Bartling et al v. Apple Inc.

Filing 88

ORDER granting 75 Motion to Dismiss without leave to amend. Signed by Judge Edward J. Davila on 8/2/2019. (ejdlc3S, COURT STAFF) (Filed on 8/2/2019)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 SAN JOSE DIVISION 8 Case No. 5:18-cv-00147-EJD 9 10 11 IN RE APPLE PROCESSOR LITIGATION ORDER GRANTING DEFENDANT’S MOTION TO DISMISS United States District Court Northern District of California Re: Dkt. No. 75 12 13 14 Putative class action Plaintiffs (“Plaintiffs”) are purchasers or lessors of certain Apple 15 products (“iDevices”) that each contain a central processing unit (“CPU”), which Plaintiffs allege 16 suffers from a design defect that allows unauthorized third-parties to access sensitive user data. 17 Plaintiffs bring this lawsuit against Defendant Apple (“Apple”) alleging that they paid more for 18 their iDevices than they were worth because Apple knowingly omitted the defect; the value of 19 Plaintiffs’ products has diminished; and Apple’s attempts to mitigate the defects with patches 20 through software updates materially slowed down the performance of their iDevices. 21 Apple has filed a motion to dismiss Plaintiffs’ second consolidated amended complaint 22 (“SCAC”) with prejudice stating that (1) under Federal Rule of Civil Procedure 12(b)(1) Plaintiffs 23 still lack Article III standing as they have not remedied their standing deficiencies in their most 24 recent amended complaint and (2) under Federal Rule of Civil Procedure 12(b)(6) for inadequate 25 pleading of their misrepresentation, omission, reliance, and damages claims. 26 This court has subject matter jurisdiction based upon the Class Action Fairness Act. 28 27 U.S.C. § 1332(d). After considering the papers submitted and hearing oral argument on the 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 1 motion, the court finds that Plaintiffs lacks Article III standing. Because of this, and the previous 2 opportunities to cure this defect, Defendant’s motion to dismiss is granted without leave to amend. I. 3 BACKGROUND1 4 A. The Parties 5 Plaintiffs are Jennifer Abrams (CA), Anthony Bartling (NH), Robert Giraldi (NY), and 6 Jacqueline Olson (NY) (“Plaintiffs”) who, on behalf of themselves and all others similarly 7 situated, allege upon personal knowledge as to their own acts and upon information and belief as 8 to the remaining matters, that certain Apple products such as iPhones, iPads, and the Apple TV 9 (collectively “iDevices”) all contain a central processing unit that is defective. SCAC ¶ 1.2 Plaintiffs allege that they have been harmed by Apple’s attempts to mitigate the alleged design 11 United States District Court Northern District of California 10 defect through software updates 11.2 and 11.2.2 have severely degraded the processor 12 performance in their iDevices and renders their iDevices less valuable. Plaintiffs bring their class action pursuant to Federal Rule of Civil Procedure 23 and seek 13 14 to represent a class that consists of: 15 All persons in the United States who purchased or leased from Apple and/or its authorized retailer sellers one or more iPhones, iPads, Apple TVs, or other products containing processors designed or modified by Apple, at any time since January 1, 2010. 16 17 18 Id. ¶ 115. Plaintiffs also seek to represent three subclasses: The “California Subclass,” the “New 19 Hampshire Subclass,” and the “New York Subclass.” Id. ¶ 117. These classes are comprised of 20 members who purchased such iDevices within their respected states. Id. Defendant Apple (“Apple”) is a business incorporated in Delaware with a principal place 21 22 of business in Sunnyvale, California. Apple designs, manufactures, distributes, and sells products 23 such as laptops, desktop computers, iDevices, and other computing devices that contain 24 processors. Id. ¶ 18. 25 26 27 28 1 2 The background is a summary of the allegations in the SCAC. Plaintiffs do not assert a claim for a product defect in this action. Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 2 1 B. The Alleged Defect 2 Within each of Plaintiffs’ iDevices resides +a central processing unit, also known as a processor or computer “chip.” Id. ¶ 24. This processor is based on architecture licensed from an 4 engineering firm ARM Holdings. Id. ¶ 43. Apple then modifies the processor by designing their 5 own “microarchitecture.” Many companies use ARM’s designs in their products differently; 6 however, how Apple modifies its processors is unique to Apple. Id. ¶¶ 45, 48. For example, 7 Apple customizes its processors with two optimization techniques called “speculative execution” 8 and “out-of-order execution,” which enable faster processor performance by either allowing 9 programs to run simultaneously or prior to a program being requested to run. Id. ¶ 30. Since as 10 early as 2010, when Apple began customizing its processors, Apple’s processors have been used 11 United States District Court Northern District of California 3 exclusively in Apple products. Id. ¶ 48. The processor within the iDevice works with Apple’s 12 operating system (“OS”) to carry out the computer’s programs and instructions. Id. ¶¶ 24, 25. In 13 2017, independent security researchers discovered that these processors contain two vulnerabilities 14 that allow unauthorized third parties to access sensitive user data. Id. ¶ 2. The two vulnerabilities 15 are called “Meltdown” and “Spectre.”3 Id. Plaintiffs allege that the way in which Apple’s 16 optimization techniques are employed allow bad actors to access exposed sensitive data that would 17 normally need to process through security checks or require isolation within the OS. Id. ¶¶ 30–42. 18 Apple is aware of the vulnerabilities and made a public announcement on January 4, 2018, 19 stating that on December 2, 2017, Apple released iOS 11.2, a software update to address 20 Meltdown. Id. ¶ 54. On January 8, 2018, Apple released iOS 11.2.2, a software update to address 21 Spectre. Id. Plaintiffs allege that Apple knew of the vulnerabilities and did not publicly disclose 22 them until after the New York Times posted an article leaking the information. Id. ¶ 84. Once 23 leaked, Apple responded ahead of a “coordinated disclosure” date agreed upon by Apple, Intel, 24 Google, Microsoft, Amazon, AMD, and ARM. Id. Plaintiffs assert that these vulnerabilities are 25 3 26 27 28 The security issues raised by Meltdown and Spectre apply to all modern processors and affect nearly all computing devices and operating systems. Researchers have identified multiple variants of Meltdown and Spectre. SCAC ¶ 49. How each manufacturer, such as Apple, Intel, or AMD, decides to mitigate the vulnerabilities varies depending on how they modify their chips. Id. ¶ 50. Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 3 1 material because “had they known data stored on their systems would be compromised and made 2 available to unauthorized third parties” they would not have purchased their iDevices. Id. ¶ 68. 3 Plaintiffs also allege that after Apple made these announcements, iDevices declined in value. Id. 4 ¶¶ 71–79. 5 C. 6 On June 8, 2018, Plaintiffs filed consolidated amended complaint against Apple alleging Procedural History 16 causes of action. Dkt. No. 46. On August 7, 2018, Apple filed a motion to dismiss, which the 8 court later granted with leave to amend. Dkt. Nos. 49, 66. In granting Apple’s motion to dismiss, 9 the court determined that Plaintiffs had not established standing and therefore the court did not 10 address the substance of the claims. Dkt. No. 66 (“Order”). Plaintiffs could neither show that a 11 United States District Court Northern District of California 7 named plaintiff had personally suffered from slower performance, nor a universal injury. Order at 12 5–8. At that time, Plaintiffs had not even alleged they personally downloaded the patches they 13 alleged caused the degrading performance. Additionally, Plaintiffs did not sufficiently allege that 14 their personal iDevices suffered any actual diminution in value. Id. at 8. Plaintiffs have since 15 amended their complaint by adding facts in support of their standing arguments while also 16 narrowing their claims down to seven. Plaintiffs seek an order enjoining Apple from continuing 17 and maintaining its alleged violations. For the class, Plaintiffs seek certification, and damages— 18 including actual, statutory, punitive, and/or civil penalties. They also request costs and attorney’s 19 fees. Apple moves to dismiss Plaintiffs’ SCAC for lack of sufficient facts in support of standing 20 or any cause of action. Dkt. No. 75. 21 22 23 II. LEGAL STANDARDS A. Federal Rule of Civil Procedure 12(b)(6) Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient 24 specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which 25 it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). 26 Although particular detail is not generally necessary, the factual allegations “must be enough to 27 raise a right to relief above the speculative level” such that the claim “is plausible on its face.” Id. 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 4 1 at 555, 570. A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to 2 state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Dismissal of a claim 3 under Rule 12(b)(6) may be based on a “lack of a cognizable legal theory or the absence of 4 sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 5 F.2d 696, 699 (9th Cir. 1988) (internal citation omitted); see Ministerio Roca Solida v. McKelvey, 6 820 F.3d 1090, 1096 (9th Cir. 2016). 7 At the motion to dismiss stage, the court must read and construe the complaint in the light 8 most favorable to the non-moving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th 9 Cir. 1996). Additionally, the court must accept as true all “well-pleaded factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). However, “courts are not bound to accept as true a 11 United States District Court Northern District of California 10 legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. Nor is a complaint 12 sufficient if it merely “tenders naked assertions devoid of further factual enhancement.” Iqbal, 13 556 U.S. at 678 (internal quotation marks omitted). “In all cases, evaluating a complaint’s 14 plausibility is a ‘context-specific’ endeavor that requires courts to draw on . . . judicial experience 15 and common sense.” Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014) (quoting Starr v. 16 Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)). 17 Claims that sound in fraud are subject to a heightened pleading standard. Fed. R. Civ. 18 Proc. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances 19 constituting fraud or mistake.”); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103–04 (9th Cir. 20 2003) (recognizing that claims “grounded in fraud” or which “sound in fraud” must meet the Rule 21 9(b) pleading standard, even if fraud is not an element of the claim). The allegations must be 22 “specific enough to give defendants notice of the particular misconduct which is alleged to 23 constitute the fraud charged so that they can defend against the charge and not just deny that they 24 have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). This 25 requires an account of the “time, place, and specific content of the false representations as well as 26 the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 27 (9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). In 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 5 1 other words, fraud or claims asserting fraudulent conduct must generally contain more specific 2 facts than is necessary to support other causes of action. When deciding whether to grant a motion to dismiss, the court generally “may not consider 3 4 any material beyond the pleadings.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 5 1542, 1555 n.19 (9th Cir. 1990). However, the court may consider material submitted as part of 6 the complaint or relied upon in the complaint, and may also consider material subject to judicial 7 notice. See Lee v. City of Los Angeles, 250 F.3d 668, 688–89 (9th Cir. 2001).4 See Warren v. Fox 8 Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (holding the court is “not required to 9 accept as true conclusory allegations which are contradicted by documents referred to in the 10 complaint.”). In the event that a motion to dismiss is granted, “leave to amend should be granted ‘unless United States District Court Northern District of California 11 12 the court determines that the allegation of other facts consistent with the challenged pleading could 13 not possibly cure the deficiency.’” DeSoto v. Yellow Freight Sys., 957 F.2d 655, 658 (9th Cir. 14 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 15 1986)). 16 III. DISCUSSION Apple moves to dismiss all of Plaintiffs’ claims alleged in their SCAC on Article III 17 18 standing grounds, arguing Plaintiffs have not remedied their FCAC and still lack a showing that 19 any named Plaintiff has suffered an injury-in-fact. Apple also moves to dismiss each of Plaintiffs’ 20 substantive claims for failure to state a claim upon which relief can be granted. Because Article 21 III standing is a threshold jurisdictional question, the court will address Apple’s 12(b)(1) motion 22 prior to analyzing the substance of the claims. See Steel Co. v. Citizens for a Better Env’t, 523 23 U.S. 83, 94 (1998); United States v. Larson, 302 F.3d 1016, 1019 (9th Cir. 2002). 24 25 26 27 28 4 Pursuant to Federal Rule of Evidence 201, the court may take judicial notice of matters of public record but may not take judicial notice of a fact that is subject to reasonable dispute. Fed. R. Evid. 201(b). The court declines to take judicial notice of Apple’s Exhibits A through I because they were not needed to arrive to the conclusion regarding standing. See Dkt. No. 76. Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 6 1 2 A. Article III Standing Standing is properly challenged through a Rule 12(b)(1) motion. White v. Lee, 227 F.3d 3 1214, 1242 (9th Cir. 2000). “A plaintiff has the burden to establish that it has standing.” 4 WildEarth Guardians v. United States Dep’t of Agric., 795 F.3d 1148, 1154 (9th Cir. 2015). 5 Article III of the Constitution extends the judicial “Power of the United States” to only “Cases” 6 and “Controversies.” Art. III, § 2; See City of Los Angeles v. Lyons, 461 U.S. 95, 101 (1983); 7 Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). “Standing to sue is a 8 doctrine rooted in the traditional understanding of a case or controversy.” Spokeo, Inc. v. Robins, 9 136 S. Ct. 1540, 1547 (2016). To satisfy Article III standing, a plaintiff must establish: (1) an “injury in fact” that is both concrete and particularized, as well as actual and imminent; (2) that the 11 United States District Court Northern District of California 10 injury is fairly traceable to the challenged action of the defendant; and (3) that it is likely, rather 12 than merely speculative, that the injury will be redressed by a favorable decision. Friends of the 13 Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180–81 (2000); Lujan v. Defenders of 14 Wildlife, 504 U.S. 555, 561–62 (1992). Particularity and concreteness are two separate inquires. 15 Robins v. Spokeo, Inc., 867 F.3d 1108, 1111 (2017). An injury is concrete when it actually exists. 16 Spokeo, 136 S. Ct. at 1548. Intangible injuries can be concrete. Id. at 1549. For an injury to be 17 “particularized,” as required for Article III standing, it “must affect the plaintiff in a personal and 18 individual way.” Id. at 1548. 19 “In class actions, the named representatives must allege and show that they personally have 20 been injured, not that injury has been suffered by other, unidentified members of the class to 21 which they belong and which they purport to represent.” Lierboe v. State Farm Mut. Auto. Ins. 22 Co., 350 F.3d 1018, 1022 (9th Cir. 2003) (quoting Pence v. Andrus, 586 F.2d 733, 736–37 (9th 23 Cir. 1978)); see also Spokeo, 136 S. Ct. at 1547 (adding that injury suffered by other unidentified 24 members of the class to which named plaintiffs belong is not enough to meet Article III standing). 25 The Supreme Court has further emphasized that “threatened injury must be certainly impending to 26 constitute injury in fact, and that allegations of possible future injury are not sufficient.” Clapper 27 v. Amnesty Int’l USA, 133 S. Ct. 1138, 1142–43 (2013) (internal quotations and citations omitted). 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 7 1 Here, Plaintiffs allege injury exists by way of the degraded performance of their iDevices 2 and a diminution in value. The first, Plaintiffs allege, is the result of Apple’s attempts to mitigate 3 the vulnerabilities of Meltdown and Spectre on their processors by applying two “patches” also 4 known as software updates, which has caused iDevices to perform slower than advertised. The 5 diminution in value, Plaintiffs argue through a new regression analysis, also provides an economic 6 injury-in-fact. The court will address each of the alleged injuries in turn, beginning with iDevice 7 performance degradation. 8 1. Injury-In-Fact Based on Performance Degradation 9 Apple contends Plaintiffs still lack standing because “they still have not alleged any personal injury or any facts that can support an inference that they personally were harmed by a 11 United States District Court Northern District of California 10 purported performance degradation caused by Apple’s software updates.” Dkt. No. 75 at 16–17. 12 Additionally, Apple argues, even with Plaintiffs’ newly added facts of testing an iPhone 7, 13 universal injury does not exist. Id. at 17. The court agrees that Plaintiffs have failed to cure their 14 pleadings to show that a named class plaintiff has experienced a degraded performance on their 15 personal iDevice. Plaintiffs are able to show the possible existence of a concrete injury, but lack a 16 showing of particularization. 17 18 a. Whether Plaintiffs’ injury is concrete Concreteness requires that an injury be “de facto,” meaning that it must actually exist. 19 Spokeo, 136 S. Ct. 1540, 1548. Here, Plaintiffs add facts in their SCAC that they tested an iPhone 20 7, which measured the “real-world performance impact of Apple’s mitigation efforts by recording 21 the time it took these iDevices to perform common operations.” SCAC ¶ 61. Plaintiffs assert that 22 “[i]n each instance, the iPhone with the Meltdown and Spectre mitigations installed performed 23 significantly worse than those with iOS versions that did not include Apple’s mitigation efforts.” 24 Id. Downloading applications such as Facebook Messenger, Instagram, and Google Maps, on 25 average, were processed 40.6 percent slower after installing “a version of iOS containing Apple’s 26 mitigation efforts than it did before.” Id. ¶ 62. A test that involved the downloading of a 4k video 27 clip after the software update, performed at a rate 7.6 percent slower than it did before the update. 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 8 1 Id. ¶ 63. Plaintiffs allege that these results are consistent with testing done by iPhone consumers 2 (Id. ¶ 64) and statements made this year by an organization within the Department of Homeland 3 Security, the U.S. Computer Emergency Readiness Team (“CERT”) (Id. ¶ 65). In taking 4 Plaintiffs’ statements as true, the testing supports a showing that some iDevices, such as an iPhone 5 7, may experience degradation in performance after the user downloads Apple’s patches through 6 the software updates. Plaintiffs’ allegations of performance degradation in some iPhones does 7 exist and thus is enough to establish a concrete injury at this stage. Next, the court looks to 8 whether the concrete injury is particularized. Spokeo, 136 S. Ct. at 1548. 9 b. Whether Plaintiffs’ injury is particularized A particularized injury affects “the plaintiff in a personal and individual way.” Spokeo, 11 United States District Court Northern District of California 10 136 S. Ct. at 1548. What is fatal to Plaintiffs’ SCAC is that no facts support a showing that any 12 named plaintiff noticed any slowdown or performance degradation after downloading Apple’s 13 updates. SCAC ¶¶ 11, 13, 15, 17. Plaintiffs’ argument is based on a universal injury theory, as 14 alleged in their earlier complaint. Previously, the court analyzed Plaintiffs’ alleged facts, which 15 included industry-type testing such as the “GeekBench 4 benchmark test” against two cases: 16 Strumlauf v. Starbucks Corp., 192 F. Supp. 3d 1025 (N.D. Cal. 2016), and John v. Whole Foods 17 Mkt. Group., Inc., 858 F.3d 732 (2nd Cir. 2017) and found that cited testing reports supported an 18 inference that some but not all users experienced slower performance in their iDevices. Order at 19 8. In sum, the testing provided by Plaintiffs with regards to a degradation in performance of some 20 iDevices after the software updates were installed, did not meet the standards for a universal-type 21 injury as found in cases like Strumlauf and Whole Foods. 22 Plaintiffs return and add new testing facts to their SCAC to double down on their universal 23 injury argument. Plaintiffs now move away from their previous arguments regarding benchmark 24 testing by stating that some of the benchmark tests “do not accurately represent real world 25 conditions and consequently do not reflect the decrease in performance an actual iDevice user 26 experiences after upgrading to those iOS versions.” SCAC ¶ 58. Plaintiffs now put forward an 27 example of testing real world conditions with an iPhone 7. Plaintiffs state that “an iPhone 7—the 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 9 1 same [model] phone owned by Plaintiffs Giraldi and Olson” was tested to measure the “real 2 world” performance impact of Apple’s mitigation efforts. Id. at ¶ 61 (emphasis added). Plaintiffs 3 allege that in each instance, this iPhone with the mitigated software updates performed 4 “significantly worse” than those without the updates. Id. 5 Plaintiffs ask the court to infer that because the tested iPhone 7 experienced slower 6 performance, and because all the iDevices in the class also contain the processor within the iPhone 7 7, that all iDevices (iPhones, Apple TVs, iPads) must suffer from the same degraded performance. 8 Dkt. No. 78 at 16. Plaintiffs allege that their iDevices are running the same iOS versions as the 9 tested iPhone 7 and therefore they must also be “suffering from the same reduction in performance.” Id. at 15. Even with the new test of one iPhone 7, and even taking Plaintiffs’ 11 United States District Court Northern District of California 10 statement about the one iPhone’s slower performance as true, their universal injury argument is 12 still unpersuasive. Conducting tests to a single recently purchased iPhone 7 is insufficient to infer 13 universal injury to all iPhone 7 users and certainly not enough to support a showing of injury 14 across all the iDevices the class seeks to represent. Plaintiffs are still without personal injury. See 15 Goodman v. HTC America, Inc., No. C11-1793MJP, 2012 WL 2412070 (W.D. Wash. June 26, 16 2012) (stating that a plaintiff “must allege a distinct and palpable injury to himself, even if it is an 17 injury shared by a large class of other possible litigants”) (quoting Warth v. Seldin, 422 U.S. 490, 18 501 (1975)). In sum, Plaintiffs have failed to plead facts that any named plaintiff experienced the 19 performance degradation that the single tested iPhone 7 experienced and thus do not plead an 20 injury that is particularized. 21 In conclusion, Plaintiffs have not met the burden in establishing injury-in-fact based on 22 their performance degradation argument. Plaintiffs’ second assertion of injury is based on an 23 economic loss theory that their phones have lost value and that they paid too much for them 24 because Apple omitted the vulnerabilities from the public. 25 26 27 28 2. Injury-In-Fact Based on a Diminution in Value a. Whether Plaintiffs’ injury is concrete Apple moves to dismiss Plaintiffs’ diminution in value theory because Plaintiffs’ new facts Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 10 1 still do not demonstrate injury-in-fact. Dkt. No. 75 at 19–21. In the Ninth Circuit, “[w]hen 2 economic loss is predicated solely on how a product functions, and the product has not 3 malfunctioned, the Court agrees that something more is required than simply alleging an 4 overpayment for a ‘defective’ product.” Cahen v. Toyota Motor Corp., 147 F. Supp. 3d 955, 970 5 (N.D. Cal. 2015), aff’d, 717 Fed. App’x 720 (9th Cir. 2017) (unpublished) (finding class plaintiffs’ 6 economic loss theory insufficient to establish standing because plaintiffs alleged no facts to show 7 their cars were worth less). Plaintiffs can allege something more by showing a demonstrable 8 effect on the market for their specific product. See id. 9 Previously, the court found that Plaintiffs’ statement that they “would not have purchased [their] iDevices, or paid the prices they did” was not enough to establish standing under a 11 United States District Court Northern District of California 10 diminution in value argument. Order at 9. Plaintiffs return alleging something more by way of a 12 regression analysis they applied to measure the loss of value of an iPhone. Plaintiffs allege that 13 their regression analysis showed that the prices of Plaintiffs’ iPhones decreased “on average” by 14 more than seventy-nine dollars following Apple’s announcement about Meltdown and Spectre 15 vulnerabilities. SCAC ¶ 78. Plaintiffs are silent regarding the other iDevices in the class such as 16 iPads and/or AppleTVs. The issue is whether Plaintiffs’ proffered regression analysis is enough to 17 show a demonstrable effect on the market, and thus a concrete injury at this stage. 18 An example of a demonstrable effect on the market can be seen in In re Toyota Motor 19 Corp., 790 F. Supp. 2d 1152, 1166 (C.D. Cal 2011). There, the economic harm theory from 20 plaintiffs’ argument that their vehicles were worth less and that they overpaid for them because 21 they contained a safety defect argument could be accurately measured. The plaintiffs were able to 22 establish that although they did not experience the safety defect themselves, once the recalls from 23 Toyota had been made public, one plaintiff’s 2007 Toyota Sienna trade-in value dropped by 24 $2,000 according to Kelly Blue book, an established reliable resource for automobile valuation. 25 Id. at 1166. Similarly, “[a] current reduction in the economic value of one’s home is a cognizable 26 injury for constitutional standing purposes.” Maya v. Centex Corp., 658 F.3d 1060, 1070–71 (9th 27 Cir. 2011) (finding plaintiffs sufficiently alleged that defendants had inflated the bubble in their 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 11 1 particular neighborhood, which caused them to overpay). Measuring the value of an electronic 2 product with an unmanifested alleged defect is less clear. 3 The regression analysis conducted by Plaintiffs seeks to show a demonstrable effect on the 4 market. The analysis covered actual transactions among consumers in the smartphone market. 5 SCAC ¶ 77. This included data from more than 75,000 transactions from iDevices and 6 comparable smartphones between September 1, 2017 and August 31, 2018. Id. The iDevices 7 included the iPhone 6s Plus, iPhone 7, iPhone 8 Plus, and iPhone SE, which are the same models 8 of iDevices that Plaintiffs own, along with comparable phones manufactured around the same time 9 by Apple’s competitors, such as, the Samsung Galaxy S6, Galaxy S7, and Galaxy S8 Plus, and Google Pixel. Id. Plaintiffs allege they controlled for things such as like age, condition, and 11 United States District Court Northern District of California 10 storage size in addition to broader economic factors such as “changes in inflation, the United 12 States’ gross domestic product, unemployment rates, non-farm payroll numbers, and overall 13 industrial production.” Id. ¶ 78. 14 Through this analysis, Plaintiffs allege, an average sale price for an iPhone 7 with 256 GB 15 of storage, dropped more than 11.5 percent from the week prior to the news of Meltdown and 16 Spectre to the week after. Id. at ¶ 73. Over a similar span of time, Plaintiffs allege, an iPhone SE 17 dropped more than 16 percent, an iPhone 6s Plus dropped more than 18 percent, and an iPhone 8 18 with 64 GB of storage dropped more than 13.5 percent. Id. ¶¶ 74–76. Plaintiffs allege that the 19 impact on Samsung and Google phones from Apple’s January 2018 announcement was less than 20 half of that observed for the iPhones. Id. ¶ 79. The result, Plaintiffs assert, is that because of 21 Meltdown and Spectre, iPhones have declined in pricing. Id. at ¶ 79. 22 There does not appear to be an industry standard on measuring the value of electronics 23 such as the iDevices in this case. Plaintiffs attempt to measure the value through its regression 24 analysis, but it is not enough to establish a demonstrable, reliable indicator of market effect as is 25 the case when measuring the housing market or vehicles through Kelly Blue Book. The 26 measurement for the value of electronics in these circumstances must be more well-known or 27 widespread. 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 12 1 Even taking Plaintiffs’ statements as true, Plaintiffs’ underlying argument is still weak. Plaintiffs conducted this analysis surrounding Apple’s announcements about Meltdown and 3 Spectre—not the degraded performance—that are unmanifested vulnerabilities. As it was then, it 4 stands still today, that no named Plaintiff, nor any consumer of any iDevice or computer related 5 product—from Apple or otherwise—has seen these potential vulnerabilities exploited. Computer 6 manufacturers such as Apple, among others, do not advertise that their computers will be free 7 from defect. Moreover, Judges in this circuit refuse to find standing where plaintiffs allege a 8 future risk of harm unless harm is certainly impending. Clapper v. Amnesty Intern. USA, 568 U.S. 9 398 (2013); Birdsong v. Apple, 590 F.3d 955, 970 (9th Cir. 2009); In re, Inc., 108 F. 10 Supp. 3d 949 (D. Nev. 2015); Cahen v. Toyota Motor Corp., 147 F. Supp. 3d 955, 970 (N.D. Cal. 11 United States District Court Northern District of California 2 2015), aff’d, 717 Fed. App’x 720 (9th Cir. 2017) (unpublished); Boysen v. Walgreen Co., No. 11- 12 cv-06262-SI, 2012 U.S. Dist. LEXIS 100528, 2012 WL 2953069, at *7 (N.D. Cal. July 19, 2012); 13 Contreras v. Toyota Motor Sales USA, Inc., No. 09-cv-06024-JSW, 2010 U.S. Dist. LEXIS 60479, 14 2010 WL 2528844, at *1 (N.D. Cal. June 18, 2010). Thus, it is more likely Plaintiffs’ regression 15 analysis results are affected by other factors and not necessarily the announcement of an 16 unmanifested risk of harm that applies to all modern processors. 17 Plaintiffs’ reliance on In re: Lenovo Adware Litigation in attempt to measure the economic 18 value is also unpersuasive for one simple distinctive reason: unlike the circumstances in Plaintiffs 19 case, there was no hypothetical risk, the plaintiffs in Lenovo actually experienced a security breach 20 in their laptops. No. 15-md-02624-RMW, 2016 WL 6277245, at *5 (N.D. Cal. Oct. 27, 2016). In 21 Lenovo, the court found that a security vulnerability actually exploited “decreased the value” of 22 plaintiffs’ laptops. This actual injury was enough to show they overpaid and establish standing at 23 the pleading stage. Id. at *4. Plaintiffs’ circumstances are distinguishable because no third-party 24 has actually accessed their iDevices or user’s personal data by way of Meltdown or Spectre. 25 Apple also argues that Plaintiffs cannot, as a matter of law, suffer an injury-in-fact based 26 on a diminution in value theory where they cannot identify an alternative product that they would 27 have purchased. Dkt. No. 75 at 21, citing Boysen, 2012 WL 2953069 at *7 n.9. In Boysen, 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 13 1 plaintiffs alleged that Walgreens failed to disclose the presence of “material and significant” levels 2 of arsenic and lead in its “100% Apple Juice” and that the omission of these toxins were false and 3 misleading. Id. at *1. Plaintiffs stated that “had they known the products contained lead and 4 arsenic” they would not have purchased the products. Id. The court held that plaintiff lacked 5 standing because he did not allege that the products caused him any physical injury, that any other 6 person had been injured, or that he would have purchased an alternate juice. Id. at *7. More 7 specifically, the court noted that “most if not all consumer fruit juices contain levels of lead and 8 arsenic” and that it was unclear whether an alternative juice existed. Id. at *7 n.9. 9 Boysen is similar to Plaintiffs’ circumstances in that Plaintiffs allege that had they known about the Meltdown and Spectre vulnerabilities, they would not have made their purchases. 11 United States District Court Northern District of California 10 SCAC ¶¶ 84, 85. Apple advertises the “benefits, capabilities, and quality of its Processors and 12 iDevices,” and specifically the speed of its Processors and the security of its iDevices. Id. ¶ 86. 13 Even still, Plaintiffs do not allege that they personally have been harmed by the Meltdown or 14 Spectre vulnerabilities or that anyone has been harmed by these vulnerabilities. Apple made 15 attempts to mitigate harm by applying patches to certain iOS systems and as a result, some 16 iPhones have experienced slowdowns, but, like in Boysen, none of the Plaintiffs have personally 17 experienced these slowdowns nor have any Plaintiffs suffered any injury from the vulnerabilities 18 Apple sought to protect its consumers from. There is nothing to show that the iDevices are not 19 “fast” or not “safe” as advertised. Lastly, it appears undisputed that Spectre and Meltdown affect 20 all modern processors and affect nearly all computing devices and operating systems. Thus, 21 although Plaintiffs do add facts that Apple’s “speculative execution” and “out-of-order execution” 22 optimization techniques are unique to Apple and create a situation in which iDevices may be more 23 vulnerable than devices that do not use these techniques, it is unclear whether there are any phones 24 or similar devices that are not subject to the same vulnerabilities. Thus, it is unclear whether there 25 are smartphones that are not affected by Meltdown or Spectre. 26 In sum, Plaintiffs have not established standing. Accordingly, the court need not address 27 the substantive claims. 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 14 1 IV. CONCLUSION AND ORDER For the foregoing reasons, Defendant’s motion to dismiss is GRANTED without leave to 2 amend. 3 IT IS SO ORDERED. 4 Dated: August 2, 2019 5 6 7 ______________________________________ EDWARD J. DAVILA United States District Judge 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Case No.: 5:18-cv-00147-EJD ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 15

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