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

Filing 290

ORDERED that Apple's 235 Motion to Compel Arbitration is GRANTED. Plaintiffs' claims against Apple must be submitted to arbitration, pursuant to the terms of AT&T's WSA. FURTHER ORDERED that all member cases consolidated within this MDL are DISMISSED WITHOUT PREJUDICE. FURTHER ORDERED that Apple's 268 Motion to Dismiss Pursuant to FRCP 12(b)(7) is DENIED AS MOOT. Signed by Judge Carl Barbier. (Reference: ALL CASES)(gec, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
:
MDL NO. 2116
IN RE: APPLE iPHONE 3G AND 3GS “MMS”
:
MARKETING AND SALES PRACTICES
:
SECTION: J
LITIGATION
:
:
JUDGE BARBIER
THIS DOCUMENT RELATES TO ALL CASES
:
MAG. JUDGE WILKINSON
.. .. .. .. .. .. .. .. .. .. .. .. .. . .. .. .. .. .. .. .. ..
ORDER AND REASONS
Before the Court are Apple Inc.’s Motion to Compel Arbitration
(Rec. Doc. 235; see also Rec. Docs. 267, 288) and Motion to Dismiss
under Rule 12(b)(7) (Rec. Doc. 268; see also Rec. Doc. 275), as
well as Plaintiffs’ memoranda in opposition to same (Rec. Docs. 264
(re Motion to Compel Arbitration), 277 (same), 286 (same), 271 (re
Motion to Dismiss)).

Having considered the arguments of counsel,

the record, and the applicable law, the Court finds as follows:
I.

BACKGROUND AND PROCEDURAL HISTORY

This Multidistrict Litigation (“MDL”) consists of twenty-three
putative class actions consolidated before this Court pursuant to
28 U.S.C. § 1407.

Plaintiffs are purchasers of the iPhone 3G or

3GS cellular telephone and subscribers to wireless service from
AT&T Mobility, L.L.C. (“AT&T”) between July 11, 2008 and September
25, 2009.

Apple Inc. (“Apple”) is the manufacturer of the iPhone

and Defendant/Mover herein.

AT&T also was named as a defendant,

but was voluntarily dismissed by Plaintiffs on November 21, 2011.
The

iPhone

combines

a

number

of

electronic devices—a

telephone, a camera, an internet communication device, a digital
music player, etc.—into a single handheld product.

On July 11,

2008 (the start of the putative class period), Apple introduced the
iPhone 3G, its second model iPhone (the first model iPhone, the
iPhone 2G, was discontinued in June 2008). On June 19, 2009, Apple
introduced its third model iPhone, the iPhone 3GS.

At the end of

the putative class period, September 25, 2009, both the 3G and 3GS
models were available for purchase.
This dispute concerns Multimedia Messaging Service (“MMS”),
one feature of the 3G and 3GS iPhones.

MMS allows the user to

quickly send pictures or videos from the phone without being
connected to the Internet.

This is in contrast to Short Messaging

Service (“SMS”), which permits users to send text-only messages
from one phone to another.
in order to function.

SMS and MMS require a wireless network

Although SMS was always available on all

model iPhones, MMS did not become a functional feature on the 3G
and 3GS iPhones until September 25, 2009 (MMS was never available
on the iPhone 2G).
Plaintiffs allege that, prior to and during the relevant time
period, “Apple and AT&T co-marketed the iPhone with AT&T’s wireless
network service.”

(Am. Compl. ¶¶ 2, 22, Rec. Doc. 71).1

That is,

one could purchase an iPhone from either Apple or AT&T, but due to
1

Separate complaints were filed for each member case consolidated with
this MDL. However, the Court adopts the parties’ practice of referencing the
First Amended and Supplemental “Carbine” Complaint (Rec. Doc. 71) as
representative of the other complaints.

-2-

an “exclusivity agreement” between Apple and AT&T, the iPhone could
only be used with AT&T’s wireless service network. (Id. ¶¶ 2, 53,
82).

To gain access to AT&T’s network (which was necessary to use

the MMS feature), iPhone purchasers had to enter into AT&T’s
Wireless Services Agreement (“WSA”).

(Id. ¶¶ 2, 53, 82).

The WSA

contained a clause requiring disputes to be resolved by arbitration
on an individual basis (i.e., class actions and class arbitration
are prohibited).

(See Decl. of Richard Rives, Ex. 1, pp. 13-17,

Rec. Doc. 117-1 at 16-20).
Plaintiffs

claim

that

AT&T

“promoted

and

sold

unlimited

texting plans to all [of] it[s] customers,” and represented that
such plans “‘included text, picture, video and IM.’” (Id. ¶ 7
(emphasis omitted)).

Plaintiffs also allege that

as the Defendants were about to launch the 3G phone, a
grave complication developed. Sending pictures by text
took considerably more capacity than sending a written
text message, and AT&T realized that its entire network
would be overloaded if millions of new iPhone users began
texting pictures on the 3G iPhone.
(Id. ¶ 4).

“AT&T’s network was unable to provide the service of

texting pictures [i.e., MMS] until it upgraded its network . . . .”
(Id. ¶ 6).

Thus, Plaintiffs claim that “AT&T intentionally barred

iPhone users from having [MMS], but continued to charge the
consumers for that service and represented to the iPhone users that
the service included pictures.”

(Id. ¶ 7; see also id. ¶ 58).

As to Apple, Plaintiffs do not allege that the unavailability
of MMS was due to any defect in the iPhone. (See id. ¶¶ 4, 5, 6, 7,
-3-

51, 75, 78, 86, 88, 112 (claiming that AT&T’s network initially
could not accommodate MMS).

Instead, Plaintiffs allege that Apple

“never disclosed to consumers that they had to pay for . . .
picture messaging under the unlimited plans for their exclusive
provider, AT&T, even though they would not have that service.”
(Id. ¶ 8). Also, “Apple made affirmative representations that such
a service was available, 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.”

(Id.).

In December of 2009, the Judicial Panel on Multidistrict
Litigation transferred the first wave of cases comprising this MDL.
In August of 2010, after amended complaints were filed in sixteen
of the then-existing cases, AT&T moved to compel Plaintiffs to
arbitration based on the arbitration clause and class action waiver
found in its WSA (Rec. Docs. 95-111).

AT&T alternatively moved at

that time to dismiss the claims under Rule 12(b)(6) (Rec. Docs.
138-154).

Concurrently,

Apple

moved

to

dismiss

under

Rule

12(b)(6), arguing that it never represented that MMS was available
on the iPhone 3G, and all advertisements for the 3GS contained
disclaimers stating that MMS would not be available until late
summer 2009. (Rec. Docs. 120-135).
briefing

on

these

motions

was

In November of 2010, before
complete,

the

Court

stayed

proceedings pending the Supreme Court’s resolution of AT&T Mobility

-4-

LLC v. Concepcion, __ U.S. __, 131 S. Ct. 1740, 1746 (2011).

At

issue in Concepcion was whether the Federal Arbitration Act (“FAA”)
preempted the “Discover Bank rule,” a judicially-created state law
that classified most class action waivers in consumer arbitration
agreements as unconscionable.

Notably, the arbitration clause in

Concepcion was nearly identical to those found in AT&T’s WSAs.
Compare Decl. of Richard Rives, Ex. 1, pp. 13-17, Rec. Doc. 117-1
at 16-20, with Concepcion, 131 S. Ct. at 1744.
Concepcion was decided in April of 2011 and held that the
Discover Bank rule was preempted by the FAA.

In October of 2011,

after the stay was lifted in this MDL and pursuant to a revised
briefing schedule, both AT&T and Apple moved to compel arbitration.
(Rec. Docs. 235-259).

In November of 2011, Plaintiffs voluntarily

dismissed their claims against AT&T, tacitly acknowledging that
their opposition to AT&T’s Motion to Compel Arbitration could not
succeed after Concepcion.2

(Rec. Doc. 262).

However, Plaintiffs

2
At oral argument, counsel for the Plaintiffs admitted that Concepcion
resolved the arbitration issue in AT&T’s favor:

THE COURT: Let
to figure out
assuming that
arbitrate your

me ask you this: What was the intended purpose--I'm trying
the maneuver of dismissing AT&T all of a sudden.
I'm
the plaintiffs concluded that you would be forced to
claims against AT&T under Concepcion?

[PLAINTIFFS’ COUNSEL]: That's correct.
THE COURT: I can't really figure any other reason why you would dismiss
them.
[PLAINTIFFS’ COUNSEL]:Absolutely. We figured that Your Honor would grant
that under Concepcion because it involved the same arbitration clause and
that arbitration clause has a ban on class actions. What it means is that
no plaintiff will have a claim against AT&T. No one is going to arbitrate
for $20 or $50 or whatever the claim is.

-5-

did not dismiss their claims against Apple, and opposed Apple’s
Motion to Compel Arbitration.

(Rec. Docs. 264, 277, 286).

Apple

subsequently filed a Motion to Dismiss under Rule 12(b)(7), arguing
that the case could not proceed without AT&T.

(Rec. Doc. 268).

Another round of briefing ensued (Rec. Docs. 271, 275), oral
argument

was

held,

and

now

both

Apple’s

Motion

to

Compel

Arbitration and Motion to Dismiss are ripe for resolution.
II.
A.

DISCUSSION

Dismissal under Rule 12(b)(7) and Rule 19
Apple argues in its Motion to Dismiss that this case cannot

proceed without AT&T, because Plaintiffs’ claims require litigating
the meaning of AT&T’s WSA and determining whether AT&T breached the
terms of that agreement. Plaintiffs counter that their theories of
liability are not predicated on the WSA’s contents, nor do they
require interpretation of the WAS or proving breach by AT&T.
These issues overlap considerably, if not entirely, with the
issues surrounding Apple’s Motion to Compel Arbitration, discussed
below.

Because resolution of the Motion to Compel is dispositive

of the Motion to Dismiss, the Motion to Dismiss is discussed only
briefly.
The Fifth Circuit has explained:
Rule 12(b)(7) allows dismissal for “failure to join a

(Tr. p. 37, Rec. Doc. 281 at 37).

-6-

party under Rule 19.” Rule 19 provides for the joinder
of all parties whose presence in a lawsuit is required
for the fair and complete resolution of the dispute at
issue.
It further provides for the dismissal of
litigation that should not proceed in the absence of
parties that cannot be joined.
HS

Resources

v.

Wingate,

327

F.3d

432,

438

(5th

Cir.

2003)

(footnotes omitted).
Analysis under Rule 19 involves multiple steps.

First, a

court must determine whether a party is “required” or “necessary”
under Rule 19(a).

A party is necessary if:

(A) in that person’s absence, the court cannot accord
complete relief among existing parties; or
(B) that person claims an interest relating to the
subject of the action and is so situated that disposing
of the action in the person’s absence may:
(i) as a practical matter impair or impede
person’s ability to protect the interest; or

the

(ii) leave an existing party subject to a substantial
risk of incurring double, multiple, or otherwise
inconsistent obligations because of the interest.
Fed. R. Civ. Proc. 19(a).

Necessary parties must be joined in the

action unless joinder is not feasible; i.e., the party is not
subject to service of process, joinder would deprive the court of
subject matter jurisdiction, or joinder would make venue improper.
Fed. R. Civ. Proc. 19(a)(1),(2); 7 Charles Alan Wright, et al.,
Federal Practice and Procedure § 1604, at 40 (3d ed. 2001).

If

joinder

be

is

not

feasible,

then

under

Rule

19(b),

it

must

determined whether, “in equity and good conscience, the action
should proceed among the existing parties or should be dismissed.”
-7-

Rule 19(b) provides several factors to consider.
Where interpretation of a contract is at issue, the parties to
the contract are necessary parties.

See Sch. Dist. of Pontiac v.

Sec’y of U.S. Dep’t of Educ., 584 F.3d 253, 303 (6th Cir. 2009);
Siemens Bldg. Techs., Inc. v. Jefferson Parish, No. 03-2272, 2004
WL 1837386 at *6 (E.D. La. Aug. 16, 2004); see also Envirotech
Corp. v. Bethlehem Steel Corp., 729 F.2d 70, 75 (2d Cir. 1984)
(affirming district court’s conclusion that a non-party was an
indispensable party under Rule 19(b) where it “possessed rights
arising

from

the

agreements

at

issue

which

are

inextricably

intertwined with issues bound to be raised in an action solely
against” the named defendant (internal quotations omitted)).

For

reasons discussed in Part C, below, Plaintiffs’ claims require
interpretation of AT&T’s WSA.
party under Rule 19(a).

Accordingly, AT&T is a necessary

See also In re Apple iPhone 3G Prod. Liab.

Lit., No. 09-2045, 2011 WL 6019217 (N.D. Cal. Dec. 1, 2011),
discussed infra note 5.
Because joinder of AT&T clearly was feasible before Plaintiffs
voluntarily dismissed it, there is no need to engage in analysis
under Rule 19(b).

See id. at *4.

Normally, the Court would simply

order that AT&T be joined. However, given that AT&T moved twice to
compel

arbitration

prior

to

its

dismissal,

and

Plaintiffs’

admission that Concepcion requires their claims against AT&T to be
arbitrated, see note 2, supra, joinder of AT&T would be inefficient

-8-

for both the Court and the parties.

AT&T presumably would move to

compel arbitration again, which would likely be granted, and the
case would be right where it is now: with Apple’s Motion to Compel
Arbitration pending.

Furthermore, because the Court ultimately

concludes that Apple’s Motion to Compel Arbitration should be
granted, as explained in Part C, below, the Motion to Dismiss
becomes moot.
B.

Waiver
Turning to Apple’s Motion to Compel Arbitration, Plaintiffs

argue that Apple has waived any right it may have to compel
arbitration.
“The right to arbitrate a dispute, like all contract rights,
is subject to waiver.”

Nicholas v. KBR, Inc., 565 F.3d 904, 907

(5th Cir. 2009) (citation omitted).

However, there is a strong

presumption against finding waiver, and the party asserting waiver
bears a heavy burden.

In re Mirant, 613 F.3d 584, 588 (5th Cir.

2010) (citing Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d
341, 344 (5th Cir.2004)).

Whether waiver occurred depends on the

facts of each case; there is no bright line rule.
(citing

Id. at 589

Tenneco Resins, Inc. v. Davy Int’l, AG, 770 F.2d 416, 420

(5th Cir.1985)).

A party asserting waiver must show (1) that the

other party has substantially invoked the judicial process and (2)
permitting arbitration will cause prejudice, id.

at 591 (citing

Nicholas, 565 F.3d at 910), though there may be some overlap

-9-

between these prongs, see Petroleum Pipe Am. Corp. v. Jindal Saw,
Ltd., 575 F.3d 476, 480 n.2 (5th Cir. 2009) (citing Price v. Drexel
Burnham Lambert, Inc., 791 F.2d 1156, 1158 (5th Cir. 1986)).
Plaintiffs

contend

that

Apple

substantially

invoked

the

judicial process when it filed Rule 12(b)(6) Motions to Dismiss in
2010—before

proceedings

were

stayed

pending

the

Concepcion

decision—thereby seeking to eliminate Plaintiffs’ claims on their
merits.

Plaintiffs note that Apple’s Motion to Compel Arbitration

was not filed until a year later.

Plaintiffs contrast Apple with

AT&T, which, in 2010, simultaneously moved to compel arbitration
and to dismiss under Rule 12(b)(6).

As to the prejudice prong,

Plaintiffs argue Apple’s delay in moving for arbitration caused
their attorneys to spend significant time responding to Apple’s
Motions to Dismiss, and Plaintiffs have not been able to engage in
discovery pending resolution of same.
The Court finds Apple has not waived its arbitration argument
for several reasons.

First, prior to the Supreme Court’s decision

in Concepcion, Apple’s Motion to Compel would have been futile as
to the member cases transferred from districts that followed
Discover Bank or an analogous rule.

Courts have declined to find

waiver when moving for arbitration would have been a futile act.
See Letizia v. Prudential Bache Securities, Inc., 802 F.2d 1185,
1187 (9th Cir. 1986); see also In re Apple & AT&TM Antitrust
Litig., __ F. Supp. 2d __, 2011 WL 6018401 at *3 & n.12 (N.D. Cal.

-10-

Dec. 1, 2011) (holding defendant’s failure to appeal from denial of
motion to compel arbitration in 2008 did not preclude it from reasserting the motion in 2011, given that any appeal would have been
futile prior to Concepcion);

Brown v. Trueblue, Inc., No. 10-514,

2011 U.S. Dist. LEXIS 134523 (M.D. Pa. Nov. 22, 2011) (fifteen
months into litigation, defendants did not waive rights by waiting
until after Concepcion to seek arbitration, even though they
answered, the parties engaged in discovery, and the parties fully
briefed the class certification issue).
Second, although Apple moved in 2010 to dismiss many of the
Complaints under Rule 12(b)(6), the Court has not ruled on those
Motions, and in fact, stayed this case before briefing was complete
and submitted for decision.

Thus, this case is distinguishable

from In re Mirant and similar cases where a defendant moved to
compel arbitration after the district court ruled on (and partially
denied) its motion to dismiss.

613 F.3d at 590.

The defendant in

In re Mirant was found to have substantially invoked the judicial
process,

because

holding

otherwise

would

have

allowed

it

to

ascertain how the case was proceeding in court before seeking
arbitration.

That concern is not present here, given that Apple’s

12(b)(6) Motions were not submitted for decision and no decision
was rendered. Furthermore, despite the fact that this case is over
two years old, this litigation is still in its early stages:

No

answers have been filed and the only discovery that has occurred

-11-

concerned AT&T’s Motion to Compel Arbitration.
Third, and most importantly, even if Apple’s Motions to
Dismiss were deemed a substantial invocation of the judicial
process, Plaintiffs still have not shown that Apple’s delay caused
them prejudice.

See In re Mirant, 613 F.3d at 591 (“In addition to

invocation of the judicial process, the party opposing arbitration
must demonstrate prejudice before we will find a waiver of the
right to arbitrate.” (emphasis added, quotations and citation
omitted)). “‘Prejudice in the context of arbitration waiver refers
to delay, expense, and damage to a party's legal position.’”
(quoting

Nicholas,

565

F.3d

at

arbitration on August 10, 2010.

910).

AT&T

moved

to

Id.

compel

That Motion, like Apple’s Rule

12(b)(6) Motions, was stayed in November 2010 pending Concepcion.
Thus, even if Apple had filed a Motion to Compel Arbitration in
2010 when AT&T did, Apple’s Motion still would have been stayed in
November 2010, and Apple would have had to re-file its Motion to
Compel in 2011 (as occurred with AT&T).

In other words, Apple’s

failure to file a Motion to Compel Arbitration in 2010 did not
delay this MDL.
Plaintiffs argue that Apple’s Motions to Dismiss prevented
them from conducting discovery until that Motion was resolved.
However, from the outset all discovery has been stayed except where
necessary for Plaintiffs to respond to AT&T’s Motion to Compel.
Thus, if Apple had filed its Motion to Compel in 2010, the only

-12-

discovery that might have been permitted would concern the Motion
to Compel.

Moreover, even this limited amount of discovery would

have ceased once the entire MDL was stayed in November 2010.
The only prejudice Plaintiffs can remotely point to is the
fact that Plaintiffs filed an Opposition to Apple’s Motions to
Dismiss. (Rec. Doc. 204).

However, on November 5, 2010, before

Plaintiffs filed its Opposition, Apple moved to stay proceedings in
light of the pending Concepcion case.

(Rec. Doc. 194)

Although

Plaintiffs previously agreed to a stay vis-à-vis AT&T (Rec. Doc.
193), they opposed Apple’s stay (Rec. Doc. 199) and subsequently
filed their Opposition on November 16, 2010 (Rec. Doc. 204).

The

next day this Court granted Apple’s request for a stay. Therefore,
had Plaintiffs agreed to Apple’s request for a stay, there would
have

been

no

need

for

Plaintiffs

to

file

their

opposition.

Consequently, any prejudice claimed by the Plaintiffs in this
regard was at least partially self-inflicted.
For these reasons, the Court finds Plaintiffs have not met the
“heavy burden” of showing Apple has waived its argument regarding
arbitration.
C.

Arbitration by Equitable Estoppel
Plaintiffs and the putative class members are signatories to

AT&T’s WSA, which contains an arbitration clause and class action
waiver.

Apple is not a signatory to the WSA.

Regardless, Apple

argues that, because Plaintiffs’ claims against Apple are so

-13-

intertwined with the claims against AT&T, the claims against Apple
also must be submitted to arbitration under an equitable estoppel
theory.
“Arbitration is favored in the law.” Grigson v. Creative
Artists Agency L.L.C., 210 F.3d 524, 526 (5th Cir. 2000) (citation
omitted).

Accordingly, parties to arbitration agreements cannot

avoid them by casting their claims in tort, and proceedings against
signatories and nonsignatories to the arbitration agreement are
stayed when the action against the nonsignatory is dependent upon
interpretation
omitted).

of

the

underlying

contract.

Id.

(citations

Furthermore, the Fifth Circuit has explained that in

certain limited circumstances, a nonsignatory to an arbitration
agreement can require a signatory to arbitrate its claims under an
equitable estoppel theory.

Id.

Whether to apply equitable

estoppel is within the Court’s discretion.

Id. at 528.

The Grigson court described two instances where equitable
estoppel applies, collectively referred to as the “intertwinedclaims test”:
“First, equitable estoppel applies when the signatory to
a written agreement containing an arbitration clause must
rely on the terms of the written agreement in asserting
its claims against the nonsignatory.
When each of a
signatory’s claims against a nonsignatory makes reference
to or presumes the existence of the written agreement,
the signatory’s claims arise out of and relate directly
to the written agreement, and arbitration is appropriate.
Second, application of equitable estoppel is warranted
when the signatory to the contract containing an
arbitration clause raises allegations of substantially
interdependent and concerted misconduct by both the
-14-

nonsignatory and one or more of the signatories to the
contract. Otherwise the arbitration proceedings between
the two signatories would be rendered meaningless and the
federal policy in favor of arbitration effectively
thwarted.”
. . .
In short, although arbitration is a matter of contract
and cannot, in general, be required for a matter
involving an arbitration agreement non-signatory, a
signatory to that agreement cannot, in those instances
described [in the preceding paragraph], “have it both
ways”: it 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 arbitration’s applicability
because the defendant is a non-signatory. . . .
Moreover, as noted, it would be especially
inequitable where, as here, a signatory non-defendant is
charged with interdependent and concerted misconduct with
a non-signatory defendant. In such instances, that
signatory, in essence, becomes a party, with resulting
loss, inter alia, of time and money because of its
required participation in the proceeding. Concomitantly,
detrimental reliance by that signatory cannot be denied:
it and the signatory-plaintiff had agreed to arbitration
in lieu of litigation (generally far more costly in terms
of time and expense); but, the plaintiff is seeking to
avoid that agreement by bringing the action against a
non-signatory charged with acting in concert with that
non-defendant signatory. Of course, detrimental reliance
is one of the elements for the usual application of
equitable estoppel.
Id. at 527-28 (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d
942,

947-48

original).

(11th

Cir.

1999))(bold

type

added,

italics

in

Grigson also noted that equitable estoppel is more

readily applicable when the case presents both bases of the
intertwined-claims test.
likely

to

apply

when

Id.
the

Equitable estoppel is also more

party

-15-

resisting

arbitration

is

a

signatory, as is the case here, as opposed to when the resisting
party is a non-signatory.

See Bridas S.A.P.I.C. v. Gov’t of

Turkmenistan, 345 F.3d 347, 361 (5th Cir. 2003); Amisil Holdings
Ltd. v. Clarium Capital Mgmt., 622 F. Supp. 2d 825, 831 (N.D. Cal.
2007) (citations omitted).
Plaintiffs contend that equitable estoppel does not apply,
because their claims against Apple are separate and independently
actionable

from

their

claims

against

AT&T.

However,

this

contention is contradicted by Plaintiffs’ other filings in this
case.
In 2010, before the stay of proceedings pending Concepcion and
well-before AT&T was dismissed in 2011, Apple filed its previouslymentioned (see Part B, supra) Rule 12(b)(6) Motions to Dismiss
(Rec. Docs. 120-135), to which Plaintiffs responded with their
previously-mentioned

opposition

memorandum

(hereinafter,

“Plaintiffs’ 2010 Opposition” or “2010 Opposition”; Rec. Doc. 204).
Apple’s 2010 Motions to Dismiss argued that it never mentioned MMS
availability for any of its iPhones until 2009, and when it did, it
stated that MMS would not become available until late summer.
Plaintiffs’ 2010 Opposition countered that this argument struck at
only one of its three “bases of relief” against Apple:
This case involves three bases for relief and two
recovery periods. Over the entire Class Period,
Plaintiffs and the class may recover for:
1) Apple’s failure to disclose to iPhone purchasers—who
are
also
captive
AT&T
customers—that
AT&T
was
-16-

contractually obligated to provide MMS to them and would
not do so; and
2) Apple’s failure to disclose to iPhone purchasers—who
are also captive AT&T customers—that AT&T would charge
iPhone users for MMS but would not provide it.
[3)] For a smaller period of time, from June 2009 to
September 2009, Apple also represented the immediate
availability of MMS, even though defendants did not make
it available. Defendants failed to unambiguously or
prominently disclaim that representation.
(Pls. 2010 Opp’n, p.8, Rec. Doc. 204 at 24 (emphasis added)).
Plaintiffs further explained that the third basis of relief was
only a “small portion” of their claims.

The “primary claims,”

urged Plaintiffs, were the first and second:
Although Apple attempts to limit Plaintiffs’ case to
advertisements and a time window between June and
September 2009, Plaintiffs’ claims against Apple predate
that time frame considerably—and have very little to do
with Apple’s advertising, which is just a one part of
Plaintiffs’ case that comes at the end of the class
period.
The alleged class period begins on July 11,
2008.
Plaintiffs allege that when defendants began
selling the 3G, Apple and AT&T failed to disclose that
AT&T would be obligated by contract to provide picture
messaging services to iPhone users. . . . Plaintiffs
also allege that when defendants began selling the 3G,
Apple and AT&T failed to inform that AT&T would actually
charge iPhone users purchasing a messaging plan for video
and picture messaging services, despite the fact that
they would not receive MMS services. . . .
Apple
repeated these failures when it began selling 3GS models
on June 19(and 3G models at a reduced price) through
September 24, 2009.
Apple provides no argument
addressing its failure to inform its 3GS customers that
its exclusive partner AT&T would be obligated to provide
picture and video messaging and would charge for it,
despite the fact that MMS would not be available on 3GS.
None of these allegations—Plaintiffs’ primary claims for
relief—are addressed by Apple’s motion.

-17-

Thus, Apple’s motions rest solely upon a small
portion
of
Plaintiffs’
claims:
statements
in
advertisements,
public
statements,
and
sales
representatives’ statements made between early Summer
2009 and September 24, 2009, solely regarding the
availability of MMS. Thus, even if Apple were able to
“disprove” the “availability” allegations [i.e., the
third basis of relief] using extrinsic evidence, it would
succeed only in depriving Plaintiffs of a single legal
theory and smaller recovery. . . . Plaintiffs will defend
their unavailability claim as Apple challenges it, but
they urge this Court not to take Plaintiffs’ defense as
any kind of argument or concession that this smaller tail
should, as Apple contends, wag the dog. This case sounds
in material omissions related to the obligation to
provide MMS and Apple’s exclusive partner, AT&T, charging
iPhone users for MMS.
(Id. at 9-10, Rec. Doc. 204 at 25-26 (bold and underscoring added,
italics in original)).
By Plaintiffs’ own descriptions in 2010, then, their “primary
claims” against Apple were ultimately based on AT&T’s alleged
contractual obligation under the WSA to provide MMS, as well as the
bills Plaintiffs paid under the WSA that allegedly included charges
for MMS.

If the WSA did not obligate AT&T to provide MMS or if

AT&T did not improperly bill for MMS, then Plaintiffs’ “primary
claims” against Apple fail.3

Thus, such claims meet the first

basis of the intertwined-claims test, because Plaintiffs must “rely

3

Also consider:

AT&T’s promises and obligations concerning its general data plans are
directly applicable to all iPhone customers.
Apple is directly
responsible for putting its customers in that position. Thus, Apple bears
a responsibility to inform its customers that AT&T was going to violate
its own contract with iPhone purchasers and would charge iPhone purchasers
for MMS services they would not be receiving.
(Pls. 2010 Opp’n, p. 24, Rec. Doc. 204 at 40).

-18-

on the terms of the written agreement in asserting [their] claims
against the nonsignatory.”

Grigson, 210 F.3d at 527.

Moreover, all three of Plaintiffs’ claims meet the second
ground of the intertwined-claims test.

The Amended Complaints

allege that, in order to “maximize profits,” Apple and AT&T “comarketed” the iPhone and entered into an “exclusivity agreement”
that required all iPhone purchasers to obtain wireless service from
AT&T.

(Am. Compl. ¶¶ 2, 22, Rec. Doc. 71).

The Amended Complaints

further allege:
Defendants [i.e., Apple and AT&T] did not want to lose
market share by announcing this feature [i.e., MMS] would
not be available and did not want to delay the lucrative
launch of the new generation of 3G iPhones and thus, lose
out on the extra revenue from millions of additional
customers who had to lock into AT&T’s exclusive contract
for service. . . . Defendants’ marketing campaign
promoted the iPhone operating [on] AT&T 3G and 3GS
networks by promising the latest in mobile technology
capable of . . . “MMS”, and much more. Despite these
promises, the iPhone’s MMS function was knowingly and
consciously disabled while, at the same time, Defendants
advertised that MMS was a feature included with the
iPhone 3G and 3GS and AT&T’s messaging service plans. .
. . Plaintiff . . . relied on representations made in
Defendants’ uniform campaign of untrue and/or misleading
marketing when choosing to purchase an iPhone 3G, 3GS and
messaging plans as set forth above.
(Id. ¶¶ 5, 9, 76 (emphasis added)).
and

second

bases

of

relief,

Likewise, Plaintiffs’ first

quoted

purchasers as “captive AT&T customers.”

above,

refer

to

iPhone

The “Factual Allegations”

section of Plaintiffs’ 2010 Opposition further stated:
Defendants Apple and AT&T worked in tandem to
promote and advertise the iPhone 3G and 3GS. Apple
manufactured the iPhone and AT&T provided the only
-19-

network upon which defendants allowed the iPhone to
operate. By defendants’ design, to use the Apple iPhone
(whether purchased from Apple or AT&T), consumers were
required to enter into a two-year service contract with
AT&T. . . . Included in the price of this plan was MMS
service. But defendants did not provide MMS service, did
not tell consumers they would not receive MMS service,
and did not tell consumers that they nonetheless would be
paying for a service that would not be made available to
them on their iPhone.
(Pls. 2010 Opp’n, p. 2, Rec. Doc. 204 at 18 (emphasis added)).
These are allegations of substantially interdependent and concerted
misconduct by Apple and AT&T, satisfying the second basis of
applying equitable estoppel.
Notwithstanding their statements in the 2010 Opposition and
the allegations in the Amended Complaints (which remain unamended
after AT&T’s dismissal), Plaintiffs now describe their claims as
follows:
(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.
(Pls. Opp'n to Mot. to Compel Arb. p.2, Rec. Doc. 264 at 3).
However, when Plaintiffs’ latest descriptions are compared to the
three

“bases

of

relief”

provided

in

2010,

it

is

clear

that

Plaintiffs have merely reversed the order of their claims and
removed language that blatantly met the intertwined-claims test

-20-

(e.g., gone are references to AT&T’s “contractual[] obligation[s]”
and iPhone purchasers being “captive AT&T customers”).

Thus, the

claim Plaintiffs listed third in 2010—and previously described as
the “tail” and “small portion” of their case—now appears first.
Likewise, the claims listed first and second in 2010—and previously
described as their “primary claims”—now appear third and second,
respectively.
descriptions

To
are

illustrate
placed

this

alongside

point,

Plaintiffs’

their

2010

current

analogues

(in

underscored text):
(1) Apple made affirmative misrepresentations to
Plaintiffs regarding MMS availability on the iPhone 3G
and 3GS;
[3)] For a smaller period of time, from June 2009 to
September 2009, Apple also represented the immediate
availability of MMS, even though defendants did not make
it available. Defendants failed to unambiguously or
prominently disclaim that representation.
(2) Apple failed to disclose that AT&T would charge
Plaintiffs for MMS service but would not provide it;
2) Apple’s failure to disclose to iPhone purchasers—who
are also captive AT&T customers—that AT&T would charge
iPhone users for MMS but would not provide it.
(3) Apple failed to disclose that AT&T's data plan
required MMS but that service would not be provided to
Plaintiffs.
1) Apple’s failure to disclose to iPhone purchasers—who
are
also
captive
AT&T
customers—that
AT&T
was
contractually obligated to provide MMS to them and would
not do so;
Despite

this

new

packaging,

Plaintiffs’

claims

are

substantively no different from the claims described in 2010.
Removing explicit references to AT&T’s contract obligations and
allusions to interdependent and concerted misconduct does not make
-21-

the claims against Apple any less intertwined with the claims
against AT&T.

See Grigson, 210 F.3d at 530-31 (affirming district

court’s decision to apply judicial estoppel where, after signatory
defendant moved to compel arbitration under the contract on which
plaintiff’s claim was based, plaintiff voluntarily dismissed the
entire case and subsequently refiled without naming the signatory
as a defendant and without referencing the contract).4

As the

Northern District of California recently held in a factuallysimilar MDL, these “cosmetic modifications” do not alter the
“gravamen of their allegations.” See In re Apple iPhone 3G Prod.
Liab. Lit. (iPhone 3G Prod. Liab.), No. 09-2045, 2011 WL 6019217 at
*3 (N.D. Cal. Dec. 1, 2011).5

Therefore, Plaintiffs’ “current”

4
The Grigson court further noted, though it did not hold, that the
plaintiffs’ inconsistent positions “bump up on, if indeed do not satisfy, the
prerequisites for judicial estoppel.” Id. at 530 (citation omitted).
5
Although the December 1, 2011 order from iPhone 3G Prod. Liab. did not
address equitable estoppel, Chief Judge Ware’s analysis still informs the present
issue. That case concerns facts, claims, and procedural circumstances that are
strikingly similar to the ones here.
There the plaintiffs initially pled that
defendants Apple and AT&T falsely represented that the iPhone 3G would be twice
as fast as the iPhone 2G, when in fact, the defendants knew that AT&T’s 3G
network was not sufficiently developed to accommodate the number of iPhone 3G
users. iPhone 3G Prod. Liab., 728 F. Supp. 2d 1065, 1068, 1072 (N.D. Cal. 2010).
In 2010, before Concepcion was decided, the court ruled that the plaintiffs’
state-law claims against AT&T were preempted by the Federal Communications Act.
Id. at 1076. The Court also found that the claims against Apple were preempted,
because those claims were “inextricably tied” to the claims against AT&T. Id.
The court reasoned:

Plaintiffs’ claims are based on allegations that Defendants acted together
to deceive Plaintiffs despite both knowing that the iPhone 3G operating in
[AT&T]’s 3G network could not perform as promised.
Although some
allegations state that flaws in the iPhone 3G contributed to the poor
performance experienced by Plaintiffs, the gravamen of the allegations is
that any defect in the iPhone 3G merely exacerbated the poor quality of
service resulting from [AT&T]’s allegedly deficient 3G network
infrastructure by, for example, using more bandwidth than the network was
capable of providing. Based on the allegations, the Court finds that it
is unable to reasonably separate Plaintiffs’ claims to pertain only to

-22-

claims meet the test for equitable estoppel, just as they would
have in 2010.

Accord In re Apple & AT&TM Antitrust Litig., __ F.

Supp. 2d. __, 2011 WL 6018401 at *5-7(N.D. Cal. Dec. 1, 2011).6
Plaintiffs cite Weingarten Realty Investors v. Miller, 661
F.3d 904 (5th Cir. 2011), to support their argument that equitable

Defendant Apple. Thus, the Court finds that the claims are preempted as to
both Defendants.
Id. (citations omitted). The court also found that under Federal Rule 19, the
case against Apple could not proceed without AT&T, “because any adjudication of
claims as to Defendant Apple would necessarily require a determination of the
sufficiency of [AT&T]’s 3G network infrastructure. . . . [and would largely]
require participation by [AT&T].” Id.
After this ruling, the plaintiffs amended the master complaint to assert
federal claims against both Apple and AT&T. Then, after Concepcion was rendered
the plaintiffs dismissed AT&T (similar to what occurred here) and amended their
master complaint to delete reference to AT&T. iPhone 3G Prod. Liab., No. 092045, 2011 WL 6019217 (N.D. Cal. Dec. 1, 2011). Apple responded as it did here:
moving to dismiss under Rule 12(b)(7). In determining (for a second time) that
AT&T was a “necessary party” under Rule 19(a), the court explained that
“Plaintiffs have simply deleted references to [AT&T] that appeared in their
previous Complaint without altering the gravamen of their allegations.” Id. at
*3. “These cosmetic modifications are unavailing . . . as the Court has already
held that [AT&T] is an ‘indispensable party’ . . . .” Id.
Given the similarity between the claims in iPhone 3G Prod. Liab. and this
MDL, Chief Judge Ware’s conclusion that the claims against Apple were
“inextricably tied” to the claims against AT&T for preemption purposes, bolsters
this Court’s conclusion that the instant claims similarly meet the intertwinedclaims test for arbitration-by-estoppel purposes. Likewise, Chief Judge Ware’s
conclusion on the Rule 12(b)(7)/Rule 19 issue supports the conclusion that AT&T
would be a necessary party, mootness issues notwithstanding.
6
In re Apple & AT&TM Antitrust Litigation is another case before Chief
Judge Ware that is similar in many respects to this MDL. See also iPhone 3G
Prod. Liab., supra, note 5. There the plaintiffs alleged that Apple and AT&T’s
“exclusivity agreement” violated the Sherman Antitrust Act, because it
effectively forced iPhone purchasers to contract with AT&T for wireless services
beyond the two year term in the WSA. Just as it did here, Apple sought to compel
the plaintiffs to arbitration based on the arbitration clause found in AT&T’s
WSA. Applying the Ninth Circuit’s test for equitable estoppel (which requires
showing that (1) the claims against the nonsignatory are intertwined with the
contract and (2) there is a relationship among the parties that justifies
estopping the plaintiff signatory), the court found that estoppel applied because
(1) plaintiffs contended throughout the litigation that their claims against both
Apple and AT&T arose from AT&T’s contract (as is the case here) and (2)
plaintiffs’ claim against Apple centered on the alleged secret agreement between
Apple and AT&T (also the case here).

-23-

estoppel

is

not

distinguishable.

appropriate.
Weingarten

However,

concerned

two

Weingarten

contracts,

a

is
loan

agreement (which contained an arbitration clause) and a guarantee
(which did not contain arbitration clause).

When the borrower

defaulted on the loan, the lender sued the guarantor, who was not
a party to the loan agreement/arbitration clause.

The district

court rejected the guarantor’s equitable estoppel argument, which
the court of appeals affirmed.

The court reasoned that the

guarantor’s obligation to pay did not require separate evaluation
of the loan agreement, because it was undisputed that the loan was
in default. The guarantor was merely asked to pay as he contracted
to do guarantee.

See id. at 912.

Admittedly, here it is not disputed that MMS was unavailable
until September 25, 2009.

However, if AT&T was still a party to

this litigation, it could be reasonably presumed that it would
dispute the claims that it was contractually obligated to provide
MMS and that it improperly charged for MMS.
unlike

Weingarten,

because

the

two

Thus, this matter is

“primary

claims”

(per

Plaintiffs’ 2010 Opposition) against Apple would require the Court
to evaluate and interpret AT&T’s WSA and billing statements.

To

the extent that Plaintiffs’ third claim (regarding Apple’s alleged
misrepresentations
interpreting

about

AT&T’s

availability

contract,

MMS)

equitable

does

not

estoppel

is

require
still

appropriate under the “interdependent and concerted misconduct”

-24-

basis, as discussed above.

Furthermore, considering Plaintiffs’

earlier description of this claim as the “tail” of their case, it
should not, to borrow Plaintiffs’ expression, wag the dog now.7
Plaintiffs also argue that equitable estoppel should not apply
because

two

of

Apple’s

contracts

with

Plaintiffs—the

iPhone

Software License and the iTunes Terms of Service—do not contain
arbitration clauses.

However, Plaintiffs’ claims are not based on

breaches of these contracts.

Indeed, there is no reference to

these contracts in Plaintiffs’ Amended Complaints.
71).

(See Rec. Doc.

These contracts are irrelevant to this dispute and the

instant question. Accord In re Apple & AT&TM Antitrust Litig., No.
07-5125, 2012 WL 293703 at *3-4 (N.D. Cal. Feb. 1, 2012).
Finally, in addition to arguing that their claims do not
satisfy Grigson’s intertwined-claims test, Plaintiffs also argue
that after the Supreme Court’s decision in Arthur Andersen LLP v.
Carlisle, 556 U.S. 624 (2009), California law governs the equitable
estoppel question.

(Pls. Opp’n to Mot. to Compel, pp. 18-21, Rec.

Doc. 264 at 19-22).

Plaintiffs contend that several California

courts apply a traditional common law test for equitable estoppel,
rather

than

the

intertwined-claims

7

test

developed

in

federal

For similar reasons, Westmoreland v. Sadoux, 299 F.3d 462 (5th Cir.
2002), is also inapposite. There the court did not apply equitable estoppel
because “Westmoreland's suit does not rely upon the terms of the shareholder
agreement or seek to enforce any duty created by the agreement, and there is no
allegation that Sadoux acted in concert with anyone.” Id. at 467. As explained
above, here Plaintiffs’ allegations must, in large part, rely on the terms of the
WSA, and allegations of substantial interdependent and concerted misconduct
between Apple and AT&T underscore all claims.

-25-

jurisprudence.
choice-of-law

However, Plaintiffs’ argument is based on the
provision

referenced

above.

irrelevant

to

contained

As

just

Plaintiffs’

in

the

discussed,

claims

and

the

two

Apple

these

contracts

contracts

instant

issue,

are
and

therefore provide no basis for applying California law.
In any respect, the Fifth Circuit has yet to determine what
effect, if any, Carlisle had on Grigson and the intertwined-claims
test. See DK Joint Venture 1 v. Weyand, 649 F.3d 310, 314 (5th Cir.
2011) (declining to decide whether federal or state law governed
equitable estoppel in the arbitration context when there was no
conflict between Texas law and federal law).

Another district

court noted that it is somewhat unclear whether or to what extent
Carlisle requires the application of state law. See Kingsley
Capital Mgmt., LLC v. Sly, __ F. Supp. 2d __, 2011 WL 5008520 at *9
(D. Ariz. Sept. 30, 2011).8

Assuming, however, that Carlisle

requires California law to apply in lieu of federal law, it is not
clear

whether

California

law

is

substantively

different

from

federal law, or, in any respect, would provide a different result
in this case. Plaintiffs concede that California courts are “split
as to the legal standard for applying equitable estoppel” (Pls.
Opp’n to Mot. to Compel, pp.19-20, Rec. Doc. 264 at 20-21), with

8

Kingsley did note that the Eleventh Circuit has interpreted Carlisle as
abrogating its earlier decisions to the extent they did not apply state law to
the arbitration-by-estoppel issue. Id. at *8. However, Kingsley also pointed
out that several district courts have continued to use the federal standard to
determine this issue. Id. at *8 n.5.

-26-

some applying the traditional common law test and some applying
federal law. In fact, and as noted above, the Northern District of
California recently found equitable estoppel to apply in a similar
case.

See note 6, supra.

Thus, this Court will not deviate from

the intertwined-claims test, given that (1) the Apple contracts are
irrelevant, (2) it is not clear that California law is different
from federal law, and (3) the Fifth Circuit has not held that
federal law does not apply to this issue.
It is also important to recognize that Grigson’s intertwinedclaims test incorporates a detrimental reliance element (albeit the
detrimental reliance of the signatory non-defendant, AT&T), which
is “one of the elements for the usual application of [i.e., the
traditional common-law approach to] equitable estoppel.”
at 528.

210 F.3d

Thus, even if a State’s law applied to this matter and

even if such law applied the traditional common law test, it is
questionable whether the traditional common law test for equitable
estoppel is substantively different from the federal law test.
Grigson explained that “detrimental reliance by that signatory
[i.e., AT&T] cannot be denied: it and the signatory-plaintiff had
agreed to arbitration in lieu of litigation (generally far more
costly in terms of time and expense).”

Id.

Thus, where claims

against the nonsignatory (i.e., Apple) require the signatory nondefendant (i.e., AT&T) to, “in essence, become[] a party, with
resulting loss, inter alia, of time and money because of its

-27-

required participation in the proceeding,” a plaintiff may not
avoid the arbitration agreement.

Id.

Additionally, requiring the

signatory non-defendant’s participation would run afoul of the
“liberal

federal

policy

favoring

arbitration

agreements,

notwithstanding any state substantive or procedural policies to the
contrary,”

as

well

as

“ensur[ing]

that

private

arbitration

agreements are enforced according to their terms.” Concepcion, 131
S. Ct. at 1748-49 (citations and internal quotations omitted).

As

explained above, AT&T’s participation would be required in this
case,

as

Plaintiffs’

“primary

claims”

against

Apple

require

determining AT&T’s obligations and performance under its contract
and Plaintiffs allege interdependent and concerted misconduct.
For the reasons explained above, the Court finds that the
arbitration clause in AT&T’s WSA applies to Plaintiffs’ claims
against Apple as well.

Because all of the issues in this MDL must

be arbitrated, there is no reason to retain jurisdiction; the Court
will dismiss the case without prejudice. See Alford v. Dean Witter
Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992); Westlake
Styrene Corp. v. P.M.I. Trading, Ltd., 71 F. App’x 442 (5th Cir.
2003)(unpublished decision).9

9
Alternatively, if the Court did not find that Plaintiffs’ claims must be
arbitrated, it would hold that the case against Apple must be stayed pending
arbitration against AT&T. Grigson, 210 F.3d at 526.

-28-

III.

CONCLUSION

IT IS ORDERED that Apple’s Motion to Compel Arbitration (Rec.
Doc. 235) is hereby GRANTED. Plaintiffs’ claims against Apple must
be submitted to arbitration, pursuant to the terms of AT&T’s WSA.
IT IS FURTHER ORDERED that all member cases consolidated
within this MDL are DISMISSED WITHOUT PREJUDICE.
IT IS FURTHER ORDERED that Apple’s Motion to Dismiss Pursuant
to Federal Rule of Civil Procedure 12(b)(7) (Rec. Doc. 268) is
DENIED AS MOOT.
Signed in New Orleans, Louisiana, this 29th day of March,
2012.

____________________________
United States District Judge

-29-