCL. 5 6 7 8 9 10 11 12 13 (19) (2) The Consumer Legal Remedies Act The CLRA (Civ. Code §1770(a)(19)) provides: The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer are unlawful: * * * Inserting an unconscionable provision in the contract. Plaintiff will demonstrate common impact for her claim under the CLRA using the same 14 evidence that will prove her federal antitrust claims. It is based on the same alleged conduct that 15 gives rise to the antitrust claims, and involves the same issues. As discussed above, these issues are 16 susceptible to class-wide proof. 17 18 "Courts recognize a somewhat relaxed standard of proof once the antitrust violation and 19 resulting injury have been proven. This is the logical result of an inability to ascertain exactly what 20 `plaintiff's position would have been in the absence of defendant's antitrust