In Re: Apple iPhone 3G and 3GS MMS Marketing and Sales Practices Litigation

Filing 264

RESPONSE/MEMORANDUM in Opposition filed by Plaintiffs re 235 MOTION to Compel Arbitration. (Attachments: # 1 Declaration, # 2 Exhibits)(Reference: All Cases)(gec, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CIVIL ACTION
IN RE: APPLE iPHONE 3G AND 3GS “MMS”
MARKETING AND SALES PRACTICES
LITIGATION
THIS DOCUMENT RELATES TO ALL CASES

MDL No: 2116

SECTION “J”
JUDGE BARBIER
MAGISTRATE JUDGE WILKINSON

MEMORANDUM IN OPPOSITION TO DEFENDANT APPLE INC.’S
MOTION TO COMPEL ARBITRATION

INTRODUCTION
Plaintiffs’ action against Apple is founded upon Apple’s misleading conduct and failure
to disclose material information regarding iPhone’s MMS functionality. Nothing else. Despite
this independent claim for relief, Apple attempts to invoke another party’s arbitration clause to
take advantage of what it perceives to be a positive development in arbitration law. Apple has
waived this option. Rather than seeking arbitration from the beginning—which, as AT&T did, it
could have done—Apple sought unqualified and non-perfunctory dismissal on the merits and has
caused Plaintiffs to oppose those several motions. In addition, Apple’s own express, written
contracts contain no arbitration clause and, in fact, contemplate actions to be filed in court, while
at the same time AT&T’s arbitration-clause-containing contract expressly excludes Apple from
the list of parties who are permitted to arbitrate alongside AT&T.
Finally, and despite Plaintiffs’ consistent position that their action involves “three bases
for relief” (Docket No. 204 at 8 (emphasis added)), Apple incorrectly argues that Plaintiffs only
“allege a single theory of unified conduct” by Apple and AT&T (Docket No. 235-1 at 3). Apple
does this because it believes that such an argument is a necessary predicate for its extraordinary
request for “equitable estoppel,” or, the rare decision from a court to compel arbitration between
parties who never agreed to arbitrate. In making its plea for equitable estoppel, however, Apple
fails to establish the sine qua non of the equitable estoppel test: that compelling Plaintiffs to
arbitrate against Apple in these circumstances would be in any way “fair.” The Court should
deny Apple’s motion.
FACTUAL BACKGROUND
I.

Plaintiffs’ Action Against Apple Is Independent of Plaintiffs’ Action Against AT&T.
This proposed class action alleges unlawfully deceptive conduct on the part of Apple

relating to the manner in which Apple, independently marketed, promoted, advertised, and sold
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two of its most profitable products: the iPhone 3G and the iPhone 3GS. While Plaintiffs had also
filed suit against AT&T relating to AT&T’s own marketing, promotion, advertising, and selling
of the iPhone 3G and 3GS and data plans, the two actions were 1 separate, divisible, and
independently actionable.
Regarding Plaintiffs’ action against Apple, Plaintiffs’ claims are based upon the
following three theories, none of which allege any obligation directly imposed upon Apple by
AT&T’s Wireless Service Agreement (“WSA”):
(1) Apple made affirmative misrepresentations to Plaintiffs regarding MMS availability
on the iPhone 3G and 3GS;
(2) Apple failed to disclose that AT&T would charge Plaintiffs for MMS service but
would not provide it; and
(3) Apple failed to disclose that AT&T’s data plan required MMS but that service would
not be provided to Plaintiffs.
Plaintiffs’ first theory of liability alleges that Apple independently and affirmatively
made representations regarding the availability of MMS on the iPhone 3G and 3GS that were
false, deceptive, and misleading. See, e.g., Carbine compl. ¶¶ 8, 12, 19, 22, 37, 38, 40, 42-48,
52, 59, 69-80, 90-120. Specifically, Plaintiffs allege that, with the launch of the iPhone 3GS,
Apple engaged in a widespread and pervasive advertising campaign to promote the availability
of MMS on the iPhone 3G and 3GS—when, in fact, it was not available—through the use of
media presentations, press releases, product packaging, its internet website, in-store displays,
guided tours, investor calls, etc. Id. Particularly lacking in Plaintiffs’ complaints are allegations
that Apple engaged in this deceptive behavior with the help of AT&T, jointly with AT&T, or
together with AT&T. See, e.g., id. ¶¶ 12, 19, 22, 37, 59, 62, 80, 93, 97, 98, 100, 103, 115.

1

All Plaintiffs have voluntarily dismissed their suits against AT&T. Their only remaining
claims in Court are against Apple alone.
2

(alleging that defendants Apple and AT&T each engaged in conduct that is likely to deceive and
has deceived the public). Additionally, not one of Plaintiffs’ allegations regarding Apple’s
affirmative misrepresentations is in any way founded in or bound up with the terms or
obligations in AT&T’s WSA. Rather, these allegations depend solely on the misconduct of
Apple, not on the terms of AT&T’s WSA, for their success.
Plaintiffs’ second theory of liability is founded upon Apple’s failure to disclose to iPhone
customers that AT&T was telling consumers that they were receiving MMS via their monthly
billing statements when they were not, and, thus, charging these individuals for a service they
were not getting. See, e.g., id. ¶¶ 12, 55-59, 69-80, 110-120. These claims are not founded
upon, nor do they rely upon, the terms or obligations of AT&T’s WSA. To illustrate, every
month AT&T would send a bill to consumers who had purchased a family unlimited message
plan advising them that the amount charge reflected the provision of MMS. These bills were not
contracts, but notifications to consumers that payment was due. MMS of course, was never
provided to customers during the class period. It is with this background that Plaintiffs have
alleged that Apple knew that AT&T was charging iPhone customers for MMS, but not providing
it, triggering a duty to disclose a fact material to the iPhone purchase and use. Thus, by virtue of
the obligations triggered by consumer protection statutes—not by AT&T’s WSA—Apple
engaged in deceptive conduct by failing to inform iPhone consumers of its knowledge of
AT&T’s practices. Apple’s duty arises out of law, not out of contract, and certainly not out of
AT&T’s WSA. Stated differently, the Court need not examine the terms of the WSA in order to
determine whether Apple failed to disclose these facts to Plaintiffs.
Plaintiffs’ third theory of liability is based upon Apple’s failure to disclose to iPhone
customers that AT&T’s data plan required MMS service but, unlike all other camera phone users

3

who paid for the same AT&T plan, they alone would not have MMS service. See, e.g., id. ¶¶ 8,
12, 31, 54, 57-59, 69-80, 110-120. Despite the tangential reference to AT&T’s data plan,
Plaintiffs do not seek to hold Apple liable to any duties and obligations imposed upon it by the
WSA—indeed, the terms and obligations in AT&T’s WSA do not mention Apple at all. Nor do
Plaintiffs attempt to hold Apple accountable for any kind of breach of the WSA. Rather,
Plaintiffs seek to hold Apple liable pursuant to law, by virtue of the fact that Apple knew yet
failed to disclose that AT&T’s data plan required MMS service but that iPhone customers would
not be receiving it. Again, Plaintiffs’ cause of action against Apple is triggered by virtue of an
obligation imposed by the consumer protection statutes, not by the WSA.
Notably absent from Plaintiffs’ allegations of material omissions (i.e., Plaintiffs’ second
and third theories of liability) are any claims that Apple coordinated its behavior with AT&T or
that Apple and AT&T conspired in such a way as to give rise to a claim of “concerted
misconduct.” While Apple cites to the fact that AT&T was the exclusive provider of cell phone
and data services for iPhone, this has nothing to do with their independent marketing conduct.
No advertisement or public communication by either Apple or AT&T contains any evidence of a
joint marketing effort. Nor have Plaintiffs alleged one. In sum, Plaintiffs have alleged claims
against Apple based on affirmative misrepresentations and omissions that are independent of
their claims against AT&T.
II.

Plaintiffs Entered Into Two Separate Agreements with Apple, Neither of Which
Contained an Arbitration Provision.
In an attempt to bootstrap itself into AT&T’s arbitration clause, Apple ignores the two

written contracts which it entered into with Plaintiffs, both of which demonstrate that neither
Apple nor any of the Plaintiffs intended to arbitrate their claims. These two written agreements

4

are the iPhone Software License Agreement (“Software Agreement”) and the iTunes Terms of
Service (“TOS”).
A.

The iPhone Software License Agreement.

When Plaintiffs purchased their iPhone 3G, 3GS, or both, regardless of whether they
purchased it from Apple or AT&T, 2 each product package contained a Software Agreement.
According to the Software Agreement’s terms, “by using [the] phone, [the user was] agreeing to
be bound by the following Apple and third party terms.” (Ex. A.) 3 Additionally, Apple’s “Legal
Information” page on its website on June 27, 2009 (the period just after iPhone 3GS began to be
sold), stated:
Hardware & Software Product Agreements
Your use of Apple-branded hardware and software products is based on the
software license and other terms and conditions in effect for the product at the
time of purchase. You will be asked to agree to the terms of the applicable
agreement at the time that you obtain or install the software or setup the hardware
product. You may review the agreements for Apple’s currently shipping products,
by clicking the appropriate link below.
(Id. (emphasis added).) Below this section was a hyperlink entitled “iPhone Software License,”
and if a consumer clicked on that link, an agreement appeared in PDF format. It is Plaintiffs’
understanding that such agreement was the same as the Software Agreement they received in
their iPhone product packaging. As such, that agreement likewise stated at the top that “by using
[the] phone, [the user was] agreeing to be bound by the following Apple and third party terms.”
In sum, pursuant to language drafted by Apple itself, the Software Agreement governs the

2

Consumers who purchased their iPhones at an Apple store may not even have had the
opportunity to first see or know about the arbitration clause in AT&T’s WSA.
3

All exhibits referenced herein are attached to the Declaration of David M. Cialkowski in
Support of Plaintiffs’ Opposition to Defendant Apple Inc.’s Motion to Compel Arbitration filed
contemporaneously herewith.
5

relationship between Apple and Plaintiffs for both software and hardware issues. In other words,
Apple cannot be heard to argue that the Software Agreement governs only a small, inapplicable
part of the relationship between the parties. Rather, it covers all phone purchase and software
issues and, thus, governs the current dispute between the parties.
There are several provisions in the Software Agreement that are relevant to the present
motion. First, as mentioned above, the first sentence specifically states, “[B]y using your
iPhone, you are agreeing to be bound by the following Apple and third party terms.” (Ex. B.)
Thus, when the iPhone was turned on for the first time, either by Plaintiffs or someone acting on
their behalf, Plaintiffs became bound by the terms of the agreement. While the agreement
references “third party terms,” there is no mention anywhere in the agreement that AT&T was a
contemplated “third party.” In fact, neither AT&T nor its WSA are mentioned in the Software
Agreement.
Second, the Software Agreement contains the following choice-of-law provision: “This
License will be governed by and construed in accordance with the laws of the State of California,
as applied to agreements entered into and to be performed entirely within California between
California residents.” (Id.) In other words, California law controls the agreement, no matter
who sues Apple, or where.
Finally, the Software Agreement does not contain an arbitration provision nor does it
reference AT&T’s arbitration provision. 4 However, it does contain an invalidation provision that
contemplates suits in court, not complaints in arbitration: “If for any reason a court of competent
jurisdiction finds any provision, or portion thereof, to be unenforceable, the remainder of this
License shall continue in full force and effect.” (Id. (emphasis added).) Apple’s reference to “a
4

Apple’s latest iPhone-related license, released in October 2011, likewise does not contain
an arbitration clause.
6

court of competent jurisdiction” within the parties’ Software Agreement is inconsistent with an
intent to arbitrate. Rather, it contemplates that all claims, whether brought by Apple or against
Apple, will be brought in court.
B.

The iTunes Terms of Service.

In addition to the Software Agreement, every Plaintiff was required to accept the iTunes
TOS in order to activate their iPhones. (Docket No. 225-1 at 4.) The TOS contains a choice-oflaw provision similar to that of the iPhone Software Agreement: “All transactions on the iTunes
Service are governed by California law . . . .” (Id.) Thus, this provision also mandates that
California law governs Plaintiffs’ claims against Apple.
Additionally, as opposed to an arbitration agreement, the iTunes TOS contains the
following exclusive jurisdiction clause: “You expressly agree that exclusive jurisdiction for any
claim or dispute with Apple or relating in any way to your use of the Service resides in the courts
of the State of California.” (Id. (emphasis added).) The plain text of this clause makes clear that
it applies to “any claim or dispute with Apple,” and not just claims or disputes relating to use of
the iTunes service. Based on this jurisdiction clause, Plaintiffs are not required nor permitted to
arbitrate claims against Apple. Rather, they must bring all claims against Apple in court.
Apple’s website, as discussed above, further makes clear that the iTunes TOS covers the
iPhone. Again, the website states that Plaintiffs’ “use of Apple-branded hardware [i.e., iPhones]
and software products is based on the software license and others terms and conditions [i.e., the
iTunes TOS] in effect for the product.” (Ex. A.) In other words, the iPhone is governed by both
the Software Agreement and the iTunes TOS. In addition, the website confirms that every
Plaintiff was “asked to agree to the terms of the [iTunes TOS]” at the time they installed the
iTunes software in order to set up and activate their iPhones. (Id.) In sum, Apple cannot argue

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that the iTunes TOS is not relevant here when its own website and exclusive jurisdiction clause
make clear that the TOS applies to Plaintiffs’ use of their iPhones.
III.

The Arbitration Provision in AT&T’s WSA Specifies Which Nonsignatories May
Enforce It, and Apple Is Not One of Them.
The arbitration provision in AT&T’s WSA states: “AT&T and you agree to arbitrate all

disputes and claims between us.” (Docket No. 117-1.) It further provides: “References to
‘AT&T,’ ‘you,’ and ‘us,’ include our respective subsidiaries, affiliates, agents, employees,
predecessors in interest, successors, and assigns, as well as all authorized or unauthorized users
or beneficiaries of services or Device under this or prior Agreements between us.” (Id.) Thus,
the express terms of the arbitration provision in AT&T’s WSA explicitly limit arbitrable disputes
to those between Plaintiffs and the enumerated categories of persons and entities identified by
AT&T. Apple does not contend, nor can it, that it falls under any of the entities defined in the
provision.
ARGUMENT
I.

Because Apple Has Sought a Non-Perfunctory Adjudication on the Merits, Apple
Has Waived Any Right It May Have Had to Compel Arbitration.
Without having to decide whether equitable estoppel applies here, the Court should

dispose of Apple’s request by finding that Apple has waived any right it may have had to compel
arbitration. A party waives the right to compel arbitration when it has “substantially invoked the
judicial process to the detriment or prejudice of the other party.” In re Mirant Corp., 613 F.3d
584, 588 (5th Cir. 2010). The right to arbitration, like any other contract right, can be waived,
and a “party waives his right to arbitrate when he actively participates in a lawsuit or takes other
action inconsistent with that right.” Miller Brewing Co. v. Fort Worth Distrib. Co., Inc., 781
F.2d 494, 497 (5th Cir. 1986) (citations omitted). While the determination of whether a party has

8

waived arbitration depends upon the particular facts of the case, “[w]hen one party reveals a
disinclination to resort to arbitration on any phase of suit involving all parties, those parties are
prejudiced by being forced to bear the expenses of a trial. . . . . Substantially invoking the
litigation machinery qualifies as the kind of prejudice . . . that is the essence of waiver.” Id.
(citing E.C. Ernst, Inc. v. Manhattan Const. Co., 559 F.2d 268, 269 (5th Cir. 1977)). To waive
its right to arbitrate a “party must, at the very least, engage in some overt act in court that evinces
a desire to resolve the arbitrable dispute through litigation rather than arbitration.” Republic Ins.
Co. v. Paico Receivables, LLC, 383 F.3d 341, 344-45 (5th Cir. 2004). Indeed, the Fifth Circuit
has recognized that “[a] party waives arbitration by seeking a decision on the merits before
attempting to arbitrate.” Petroleum Pipe Ams. Corp. v. Jindal Saw, Ltd., 575 F.3d 476, 480 (5th
Cir. 2009).
In MC Asset Recovery, LLC v. Castex Energy, Inc., 2009 WL 900745, at *6 (N.D. Tex.
Apr. 3, 2009), the court held that the defendant, Castex, waived the right to compel arbitration as
it first filed a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) and
three motions to dismiss under Rules 9 and 12(b)(6). On appeal, the Fifth Circuit affirmed,
finding that Castex’s motions to dismiss were not perfunctory but instead sought a decision on
the merits prior to attempting to arbitrate. In re Mirant Corp., 613 F.3d at 589. The Fifth Circuit
also found that the plaintiff had been prejudiced by Castex’s conduct in that it incurred
considerable legal expenses responding to the motions, suffered an eighteen month delay in the
litigation, and was placed in a weaker legal position by being unable to pursue discovery. Id. at
591-92.
Here, Apple waived its right to seek arbitration after having first sought a decision on the
merits by filing 16 motions to dismiss directed to the Plaintiffs’ First Amended Complaints then

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consolidated before this Court. 5 Each of these motions to dismiss argued, among other things,
that Plaintiffs lacked Article III standing, that Plaintiffs’ complaints failed to allege fraud against
Apple with requisite specificity as required by Federal Rule of Civil Procedure 9(b), and that
Plaintiffs had failed to state causes of action for negligent misrepresentation, breach of warranty,
breach of contract, and unjust enrichment. Apple tailored each of its 16 motions to dismiss to the
state law applicable to each of the respective complaints and filed with the Court numerous
exhibits in support of its motions, including videos and a transcript of a telephone conference call
with industry analysts regarding Apple’s third quarter 2009 earnings. 6
Unquestionably, Apple’s filing of its motions to dismiss evidenced an intent to seek
resolution of the present MDL proceedings through litigation rather than arbitration. Apple’s
motions to dismiss constitute a serious effort to enlist the decision-making power of the Court to
eliminate Plaintiffs’ claims on their merits and not just an effort to preserve legal arguments
pending a motion to compel arbitration. In fact, Apple’s submission of over 55 pages of exhibits
along with CDs containing videos and other materials illustrates its desire to litigate this case in
court as opposed to an arbitral forum. Far from being a “perfunctory” motion to dismiss, Apple
fully briefed and supported a comprehensive request to have this Court rule on the merits of
Plaintiffs’ claims.
5

After Apple filed its salvo of motions to dismiss, additional actions were either
transferred by the JPML to this Court or direct filed pursuant to this Court’s direct filing order.
For a variety of procedural reasons, Apple was not required to respond to these additional seven
complaints until now.
6

In its brief supporting each respective motion to dismiss, Apple argued that the factual
material attached to its motions consisted only of items referenced or pled by Plaintiffs thereby
not converting its motions to dismiss into motions for summary judgment. (See, e.g., Docket No.
135-1 at 5 n.4.) Plaintiffs were required to respond substantively to this evidence, and argued
that the evidence went beyond the pleadings, requiring the Court to convert the motions to those
requesting summary judgment. (Docket. No. 204 at 29-33.)
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Moreover, the contrast between Apple’s conduct and that of AT&T illustrates that
Apple’s conduct in this case evinces a desire to litigate as opposed to arbitrate. Apple filed its
motions to dismiss on the same day that AT&T filed its own series of motions to dismiss, that is,
on August 10, 2010. In sharp contrast to Apple’s approach, AT&T filed motions to dismiss not
only urging the Court to dismiss Plaintiffs’ complaints on similar substantive grounds as
advanced by Apple, but AT&T also concurrently filed motions requesting that the Court dismiss
Plaintiffs’ cases in favor of compelling the parties to arbitration. In its briefs supporting its
numerous motions to dismiss Plaintiffs’ complaints on substantive grounds, AT&T stated that it
was contemporaneously filing motions to compel arbitration and that the Court should rule on
the arbitration motions first, the Court should consider deferring “briefing on the motion[s] to
dismiss,” and its substantive motions to dismiss were being filed for the Court’s consideration
only in the event that the Court were to deny AT&T’s motions to compel arbitration. (See
Docket No. 139-1 at 1 n.1.) Apple did not so condition or qualify its motions to dismiss, which
instead were completely silent on the issue of arbitration.
Recognizing that its initial conduct in the case was inconsistent with an intent to pursue
arbitration, Apple now disingenuously claims that it could not have moved to compel arbitration
earlier because the Discover Bank rule was effective in California at the time it filed its motions
to dismiss. In reality, the Discover Bank rule applied with equal force to its codefendant, AT&T,
at the time the parties filed their respective motions to dismiss in August 2010. AT&T had no
qualms about asking the Court to compel arbitration at that time, which was well before the
Supreme Court overturned the Discover Bank rule in AT&T Mobility LLC v. Concepcion, 131 S.
Ct. 1740 (2011). Apple could have easily joined in AT&T’s motion to compel arbitration at that
time just as it has now done post-Concepcion. Moreover, as of August 2010, the present MDL

11

proceeding involved numerous cases filed outside of California and nothing prevented Apple
from seeking to compel arbitration in jurisdictions other than California even when the Discover
Bank rule still had vitality. In reality, Apple’s new found enthusiasm for arbitration is an
opportunistic about-face that should not be countenanced by this Court.
Finally, Plaintiffs have suffered prejudice by virtue of Apple’s delay in requesting
arbitration. Plaintiffs have been prejudiced by Apple’s conduct in that their lawyers have spent
significant time preparing responses to the 16 motions to dismiss and, as was true in Castex
Energy, Plaintiffs have not been able to engage in discovery against Apple pending resolution of
Apple’s motions. See Castex Energy, Inc., 2009 WL 900745, at *6. Thus, as the court did in
Castex Energy, this Court should deny Apple’s present motion to compel arbitration on the basis
that the Plaintiffs have suffered prejudice due to Apple’s delay and untimely change of heart.
II.

The Court Need Not Consider Equitable Estoppel Because All of the Express,
Written Contracts Applicable to the Parties Indicate that iPhone Purchasers Did
Not Agree or Intend to Arbitrate with Apple.
Apple’s express, written contracts with Plaintiffs contain zero arbitration clauses.

AT&T’s WSA contains an arbitration clause, but also contains a limitation as to who may
arbitrate under that arbitration clause, and Apple is not an authorized party. Again, this Court
need not reach the issue of equitable estoppel at all, as the plain reading of all the relevant
contracts indicates that it is inappropriate for Plaintiffs to be compelled to arbitration with Apple.
A.

The Court Should Give Effect to the Plain Language of AT&T’s Arbitration
Clause, Which Expressly Limits Mandatory Arbitration to Disputes Between
AT&T and Its Customers.

In seeking to compel Plaintiffs to submit their claims to arbitration based upon AT&T’s
WSA, Apple goes straight to the theory of equitable estoppel without even analyzing the
arbitration provision that it seeks to invoke. “[T]hat approach skips the first step [of]

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determining whether a valid agreement to arbitrate exists.” Sherer v. Green Tree Servicing LLC,
548 F.3d 379, 382 (5th Cir. 2008). That first step requires the Court to examine the terms of the
arbitration provision at issue to determine who is actually bound by it. See id. at 381. Indeed, a
party to an arbitration agreement is entitled “to limit with whom [it] will arbitrate its disputes.”
Concepcion, 131 S. Ct. at 1749. Accordingly, “[i]f [an] agreement specifies the circumstances in
which a signatory is required to arbitrate his claims against a nonsignatory, the terms of the
contract govern.” Green v. Serv. Corp. Int’l, 333 F. App’x 9, 11 n.1 (5th Cir. 2009).
Because AT&T’s WSA expressly limits to whom its arbitration clause applies, and that
clause does not include Apple, equitable estoppel should not even be considered. Mims v.
Global Credit & Collection Corp., No. 10-23830-CIV, 2011 WL 3586056 (S.D. Fla. Aug. 12,
2011), is instructive. In Mims, a debt collector sought to compel arbitration based on a credit
agreement between the plaintiff and his creditor which contained an arbitration provision. Id. at
*1. The arbitration provision covered claims “between you and us,” and it defined “us” as
including the “[the creditor], its successors, assigns, agents, and/or authorized representatives.”
Id. The court found:
[I]n defining “us” as referring only to certain enumerated categories of
individuals, the parties evinced a clear intent that the arbitration provision only
apply to disputes between Plaintiff and those specific individuals. Consequently,
the Court will not construe the provision as limitlessly expanding that definition.
Id. at *6; see also Fox v. Nationwide Credit, Inc., No. 09-cv-7111, 2010 WL 3420172, at *4
(N.D. Ill. Aug. 25, 2010) (denying nonsignatory’s motion to compel where agreement “expressly
and specifically limited” the claims subject to arbitration “to those between the [plaintiff] and a
defined list of persons and entities”); cf. Sherer, 548 F.3d at 382 (compelling arbitration because
plaintiff’s claim fell within loan agreement that “clearly identif[ied] when [plaintiff] may be
compelled to arbitrate with a nonsignatory”); Hornicek v. Cardworks Servicing, LLC, No. 1013

3631, 2011 WL 2623274, at *3 (E.D. Pa. June 29, 2011) (compelling arbitration because
nonsignatory “falls squarely within one of the enumerated categories with which [plaintiff] has
agreed to arbitrate”). Further, when an agreement specifies who is bound by it, a court need not
“draw[] on various theories of contract and agency law, including equitable estoppel, to
determine a nonsignatory’s rights and duties under an arbitration clause.” Sherer, 548 F.3d at
382.
Like the arbitration provision at issue in Mims, the express terms of the arbitration
provision in AT&T’s WSA explicitly limit arbitrable disputes to those between Plaintiffs and the
enumerated categories of persons and entities—specifically, “subsidiaries, affiliates, agents,
employees, predecessors in interest, successors, and assigns, as well as all authorized or
unauthorized users or beneficiaries of services or Device under this or prior Agreements between
us.” (Docket No. 117-1.) None of these entities includes Apple. “Plaintiff[s] thus cannot fairly
be considered to have consented to arbitration with other unenumerated entities.” Mims, 2011
WL 3586056, at *6. As such, this Court should give effect to the plain language of the provision
and need not consider whether equitable estoppel applies.
B.

Apple’s Express, Written Agreements Make Clear That Neither Plaintiff Nor
Apple Contemplated Arbitration.

In determining whether parties have agreed to arbitrate a dispute, courts apply “general
state-law principles of contract interpretation.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland
Stanford Junior Univ., 489 U.S. 468, 475 (1989). One such principle is that equitable relief
cannot be granted where the rights of the parties are governed by an express, valid contract. 30A
C.J.S. Equity § 60 (2011) (“[E]quitable remedies will not lie where the rights of the parties are
governed by a valid contract.”). Consistent with this principle, some courts have found that the
existence of a separate agreement between the parties litigating a motion to compel arbitration
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precludes equitable estoppel. For example, in Goldman v. KPMG LLP, 92 Cal. Rptr. 3d 534
(Cal. Ct. App. 2009), the plaintiffs sued their investment advisors and accountants for damages
in connection with fraudulent tax shelter schemes. The plaintiffs’ “standard operating
agreement” with their investment advisors included an arbitration provision. Id. at 539. Their
accountants, who were not parties to that agreement, moved to compel arbitration on the basis of
equitable estoppel even though the accountants’ separate engagement letter with the plaintiffs did
not contain an arbitration provision. Id. at 539-40. According to the court,
The existence of engagement letters . . . containing no arbitration clauses makes it
all the more apparent that the application of an equitable doctrine to require
arbitration between parties who have not agreed to arbitrate is entirely
inappropriate in this case. . . . [U]nless a party to an arbitration agreement has
used the substantive terms of that agreement as the foundation for his claims
against a nonsignatory, there is no reason in equity why he should be forced to
arbitrate his claims against the nonsignatory. This is especially so where that
party actually has a written agreement with the defendant containing no
arbitration clause.
Id. at 555; see also Hallwood Group Inc. v. Balestri, No. 3:10-CV-1198-K, 2010 WL 427454, at
*2 (N.D. Tex. Oct. 21, 2010) (affirming denial of motion to compel arbitration where “[t]he only
contract signed by both parties . . . did not contain an arbitration clause” and “contained a jury
trial waiver and consent to Texas state court jurisdiction,” which “are clearly inconsistent with an
intent to arbitrate”); In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191 (Tex. 2007)
(finding nonsignatories had no right under arbitration agreement where that agreement “referred
to some affiliates and third parties, but not [the nonsignatories],” those nonsignatories “signed
their own contracts with the plaintiffs, which had no arbitration clauses,” and where allowing
them “to compel arbitration would effectively rewrite their contracts”); Hartford Life Ins. Co. v.
Forman, Nos. 13-08-00547-CV & 13-08-00603-CV, 2009 WL 1546924, at *6 (Tex. App. June
3, 2009) (finding that, where defendants—nonsignatories to the arbitration agreement—“had

15

separate contracts with [plaintiff] which did not contain arbitration clauses,” compelling
arbitration “would allow them to effectively rewrite their contracts”).
Here, the existence of, not one, but two agreements between Apple and Plaintiffs, neither
of which contain an arbitration provision, makes it all the more apparent that applying equitable
estoppel to force arbitration between parties who have not agreed to arbitrate is inappropriate. 7
Apple could have included an arbitration provision in the software license agreement or the
iTunes TOS, but chose not to do so. 8 In fact, the iTunes TOS evinces an intent not to arbitrate
by providing that the “exclusive jurisdiction for any claim or dispute” resides in court, not
arbitration. See Hallwood, 2010 WL 427454, at *2. Additionally, the invalidation provision in
the Software Agreement, which refers to “a court of competent jurisdiction” further evinces an
intent not to arbitrate. Apple should not be allowed to rewrite its own agreements in favor of
AT&T’s contract. “To allow [Apple] to assert the right to arbitrate under these circumstances
would further denude the doctrine of equitable estoppel of its essence: equity.” Goldman, 92
Cal. Rptr. 3d at 555.

7

Apple argues that the existence of other agreements between Plaintiffs and Apple is
irrelevant. (Docket No. 235-1 at 16 n.7.) Apple, however, misstates the holdings in the two
cases that it cites. In Grigson v. Creative Artists Agency, LLC, 210 F.3d 524 (5th Cir. 2000), the
court mentions a separate contract between the two codefendants, but makes no mention of a
separate contract between the nonsignatories and the parties to be estopped. The court in NS
Holdings LLC v. American International Group, Inc., No. 10-1132, 2010 WL 4718895 (C.D.
Cal. Nov. 15, 2010), likewise makes no mention of separate contracts between the nonsignatories
and the parties to be estopped.
8

Apple may argue that it did not include an arbitration clause because it could not do so
until after Concepcion. That argument is unpersuasive. First, many corporations, including
AT&T, have arbitration clauses in their contracts that are applicable in California, and have
repeatedly argued that they are valid and enforceable. One example is the Concepcion case
itself. Simply put, Apple made a strategic choice not to include an arbitration clause. Second,
the latest iPhone-related license, released in October 2011 after Concepcion, still does not
contain an arbitration clause. Third, the argument is irrelevant—Apple’s motivation for not
having an arbitration clause cannot possibly have any bearing on the analysis.
16

Apple argues that the iTunes TOS is irrelevant, brazenly stating that the service is used
only to purchase things like music and books. Yet since iPhone’s inception, Apple has utilized
the iTunes software interface to perform many housekeeping tasks necessary for iPhone’s use,
including updating the operating system. (See Ex. C (stating that “iTunes can update your
[iPhone] device to the latest available iOS software,” and explaining the step by step
procedures)). In fact, when Apple finally made MMS available to its customers in late
September 2009, all users were required to use iTunes to acquire the necessary software update
that permitted MMS messages to be received, viewed, and sent on the iPhone. (Ex. D.) To
claim that the iTunes contract is irrelevant to MMS functionality does not comport with reality.
III.

If the Court Reaches the Question, Apple Does Not Meet Its Burden of Showing
That This Constitutes One of the “Rare Circumstances” Where Equitable Estoppel
May Apply.
Even if Apple’s contracts permitted mandatory arbitration, and even if AT&T’s WSA

included Apple as a party that was permitted to arbitrate under the WSA, this Court should
nevertheless find that Apple has failed to satisfy the narrow test for applying equitable estoppel.
Apple has the burden of showing that equitable estoppel applies. See Just Film, Inc. v. Merchant
Servs., Inc., 2011 WL 3809908, at *6 (N.D. Cal. Aug. 29, 2011) (stating that “parties seeking to
invoke estoppel, have the burden to show that it applies”); Cal. Chiropractic Ass’n v. Am.
Specialty Health Plans, Inc., No. D039238, 2003 WL 1870963, at *6 (Cal. Ct. App. Apr. 14,
2003). Under all potentially applicable iterations of the elements of equitable estoppel, Apple
fails to meet this burden.
Additionally, the federal policy favoring arbitration does not apply to Apple’s motion.
“The question here is not whether a particular issue is arbitrable, but whether a particular party is
bound by the arbitration agreement. Under these circumstances, the liberal federal policy

17

regarding the scope of arbitrable issues is inapposite.” Comer v. Micor, Inc., 436 F.3d 1098,
1104 n.11 (9th Cir. 2006); see Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th
Cir. 2002). Rather, “[o]ridinary contract principles determine who is bound.” Fleetwood, 280
F.3d at 1073 (internal quotations omitted).
A.

California Law Should Apply to the Issue of Equitable Estoppel, But Even If
It Does Not, the Entire Body of Caselaw Establishes that Arbitration Should
Not Be Compelled in This Case.

When deciding a motion to compel arbitration on the grounds of equitable estoppel, the
United States Supreme Court has stated that a district court must look to the appropriate state’s
contract law to determine whether it should be granted. Arthur Andersen LLP v. Carlisle, 129 S.
Ct. 1896, 1902 (2009); see also First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944
(1995). Here, because Plaintiffs entered into two separate contracts with Apple in which they
agreed that California law would apply to any claim or dispute between them, see supra,
California contract law is the appropriate state’s contract law to apply to Apple’s motion to
compel arbitration. See Delhomme Indus., Inc. v. Houston Beechcraft, Inc., 669 F.2d 1049, 1058
(5th Cir. 1982) (stating that, in Louisiana, choice-of-law clauses in contracts are given effect
unless there is law or strong public policy justifying the refusal to enforce the contract as
written).
Prior to the U.S. Supreme Court’s decision in Carlisle, the Fifth Circuit had directed that
“the federal substantive law of arbitrability,” not state contract law, applies to the question of “to
what extent a non-signatory is bound by an arbitration provision contained in a contract.” Wash.
Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 267 n.6 (5th Cir. 2004) (internal quotations
omitted). Since Carlisle, the Fifth Circuit has found that uncertainties continue to exist regarding
whether state contract law or the federal substantive law of arbitrability should be applied. See,

18

e.g., D.K. Joint Venture 1 v. Weyand, 649 F.3d 310, 314 (5th Cir. 2011). Given this uncertainty,
the Fifth Circuit has advised that, when deciding whether to compel arbitration on the grounds of
equitable estoppel, a district court may first determine if a conflict exists between state law and
federal law such that a choice of law analysis is necessary. Id. Should the Court find that both
bodies of law lead to the same conclusion, then a choice of law analysis need not be undertaken.
Id. Here, because both federal and California law lead to the same ultimate conclusion—that
plaintiffs cannot be compelled to arbitrate their claims against Apple—this Court should deny
Apple’s motion.
California and federal courts both adhere to the general rule that “a nonsignatory to an
agreement cannot be compelled to arbitrate.” Sweidan v. Fountain Valley Reg’l Hosp., No.
B228392, 2011 WL 4639911, at *6 (Cal. Ct. App. Oct. 7, 2011); see also Westmoreland v.
Sadoux, 299 F.3d 462, 467 (5th Cir. 2002) (stating that “courts must not offer contracts to
arbitrate to parties who failed to negotiate them before trouble arrives”). The rationale behind
this rule is simple—“one cannot be required to submit a dispute to arbitration unless one has
agreed to do so.” Goldman, 92 Cal. Rptr. 3d at 542; see also Westmoreland, 299 F.3d at 467.
Nevertheless, both California and federal law provide for exceptions to this general
rule—one rare exception being equitable estoppel. Weingarten Realty Investors v. Miller, No.
11-20676, 2011 WL 5142183, at *5-6 (5th Cir. Nov. 1, 2011); Mundi v. Union Sec. Life Ins. Co.,
555 F.3d 1042, 1045-46 (9th Cir. 2009); Sweidan, 2001 WL 4639911, at *6. Federal courts
apply an “intertwined-claims test” to determine whether to apply equitable estoppel.
Weingarten, 2011 WL 5142183, at *5-6. California courts, on the other hand, are split as to the
legal standard for applying equitable estoppel. Some apply federal decisional authority (i.e., the
intertwined-claims test), while others apply the traditional common law requirements of

19

equitable estoppel. Compare Sweidan, 2011 WL 4639911, at *6, with Cal. Chiropractic, 2003
WL 1870963, at *5. Regardless of whether this Court applies the common law principles of
equitable estoppel or the intertwined-claims test, the specific facts of this case mandates denial of
Apple’s motion.
B.

Apple Fails to Meet the Common Law Test for Equitable Estoppel.

Several California courts have adhered to the common law test for equitable estoppel in
determining whether to compel arbitration between a signatory and a nonsignatory. See
Coachmen Indus., Inc. v. Freightliner LLC, No. C045709, 2005 WL 1714234, at *3-4 (Cal. Ct.
App. July 25, 2005); Cal. Chiropractic, 2003 WL 1870963, at *5; CD Listening Bar, Inc. v.
Superior Court, 2001 WL 1660049, at *5 (Cal. Ct. App. 2001); see also Ervin v. Nokia, Inc., 812
N.E.2d 534, 541 (Ill. App. Ct. June 22, 2004) (“A claim of equitable estoppel exists where a
person, by his or her statements or conduct, induces a second person to rely, to his or her
detriment, on the statements or conduct of the first person.”). These courts reason that equitable
estoppel “is founded on concepts of equity and fair dealing,” and whenever a party has, by his
own statement or conduct, “intentionally and deliberately led another to believe a particular thing
true and to act upon such belief, he . . . is not, in any litigation arising out of such statement or
conduct, permitted to contradict it.” Cal. Chiropractic, 2003 WL 1870963, at *5 (internal
quotations omitted); see also Grigson v. Creative Artists Agency, LLC, 210 F.3d 524, 528 (5th
Cir. 2000) (“The linchpin for equitable estoppel is equity-fairness.”). Specifically, for equitable
estoppel to apply
[t]here must be (1) a representation or concealment of material facts (2) made
with knowledge, actual or virtual, of the facts, (3) to a party ignorant, actually and
permissibly, of the truth, (4) with the intent, actual or virtual, that the latter act
upon it, and (5) the party must have been induced to act upon it.
Cal. Chiropractic, 2003 WL 1870963, at *5 (alteration in original) (internal quotations omitted).
20

A case with facts very similar to the one at present is Ervin v. Nokia, Inc. While Ervin
was decided by an Illinois state court, it applied common law principles of “equitable estoppel,”
as does California. 812 N.E.2d at 541. In Ervin, a cell phone purchaser brought a putative class
action against the cell phone manufacturer (Nokia) and the cell phone service provider (AT&T)
for damages for the alleged manufacture and sale of a defective product. Id. at 536. Similar to
the case at bar, the cell phone purchaser entered into a contract with AT&T for cell phone
service. Id. at 536-37. The box of the cell phone contained an owner’s manual which did not
contain an arbitration clause. Id. at 537. Nokia moved to compel arbitration on the grounds of,
inter alia, equitable estoppel. The court denied the motion, holding that Nokia could not compel
arbitration based on the arbitration clause in AT&T’s wireless service agreement because Nokia
did not reasonably rely to its detriment upon the acts or representations of the purchaser
regarding the arbitration clause and such reliance is a requirement of the common law doctrine of
equitable estoppel. Id. at 541-43. To hold otherwise would deny the purchaser “access to the
courts and force him to arbitrate his claim against Nokia, in spite of the fact that Nokia was not a
party to [AT&T’s wireless service agreement] that [the purchaser] entered into with AT&T.” Id.
at 543.
Here, Apple does not argue that it meets the five elements of equitable estoppel described
above. Nor can it. There is no evidence that Plaintiffs represented or concealed any material
fact with the intent that Apple act upon it. Further, it cannot be said that Apple was ignorant of
the arbitration agreement in AT&T’s WSA or Plaintiffs’ claims. Simply put, the common law
principles of estoppel do not permit Apple to invoke the arbitration clause in AT&T’s WSA.

21

C.

Even if the Court Does Not Apply the Common Law Test for Equitable
Estoppel, Apple’s Motion Still Fails Because It Cannot Show that Plaintiffs’
Claims Are Intertwined with AT&T’s WSA.

In determining whether to apply equitable estoppel, “the sine qua non . . . is that the
claims the plaintiff asserts against the nonsignatory must be dependent upon, or founded in and
inextricably intertwined with, the underlying contractual obligations of the agreement containing
the arbitration clause.” Goldman, 92 Cal. Rptr. 3d at 540 (emphasis added); see Weingarten,
2011 WL 5142183, at *6. Thus, the intertwined-claims test permits equitable estoppel “only if
the plaintiffs’ claims against the nonsignatory are dependent upon, or inextricably bound up
with, the obligations imposed by the contract plaintiff has signed with the signatory defendant.”
Goldman, 92 Cal. Rptr. 3d at 550 (emphasis added). The rationale behind this is fairness.
Grigson, 210 F.3d at 528 (“The linchpin for equitable estoppel is equity-fairness.”). A signatory
“cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed by the
agreement, which contains an arbitration provision, but, on the other hand, deny the arbitration’s
applicability because the defendant is a non-signatory.” Id. (emphasis added); see also Goldman,
92 Cal. Rptr. 3d at 542-43 (stating that equitable estoppel “precludes a party from asserting
rights he otherwise would have had against another when his own conduct renders assertion of
those rights contrary to equity” (internal quotations omitted)).
Courts have found the intertwined-claims test met where plaintiffs have attempted to
hold signatories liable pursuant to duties or obligations imposed by the agreements containing
the arbitration clause. 9 See Grigson, 210 F.3d at 527-28 (finding estoppel to be appropriate
under the facts of that particular case because plaintiffs were attempting “to hold the
9

Apple recognizes this “imposition of duty” principle in its brief (see Docket No. 235-1 at
11) but it fails to direct the Court to allegations contained in Plaintiffs’ complaints in which
Plaintiffs alleged that Apple owed them a duty imposed by AT&T’s WSA. Indeed, no such
allegations exists. See supra.
22

nonsignatory liable pursuant to duties imposed by the agreement, which contain[ed] an
arbitration provision,” while at the same time trying to avoid the arbitration clause contained in
the same contract (emphasis added)); see also Bank One of Ariz., N.A. v. Wilton Hurst, No. 3:00cv-2254-x, 2001 WL 276891, at *2 (N.D. Tex. March 19, 2001) (applying estoppel where
plaintiff attempted to hold nonsignatory general partner liable pursuant to duties imposed by the
loan agreement containing arbitration clause); Amisil Holdings Ltd. v. Clarium Capital Mgmt.,
622 F. Supp. 2d 825, 840-41 (N.D. Cal. 2007) (applying estoppel where plaintiff attempted to
use the written agreement containing the arbitration clause as a basis for his action against
nonsignatory defendants). In other words, the plaintiffs were trying to “have it both ways” and
fairness dictated that the court apply equitable estoppel. See Grigson, 210 F.3d at 528.
Conversely, in denying motions to compel arbitration, courts have made clear that
equitable estoppel applies only in rare circumstances where a signatory is bringing suit arising
out of duties directly imposed by the underlying agreement containing the arbitration clause.
See, e.g., Weingarten, 2011 WL 5142183, at *5-6 (denying motion to compel arbitration where
nonsignatory’s duty arose from a separate agreement which did not contain an arbitration
provision); Corporate Am. Credit Union v. Herbst, 397 Fed. App’x 540, 542 (11th Cir. 2010)
(denying motion to compel arbitration where plaintiffs’ claims of negligence or fraudulent
misrepresentations did not arise from the terms of the contract containing the arbitration
provision); Bridas S.A.P.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347, 360-62 (5th Cir. 2003) 10

10

Notably, the Fifth Circuit panel deciding Bridas further placed the Grigson opinion into
question, observing, “Grigson, and the 11th Circuit decision that it relied upon, have been
referred to as misguided deviations from traditional estoppel theories.” Bridas, 345 F.3d at 361
n.12. It specifically took heed of language in the Grigson dissent, which stated, “[N]early
anything can be called estoppel. When a lawyer or a judge does not know what other name to
give for his decision to decide a case in a certain way, he says there is an estoppel.” Id. (internal
quotations omitted). Thus, Grigson should not be hastily applied beyond its narrow facts.
23

(denying signatory’s motion to compel arbitration against a nonsignatory, narrowing Grigson,
where the nonsignatory did not sign a contract containing an arbitration provision nor ever sued
the signatory on the agreement containing the arbitration provision); Westmoreland, 299 F.3d at
467 (denying motion to compel arbitration where signatory’s suit did not seek to enforce any
duty created by the agreement containing the arbitration clause); Goldman, 92 Cal. Rptr. 3d at
540-41 (finding that signatories’ claims against nonsignatories were unrelated to any obligations
in the operating agreements containing the arbitration clause).
Even where the signatory relies, to some extent, upon the contract containing the
arbitration provision, courts have denied a nonsignatory’s motion to compel. For example, in
Weingarten Realty Investors v. Miller, two companies, Weingarten Realty Investors (“WRI”) and
Miller Sheriden, LLC (“MS”), created a joint venture (“JV”) and WRI agreed to loan the joint
venture $75 million under the “Loan Agreement” entered into between WRI and the JV.
Weingarten, 2011 WL 5142183, at *1. The Loan Agreement was signed both by WRI and by
the JV, and contained an arbitration provision which provided that any dispute “arising out of, in
connection with, or relating to the Note or any of the other Loan Documents” would be settled by
arbitration. Id.
Defendant, Steven Miller, did not sign the Loan Agreement that contained the arbitration
clause. Id. Miller did personally sign a “Limited Guarantee” for the loan, which was executed
contemporaneously with the Loan Agreement. Id. The Limited Guarantee was also signed by
Miller Sheriden, LLC. Id. The Limited Guarantee did not contain an arbitration clause and the
Loan Agreement did not identify the Limited Guarantee as a Loan Document. 11 Id. Therefore,

11

The Loan Agreement was subsequently amended twice and in both amendments the
definition of “Loan Documents” included the Limited Guarantee. Weingarten, 2011 WL
5142183, at *1. However, the Fifth Circuit determined, “Although the two amendments to the
24

defendant Miller was a nonsignatory to any arbitration clause. To summarize:
Loan Agreement = Arbitration Clause
Signatories: WRI and JV

Limited Guarantee = No Arbitration Clause
Signatories: Miller and MS

The JV subsequently did not pay on its note, so WRI sought payments from Miller under
the terms of the Limited Guarantee. Id. After suit was filed against Miller for payment pursuant
to the Limited Guarantee, Miller sought arbitration on the grounds of, inter alia, equitable
estoppel. Id. Nonsignatory Miller contended that WRI’s claims against it depended upon the
Loan Agreement, because Miller’s obligation to pay, as guarantor, was automatically triggered
when the joint venture did not perform under the terms of the Loan Agreement. Id. at *6. Thus,
Miller argued that liability under the Limited Guarantee was determined solely by whether and
when there was a breach of the Loan Agreement, and thus equitable estoppel needed to be
applied to enforce the arbitration clause contained in the Loan Agreement. Id.
The district court rejected Miller’s argument, finding that Miller’s Limited Guarantee was
not covered by the arbitration provision in the Loan Agreement. (Ex. E.) The Fifth Circuit
affirmed the district court’s denial, rejecting the nonsignatory’s argument that equitable estoppel
applied, even though plaintiff WRI’s cause of action directly arose, and was entirely dependent
upon, the joint venture breaching Loan Agreement. Weingarten, 2011 WL 5142183, at *6. The
Fifth Circuit held that, although proving a breach of the Loan Agreement was necessary to
establish nonsignatory Miller’s liability under the Limited Guarantee, that was not enough for the
Fifth Circuit to find reliance upon the terms of the Loan Agreement so as to apply equitable

Loan Agreement describe ‘Loan Documents’ as including the Limited Guarantee, those recitals
are not strictly part of the contract [and] cannot extend contractual stipulations . . . . Therefore,
even though the recitals of the subsequent amendments refer to the Limited Guarantee as a Loan
Document, it cannot extend the arbitration clause’s coverage in the original Loan Agreement.”
Id. at *5 (internal quotations omitted). Thus, the Limited Guarantee could not fall within the
scope of the arbitration clause agreed to.
25

estoppel. Id. (“[T]he district court did not abuse its discretion in concluding that the Limited
Guarantee is not so intertwined with and dependent on the distribution agreement that arbitration
should be compelled under the exceptional principle of equitable estoppel.”) Therefore, the mere
fact that the nonsignatory’s liability depended on proving that a contract containing an arbitration
clause had been breached was not enough to show that the claim against the nonsignatory was so
intertwined with and dependent on the arbitration-clause-containing contract as to trigger
equitable estoppel.
Similarly, in Ellen v. A.C. Shultes of Maryland, Inc., 615 S.E.2d 729 (N.C. Ct. App.
2005), the North Carolina Court of Appeals affirmed the trial court’s denial of a motion to
compel arbitration. The defendant, a general contractor, signed an agreement with a
subcontractor that contained an arbitration clause. Id. at 730. Plaintiffs were shareholders in the
subcontractor but were not signatories to the agreement. Id. Plaintiffs then filed a complaint
against the general contractor, alleging unfair and deceptive trade practices and tortious
interference with prospective business advantages. Id. Invoking the arbitration clause in its
agreement with the subcontractor, the general contractor sought to compel plaintiffs to arbitrate
their claims based on equitable estoppel. See id. at 732. The court recognized that the agreement
“provides part of the factual foundation” for plaintiffs’ complaint. Id. (internal quotations
omitted). Nevertheless, it refused to force plaintiffs to arbitrate their claims because the general
contractor’s “liability will be determined by its duties under North Carolina statutory and
common law, not by its duties under the [agreement].” Id. at 733; see also Billieson v. City of
New Orleans, 863 So. 2d 557, 560 (La. Ct. App. 2003) (denying motion to compel arbitration
because plaintiffs’ suit against nonsignatory defendants sounded in tort, not contract, and
plaintiffs were only making reference to the underlying agreement containing the arbitration

26

provision to assert tort liability not to enforce the contract itself); Simmons Housing, Inc. v.
Shelton ex rel. Shelton, 36 So. 3d 1283, 1288 (Miss. 2010) (denying motion to compel where
actions sounded in tort); Netco, Inc. v. Dunn, 194 S.W.3d 353, 361 (Mo. 2006) (noting that
“estoppel theory in this context is most often applied in cases where a plaintiff alleges that a
defendant is liable under the terms of a contract” and denying motion to compel arbitration
where charge being alleged against nonsignatories was conspiracy to misappropriate plaintiffs’
business, not failure to perform pursuant to the terms of the agreement containing the arbitration
clause); I Sports v. IMG Worldwide, Inc., 813 N.E.2d 4, 9 (Oh. Ct. App. 2004) (denying
nonsignatories’ motion to compel arbitration finding that the plaintiffs’ need to establish breach
of the underlying agreement containing the arbitration clause did not mean that plaintiff must
rely upon the terms of the agreement to assert their claims of defamation, interference with
contractual relations, unfair and deceptive trade practices, and unauthorized practices of law
against nonsignatories).
As discussed above, Plaintiffs here claim that Apple engaged in deceptive conduct in one
of three ways: (1) by affirmatively misrepresenting the availability of MMS on the iPhone 3GS;
(2) by failing to disclose that AT&T would be charging them for MMS but not providing it; and
(3) by failing to disclose that AT&T’s data plan required MMS but they would not receive it. In
asserting these three claims, Plaintiffs have not alleged a duty on the part of Apple imposed by
AT&T’s WSA nor have they alleged reliance upon AT&T’s WSA. Rather, Apple’s duty to
disclose was imposed by the consumer protection statutes upon which Plaintiffs assert a cause of
action. As in Weingarten Realty Investors, the mere “fact” of a breach of contract triggered a
duty arising from a separate agreement or legal obligation does not make that contract so
“intertwined” with the nonsignatory as to allow equitable estoppel to apply.

27

First, Plaintiffs’ claims of affirmative misrepresentation by Apple do not reference AT&T
or the WSA. The duty allegedly owed by Apple giving rise to Plaintiffs’ affirmative
misrepresentation claims against Apple is imposed by law. See, e.g., Carbine compl. Counts I,
II, VIII, and IX (duties imposed by law); id. Counts IV, V, and VI (duties imposed by contract
between Plaintiffs and Apple); id. Count VII (duty imposed by principles of equity).
Second, Plaintiffs’ claims of Apple’s failure to disclose that they would be charged for
MMS, again, do not refer to the WSA. Nor do they allege that Apple owed or breached a duty
under the WSA. Rather, Plaintiffs allege that Apple owed them a duty imposed by law to
disclose that AT&T would be charging for MMS but not providing it, and that Apple violated
that duty by failing to disclose the material information. See, e.g., id. Counts I, II, and VIII. In
other words, Plaintiffs’ claims are based upon Apple’s knowledge of certain material facts,
which the law requires them to disclose and which Apple affirmatively and independently chose
not to disclose. Id.
Third, Plaintiffs’ claims of Apple’s failure to disclose to iPhone customers that the AT&T
data plan required MMS service but they would not receive it are based upon legal duties
imposed on Apple by law, not contract, and most certainly not AT&T’s WSA. See, e.g., id.
Counts I, II, and VIII. While this particular claim does refer to the WSA so as to provide factual
background, the legal basis of Plaintiffs’ claim against Apple does not depend on any obligation
imposed on Apple by the terms of the WSA. See Weingarten, 2011 WL 5142183, at *6 (merely
using underlying agreement containing arbitration provision and signatory’s breach thereof to
trigger collateral legal duty was not enough for nonsignatory to compel arbitration); Weisblatt v.
Apple, Inc., No. C-10-02553, 2010 WL 4071147, at *4 (N.D. Cal. Oct. 18, 2010); Goldman, 92
Cal. Rptr. 3d at 541 (finding that signatory “must rely on the terms” of the agreement with an

28

arbitration clause and that “merely mak[ing] reference to [it] . . . is not enough” (first alteration
in original) (internal quotations omitted)). Rather, this claim refers to the WSA only to inform
the Court of the material information which was within Apple’s possession and which Apple
chose not to disclose to Plaintiffs in violation of their duties imposed by law.
In short, not one of Plaintiffs’ causes of action against Apple arise out of any duty
imposed on Apple by AT&T’s WSA. Nor do Plaintiffs’ complaints allege that the duty owed to
them by Apple arose out of the WSA. In fact, Plaintiffs specifically do not allege a duty owed to
them by Apple under AT&T’s WSA. See Carbine compl. Count III (cause of action against
AT&T only for breach of obligations imposed by the WSA). Accordingly, because Plaintiffs are
not seeking to hold Apple liable pursuant to duties imposed by AT&T’s WSA, the underlying
principle of fairness, which supports the application of equitable estoppel only in rare
circumstances, does not apply. See Westmoreland, 299 F.3d at 465 (stating that arbitration
agreement can be invoked by nonsignatory only in “rare circumstances”). As such, the Court
should deny Apple’s motion.
D.

Plaintiffs Have Not Raised Allegations of Substantially Interdependent and
Concerted Misconduct by Apple and AT&T.

Apple misstates the bases upon which this Court may apply equitable estoppel. It asserts
that, in addition to showing that Plaintiffs’ claims rely on or are inextricably bound up with the
obligations imposed by the WSA, equitable estoppel also applies upon a showing of
interdependent and concerted misconduct by Apple and AT&T. According to Apple, the latter
constitutes an “independently sufficient bas[i]s” for estoppel. (Docket No. 235-1 at 9.)
However, allegations of “interdependent and concerted misconduct by signatories and
nonsignatories, standing alone, are not enough: the allegations of interdependent misconduct

29

must be founded in or intimately connected with the obligations of the underlying agreement.”
Goldman, 92 Cal. Rptr. 3d at 541; see also Weingarten, 2011 WL 5142183, at *6.
Nevertheless, even if allegations of interdependent and concerted misconduct are
sufficient, Apple has not pointed to any such allegations in Plaintiffs’ complaints. Rather, Apple
has misconstrued the contents of Plaintiffs’ allegations. A clear reading of each complaint,
however, reveals that, despite Apple and AT&T having an exclusive relationship with regard to
iPhone service, not a single Plaintiff has alleged that they coordinated their conduct regarding
MMS misrepresentations or non-disclosures. In fact, Apple was likely frustrated with the fact
that AT&T would not provide MMS services for iPhone. Indeed, Plaintiffs’ claims against
Apple are independent of their claims against AT&T and can be maintained “without regard to
the intent, knowledge or liability of [AT&T].” See Weisblatt, 2010 WL 4071147, at *4 (denying
Apple’s motion to stay plaintiffs’ actions against Apple pending Concepcion where plaintiffs’
claims against Apple, while related to AT&T’s iPad data plans, centered around specific
misrepresentations made by each defendant, “each of which [was] independently actionable
against the party that made them, without regard to the intent, knowledge or liability of the other
[d]efendant”).
Plaintiffs have alleged separate causes of action against Apple based upon Apple’s
deceptive behavior in misrepresenting and failing to disclose material information to Plaintiffs.
Not one of Plaintiffs’ allegations specifically state that Apple and AT&T jointly,
interdependently, or conspiratorially engaged in these activities. In fact, throughout their
complaints, Plaintiffs have specifically delineated which activities were engaged in by Apple and
which were engaged in by AT&T, examples of which are as follows:
•

AT&T made a decision to let all of its customers, except iPhone customers, have
access to its network to text pictures. AT&T promoted and sold unlimited texting
30

plans to all it customers, called “Messaging Unlimited” which gave its customers
the ability to send unlimited messages to any wireless phone in the United States
for $19.99 per month. Promoting its Messaging Unlimited MMS capabilities,
AT&T advertised and represented to consumers, including Plaintiff, that its
Messaging Unlimited plan “included text, picture, video and IM.” AT&T also
offered unlimited “Family Plans” for $30.00 per month. While AT&T allowed
customers other than iPhone users to text pictures, AT&T intentionally barred
iPhone users from having the same ability given its network limitations.
However, AT&T continued to charge the consumers for that service and
represented to the iPhone users that the service included pictures. See, e.g.,
Carbine compl. ¶ 7.
•

For Apple’s part, it covered up the “problem” with an intentionally misleading
advertising campaign. Specifically, Apple never disclosed to consumers that they
had to pay for the picture messaging under the unlimited plans from their
exclusive provider, AT&T, even though they would not have that service.
Moreover, Apple made affirmative representations that such a service was
available on the iPhone, including large in-store videos showing people texting
pictures with small, fine print disclosures about when the service was available,
intentionally designed so that consumers would not see or understand them. See,
e.g., id. ¶ 8.

•

Defendants each engaged in conduct that is likely to deceive and has deceived the
public. See, e.g., id. ¶ 12.

•

Defendants Apple and AT&T each promoted and advertised the iPhone and
AT&T’s messaging plans. See, e.g., id. ¶ 22.

•

In the spring of 2009, Apple and AT&T each initiated an advertising campaign to
sell its older 3G models in preparation for the launch of 3GS . . . On March 17,
2009, Apple issued a press release relating to the iPhone 3GS, which stated in
part, “The new iPhone OS 3.0 software will be available to iPhone . . . users this
summer with over 100 new features including . . . MMS to send and receive
photos . . . .” That same press release states that “MMS available only on the
iPhone 3G” which was false and misleading. See, e.g., id. ¶ 37.

•

During the class period, through advertising campaigns, Apple and AT&T each
misrepresented and/or concealed, suppressed, or omitted material facts to and
from customers about the fact that MMS was not an available feature on the
iPhone 3G. Further, iPhone users had to pay for MMS if they wanted unlimited
AT&T messaging plans. See, e.g., id. ¶ 59.

As demonstrated from a clear reading of each complaint, it is Plaintiffs’ position that the
misconduct engaged in by Apple was done by Apple on its own with no help from AT&T and it

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is Apple’s knowledge of AT&T’s behavior, separate and apart from AT&T’s behavior itself,
which serves as the basis for Plaintiffs’ fraudulent concealment claims against Apple. Cf. Brown
v. Gen. Steel Domestic Sales, LLC, No. 08-00779, 2008 WL 2128057, at *8-9 (C.D. Cal May 19,
2008) (granting motion to compel arbitration where allegations were made against all defendants
in general and plaintiffs had not differentiated between or individualized the activity engaged in
by each defendant). As such, the Court should deny Apple’s motion.
IV.

The Court Must Balance the Equities of Compelling Arbitration against
Nonconsensually Depriving Plaintiffs of Their Day in Court.
As a preliminary matter, FAA preemption only applies to express written contracts

signed by both Parties, not to nonsignatories seeking an equitable entre into arbitration. The
purpose of the FAA is to compel courts to honor contractual agreements to arbitrate, even in the
face of state efforts to restrict the enforceability of arbitration agreements. See Shearson/Am.
Express, Inc. v. McMahon, 482 U.S. 220, 225-26 (1987) (“The Act was intended to reverse
centuries of judicial hostility to arbitration agreements, by placing arbitration agreements upon
the same footing as other contracts.” (internal quotations omitted)). The FAA is not selfexecuting, as it does not define or specify the controversies that are subject to arbitration, does
not prescribe any mandatory procedures for arbitration, nor does it confer jurisdiction on any
particular court to enforce its purpose. Instead, the groundwork for arbitration must be found in
the agreement of the parties, and by virtue of the express language of the FAA, the agreement to
arbitrate must be in writing—that is, the FAA only applies as to express written contractual
agreements. Westmoreland, 299 F.3d at 465 (“An agreement to arbitrate is a waiver of valuable
rights that are both personal to the parties and important to the open character of our state and
federal judicial systems—an openness this country has been committed to from its inception. It
is then not surprising that to be enforceable, an arbitration clause must be in writing and signed
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by the party invoking it.”); Rojas v. TK Comms., Inc., 87 F.3d 745, 748 (5th Cir. 1996)
(observing that the “FAA requires that the arbitration clause being enforced be in writing”); see
also 9 U.S.C. § 2 (“A written provision in any maritime transaction or a contract evidencing a
transaction involving commerce to settle by arbitration a controversy thereafter arising out of
such contract or transaction, . . . or an agreement in writing to submit to arbitration an existing
controversy arising out of such a contract, transaction, or refusal . . . .” (emphasis added)); RentA-Center, West, Inc. v. Jackson, 130 S. Ct. 2772, 2776 (2010) (“The FAA reflects the
fundamental principle that arbitration is a matter of contract.”); Southland Corp. v. Keating, 465
U.S. 1, 10-11 (1984) (“We discern only two limitations on the enforceability of arbitration
provisions governed by the Federal Arbitration Act: they must be part of a written maritime
contract or a contract ‘evidencing a transaction involving commerce’ and such clauses may be
revoked upon ‘grounds as exist at law or in equity for the revocation of any contract.’”);
Kaltwasser v. Cingular Wireless LLC, 543 F. Supp. 2d 1124, 1127 (N.D. Cal. 2008) (The FAA
“applies to all written contracts involving interstate or foreign commerce.”).
FAA preemption jurisprudence is similarly limited in its scope. The preemptive language
is found in Section 2 of the FAA, which “makes agreements to arbitrate ‘valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.’” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1744 (2011) (quoting 9 U.S.C.
§ 2). “The FAA contains no express pre-emptive provision, nor does it reflect a congressional
intent to occupy the entire field of arbitration.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland
Stanford Junior Univ., 489 U.S. 468, 477 (1988). Instead, FAA preemption rests on the basis of
“conflict” preemption. A state’s arbitration statute may “be pre-empted to the extent that it
actually conflicts with federal law—that is, to the extent that it ‘stands as an obstacle to the

33

accomplishment and execution of the full purpose and objectives of Congress.’” Id. (quoting
Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).
Since the FAA only applies to express written agreements to arbitrate, FAA preemption
therefore can only apply to state laws affecting express written agreements to arbitrate. Apple
cites the recent FAA preemption case of Concepcion throughout its brief, but Concepcion can
only have an effect on the enforceability of a written arbitration agreement, such as the one
signed between Plaintiffs and AT&T. Concepcion is actually a narrow case, as Apple points out
in its simple statement of the holding in its brief. (See Docket No. 235-1 at 8 (“In Concepcion,
the Supreme Court held that the Federal Arbitration Act preempts state rules prohibiting class
action waivers in consumer agreements.”). Even after Concepcion, Apple’s entre into arbitration
in this case is still only founded on the basis of equitable principles, which the FAA does not
change, and therefore those principles are clearly not affected by the Supreme Court’s ruling in
Concepcion. 12 Since Apple’s entre into arbitration is based on equity, the Court should consider
the equitable factors involved in such an action to determine whether Apple can equitably
arbitrate the claims against it as a nonsignatory third party to the AT&T agreement.
12

See also Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1774-75 (2010)
(“We think it is also clear from our precedents and the contractual nature of arbitration that
parties may specify with whom they choose to arbitrate their disputes); EEOC v. Waffle House,
Inc., 534 U.S. 279, 289 (2002) (“[N]othing in the [FAA] authorizes a court to compel arbitration
of any issues, or by any parties, that are not already covered in the agreement.” (emphasis
added)); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983) (“[A]n
arbitration agreement must be enforced notwithstanding the presence of other persons who are
parties to the underlying dispute but not to the arbitration agreement.”); United Steelworkers of
Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 581 (1960) (An arbitrator “has no general
charter to administer justice for a community which transcends the parties.” (internal quotations
omitted)); accord First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995)
(“[A]rbitration is simply a matter of contract between the parties; it is a way to resolve those
disputes—but only those disputes—that the parties have agreed to submit to arbitration.”
(emphasis added)). It falls to courts and arbitrators to give effect to these contractual limitations,
and when doing so, courts and arbitrators must not lose sight of the purpose of the exercise: to
give effect to the intent of the parties. Volt Info., 489 U.S. at 479.
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On one hand, Apple is seeking to equitably compel arbitration when they are not a
signatory to the arbitration agreement. As discussed earlier in this brief, such non-contractual
arbitration should only be allowed in rare circumstances. Moreover, Apple has a separate
agreement with Plaintiffs that does not include an arbitration clause. To at the same time allow
Apple to use the equitable doctrine of estoppel against the Plaintiffs flies in the face of basic
notions of fairness. Goldman v. KPMG LLP, 92 Cal. Rptr. 3d 534, 555 (Cal. Ct. App. 2009)
(“The existence of [a separate agreement between the nonsignatory and the party to be estopped]
containing no arbitration clauses makes it all the more apparent that the application of an
equitable doctrine to require arbitration between parties who have not agreed to arbitrate is
entirely inappropriate in this case.”).
On top of this, the Court must weigh the fact that arbitration with Apple will deprive
class members, without their consent, of their right to have their claims against Apple heard in a
court of law. See, e.g., McCarthy v. Azure, 22 F.3d 351, 355 (1st Cir.1994) (“Subject matter
jurisdiction over an action or series of claims can be conceptualized as conferring a personal
right on the parties to have that action, or those claims, adjudicated in a judicial forum.);
Pacemaker Diagnostic Clinic of Am., Inc. v. Instromedix, Inc., 725 F.2d 537, 541 (9th Cir.1984)
(en banc) (recognizing that the “federal litigant has a personal right, subject to exceptions in
certain classes of cases, to demand Article III adjudication of a civil suit”); accord Glidden Co.
v. Zdanok, 370 U.S. 530, 536 (1962). Though a person may, by contract, waive his or her right
to adjudication, see 9 U.S.C. § 2, there can be no waiver in the absence of an agreement
signifying an assent. To allow Apple to enter arbitration on this nonconsensual basis is indeed
inequitable and against the basic notions of fairness upon which the American legal system rests.

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V.

Because the Claims Against Apple Are Independent and Distinct from the Claims
Against AT&T, and Because This Court Should Not Speculate That Someone Might
Arbitrate an Individual Claim, This Court Should Not Stay the Case Against Apple
Pending Arbitration with AT&T.
For the same reasons that the Court should not compel Plaintiffs to arbitrate their claims

against Apple, the Court should not stay the present case against Apple. 13 In the context of
granting a discretionary stay pending arbitration in favor of a nonsignatory to an arbitration
agreement, the Fifth Circuit has stated that “the moving party bears a heavy burden to show why
a stay should be granted absent statutory authorization, and a court should tailor its stay so as not
to prejudice other litigants unduly.” Costal (Bermuda) Ltd. v. E.W. Saybolt & Co., 761 F.2d 198,
204 n.6 (5th Cir.1985) (emphasis added). Thus, this Court should consider the potential
prejudice to other litigants if a stay is granted and employ the
exercise of judgment, which must weigh competing interests and maintain an even
balance. . . . True, the suppliant for a stay must make out a clear case of hardship or
inequity in being required to go forward, if there is even a fair possibility that the stay for
which he prays will work damage to some one else.
Nederlandse Erts-Tankersmaatschappij, N.V. v. Isbrandtsen Co., 339 F.2d 440, 442 (2d Cir.
1964) (citing Landis v. North Am. Co., 299 U.S. 248, 254-255, (1936)). Finally, the granting of
such a stay should not be a quotidian exercise, as “[t]he words ‘pending arbitration’ can do no
more to close the judicial doors than the words ‘open sesame’ can do the reverse.” Costal
(Bermuda) Ltd., 761 F.2d at 203-04 & n.6.
As has been detailed throughout this memorandum, Plaintiffs’ claims against Apple are
separate and distinct from the claims they have raised against AT&T. Given this, allowing the
claims against Apple would not be unduly prejudicial to Apple. In fact, the court in Weisblatt v.

13

Apple implicitly recognizes that as a nonsignatory to AT&T’s WSA, it is not entitled to a
mandatory stay under Section 3 of the Federal Arbitration Act, codified at 9 U.S.C. § 3. See
Adams v. Georgia Gulf Corp., 237 F.3d 538, 541 (5th Cir. 2001).
36

Apple, Inc., No. C-10-02553, 2010 WL 4071147 (N.D. Cal. Oct. 18, 2010), concluded that,
although “plaintiffs’ claims are related to [AT&T’s] iPad data plans,” the plaintiffs could
proceed against Apple while claims with respect to AT&T would be stayed “[b]ecause plaintiffs’
claims against Apple are not subject to the [AT&T] arbitration agreement and appear to be
independently actionable.” Id. at *4. Similarly, as has been discussed throughout this
memorandum, the claims Plaintiffs raise against Apple are independently actionable and should
not be stayed even though claims against AT&T may proceed in arbitration.
Furthermore, Plaintiffs have dismissed their claims against AT&T. Although Plaintiffs
will not refile their claims against AT&T in court, there is no requirement that they actually
pursue their cases individually in arbitration, either. Nor is there a probability that they will, and
at the present time Plaintiffs are not aware of anyone planning to litigate in two forums. Courts
have recognized that in the absence of class-based proceedings, individual litigation will as a
practical matter not be pursued over small claims due to the time and effort needed to recover a
few thousand dollars. See Bell v. Farmers Ins. Exch., 9 Cal. Rptr. 3d 544, 570 (Cal. Ct. App.
2004) (noting that the costs of litigation may involve travel expenses and time off from work to
pursue the case, and the value of any ultimate recovery may be further reduced by legal
expenses). As the Seventh Circuit recognized, “[t]he realistic alternative to a class action is not
17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”
Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2007) (Posner, J.).
Even if a consumer were to pursue individual arbitration against AT&T, it makes little
sense to put the claims of millions of consumers on hold while a scant few arbitrate separate and
independent claims against a different party. This would place a tremendous burden on those not
arbitrating at all—a key factor in this Court’s analysis.

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As to the named Plaintiffs, granting a stay to Apple in the present case will greatly
prejudice Plaintiffs with additional delay, particularly where Plaintiffs have already been waiting
over 18 months to litigate their claims against Apple in court, as contemplated by the express
agreement between them. Indeed, aside from arguments that it is entitled to benefit from
AT&T’s arbitration agreement, Apple provides the Court with no clear case of hardship or
inequity in being required to go forward in the present forum should the Court determine that it
is not entitled to enforce AT&T’s arbitration clause against Plaintiffs. Absent such a showing,
Apple has not met its heavy burden in justifying a stay, and the Court should deny its request.
The cases cited by Apple in support of its request for a stay are inapposite. For example
in Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir. 1999), the court held that
claims against a franchisor’s affiliates should have been stayed pending arbitration proceedings
against the franchisor even though the affiliates themselves had no right to arbitration because
the claims brought by the franchisees were based entirely on the franchisees’ rights under the
very same contract that required arbitration. Also cited by Apple is Citgo Petroleum Corp. v.
M/T Bow Fighter, No. H-07-2950, 2009 WL 960080 (S.D. Tex. Apr. 7, 2009), which involved
various parties suing over the late delivery of certain cargo by ship. The Citgo court stayed
claims of a nonsignatory to an underlying bill of lading and charter party agreement containing
an arbitration clause because of the overlapping issues to be resolved in both arbitration and
litigation. The court found that issues such as “the nature of the various agreements between the
parties, the existence and scope of duties potentially owed by the defendants, and the mechanical
condition of the Bow Fighter” would need to be resolved in both arbitration and litigation and
thus allowing cases to move forward in both forums would be unduly prejudicial. Id. at *6. In
Sam Reisfeld & Son Imp. Co. v. S. A. Eteco, 530 F.2d 679, 681 (5th Cir. 1976), the court found it

38

appropriate to stay claims asserted against a parent corporation where those claims were
“inherently inseparable” from the claims against the subsidiary that had successfully moved to
compel arbitration. In so finding, the court noted that “[i]f the parent corporation was forced to
try the case, the arbitration proceedings would be rendered meaningless and the federal policy in
favor of arbitration effectively thwarted.” Id. Notably, however, the court allowed antitrust
claims to proceed in litigation despite ordering arbitration of the other claims on the basis that
antitrust claims are generally not arbitrable. Id. Finally, in Wolf v. Langemeier, No. 2:09-cv03086, 2010 WL 3341823, at *8 (E.D. Cal. Aug. 24, 2010), the court stayed claims of certain
plaintiffs where it appeared likely that those plaintiffs had signed the same agreement containing
an arbitration clause as the other plaintiffs in the action whose claims the court compelled to
arbitration. None of these cases are applicable to the present case where Plaintiffs’ claims
against Apple are separate and distinct from those Plaintiffs raise against AT&T. Likewise, the
cases cited by Apple are distinguishable from the present case in that there are no allegations and
no evidence of a relationship between Apple and AT&T such as between a parent and subsidiary
corporation or an agent and principal.
Given Apple’s failure to meet its heavy burden to justify a stay, the Court should deny
Apple’s request and allow Plaintiffs to move forward with litigation against it. Allowing
Plaintiffs to litigate against Apple will avoid undue and unnecessary prejudice to Plaintiffs by
forcing Plaintiffs—and the constituent class members—to wait an indeterminate period of time
to resolve their independent claims against Apple.
CONCLUSION
Based on the foregoing points and authorities, Plaintiffs respectfully request that this
Court DENY Apple’s motion to compel arbitration.

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Respectfully submitted,
/s/ SCOTT R. BICKFORD
SCOTT R. BICKFORD (1165)
Martzell & Bickford
338 Lafayette St.
New Orleans, LA 70130
Telephone:
504/581-9065
Facsimile:
504/581-7636
[e-mail]
Plaintiffs’ Liaison Counsel

CERTIFICATE OF SERVICE
I hereby certify that a copy of the above and foregoing has been served upon all counsel
of record via ECF this 21st day of November, 2011.
/s/Scott R. Bickford
SCOTT R. BICKFORD

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