"The Apple iPod iTunes Anti-Trust Litigation"

Filing 638

NOTICE by Apple Inc. Apple's Request for Leave and Supplemental Brief Re Wal-Mart Stores Inc. v. Dukes (Mittelstaedt, Robert) (Filed on 6/22/2011)

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1 2 3 4 5 6 7 8 Robert A. Mittelstaedt #60359 ramittelstaedt@jonesday.com Craig E. Stewart #129530 cestewart@jonesday.com David C. Kiernan #215335 dkiernan@jonesday.com 555 California Street, 26th Floor San Francisco, CA 94104 Telephone: (415) 626-3939 Facsimile: (415) 875-5700 Attorneys for Defendant APPLE INC. 9 UNITED STATES DISTRICT COURT 10 NORTHERN DISTRICT OF CALIFORNIA 11 SAN FRANCISCO DIVISION 12 13 14 THE APPLE iPOD iTUNES ANTITRUST LITIGATION 15 __________________________________ 16 This Document Relates To: 17 ALL ACTIONS 18 19 Lead Case No. C 05-00037 JW (HRL) [CLASS ACTION] APPLE’S REQUEST FOR LEAVE AND SUPPLEMENTAL BRIEF RE WALMART STORES INC. V. DUKES Date: Time: Place: June 27, 2011 9:00 a.m. Courtroom 5, 17th Floor 20 21 22 23 24 25 26 27 28 Supp. Br. re Wal-Mart C 05-00037 JW (HRL) 1 Apple respectfully requests leave of Court to submit this supplemental brief addressing 2 the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (June 20, 2011) as it 3 relates to Plaintiffs’ pending motion for class certification. Because Wal-Mart is the latest 4 Supreme Court pronouncement on the standards for class certification, Apple believes the Court 5 will benefit from this short brief outlining its effect on the issues raised by Plaintiffs’ motion. 6 Wal-Mart buttresses Apple’s opposition to class certification in several critical respects: 7 First, the Supreme Court made clear that, contrary to Plaintiffs’ assertions here (Doc. 550, 8 p. 3), no presumption exists in favor of class certification. The Court reiterated that a “class 9 action is an exception to the usual rule that litigation is conducted by and on behalf of the 10 individual named parties only.” Op. at 8. Thus, a “party seeking class certification must affirma- 11 tively demonstrate his compliance with” Rule 23 with “convincing proof.” Id. at 10, 19. 12 “[A]ctual, not presumed, conformance with Rule 23(a) remains . . . indispensable.” Id. (internal 13 quotation marks omitted). 14 Second, district courts must inquire into the merits of the plaintiff’s claim when necessary 15 to determine whether the requirements of Rule 23 are met. The “rigorous analysis” that courts are 16 required to conduct under Rule 23 “frequently will entail some overlap with the merits of the 17 plaintiff’s underlying claim. That cannot be helped.” Id. Thus, where a securities fraud plaintiff 18 relies on the “fraud-on-the-market” presumption to avoid individual reliance issues, the plaintiff 19 must prove at the class certification stage that the shares were traded on an efficient market, even 20 though that is a merits issue that the plaintiff would have to prove at trial. Id. at 11 n.6. Similarly, 21 in this case, because Plaintiffs rely on purported econometric models to prove that class-wide 22 injury exists, they must prove at the class certification stage that those models are valid and will 23 work in the circumstances here, even though that is a matter they will also have to prove on the 24 merits at trial. 25 Third, a plaintiff cannot discharge its burden to justify class treatment by relying on expert 26 testimony that is inconclusive or does not bear on the relevant issues. Id. at 13-14. Thus, the 27 Supreme Court “disregard[ed]” the testimony of the plaintiffs’ sociology expert, who had 28 conducted a “social framework analysis” and opined that Wal-Mart has a corporate culture that -1- Supp. Br. re Wal-Mart C 05-00037 JW (HRL) 1 made it “vulnerable” to gender bias. Id. at 13-14. The Court found that this testimony was 2 insufficient because the expert admitted that he “could not determine with any specificity” the 3 degree to which bias played a role in Wal-Mart’s employment decisions. Id. The expert 4 conceded that “he could not calculate whether 0.5 percent or 95 percent of the employment 5 decisions at Wal-Mart might be determined by stereotyped thinking.” Id. at 13. The Supreme 6 Court concluded that testimony did “nothing to advance respondents’ case” because it failed to 7 answer the essential question on which class certification depended—i.e., whether discrimination 8 could be shown on a common basis. 9 Similarly, the Court rejected the plaintiffs’ reliance on statistical regression analyses 10 because the analyses addressed pay and promotion disparities only at the national and regional 11 levels, and thus did not show whether disparities existed at individual stores, let alone that they 12 were the product of unlawful discrimination. Id. at 16-17. These rulings effectively rejected 13 lower court holdings, relied on by plaintiffs here (e.g., Doc. 550, p. 4), that plaintiffs at class 14 certification have only a “limited burden,” that district courts are not permitted to resolve a “battle 15 of experts,” and that a plaintiffs’ expert’s proposed methods must be accepted unless they are “so 16 insubstantial as to amount to no method at all.” 17 Based on these rulings, the Supreme Court reversed the Ninth Circuit and held that 18 plaintiffs failed to discharge their burden of providing “convincing proof of a companywide 19 discriminatory pay and promotion policy” and thus failed to establish the “existence of any 20 common question” as required by Rule 23(a)(2). Op. at 19. The dissent criticized the majority 21 for conducting that inquiry under the (a)(2) commonality requirement rather than under the (b)(3) 22 predominance standard. But whether analyzed under (a)(2) or (b)(3), the Court made clear that 23 “convincing proof” rather than an expert’s inconclusive say-so is required. 24 The Supreme Court’s ruling applies to Plaintiffs’ expert testimony here. Neither 25 Plaintiffs nor their expert Roger Noll have offered any evidence, let alone “convincing proof,” 26 that the only alleged exclusionary act left in this case, iTunes 7.0, had any impact on iPod prices. 27 The only regression Dr. Noll has attempted to run was with respect to the alleged effect of iTunes 28 4.7, which the Court has since ruled was lawful. Dr. Noll has performed no analysis of the -2- Supp. Br. re Wal-Mart C 05-00037 JW (HRL) 1 alleged impact, if any, of iTunes 7.0 on iPod prices. And even as to the regression he previously 2 ran, Dr. Noll admitted that it is not a workable, valid damages model: “I do not regard this as a 3 damage model.” Doc. 595, Ex. 1 (Noll Dep. at 90). “I am not here to defend as the final damages 4 equation that which I have done because it’s obviously incomplete.” Id. at 110. He does not 5 know whether his model contains specification errors and admits that it may reflect a “spurious 6 correlation.” Id. at 87-89, 91-92. He thus cannot draw any “causal inferences from that 7 regression” (id. at 90), including any inference on the pivotal question for which Plaintiffs offer 8 his testimony—i.e., whether Apple’s software updates caused any change in the price of iPods. 9 As he summarized, “I cannot rule out anything based on the regression I have because I’m not 10 relying on it for anything.” Id. at 130-131. In short, Plaintiffs have presented nothing to show 11 whether or the degree to which iTunes 4.7 impacted iPod prices. And they have not even tried to 12 do so with respect to iTunes 7.0. 13 In Wal-Mart, the Court found that because the expert could not say whether a high or low 14 percent of employment decisions might be discriminatory, “we can safely disregard what he has 15 to say. It is worlds apart from ‘significant proof’ that Wal-mart ‘operated under a general policy 16 of discrimination.’” Id. at 14. Even more so here, Dr. Noll’s testimony that he is “not relying” on 17 his regression analysis “for anything” fails to carry Plaintiffs’ burden of showing that a workable 18 classwide method exists to determine the key elements of impact and damages. Indeed, as shown 19 in Apple’s June 6 brief (Doc. 633), Plaintiffs have failed to make any showing of when the 20 alleged impact or damages began or ended. 21 Given Plaintiffs’ failure of proof, their motion for class certification should be denied. 22 Alternatively, this matter should be set for an evidentiary hearing, as conducted in the Somers 23 case (Somers Docs. 61, 73), to determine whether Plaintiffs have demonstrated “in fact” by 24 “convincing proof” (Wal-Mart, Op. at 10, 19) that the requirements of Rule 23 are met. 25 26 27 28 -3- Supp. Br. re Wal-Mart C 05-00037 JW (HRL) 1 2 Dated: June 22, 2011 JONES DAY By:/s/ Robert A. Mittelstaedt Robert A. Mittelstaedt 3 4 Counsel for Defendant APPLE INC. 5 6 SFI-701161v1 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4- Supp. Br. re Wal-Mart C 05-00037 JW (HRL)