Herskowitz v. Apple, Inc

Filing 56

Order by Hon. Lucy H. Koh granting 47 Motion to Dismiss.(lhklc3, COURT STAFF) (Filed on 4/15/2013)

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

11
12
13
14
15
16
17
18
19
20
21
22
23
24

SAN JOSE DIVISION
ROBERT HERSKOWITZ, individually and on )
behalf of all others similarly situated,
)
)
Plaintiff,
)
v.
)
)
APPLE INC.,
)
)
Defendant.
)
)
)
PHOEBE JUEL, individually and on behalf of all)
others similarly situated,
)
)
Plaintiff,
)
v.
)
)
APPLE INC.,
)
)
Defendant.
)
)

Consolidated Case Nos.:
12-CV-02131-LHK
12-CV-03124-LHK
ORDER GRANTING MOTION TO
DISMISS

Plaintiffs Robert Herskowitz (“Herskowitz”) and Phoebe Juel (“Juel”) (collectively,

25

“Plaintiffs”) bring this putative class action lawsuit against Apple Inc. (“Apple”), alleging that

26

Apple routinely and unlawfully charges its “e-Store” customers more than once for the same

27

products and services in violation of the consumer agreements governing those transactions,

28

California’s Unfair Competition Law, California Business and Professions Code § 17200 et seq.,
1
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

California’s Consumer Legal Remedies Act, California Business and Professions Code § 17500 et

2

seq., and California common law.

3

Apple moves to dismiss Plaintiffs’ First Amended Consolidated Complaint (“FAC”). The

4

Court held a hearing on this motion on April 11, 2013. Having considered the submissions of the

5

parties, the parties’ oral arguments, and the relevant law, the Court hereby GRANTS Apple’s

6

Motion to Dismiss Plaintiffs’ First Amended Consolidated Complaint.

7

I.

BACKGROUND
A.

9

Apple’s “iTunes Store” is a software-based online digital-media store from which

10
United States District Court
For the Northern District of California

8

customers can purchase music and videos, among other things. FAC ¶ 20, ECF No. 46. Apple

11

also operates an “App Store,” a digital-application distribution platform that allows users to browse

12

and purchase applications (“apps”) for iPhones, iPads, and iPod Touch devices, FAC ¶ 21, as well

13

as a “Mac App Store,” which allows users to purchase and download applications for personal Mac

14

computers, FAC ¶ 22. In addition, Apple operates an “iBookstore,” which is part of “iBooks,”

15

Apple’s e-book application which allows customers to download and read books on the iPhone, the

16

iPad, and the iPod Touch. FAC ¶ 23.

17

Factual Allegations

Herskowitz and Juel, on behalf of themselves and others who are similarly situated, allege

18

that Apple bills its “e-Store” customers more than once for the apps, songs, videos, games, and

19

books (“Products”) that they purchase for use on their iPhones, iPads, iPod Touches, and/or Mac

20

personal computers. See FAC ¶2. Specifically, Plaintiffs allege that Apple: (1) double bills its

21

customers for a single product at the time of purchase; (2) refuses to allow customers to download

22

for free already purchased products despite the fact that the customers have not downloaded the

23

product more times than the contractually specified limit; and (3) prevents customers from

24

accessing, storing, transferring, or managing already purchased products, causing customers to lose

25

purchased products and requiring customers to re-purchase the products at an additional charge.

26

Id.

27

1.

Double Billing for a Single Product

28
2
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

On or about December 2, 2010, Herskowitz purchased twenty-two songs from the iTunes

2

Store. FAC ¶ 32. However, Apple charged Herskowitz twice for one of his selections, a “pop”

3

song entitled, “Whataya Want from Me.” Id. As a result, Apple billed Herskowitz a total of $2.58

4

for a song that cost $1.29 to download. Id. Herskowitz reported the double-billing to Apple. FAC

5

¶ 33. In response, Apple told Herskowitz that it would not refund the overcharge based on its

6

purported no-refund policy:
Your request for a refund for “Whataya Want from Me” was carefully considered;
however, according to the iTunes Store Terms of Sale, all purchases made on the
iTunes Store are ineligible for refund. This policy matches Apple’s refund policies
and provides protection for copyrighted material.

7
8
9

FAC ¶ 7. Herskowitz alleges that Apple has sent identical responses to “countless other

United States District Court
For the Northern District of California

10

customers” who have raised similar complaints, despite the fact that Apple’s standard “Terms and

11

Conditions,” which “govern[] the ‘use of’ the Apple Stores,” do not explicitly state such a policy.

12

FAC ¶ 7.

13
2.
14
15

Charging Customers Twice for Re-downloading Products
That They Cannot Access

On or about December 31, 2010, Juel purchased and downloaded a song from iTunes.

16

FAC ¶ 10. Although Juel attempted to access the song later, she could not do so. Id.

17

Consequently, Juel downloaded the same song again. Id. When she did, Apple charged her a

18

second time for purchasing the song, despite the fact that Apple’s records showed that she

19

purchased the song previously. Id.

20

Juel alleges that Apple has “adopted a policy and practice of refusing to allow customers to

21

access Products that they previously purchased from the Apple Stores and then charging those

22

customers a second time after the original download for re-downloading the same Product.” FAC

23

¶ 9. Juel contends that this policy is contrary to Apple’s “Terms and Conditions” (the

24

“Agreement”), which: (1) provides that personal and noncommercial customers are entitled to keep

25

and utilize the products they purchase from the Apple stores for as long as they wish; (2) allows

26

customers to use their products on five Apple-authorized devices at any time; and (3) permits

27

customers to store products from up to five different Accounts at a time on their compatible

28

devices. Id.
3
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

Plaintiffs seek to bring this putative class action on behalf of a nationwide class consisting

2

of “all individuals or entities who purchased Products from the App Store, the iTunes Store, the

3

iBookstore, and/or the Mac App Store and who were charged more than once and paid Defendant

4

more than once for the same product.” FAC ¶ 44. This class also includes two proposed sub-

5

classes. Herskowitz seeks to represent Subclass A, which includes: “[a]ll individuals or entities

6

who were charged at the time of purchase and paid Apple more than once for the same Product

7

. . . .” Id. (“Subclass A”). Juel seeks to represent Subclass B, which includes: “[a]ll individuals or

8

entities who purchased any Product . . . and were billed again for subsequently downloading the

9

same Product.” Id. (“Subclass B”). Plaintiffs seek damages and injunctive relief.

United States District Court
For the Northern District of California

10

B.

11

Herskowitz filed his initial complaint in federal court on April 27, 2012, ECF No. 1, which

12

he then amended on June 15, 2012, ECF No. 12. Juel filed her initial complaint in the Santa Clara

13

Superior Court, which Apple then removed to this Court on June 15, 2012. See ECF No. 1, Ex. B,

14

Case No. 12-CV-03124. On July 10, 2012, the Court related the Herskowitz and Juel cases. ECF

15

No. 15. Apple then filed a Motion to Consolidate the Related Actions, which the Court granted on

16

November 2, 2012. ECF No. 42.

17

Procedural History

Plaintiffs filed a First Amended Consolidated Class Action Complaint on November 21,

18

2012. ECF No. 46. On December 11, 2012, Apple filed a Motion to Dismiss the First Amended

19

Complaint for: (1) failure to state a claim upon which relief may be granted, pursuant to Rule

20

12(b)(6) of the Federal Rules of Civil Procedure; (2) failure to plead claims grounded in fraud with

21

sufficient particularity, as required by Rule 9(b) of the Federal Rules of Civil Procedure; and (3)

22

lack of subject matter jurisdiction as required by Rule 12(b)(1) of the Federal Rules of Civil

23

Procedure. See Def.’s Mot. to Dismiss (“Mot.”), ECF No. 47. Apple also filed a Request for

24

Judicial Notice. ECF No. 48. Plaintiffs filed an opposition to the Motion to Dismiss, see Pls.’

25

Opp. to Def.’s Mot. to Dismiss (“Opp’n”), ECF No. 52, to which Defendants filed a reply, see

26

Def.’s Reply Supp. Mot. to Dismiss (“Reply”), ECF No. 53.

27

II.

28

LEGAL STANDARDS
A.

Rule 12(b)(6)
4

Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss an

2

action for failure to allege “enough facts to state a claim to relief that is plausible on its face.” Bell

3

Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the

4

plaintiff pleads factual content that allows the court to draw the reasonable inference that the

5

defendant is liable for the misconduct alleged. The plausibility standard is not akin to a

6

‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted

7

unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citation omitted). For purposes

8

of ruling on a Rule 12(b)(6) motion, the court “accept[s] factual allegations in the complaint as true

9

and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St.

United States District Court
For the Northern District of California

10

Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

11

However, a court need not accept as true allegations contradicted by judicially noticeable

12

facts, Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and a “court may look beyond

13

the plaintiff’s complaint to matters of public record” without converting the Rule 12(b)(6) motion

14

into one for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor is a

15

court required to “‘assume the truth of legal conclusions merely because they are cast in the form

16

of factual allegations.’” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam)

17

(quoting W. Min. Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981)). Mere “conclusory

18

allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.”

19

Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); accord Iqbal, 556 U.S. at 678.

20

Furthermore, “a plaintiff may plead [him]self out of court” if he “plead[s] facts which establish that

21

he cannot prevail on his . . . claim.” Weisbuch v. Cnty. of L.A., 119 F.3d 778, 783 n.1 (9th Cir.

22

1997) (internal quotation marks and citation omitted).

23

B.

Rule 9(b)

24

Claims sounding in fraud or mistake are subject to the heightened pleading requirements of

25

Federal Rule of Civil Procedure 9(b), which require that a plaintiff alleging fraud “must state with

26

particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b); see Kearns v. Ford Motor

27

Co., 567 F.3d 1120, 1124 (9th Cir. 2009). To satisfy the heightened standard under Rule 9(b), the

28

allegations must be “specific enough to give defendants notice of the particular misconduct which
5
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

is alleged to constitute the fraud charged so that they can defend against the charge and not just

2

deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir.

3

1985). Thus, claims sounding in fraud must allege “an account of the ‘time, place, and specific

4

content of the false representations as well as the identities of the parties to the

5

misrepresentations.’” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam). The

6

plaintiff must set forth what is false or misleading about a statement, and why it is false.” In re

7

GlenFed, Inc. Securities Litig., 42 F.3d 1541, 1548 (9th Cir. 1994) (en banc), superseded by statute

8

on other grounds as stated in Marksman Partners, L.P. v. Chantal Pharmaceutical Corp., 927 F.

9

Supp. 1297, 1309 (C.D. Cal. 1996).

United States District Court
For the Northern District of California

10

C.

Rule 12(b)(1)

11

A defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant

12

to Federal Rule of Civil Procedure 12(b)(1). A Rule 12(b)(1) motion to dismiss tests whether a

13

complaint alleges grounds for federal subject matter jurisdiction. A motion to dismiss for lack of

14

subject matter jurisdiction will be granted if the complaint on its face fails to allege facts sufficient

15

to establish subject matter jurisdiction. See Savage v. Glendale Union High Sch., 343 F.3d 1036,

16

1039 n.2 (9th Cir. 2003). In considering a Rule 12(b)(1) motion, the Court “is not restricted to the

17

face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve

18

factual disputes concerning the existence of jurisdiction.” McCarthy v. United States, 850 F.2d

19

558, 560 (9th Cir. 1988).

20

If the plaintiff lacks standing under Article III of the U.S. Constitution, then the court lacks

21

subject matter jurisdiction, and the case must be dismissed. See Steel Co. v. Citizens for a Better

22

Env’t, 523 U.S. 83, 101-02 (1998). Once a party has moved to dismiss for lack of subject matter

23

jurisdiction under Rule 12(b)(1), the opposing party bears the burden of establishing the court’s

24

jurisdiction. See Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010).

25

D.

Leave to Amend

26

If the Court determines that the complaint should be dismissed, it must then decide whether

27

to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend

28

“shall be freely given when justice so requires,” bearing in mind “the underlying purpose of Rule
6
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

15 . . . [is] to facilitate decision on the merits, rather than on the pleadings or technicalities.” Lopez

2

v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (internal quotation marks and citation

3

omitted). Nonetheless, a court “may exercise its discretion to deny leave to amend due to ‘undue

4

delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by

5

amendments previously allowed, undue prejudice to the opposing party. . . , [and] futility of

6

amendment.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010)

7

(quoting Foman v. Davis, 371 U.S. 178, 182 (1962)) (alterations in original).

8

III.

DISCUSSION
Plaintiffs collectively bring claims for: (1) breach of contract; (2) breach of the implied

10
United States District Court
For the Northern District of California

9

covenant of good faith and fair dealing; and (3) unjust enrichment. Herskowitz further asserts

11

claims for violation of California’s Consumer Legal Remedies Act (“CLRA”) and California’s

12

Unfair Competition Law (“UCL”). Juel alone asserts a claim for fraud. Apple seeks to dismiss all

13

of these claims. For the reasons stated herein, the Court GRANTS Apple’s Motion to Dismiss

14

without prejudice.

15

A.

16

“In order to state a claim for breach of contract, a plaintiff must plead the existence of a

Breach of Contract

17

contract, his performance of the contract or excuse for nonperformance, the defendant’s breach and

18

resulting damages.” Donohue v. Apple, Inc., 871 F. Supp. 2d 916, 930 (N.D. Cal. 2012) (citing

19

Otworth v. Southern Pac. Transp. Co., 166 Cal. App. 3d 452, 458 (1985)). In addition, “[t]he

20

complaint must identify the specific provision of the contract allegedly breached by the defendant.”

21

Id. (citing Progressive West Ins. Co. v. Superior Court, 135 Cal. App. 4th 263, 281 (2005)).
Here, Plaintiffs allege that the use of Apple’s “e-Stores” is governed by Apple’s standard

22
23

“Terms and Conditions,” to which Plaintiffs refer as the “Agreement.” FAC ¶ 5. Customers

24

cannot purchase products through the Apple Stores without agreeing to these Terms and

25

Conditions. See FAC ¶ 25. Accordingly, every customer, including Plaintiffs Herskowitz and

26

Juel, entered into the Agreement with Apple prior to using the Apple Stores to purchase products.

27

Id.

28
7
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

Under the Agreement, Apple may charge customers only once “for any products purchased

2

and for any additional amounts (including any taxes and late fees, as applicable) that may be

3

accrued by or in connection with your Account.” FAC ¶ 26. Nevertheless, on behalf of Subclass

4

A, Herskowitz alleges that Apple billed him twice “in connection with his purchase” of a song on

5

iTunes. FAC ¶ 62. On behalf of Subclass B, Juel alleges that Apple billed her twice after

6

downloading a song and then downloading it again. FAC ¶¶ 71-72.

7

Apple claims that, although each Plaintiff sets forth a separate breach of contract claim on

8

behalf of the two proposed subclasses, “both fail for the same reason: neither [P]laintiff can point

9

to any term of the Agreement that was actually breached.” Mot. at 7. In addition, Apple asserts

United States District Court
For the Northern District of California

10

that Plaintiffs’ claims are contrary to an express provision of the contract. Mot. at 8. Accordingly,

11

Apple argues that Plaintiffs’ Breach of Contract claims fail as a matter of law.

12

1.

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Plaintiff Juel: Breach of Contract for Charging Customers Twice for
Re-downloading Products They Cannot Access

Juel alleges that Apple “breached the Agreement it had with Plaintiff Juel by not allowing
her to access the same Product without being charged a second time.” FAC ¶71. Juel contends
that this amounts to a breach of contract because: (1) Juel “performed her obligations under
Apple’s adhesion contract—to pay for her purchase;” (2) “the meaning of the term ‘download’ is
undefined in the Agreement, and Apple’s proposed construction conflicts with ordinary usage;”
(3) “the contract does not state that a customer will be billed a second time if she downloads the
same song more than once;” (4) “the Agreement expressly permits Juel to download a song to as
many as five devices, yet Apple charged her twice for downloading the same song less than five
times;” and (5) “the ambiguities in the adhesion contract drafted by Apple should be interpreted
against it.” Opp’n at 8-9. Despite Juel’s arguments, the Court does not find that the factual
allegations contained in the FAC support a reasonable inference that Apple has committed a breach
of contract.
First, the Agreement in effect at the time of Juel’s purchase contained an express provision
that purchasers were not entitled to re-download a song free of charge. Specifically, the
Agreement provided that:
8
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

2

Products may be downloaded only once and cannot be replaced if lost for any
reason. Once a Product is downloaded, it is your responsibility not to lose, destroy
or damage it, and Apple shall not be liable to you if you do so.

3

See Def.’s Request for Judicial Notice, ECF No. 48, Ex. A (Decl. Penelope Preovolos (“Preovolos

4

Decl.”)), at AGMT00006 (emphasis added).1 Here, Juel alleges that she “purchased and

5

downloaded a song from the Apple Stores pursuant to the Agreement,” and then “downloaded it

6

again,” after trying to access the song, but being unable to do so. FAC ¶ 10. By virtue of the

7

express language of the Agreement, Juel was only entitled to download the song once. Therefore,

8

the fact that she was charged twice for downloading a song twice does not amount to a breach of

9

contract.

1

In addition, the Agreement contained an express and exclusive remedy to contact Apple for

United States District Court
For the Northern District of California

10
11

replacement or refund of the price paid for a song if “technical problems prevent or unreasonably

12

delay delivery” of a song. Mot. at 9 (citing Preovolos Decl. at AGMT00002). In this case, Juel

13

does not allege that she contacted Apple or in any way sought to take advantage of this contractual

14

right.

15

Moreover, contrary to Juel’s assertion, the Agreement in effect at the time of Juel’s

16

purchase did not “expressly permit[] Juel to download a song to as many as five devices.” Opp’n

17

at 8-9. Rather, the Agreement “authorize[d] [customers] to use Products on five Apple-authorized

18
19
20
21
22
23
24
25
26
27
28

1

In support of Apple’s Motion to Dismiss, Apple requests that the Court take judicial notice of
Apple’s iTunes Store, App Store, and iBookstore Terms of Sale and iTunes Store Terms and
Conditions, as well as the App Store and iBookstore Terms and Conditions, which were operative
when Plaintiffs Herskowitz and Juel allegedly purchased the iTunes songs at issue in this action.
See Def.’s Request for Judicial Notice, ECF No. 48. Pursuant to Rule 201 of the Federal Rules of
Evidence, a court may take judicial notice of adjudicative facts “not subject to reasonable dispute
in that [they are] . . . capable of accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). The materials attached as
Exhibit A in support of the Request for Judicial Notice are cited, quoted, and/or referenced in
Plaintiffs’ FAC. See Brach v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other
grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002) (holding that
“documents whose contents are alleged in a complaint and whose authenticity no party questions,
but which are not physically attached to the pleading, may be considered in ruling on a Rule
12(b)(6) motion to dismiss”). In addition, Plaintiffs do not oppose this Court’s taking judicial
notice of these materials and, in fact, refer to these materials in their Opposition. See Opp’n at 4
n.3 (“Plaintiffs take no position on Apple’s request that the Court take judicial notice” of these
materials); see, e.g., Opp’n at 7 & 9 (referring to Exhibit A). Accordingly, the Court GRANTS
Apple’s Request for Judicial Notice.
9
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

devices at any time,” and to “store Products from up to five different Accounts at a time on

2

compatible devices.” Preovolos Decl. at AGMT00005-06 (emphasis added). Permitting customers

3

to “use” and “store” products on five devices is different than permitting customers to “download”

4

the same song onto five different devices for the price of one song purchase. See Reply at 3

5

(noting that “Juel’s argument confuses the download of a song from iTunes with a customer’s

6

ability to sync and play a song on multiple devices.”).

7

Despite the plain language of the Agreement, Juel seeks to insert ambiguity into the

8

contract by claiming that Apple’s use of the term download constitutes “some specialized meaning

9

known only to Apple,” whereas Juel’s definition of “download” means “plac[ing] a song on a

United States District Court
For the Northern District of California

10

separate device.” Opp’n at 9. In support of her position, Juel cites to Merriam-Webster’s

11

Collegiate Dictionary, 376 (11th ed. 2006), for the proposition that the ordinary meaning of the

12

term “download” is to “transfer (as data or files) from a usually large computer to the memory of

13

another device (as a smaller computer).” See Opp’n at 9. However, as noted by Apple,

14

transferring a song from iTunes (a larger system) to the memory of a personal computer (a smaller

15

device) is perfectly consistent with this definition. See Reply at 3 n.2.

16

“Under California contract law, ‘if the language [of a contract] is clear and explicit, and

17

does not involve an absurdity,’ the language must govern the contracts interpretation.” In re

18

iPhone Application Litig., 844 F. Supp. 2d 1040, 1076 (N.D. Cal. 2012) (citing Cal. Civ. Code

19

§ 1638). “However, ‘[i]f a contract is capable of two different reasonable interpretations, the

20

contract is ambiguous.’” Id. (quoting Oceanside 84, Ltd. v. Fid. Fed. Bank, 56 Cal. App. 4th 1441,

21

1448 (1997)). Moreover, under California contract law, “‘if reasonably practicable,’ a contract

22

must be interpreted as a whole, ‘so as to give effect to every part, . . . each clause helping to

23

interpret the other.’” Id. (citing Cal. Civ. Code. § 1641). “In cases of uncertainty not removed by

24

. . . [California’s interpretation of contracts], the language of a contract should be interpreted most

25

strongly against the party who caused the uncertainty to exist.” Cal. Civ. Code § 1654.

26

The Court has doubts about whether Apple’s use of the term “download” is actually

27

contrary to ordinary usage. Nevertheless, any ambiguity regarding the definition of “download”

28

and the “multiple device” provision appears to be eliminated by the provision prohibiting multiple
10
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

downloads. If Juel’s interpretation were adopted, this latter provision—which states that

2

“[p]roducts may be downloaded only once”—would seemingly be rendered meaningless.

3

Therefore, in light of the express provisions within the Agreement, the Court does not find that Juel

4

has pled sufficient facts to support a reasonable inference that Apple is liable for a breach of

5

contract on the basis alleged. See Iqbal, 556 U.S. at 678 (holding that “[t]he plausibility standard is

6

not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant

7

has acted unlawfully.”).2 Accordingly, the Court GRANTS Apple’s Motion to Dismiss Juel’s

8

breach of contract claim without prejudice.

9

2.

United States District Court
For the Northern District of California

10

Subclass A: Breach of Contract for Double Billing Customers

Herskowitz alleges in the FAC that he was charged twice for purchasing a single song. See

11

FAC ¶ 7 (“Plaintiff Herskowitz was charged twice for purchasing a single song.”); FAC ¶ 32

12

(“Apple billed Mr. Herskowitz a total of $2.58 for a song that cost $1.29 to download.”). Apple

13

contends that Herskowitz has failed to allege a breach of contract claim because he “unilaterally

14

elected to download the song a second time, only contacting Apple to request a refund after he did

15

so.” Mot. at 9. In opposition, Herskowitz disputes that he downloaded a song a second time and,

16

instead, asserts that his actual claim is that “Apple charged him twice for a single download.”3

17

Opp’n at 8.

18

For the purpose of this Rule 12(b)(6) motion, both parties rely on assertions and references

19

to evidence contained outside of the FAC. But see Hal Roach Studios, Inc. v. Richard Feiner &

20

Co., 896 F.2d 1542, 1555 n. 19 (9th Cir. 1990) (“Generally, a district court may not consider any

21

material beyond the pleadings in ruling on a Rule 12(b)(6) motion.”); Broam v. Bogan, 320 F.3d

22

1023, 1026 n.2 (9th Cir. 2003) (“In determining the propriety of a Rule 12(b)(6) dismissal, a court

23

may not look beyond the complaint to a plaintiff’s moving papers, such as a memorandum in

24
25
26
27
28

2

During the hearing on Apple’s motion to dismiss, Juel raised other arguments—based on recently
produced discovery—regarding why Apple breached its contract by virtue of charging Juel twice
after downloading the song twice. Those factual allegations are not contained within the face of
the FAC. Accordingly, the Court does not consider these allegations for the purpose of this
Motion.
3
During the hearing on Apple’s Motion to Dismiss, the Court sought to clarify the bases of
Herskowitz’s claims. Herskowitz’s counsel’s response was evasive.
11
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

opposition to a motion to dismiss.”) (internal quotation marks and citation omitted). Yet, despite

2

their allegations and arguments relating to facts beyond those contained in the FAC, neither side

3

appears to be requesting that this Rule 12(b)(6) motion be treated as a motion for summary

4

judgment. But see Erlich v. Glasner, 374 F.2d 681, 683 (9th Cir. 1967) (holding that evidence

5

submitted by a moving party beyond the pleadings, which is not excluded by a district court,

6

mandates that a Rule 12(b) motion be treated as a motion for summary judgment pursuant to Rule

7

56 of the Federal Rules of Civil Procedure). Therefore, the Court declines to consider Plaintiffs’

8

and Apple’s supplementary factual arguments and allegations in ruling on this motion.
Nevertheless, the Court finds Herskowitz’s factual allegations regarding the basis for his

10
United States District Court
For the Northern District of California

9

entitlement to relief to be unclear from the face of the FAC. Rule 8(a)(2) of the Federal Rules of

11

Civil Procedure requires a plaintiff to set forth “a short and plain statement of the claim showing

12

that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “While a complaint attacked by a

13

Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation

14

to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions,

15

and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at

16

555 (internal citations omitted). Moreover, “[w]here a complaint pleads facts that are merely

17

consistent with a defendant’s liability, it stops short of the line between possibility and plausibility

18

of entitlement to relief.” Iqbal, 556 U.S. at 678.

19

Here, it is unclear from the face of the complaint whether Herskowitz is alleging a breach

20

of contract claim based on: (1) the fact that Herskowitz purchased and downloaded one song for

21

which Apple charged him twice, which may constitute a breach of contract claim;4 or (2) whether

22

Herskowitz intentionally or unintentionally purchased and downloaded a single song twice, and

23

was then charged by Apple twice, which—as discussed in regard to Juel—may not constitute a

24

breach of contract claim. Consequently, the Court does not find that Herskowitz has sufficiently

25

alleged and shown facts that provide the grounds for his entitlement to relief. But see Twombly,

26
27
28

4

During the hearing on Apple’s Motion to Dismiss, Apple stated that it would not dispute that
Herskowitz had sufficiently alleged a claim for a breach of contract and/or a breach of the implied
covenant of good faith and fair dealing if, indeed, Herskowitz’s claim is that he downloaded one
song once, for which he was charged twice.
12
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

550 U.S. at 555; Iqbal, 556 U.S. at 679 (“Determining whether a complaint states a plausible claim

2

for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial

3

experience and common sense. But where the well-pleaded facts do not permit the court to infer

4

more than the mere possibility of misconduct, the complaint has alleged—but it has not

5

‘show[n]’—‘that the pleader is entitled to relief.’”) (citing Rule 8(a)(2)). Thus, Herskowitz has

6

failed to provide “more than a sheer possibility that [Apple] has acted unlawfully.” Iqbal, 556 U.S.

7

at 678. Accordingly, the Court GRANTS Apple’s Motion to Dismiss this claim with leave to

8

amend.

9

United States District Court
For the Northern District of California

10

B.

Breach of the Implied Covenant of Good Faith and Fair Dealing

Under California law, “[e]very contract imposes on each party a duty of good faith and fair

11

dealing in each performance and in its enforcement.” Carson v. Mercury Ins. Co., 210 Cal. App.

12

4th 409, 429 (2012) (internal quotation marks and citations omitted). “The covenant ‘is based on

13

general contract law and the long-standing rule that neither party will do anything which will injure

14

the right of the other to receive the benefits of the agreement.’” Rosenfeld v. JP Morgan Chase

15

Bank, N.A., 732 F. Supp. 2d 952, 968 (N.D. Cal. 2010) (quoting Waller v. Truck Ins. Exchange,

16

Inc., 11 Cal. 4th 1, 36 (1995)).

17

In order to establish a breach of the covenant of good faith and fair dealing, a plaintiff must

18

show: “(1) the parties entered into a contract; (2) the plaintiff fulfilled his obligations under the

19

contract; (3) any conditions precedent to the defendant’s performance occurred; (4) the defendant

20

unfairly interfered with the plaintiff’s rights to receive the benefits of the contract; and (5) the

21

plaintiff was harmed by the defendant’s conduct.” Rosenfeld, 732 F. Supp. 2d at 968 (citing

22

Judicial Council of California Civil Jury Instruction 325). Here, neither Plaintiff has sufficiently

23

alleged a claim for the breach of the implied covenant of good faith and fair dealing.

24

Juel alleges that Apple breached the implied covenant of good faith and fair dealing by “not

25

allowing her to access the same Product she had purchased without being charged a second time.”

26

FAC ¶ 82. However, “[t]he implied covenant of good faith and fair dealing is limited to assuring

27

compliance with the express terms of the contract, and cannot be extended to create obligations not

28

contemplated by the contract.” Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089,
13
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

1093-1094 (2004) (emphasis added); see also Wolf v. Walt Disney Pictures and Television, 162

2

Cal. App. 4th 1107, 1120 (2008) (amended) (“The general rule [regarding the covenant of good

3

faith] is . . . subject to the exception that the parties may, by express provisions of the contract,

4

grant the right to engage in the very acts and conduct which would otherwise have been forbidden

5

by an implied covenant of good faith and fair dealing”) (internal quotation marks and citation

6

omitted). As discussed previously, the express terms of the Agreement state that a song can be

7

downloaded only once and provide an express and exclusive remedy for any issues with the initial

8

download. See Preovolos Decl. at AGMT00002, AGMT00006. In light of the express language

9

contained within the Agreement, the Court does not find that Juel has sufficiently stated a plausible

United States District Court
For the Northern District of California

10
11

claim for a breach of the implied covenant of good faith and fair dealing.
Herskowitz alleges that Apple breached the implied covenant by “double-billing him for

12

Products purchased under the agreement.” FAC ¶ 77. However, given the indeterminate nature of

13

Herskowitz’s breach of contract claim, the Court does not find that Herskowitz has sufficiently

14

alleged and shown a plausible claim for the implied covenant of good faith and fair dealing. See

15

Iqbal, 556 U.S. at 679.

16
17

Thus, the Court GRANTS Apple’s Motion to Dismiss without prejudice both of Plaintiffs’
claims for breach of the implied covenant of good faith and fair dealing.

18

C.

19

Herskowitz, on behalf of the members of Subclass A, alleges that Apple violated the CLRA

20

by “inserting an unconscionable provision in a contract by implementing an unlawful policy and/or

21

practice of refusing to refund Apple’s customers who have been double-billed for purchases of

22

Product and services through the Apple Stores.” FAC ¶ 96 (citing Cal. Civ. Code §1770(a)(19)).

23

The CLRA prohibits certain “unfair methods of competition and unfair or deceptive acts or

24

practices undertaken by any person in a transaction intended to result or which results in the sale or

25

lease of goods or services to any consumer.” Cal. Civ.Code § 1770(a).

26

California Legal Remedies Act

Apple contends that Herskowtiz’s claim fails because he cannot allege facts establishing

27

either “procedural” or “substantive” unconscionability. Mot. at 12. In California,

28

“unconscionability has both a ‘procedural’ and a ‘substantive’ element, the former focusing on
14
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-

2

sided’ results.” Armendariz v. Found. Health Psychare Servs., Inc., 24 Cal. 4th 83, 114 (2000),

3

abrogated in part on other grounds in AT&T Mobility LLC v. Concepcion, 563 U.S. ---, 131 S. Ct.

4

1740, 1746 (2011) (internal quotation marks and citations omitted). “The prevailing view is that

5

[procedural and substantive unconscionability] must both be present in order for a court to exercise

6

its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” Id.

7

(citing Stirlen v. Supercuts, Inc., 51 Cal. App. 4th 1519, 1533 (1997)). “But they need not be

8

present in the same degree. Essentially a sliding scale is invoked which disregards the regularity of

9

the procedural process of the contract formation, that creates the terms, in proportion to the greater

10
United States District Court
For the Northern District of California

1

harshness or unreasonableness of the substantive terms themselves.” Id. (internal quotation marks

11

and citation omitted).

12

Herskowitz contends that he has pleaded oppression and surprise based on Apple’s

13

“unconscionable decision not to provide a refund after double-billing him for purchasing a single

14

download.” Opp’n at 16. According to Herskowitz, Apple billed his “credit card twice before

15

sending him a receipt alerting him that he had been double-billed for a product that Mr. Herskowitz

16

did not—and did not want to—purchase.” Id. In addition, Herskowitz alleges that he has satisfied

17

the substantive unconscionability prong because Apple’s refusal to refund Herskowitz after

18

charging him double the advertised price is so overly harsh and one-sided as to be considered

19

unconscionable under the CLRA. Opp’n at 17. Herskowitz notes that “Courts have found

20

unconscionabiltiy in situations where a seller charged a price for commodities several times greater

21

than their actual value.” Id. (citing Carboni v. Arrospide, 2 Cal. App. 4th 76, 84 (1991) (collecting

22

cases).

23

If Herskowitz’s claim is that he purchased and twice downloaded a single song, for which

24

he was then charged twice, the Court does not find that Herskowitz has satisfied the “surprise” or

25

“oppression” elements of the procedural unconscionability prong. After all, a clear contractual

26

provision alerting customers that they may not download a song twice would appear to eliminate

27

any element of surprise or oppression. See Preovolos Decl. at AGMT00006. Even if Herskowitz’s

28

claim is that he was charged twice after purchasing and downloading a song only once, the Court
15
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

has concerns about whether Apple’s Agreement is so “overly harsh” or “one-sided” as to create

2

results that “shock the conscience.” Belton v. Comcast Cable Holdings, LLC, 151 Cal. App. 4th

3

1224, 1245 (2007) (“The substantive element of unconscionability focuses on the actual terms of

4

the agreement and evaluates whether they create overly harsh or one-sided results as to shock the

5

conscience.”) (internal quotation marks and citation omitted). Ultimately, due to limited

6

allegations contained in the FAC, the Court does not find that Herskowitz has sufficiently alleged

7

facts that provide “more than a sheer possibility that [Apple] has acted unlawfully” for the reasons

8

alleged. See Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 555. The Court thus GRANTS Apple’s

9

Motion to Dismiss this claim without prejudice.5

United States District Court
For the Northern District of California

10

D.

Unfair Competition Law

11

Plaintiff Herskowitz, on behalf of himself and Subclass A, also brings a claim for unlawful

12

and/or unfair business acts and practices under California’s UCL. FAC ¶ 85. The UCL creates a

13

cause of action for business practices that are: (1) unlawful, (2) unfair, or (3) fraudulent. Cal. Bus.

14

& Profs. Code § 17200. Its coverage has been described as “sweeping,” and its standard for

15

wrongful business conduct is “intentionally broad.” In re First Alliance Mortg. Co., 471 F.3d 977,

16

995 (9th Cir. 2006). Each “prong” of the UCL provides a separate and distinct theory of liability,

17

Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007). Here, Herskowitz

18

asserts claims under the “unlawful” and “unfair” prongs.

19

The unlawful prong of the UCL prohibits “anything that can properly be called a business

20

practice and that at the same time is forbidden by law.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular

21

Tel. Co., 20 Cal. 4th 163, 180 (1999) (internal quotation marks and citations omitted). By

22

proscribing “any unlawful” business practice, the UCL permits injured consumers to “borrow”

23

violations of other laws and treat them as unfair competition that is independently actionable. Id.

24

Herskowitz seeks to bring a claim under the unlawful prong of the UCL by alleging that “Apple’s

25

purported ‘no-refund policy’ under the Agreement precluding refunds to customers who have been

26
27
28

5

Given the deficiencies in the FAC, the Court declines to reach the question of whether iTunes
songs constitute “goods” or ‘services” for the purpose of the CLRA. See Cal. Civ. Code § 1761
(defining “goods” and “services”).
16
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

double-billed is unconscionable within the meaning of the UCL.” FAC ¶ 90. For the reasons

2

already discussed in regard to Herskowitz’s CLRA claim based on unsconscionability—as well as

3

his breach of contract and breach of implied covenant claims—the Court finds that Herskowitz has

4

not plausibly alleged facts sufficient to provide a reasonable basis for inferring that Apple’s

5

agreement and enforcement thereof is unconscionable. See Iqbal, 556 U.S. at 679. Thus, no

6

violation of law serves as the basis for the unlawful prong of Herskowitz’s UCL claim.

7

The UCL also creates a cause of action for a business practice that is “unfair” even if not

8

specifically proscribed by some other law. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.

9

4th 1134, 1143 (2003). “The UCL does not define the term ‘unfair’ . . . [and] the proper definition

United States District Court
For the Northern District of California

10

of ‘unfair’ conduct against consumers ‘is currently in flux’ among California courts.” Davis v.

11

HSBC Bank Nevada, N.A., 691 F.3d 1152, 1170 (9th Cir. 2012) (citing Lozano, 504 F.3d at 735).

12

Nevertheless, there are at least two possible tests: (1) the “tethering test,” which requires “that the

13

public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong

14

of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions,” Drum v.

15

San Fernando Valley Bar Ass’n, 182 Cal. App. 4th 247, 257 (2010); Bardin v. Daimlerchrysler

16

Corp., 136 Cal. App. 4th 1255, 1260-61 (2006); and (2) the “balancing test,” which examines

17

whether the challenged business practice is “immoral, unethical, oppressive, unscrupulous or

18

substantially injurious to consumers and requires the court to weigh the utility of the defendant’s

19

conduct against the gravity of the harm to the alleged victim,” Drum , 182 Cal. App. 4th at 257

20

(citing Bardin, 136 Cal. App. 4th at 1260 (2006)); cf. Williamson v. Reinalt-Thomas Corp., No. 11-

21

03548, 2012 WL 1438812,*11 (N.D. Cal. Apr. 25, 2012) (recognizing that the “balancing test” is

22

sometimes construed as two separate tests, as some California appellate courts have applied the

23

balancing test as requiring only that a court “weigh the utility of the defendant’s conduct against

24

the gravity of the harm to the alleged victim,” see S. Bay Chevrolet v. Gen. Motors Acceptance

25

Corp., 72 Cal. App. 4th 861, 886 (1999), whereas other appellate state courts have applied a

26

slightly different test which mandates that plaintiffs show that a practice is “immoral, unethical,

27
28
17
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

oppressive, unscrupulous, or substantially injurious to consumers, see Bardin, 136 Cal. App. 4th at

2

1260).6
Herskowitz argues that his allegations satisfy the “tethering test” because “Apple has

3
4

interpreted and applied the Agreement’s ‘final sale’ provision in an unconscionable manner and

5

California law has declared its disapproval of unconscionable contract terms through specific

6

statutory provisions such as California Civil Code Sections 1670.5 and 1770(a)(19).” Opp’n at 19.

7

Because the Court does not find that Herskowitz has sufficiently alleged violations based on

8

unconscionability, the Court similarly finds that Herskowitz has not alleged a violation that is

9

tethered to any statutory provision.
Nevertheless, Herskowitz also contends that his allegations satisfy the “balancing test”

United States District Court
For the Northern District of California

10
11

because “he claims that he attempted to purchase a single download, yet Apple billed him for two

12

downloads, citing its ‘final sale’ policy as its sole grounds for refusing to refund him the

13

overcharged amount.” Opp’n at 19. According to Herskowitz, “[w]hile Apple may find it

14

expedient—and profitable—to refuse to rectify overcharges, that cannot be a valid ‘countervailing

15

benefit’ under the UCL.” Id. “The harm to customers, on the other hand, is considerable because if

16

Apple prevails, e-Stores customers would bear the risk that Apple might unilaterally bill them

17

multiple times when they attempt to purchase a single song.” Id. Apple argues that “it is difficult

18

to see how [Apple’s] conduct negatively impacted’ Herskowitz, when the Agreement made it

19

completely clear that Herskowitz could only download a song once, and Herskowitz agreed to that

20

term.” Mot. at 16 (citing Williamson v. Reinalt-Thomas Corp., No. 11-03548, 2012 WL 1438812

21

(N.D. Cal. Apr. 25, 2012).

22
23
6

24
25
26
27
28

As this Court noted in Williamson, still other courts “have adopted the three-pronged test
contained in the Federal Trade Commission Act, 15 U.S.C. § 45(a), holding that a business practice
is unfair under the UCL if (1) the consumer injury is substantial; (2) the injury is not outweighed
by any countervailing benefits to consumers or competition; and (3) the injury could not reasonably
have been avoided by consumers themselves.” Williamson, 2012 WL 1438812, *11 (citing
Camacho v. Auto. Club of S. Cal., 142 Cal. App. 4th 1394, 1403-05 (2006)). “However, the Ninth
Circuit has rejected this last test as inapplicable to claims of anti-consumer, as opposed to anticompetitive, conduct, and ‘decline[s] to apply [it] in the absence of a clear holding from the
California Supreme Court.’” Id. (citing Lozano, 504 F.3d at 736).
18
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

The Court finds that, if Herskowitz’s allegation is that Apple charges individuals twice for a

1
2

single purchase and single download, his contention may suffice to state a claim for unfairness

3

under the UCL. However, if Herskowitz’s allegation is that Apple is required to issue refunds after

4

customers download the same song multiple times, despite the clear provision warning customers

5

to download a song only once and the provision providing for refunds under limited circumstances,

6

the plausibility of such a claim is much weaker. Given the ambiguity in Herskowitz’s pleadings,

7

the Court GRANTS Apple’s Motion to Dismiss this claim, though affords Herskowitz leave to

8

amend.

9

United States District Court
For the Northern District of California

10

E.

Fraud

Apple also moves to dismiss the fraud claim, brought only by Juel, for failure to satisfy

11

Rule 9(b)’s heightened pleading requirements. Mot. at 17. The elements of a fraud claim are: (1)

12

misrepresentation; (2) knowledge of the falsity (or “scienter”); (3) intent to defraud, i.e., to induce

13

reliance; (4) justifiable reliance; and (5) resulting damage. See Lazar v. Superior Court, 12 Cal.

14

4th 631, 638 (1996). Apple argues that Juel’s fraud claim fails to meet Rule 9(b) because “she

15

alleges no facts that show the ‘who, what, when, where, and how’ of the alleged fraud, any

16

knowledge of the falsity or intent to defaud [sic], or any justifiable reliance.” Mot. at 17.

17

“Averments of fraud must be accompanied by ‘the who, what, when, where, and how’ of

18

the misconduct charged,” Kearns, 567 F.3d at 1124, as well as the circumstances indicating

19

fraudulent conduct, Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). Juel

20

contends that the FAC satisfies this requirement because of the following: (1) the “who” is Juel and

21

Apple; (2) the “what” is “Apple’s policy of charging its customers more than once for a single

22

product,” see, e.g., FAC ¶ 10 (“even though Apple’s records showed that she had already

23

purchased the song, Apple charged her a second time for the same Product”); (3) the “when” is

24

December 31, 2010—the date of Juel’s initial transaction—and over a period of years to other

25

customers, see FAC ¶¶ 10, 39; (4) the “where” is purchases made online through iTunes, FAC ¶

26

68; and (5) the “how” is Apple’s representations “over a period of years that its customers could

27

download its products on multiple devices,” Opp’n at 22 (citing FAC ¶ 39). The Court finds that

28

Juel has failed to allege the “what,” “when,” “where,” and “how” elements of a claim for fraud,
19
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

particularly as they relate to Apple’s alleged misrepresentations, scienter, intent to defraud, or

2

Juel’s justifiable reliance.

3

First, despite Juel’s references to Apple’s “misleading advertising campaign,” see FAC

4

¶ 39, Juel does not point to any representation that Apple allowed customers to “redownload” a

5

song if they “could not locate” it for any other reason. In fact, as discussed previously, the

6

Agreement states expressly that iTunes songs “may be downloaded only once and cannot be

7

replaced if lost for any reason.” Preovolos Decl. at AGMT00006. Moreover, the fact that Apple

8

permits customers to burn songs onto CDs and play songs on up to five computers does not amount

9

to a misrepresentation about customers being able to download a song multiple times on the same

United States District Court
For the Northern District of California

10

computer without being charged for each download. At the very least, to satisfy Rule 9(b)’s

11

heightened pleading requirement, Juel must allege with more particularity why these statements are

12

false. See In re GlenFed, Inc., 42 F.3d at 1548 (9th Cir. 1994). In addition, Juel does not

13

specifically allege “when” and “where” she saw and relied upon the alleged misrepresentations.

14

See Kearns, 567 F.3d at 1126 (failing to specify when alleged misrepresentation was made, or

15

when the plaintiffs was exposed to it, did not give the defendant an opportunity to respond to the

16

alleged misconduct).

17

Second, Juel does not allege any facts supporting a reasonable inference that Apple had

18

knowledge of an alleged misrepresentation or an intent to defraud, as required by Rule 9(b). See

19

Lazar, 12 Cal. 4th at 638. Juel alleges that “Apple intended to mislead Juel and the members of

20

Subclass B” when it made representations “about possession and ability to reasonably access,

21

transfer, store and utilize Products purchased from the Apple Stores” because “the representations

22

were false.” See FAC ¶¶ 112-113, 118, 119. However, Juel’s claims constitute little more than

23

“conclusory allegations” and “unwarranted inferences.” Adams, 355 F.3d at 1183. Without more,

24

there is no basis for inferring that Apple made any false statements knowingly and with the intent

25

to defraud its customers. Similarly, Juel’s claim regarding justifiable reliance does not rise above

26

the level of a conclusory allegation. Specifically, Juel alleges that she and members of Subclass B

27

“did reasonably rely on those misrepresentations in purchasing Apple Products.” FAC ¶ 115. This

28
20
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

is not sufficient, in and of itself, to satisfy the heightened requirements of Rule 9(b). See Iqbal, 556

2

U.S. at 679.

3

Accordingly, the Court GRANTS Apple’s Motion to Dismiss Juel’s fraud claim without

4

prejudice.

5

F.

6

Both Herskowitz and Juel bring a claim for restitution based on “unjust enrichment.”

Unjust Enrichment

7

Apple contends that this claim must be dismissed because California does not recognize “unjust

8

enrichment” as a separate cause of action. Mot. at 20. The Court agrees.
Despite some inconsistency in the law, several recent decisions by the California Court of

10
United States District Court
For the Northern District of California

9

Appeals have held that “[u]njust enrichment is not a cause of action, just a restitution claim.” Hill

11

v. Roll Int’l Corp., 195 Cal. App. 4th 1295, 1307 (2011); accord Levine v. Blue Shield of Cal., 189

12

Cal. App. 4th 1117, 1138 (2010); Durell v. Sharp Healthcare, 183 Cal. App. 4th 1350, 1370

13

(2010); Melchior v. New Line Prods., Inc., 106 Cal. App. 4th 779, 793 (2003). In light of this

14

recent persuasive authority, this Court has previously determined that there is no cause of action for

15

unjust enrichment under California law. See, e.g., Low v. LinkedIn Corp., --- F. Supp. 2d ---, 2012

16

WL 2873847, *15 (N.D. Cal. 2012); Fraley v. Facebook, Inc., 830 F. Supp. 2d 785, 814 (N.D. Cal.

17

2011); accord Ferrington v. McAfee, Inc., No. 10-01455, 2010 WL 3910169, at *17 (N.D. Cal.

18

Oct. 5, 2010) (citing Durell, 183 Cal. App. 4th at 1370)). Other federal courts have similarly

19

determined that there is no independent cause of action for unjust enrichment. See, e.g., Robinson

20

v. HSBC Bank USA, 732 F. Supp. 2d 976, 987 (N.D. Cal. 2010) (dismissing with prejudice

21

plaintiffs’ unjust enrichment claim brought in connection with claims of misappropriation and

22

violation of the UCL because unjust enrichment does not exist as a stand-alone cause of action);

23

LaCourt v. Specific Media, Inc., No. 10-1256, 2011 WL 1661532, *8 (C.D. Cal. 2011) (dismissing

24

unjust enrichment claim because it “cannot serve as an independent cause of action”); In re

25

DirecTV Early Cancellation Litig., 738 F. Supp. 2d 1062, 1091-92 (C.D. Cal. 2010) (same).

26
27
28

Accordingly, the Court thus GRANTS Defendants’ Motion to Dismiss Apple’s claim for
Restitution Based on Unjust Enrichment with prejudice.
G.

Plausibility, Particularity, and Standing
21

Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

Finally, Apple argues that Plaintiffs’ individual claims, which are the subject of this Motion

2

to Dismiss, relate solely to iTunes songs; Plaintiffs do not allege that they purchased digital content

3

from any other Apple e-store, much less that they paid more than once for such products. Mot. at

4

20, 21. Accordingly, Apple argues that, “Plaintiffs do not allege facts sufficient under either Rule

5

8 or Rule 9(b) to state a claim as to any product other than the songs they purchased through the

6

iTunes Store.” Id. at 21. In addition, Apple contends that Plaintiffs lack standing to assert claims

7

regarding such other products. Id. Plaintiffs assert that all of Apple’s arguments relate to class

8

certification, and are thus premature. Opp’n at 24.

9

An Article III federal court must ask whether a plaintiff has suffered sufficient injury to

United States District Court
For the Northern District of California

10

satisfy the “case or controversy” requirement of Article III of the U.S. Constitution. See Clapper v.

11

Amnesty Int’l, --- U.S. ---, 133 S.Ct. 1138, 1146 (2013) (“One element of the case-or-controversy

12

requirement’ is that plaintiffs ‘must establish that they have standing to sue.’”) (quoting Raines v.

13

Byrd, 521 U.S. 811, 818 (1997)). To satisfy Article III standing, a plaintiff must allege: (1) injury-

14

in-fact that is concrete and particularized, as well as actual and imminent; (2) wherein injury is

15

fairly traceable to the challenged action of the defendant; and (3) redressable by a favorable ruling.

16

Monsanto Co. v. Geertson Seed Farms, --- U.S. ---, 130 S.Ct. 2743, 2752 (2010); Friends of the

17

Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000) (same); Lujan v.

18

Defenders of Wildlife, 504 U.S. 555, 561-62 (1992) (same). “The party invoking federal

19

jurisdiction bears the burden of establishing these elements.” Lujan, 504 U.S. at 561.

20

Courts are split as to whether an actual purchase is required to establish the requisite injury-

21

in-fact for the purpose of Article III standing or whether this is an issue better resolved at the class

22

certification stage. Compare Granfield v. NVIDIA Corp., No. 11-05403, 2012 WL 2847575, at *6

23

(N.D. Cal. July 11, 2012) (“[W]hen a plaintiff asserts claims based both on products that she

24

purchased and products that she did not purchase, claims relating to products not purchased must

25

be dismissed for lack of standing”), with Astiana v. Dreyer’s Grand Ice Cream, Inc., No. 11-2910,

26

2012 WL 2990766, *11-13 (N.D. Cal. July 20, 2012) (observing that “the critical inquiry seems to

27

be whether there is sufficient similarity between the products purchased and not purchased” and

28

holding that “any concerns . . . about material differences [in ice creams] are better addressed at the
22
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

1

class certification stage rather than at the 12(b)(6) stage”). Other cases in this district have, instead,

2

focused on Defendants’ “uniform exertion of control” such that the harm alleged by named

3

plaintiffs is similar to the harm alleged by the putative class. See, e.g., Yordy v. Plimus, No. 12-

4

0229, 2012 WL 2196128 (June 14, 2012) (“Plaintiff has alleged a uniform exertion of control on

5

the part of [defendant] over the misleading statements issued by all its affiliate retailers . . . and

6

therefore has demonstrated an actual, personal injury in fact that is fairly traceable to the

7

challenged actions of Defendant, and is likely to be redressed by a decision in Plaintiff’s favor.”).

8

The Supreme Court has noted, without clearly resolving, tension in the law in this area. See Gratz

9

v. Bollinger, 539 U.S. 244, 263 n.15 (2003) (declining to resolve whether variations in the factual

United States District Court
For the Northern District of California

10

circumstances underlying plaintiffs’ and absent class members’ injuries “is appropriately addressed

11

under the rubric of standing or adequacy, we note that there is tension in our prior cases in this

12

regard.”).

13

The Court finds that neither Juel nor Herskowitz can allege claims brought on behalf of

14

customers who bought products other than from the iTunes Store. First, because Juel’s claims

15

sound in fraud, they are subject to a heightened pleading standard. However, Juel has not alleged

16

any specific facts, including the “who, what, when, and where,” of any alleged fraud regarding

17

products purchased from the App Store, Mac App Store, or iBookstore. But see Kearns, 567 F.3d

18

at 1124. Second, the actual terms and conditions related to the downloading of songs from iTunes

19

appear to differ from those for iBookstore and the app stores. Notably the Terms and Conditions

20

that govern apps and books permit free redownloads. See Preovolos Decl. at AGMT00013

21

(“Solely as an accommodation to you, some Products may be redownloaded for use in accordance

22

with the usage rules.”). Therefore, the core characteristic of the iTunes song purchases that Juel

23

argues injured her is not a characteristic of the other products. Given that it is doubtful that Juel

24

has alleged injury-in-fact that is substantially similar to the alleged harm of customers who

25

purchased products from the App Store, Mac App Store, or iBookstore, the Court finds that Juel

26

currently lacks standing to assert claims on behalf of customers who purchased products other than

27

from iTunes.

28
23
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS

Likewise, to the extent that Herskowitz’s claims stem from being charged twice after twice

1
2

downloading a song off of iTunes, Herskowitz appears to lack standing to assert claims on behalf

3

of customers who were permitted to redownload apps and iBooks from Apple’s other e-stores.

4

While Herskowitz may be able to represent customers who were charged twice for single purchases

5

and downloads from the other e-stores, the Court declines to rule on this issue until Herskowitz has

6

sufficiently pled factual allegations, in compliance with Rule 8(a)(2), that enable the Court to infer

7

more than the mere possibility of Apple’s misconduct. Iqbal, 556 U.S. at 679.7
Accordingly, the Court GRANTS Apple’s Motion to Dismiss without prejudice based on

8
9

Plaintiffs’ failure to allege facts sufficient to state a claim and demonstrate standing regarding

United States District Court
For the Northern District of California

10

products they did not purchase.

11

IV.

CONCLUSION
For the foregoing reasons, the Court GRANTS Apple’s Motion to Dismiss without

12
13

prejudice, with the exception of Plaintiffs’ unjust enrichment claim, which the Court dismisses

14

with prejudice. Should Plaintiffs elect to file a Second Amended Consolidated Complaint curing

15

the deficiencies discussed herein, they shall do so within 30 days of the date of this Order. Failure

16

to meet the 30-day deadline to file an amended complaint or failure to cure the deficiencies

17

identified in this Order will result in a dismissal with prejudice. Plaintiffs may not add new causes

18

of action or parties without leave of the Court or stipulation of the parties pursuant to Federal Rule

19

of Civil Procedure 15.

20

IT IS SO ORDERED.

21
22

Dated: April 15, 2013

23

________________________________
LUCY H. KOH
United States District Judge

24
25
26
27
28

7

Due to the deficiencies identified in Plaintiffs’ claims, the Court DENIES Plaintiffs the right to
obtain further discovery concerning transactions involving products purchased from the App Store,
the iBookstore, and/or the Mac App Store until Plaintiffs have demonstrated that they have
standing to assert claims for products that they did not purchase.
24
Case Nos.: 12-CV-02131-LHK; 12-CV-03124-LHK
ORDER GRANTING MOTION TO DISMISS