In re Apple iPhone Antitrust Litigation

1 UNITED STATES DISTRICT COURT 2 NORTHERN DISTRICT OF CALIFORNIA [3] IN RE APPLE IPHONE ANTITRUST 4 LITIGATION CASE NO. 11-cv-6714-YGR [5] ORDER DENYING CONSUMER PLAINTIFFS’ 6 MOTION FOR LEAVE TO FILE FOURTH AMENDED COMPLAINT; 7 GRANTING CONSUMER PLAINTIFFS’ MOTION TO STRIKE APPLE’S MOTION TO 8 COMPEL TRIAL PLAN; AND DENYING MOTION TO COMPEL TRIAL 9 PLAN AS MOOT 10 Re: Dkt. Nos. 471, 487, and 544 [11] 12 Plaintiffs Stephen H. Schwartz, Edward W. Hayter, Robert Pepper, and Edward 13 Lawrence’s (“Consumer Plaintiffs”) bring this putative class action against Apple, Inc. for Apple’s 14 alleged anticompetitive conduct and alleged violation of the Sherman Act. (Dkt. No. 228, Ex. A 15 (“TAC”) at 1.) 16 Now before the Court are the following motions: (1) Consumer Plaintiffs’ motion for leave 17 to file a fourth amended complaint, specifically to include one additional affirmative claim for a 18 violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 , et seq. 19 (“UCL”). Consumer Plaintiffs’ UCL claim is based on Apple’s alleged anticompetitive conduct 20 and alleged violation of the Sherman Act using all three prongs of the Act: unfair, fraudulent and 21 unlawful. Under the UCL, Consumer Plaintiffs seek both injunctive relief and equitable 22 restitution (Dkt. No. 544); (2) Apple’s motion to compel plaintiffs to submit a trial plan (Dkt. No. 23 471) in light of Consumer Plaintiffs’ pending motion for class certification; and (3) Consumer 24 plaintiffs’ motion to strike Apple’s motion to compel plaintiffs to submit a trial plan (Dkt. No. 25 487).1 [27] 1 Having carefully considered the pleadings and the papers submitted, the Court 2 HEREBY ORDERS as follows: (1) the Court DENIES Consumer Plaintiffs’ motion for leave to 3 amend given the unjustified delay, considerable prejudice, and lack of good cause; (2) GRANTS 4 Consumer Plaintiffs’ motion to strike Apple’s motion to compel plaintiffs to submit a trial plan as 5 it relates to plaintiffs’ motion for class certification and violates Local Rule 7-3(a); and (3) DENIES 6 WITHOUT PREJUDICE Apple’s motion to compel plaintiffs to submit a trial plan as moot.2 7 I. MOTION FOR LEAVE TO FILE FOURTH AMENDED COMPLAINT 8 A. Procedural History 9 This case has a long history having been filed a decade ago. Upon return from the 10 Supreme Court, and with input from counsel, the Court issued a scheduling order to expedite 11 resolution of the case by setting the briefing schedule for discovery cutoffs and class certification. 12 Plaintiffs did not request to amend their complaint at that time. 13 On January 9, 2020, the Court entered a Revised Case Management and Pretrial Order 14 setting the hearing for class certification on February 1, 2021 and trial for March 7, 2022. (Dkt. 15 No. 198.) Thereafter, in June 2020, due in part to the COVID-19 pandemic, the parties stipulated 16 to a revised schedule extending the schedule four months. The Court granted the request and reset 17 the trial date for July 11, 2022. (Dkt. No. 209.) Plaintiffs did not request to amend their 18 complaint at that time. 19 In the related actions, the Developer Class filed a consolidated class action complaint on 20 June 4, 2019, which included a claim under the UCL. Epic Games filed an action against Apple 21 on August 13, 2020, which also included a claim under the UCL. 3 Thereafter, Consumer Plaintiffs [22] 23 2 Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court finds these motions appropriate for decision without oral argument. Accordingly, the Court 24 VACATES the motion hearing for Consumer plaintiffs’ motion for leave to file a fourth amended complaint and Apple’s motion to compel plaintiffs to submit a trial plan set for NOVEMBER 16, 25 2021. The hearing on Consumer plaintiffs’ motion for class certification and Apple’s motion to exclude the testimony of Professor McFadden shall proceed as scheduled on November 16, 2021. 26 Thus, the parties’ joint stipulation continuing the class certification, motion to compel trial plan, and Daubert hearing is DENIED. [27] 1 filed their own amended complaint and chose again not to include a UCL claim. See Dkt. Nos. 1, 2 26 (3/21/2012), 81 (9/28/2012), and 229 (9/11/2020). 3 Again, upon the parties’ request, on January 8, 2021, the Court extended the briefing 4 schedule for the class certification motion requiring: 5 • Class Certification Motion shall be filed and supporting Expert Reports with all 6 data upon which they are based shall be produced by June 1, 2021. 7 • Class Certification Opposition shall be filed and supporting Expert Reports with all 8 data upon which they are based shall be produced by August 10, 2021. 9 • Class Certification Reply shall be filed and any Rebuttal Expert Reports with all 10 data upon which they are based shall be produced by October 12, 2021. 11 The hearing is scheduled for November 16, 2021. (Order at Dkt. No. 362; see related order at Dkt. 12 330.) The Court did not vacate the trial date nor did plaintiffs request to amend their complaint. 13 (Id.) Under the current scheduling order, the following deadlines apply, assuming the Court 14 renders its decision on class certification by December 1, 2021: [15] Deadline for Expert Reports January 30, 2022 [16] Deadline for Rebuttal Reports March 16, 2022 [17] Expert Cutoff April 15, 2022 [18] Dispositive Motions/Dauberts filed May 30, 2022 [19] Joint Pretrial Statements June 10, 2022 [20] Trial July 11, 2022 [21] 22 As this Court has done in other antitrust cases, a brief period of time is allowed after class 23 certification practice to tie up any loose ends which may have been identified during that portion 24 of the pretrial practice. The time is too short to do much else. Thus, given the parties’ requested 25 extensions, under the current scheduling order, the parties have already committed to double track 26 dispositive and Daubert motion practice with trial preparation. See Standing Order re Civil Trial 27 for trial related deadlines. 1 requested input from the Consumer Plaintiffs and the Developer Plaintiffs including their 2 perspectives on the legal issues being litigated, including the UCL. Not once did the Consumer 3 Plaintiffs request to amend their complaint. 4 In August 2021, counsel for the Developer Plaintiffs advised the Court that they had 5 reached a tentative settlement with Apple and the Court preliminarily approved the settlement on 6 November 2, 2021. 7 After a bench trial in the Epic Games/Apple case, the Court issued a 185-page decision on 8 September 10, 2021 with its findings which included a finding against Apple on the UCL claim. 9 On October 8, 2021, counsel for Consumer Plaintiffs filed the instant motion, never really 10 explaining why they never alleged a UCL claim but merely stating that they would be “remiss not 11 to,” given the Court’s decision in the Epic Games/Apple case. 12 B. Legal Standard 13 The parties dispute the rule under which Consumer Plaintiffs’ motion for leave to amend 14 should be evaluated. Two potential rules apply: Federal Rule of Civil Procedure (FRCP) 15 15(a) (Amendments before Trial) or FRCP 16(b) (Modifying a Case Schedule). Rule 16 15(a) generally governs when parties may amend their pleadings and Rule 16(b) governs 17 amendments that would alter the Court’s pretrial schedule. 18 Apple avers that the motion to amend, if granted, would result in a change to the Court’s 19 scheduling order, and thus Rule 16 applies. (Opp. at 8-9.) Plaintiffs counter that Rule 16 only 20 applies when a court has entered a scheduling order that sets a deadline for amendments to the 21 pleadings. (Dkt. No 567 (“Reply”) at 3-4.) According to plaintiffs, because the Court’s scheduling 22 orders in this case have not set such a deadline, Rule 15 applies. (Id.) 23 The Court notes that the case law regarding the governing standard in a case with a unique 24 procedural history such as this one appears mixed. At least one court in this district has 25 applied Rule 16(b) absent a scheduling order setting a deadline for amendment of pleadings and 26 was affirmed by the Ninth Circuit. See Design Data Corp. v. Unigate Enter., Inc., No. 12-CV27 04131-WHO, 2014 WL 4477244 , at *2 (N.D. Cal. Sept. 11, 2014), aff’d, 847 F.3d 1169 (9th Cir. 1 the pleadings, Rule 16(b) applied “[g]iven that the timing of [defendant]’s motion to amend would 2 upend the trial schedule”). However, in other cases, courts have stated that Rule 16(b) controls 3 only after “the district court [ ] file[s] a pretrial scheduling order pursuant to [Rule] 16 which 4 establish[s] a timetable for amending pleadings[.]” Johnson v. Mammoth Recreations, Inc., 975 5 F.2d 604 , 607–608 (9th Cir. 1992); Moeller v. Taco Bell Corp., No. C 02-5849 PJH, 2013 WL 6 6140730, at *1 (N.D. Cal. Nov. 21, 2013) (where “no deadline for amending the pleadings was 7 ever set in a case management or pretrial scheduling order, . . . the applicable standard is provided 8 by Rule 15(a)”). 9 Given the lengthy procedural history of this case, the Court will use the concepts 10 underlying both FRCP 15 and 16 to evaluate the request. Courts are to grant leave to amend 11 “when justice so requires.” Generally speaking, the rule is “to be applied with extreme 12 liberality.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 13 2001) (quoting Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990)). 14 That said, “leave to amend is not to be granted automatically.” Jackson v. Bank of Hawaii, 902 15 F.2d 1385 , 1387 (9th Cir. 1990). 16 Under Rule 15 the Court weighs the following factors in ruling on a motion for leave to 17 amend: (1) bad faith; (2) undue delay; (3) prejudice to the opposing party; (4) futility of the 18 amendment; and (5) whether the movant has previously amended its pleadings to cure 19 deficiencies. See Foman v. Davis, 371 U.S. 178, 182 (1962); see also Johnson v. Buckley, 356 20 F.3d 1067 , 1077 (9th Cir. 2004). Of these factors, “the consideration of prejudice to the opposing 21 party [ ] carries the greatest weight.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 , 1052 22 (9th Cir. 2003). “Undue delay alone cannot serve as the basis for the denial of leave to amend.” 23 In re Tracht Gut, LLC v. L.A. Cty. Treasurer & Tax Collector, 836 F.3d 1146 , 1155 n.4 (9th Cir. 24 2016). 25 Rule 16 requires diligence and allows changes due to matters not reasonably foreseeable at 26 the time the scheduling order was issued. Johnson, 975 F.2d at 609. 27 C. Analysis 1 scheduling order and reopen the pleadings. Further, even under Rule 15, Apple claims (a) it 2 would be prejudiced by the amendment; (b) Consumer Plaintiffs unduly delayed in seeking leave 3 to amend; (c) Consumer Plaintiffs’ proposed amendment would be futile; (d) Consumer Plaintiffs 4 have amended their complaint “five” times; (e) and the timing of Consumer Plaintiffs’ amendment 5 reflects bad faith. The Court addresses each factor. 6 1. Rule 16: Modification to the Court’s Schedule 7 The schedule for this case was coordinated with two other related cases; one of which has 8 been tried and is now on appeal and the other of which settled. Class certification briefing is 9 complete pending a hearing and, due to requests for extensions, the schedule already overlaps with 10 trial preparation. Thus, the request to reopen pleadings to add a new claim would entirely disrupt 11 an already tight schedule. 12 Further, and importantly, counsel for the Consumer Plaintiffs have utterly failed to explain 13 their delay in raising this issue. That this Court ruled in favor of Epic Games for its UCL claim 14 does not justify granting leave for the belated request to reopen the pleadings. 15 Protestations to the contrary, Consumer Plaintiffs add three new theories under the UCL 16 and additional remedies. (See Proposed Fourth Amended Complaint, ¶¶ 19, 20, and 90-101.) 17 Moreover, the proposal adds generic bald allegations which would be subject to Rule 12 practice. 18 For instance, the proposed paragraph 92 alleges that “Apple’s acts, omissions, misrepresentations, 19 practices and non-disclosures, as alleged herein, constituted a common, continuous, and 20 continuing course of conduct of unfair competition . . . .” Yet, the proposed complaint is devoid of 21 any factual allegations or any specific reference to any “omission,” “misrepresentation,” or “non22 disclosure” as is required by a heightened pleading standard for the “fraud” theory under the UCL. 23 Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Similarly, they propose to allege 24 in paragraph 94 “immoral, unethical, oppressive, and unscrupulous” conduct but never identifies 25 any facts to support the conclusory statement of law. Finally, they request in the Prayer and 26 proposed paragraphs 98 and 101, “full restitution and/or disgorgement . . . .” which are entirely 27 new bases for requested relief. While perhaps the damages issues would not be subject to Rule 12 1 these additional factual issues distinguish the authorities offered by the Consumer Plaintiffs. 2 Under a Rule 16 analysis, the motion should be denied. 3 2. Rule 15 Analysis 4 a. Prejudice 5 “Prejudice is the touchstone of the inquiry under Rule 15(a).” Eminence Capital, LLC v. 6 Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (internal quotations and citations omitted). A 7 need to reopen discovery, a delay in the proceedings, or the addition of complaints or parties may 8 be indicators of prejudice. See Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080, 1087 (9th Cir. 2002) 9 (affirming district court's denial of motion to amend pleadings filed five days before close of 10 discovery where amendments would have required additional discovery and delayed proceedings); 11 Solomon v. N. Am. Life and Cas. Ins. Co., 151 F.3d 1132, 1139 (9th Cir. 1998) (holding the 12 district court did not abuse its discretion in denying plaintiff's motion to amend on grounds of 13 undue delay and prejudice where the motion was made “on the eve of the discovery deadline . . . 14 [and] would have required reopening discovery, thus delaying the proceedings”). 15 While the Court acknowledges that the UCL claim overlaps with the facts and theory set 16 out in the operative complaint, it is a distinctly different claim. As referenced above, despite any 17 overlap, the breadth of Consumer Plaintiffs’ proposed amendments include a fraud component 18 which could widen the scope dramatically. For this reason, Apple is correct that that additional 19 discovery will be needed to understand the nature and scope of plaintiffs’ UCL claim and the 20 common evidence upon which the class is relying to for class certification purposes. 21 Finally, given that the remedy identified in the proposed complaint is entirely new, 22 additional expert discovery would be required for both the plaintiff class and in opposition thereto. 23 Consumer Plaintiffs’ argument that they intend to pursue the same claim decided in the 24 Epic Games/Apple case is not consistent with their proposed complaint which does not address 25 any of those factual issues at all. Nor do the Consumer Plaintiffs dispute that they have never 26 provided any discovery to Apple on those claims, which would require additional discovery both 27 factual and expert to occur. While Consumer Plaintiffs argue that briefing on class certification 1 Given the Court’s experience in evaluating such motions, it is doubtful. 2 Accordingly, this factor weighs against granting the motion for leave to amend. 3 b. Undue Delay 4 The Court next examines whether undue delay exists. “Although delay is not a dispositive 5 factor in the amendment analysis, it is relevant, . . . especially when no reason is given for the 6 delay[.]” Lockheed Martin Corp. v. Network Solutions Inc., 194 F.3d 980, 986 (9th Cir. 7 1999) (internal citations omitted). Further, “[r]elevant to evaluating the delay issue is whether the 8 moving party knew or should have known the facts and theories raised by the amendment in the 9 original pleading.” Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388 (9th Cir. 1990). 10 Here, and as outlined in the procedural history of this case, counsel for the Consumer 11 Plaintiffs have had multiple opportunities, and time, to amend their complaint. In fact, they last 12 amended their complaint in September 2020 and were aware, or on notice, that the other two 13 related cases included UCL claims. Plaintiffs waited nearly two years after this case had come 14 back to this Court from appeal before seeking leave to add the UCL claim, and only as a result of 15 having read this Court’s decision. 16 Accordingly, the Court finds that plaintiffs were unduly delayed in seeking leave to add 17 their UCL claim, weighing against granting the motion for leave to amend. 18 c. Futility 19 With respect to the next issue of futility, the Court must be satisfied that “no set of facts 20 can be proved under the amendment to the pleadings that would constitute a valid and sufficient 21 claim or defense.” Missouri ex el rel. Koster v. Harris, 847 F.3d 646,656 (9th Cir. 2017). The 22 party opposing leave to amend “bear[s] a particularly heavy burden” identical to the one governing 23 12(b)(6) motions. Dong Ah Tire & Rubber Co., Ltd. v. Glasforms, Inc., No. C-06-3359- JF-RS, [24] 2009 WL 667171 at *2 (N.D. Cal. Mar. 10, 2009). Even claims or defenses with “tenuous basis in 25 the record” or those “fraught with contradictions” will survive the futility inquiry. Id. 26 Here, Apple argues that plaintiffs’ claim for equitable relief under the UCL is futile 27 because plaintiffs have an adequate remedy at law. While case law establishes that a plaintiff is 1 precludes plaintiffs from seeking restitution under the UCL in the alternative from their other 2 remedies sought. 3 The Court is not convinced that the claim would be futile. This weighs in favor of granting 4 the motion. 5 d. Previous Amendments to Cure Deficiencies 6 Next, the Court considers whether plaintiffs’ amendment is the result of “repeated failure 7 to cure deficiencies by amendments previously allowed.” Forman v. Davis, 371 U.S. 178 , 182 8 (1962). Apple argues that the Court should deny Consumer Plaintiffs’ motion because plaintiffs 9 have already amended their complaint five times. Apple’s argument overlooks the purpose of 10 plaintiffs’ previous amendments. Aside from plaintiffs’ earlier amendment to fix an issue with 11 standing, the bulk of plaintiffs’ amendments were not to cure deficient pleadings. Instead, they 12 were to add the consolidated plaintiffs and to expand the relevant market definition. Moreover, 13 plaintiffs’ current motion for leave to amend does not seek to cure any deficiency. 14 Accordingly, this factor weighs in favor of granting the motion but carries little 15 applicability in this context. 16 e. Bad Faith 17 Lastly, the Court examines whether Consumer Plaintiffs acted in bad faith. Apple argues 18 that plaintiffs acted in bad faith by waiting to bring their UCL claim until after the Court’s 19 decision in the Epic Games/Apple case. Consumer Plaintiffs’ decision to seek a UCL claim, while 20 unduly delayed, does not rise to the level of bad faith. Indeed, Apple’s only cited authority, 21 Lockheed Martin Corp. v. Network Solutions, Inc., 194 F.3d 980, 986 (9th Cir. 1999) is 22 distinguishable. In Lockheed Martin Corp., the plaintiff waited until discovery closed and while 23 facing a motion for summary judgment to bring additional claims and allege new factual 24 allegations. The Court found that such conduct “might reflect bad faith.” Rather, courts typically 25 find bad faith where parties seek leave to add frivolous claims in order to avoid having the case 26 dismissed. Trans Video Elecs., Ltd. v. Sony Elecs., Inc., 278 F.R.D. 505, 509-10 (N.D. Cal. 2011) 27 (denying motion for leave to amend where plaintiff sought amendment as a last-ditch attempt to 1 That said, the Court cannot discern any credible reason for delay and counsel provide none. 2 It appears counsel would like to benefit from 20-20 hindsight. Thus, the Court could view the 3 motion as one of gamesmanship or the result of negligence in failing to allege a claim which was 4 found to be successful. Alternatively, the Court could also view counsel’s actions as reflecting a 5 considered decision that the UCL claim was not necessary or appropriate, especially given that 6 counsel states it wants to assert the UCL claim “out of an abundance of caution.” (Opp. at 8:1.) 7 Accordingly, given the lack of bad faith but also the lack of any reasoned explanation for 8 its actions or any good cause for counsel’s prior actions, this factor is neutral in terms of granting 9 the motion. 10 D. Conclusion 11 Based upon both Federal Rule of Civil Procedure 16 and a balancing under Federal Rule of 12 Civil Procedure 15, the motion to amend is denied. Consumer Plaintiffs shall proceed on the basis 13 that they have repeatedly reaffirmed. To find otherwise, would require this Court to entirely 14 modify the trial and pre-trial schedule in this action which already requires the parties to double 15 track pretrial motions and trial preparation, and would reopen the pleadings for additional Rule 12 16 motions. 17 II. MOTION TO STRIKE 18 Consumer Plaintiffs move to strike Apple’s motion to compel plaintiffs to submit a trial 19 plan under Local Rule 7-11. Plaintiffs argue that the motion should be stricken for three reasons, 20 namely: (1) it includes a procedural objection to plaintiffs’ motion for class certification in 21 violation of Local Rule 7-3(a); (2) it improperly circumvents page limits; and (3) it would upend 22 the class certification schedule. 23 The Court examines whether the motion violates Local Rule 7-3(a). Under Rule 7-3(a), 24 “[a]ny opposition to a motion may include a proposed order, affidavits, or declarations, as well as 25 a brief or memorandum under Civil L.R. 7-4. Any evidentiary and procedural objections to the 26 motion must be contained within the brief or memorandum. Pursuant to Civil L.R. 7-4(b), such 27 brief or memorandum may not exceed 25 pages of text.” 1 While Apple frames the motion as a separate motion, the Court notes that the gravamen of 2 || the motion are arguments for denial of class certification including procedural objections. For 3 || example, Apple argues that “plaintiffs should be required to address [how the cases could fairly be 4 || tried to judgment] before the Court rules on their respective motions for class certification”, and 5 || that the “Court cannot, and should not, certify any class or subclass without requiring such a plan, 6 || or because of the absence of a plan.” (Dkt. No. 471, at 1: 23-27). Its constitutional arguments are 7 also tied to the class certification process. Under Local Rule 7-3(a), these arguments should have 8 || been included in Apple’s opposition to plaintiffs’ motion for class certification. They were not. 9 Given such, they are improper under Rule 7-3(a). E 10 Accordingly, the Court hereby GRANTS plaintiffs’ motion to strike Apple’s motion to = 11 compel plaintiffs to submit a trial plan because it violates Local Rule 7-3(a). The Court need not S 12 || address plaintiffs’ other arguments. In light of the foregoing, Apple’s motion to compel is 5 13 DENIED as moot. 14 However, the motion is denied WITHOUT PREJUDICE, to be refiled in the context of trial if 5 15 class certification is granted. Moreover, the Court anticipates that the motion will need to consider 16 the class action settlement in Cameron et al. vy. Apple, Inc., No. 19-3074-YGR and the impact of 17 that case, if any. 18 || TN. CONCLUSION 19 For the foregoing reasons, the Court DENIES Consumer Plaintiffs’ motion to file a fourth 20 || amended complaint; GRANTS Consumer Plaintiffs’ motion to strike Apple’s motion to compel a 21 trial plan; and DENIES WITHOUT PREJUDICE said motion. 22 This Order terminates Docket Nos. 471, 487, and 544. 23 || Ir Is SO ORDERED. 24 || Dated: November 8, 2021 (YVONNE Gonz@rz Kocrrs © 25 UNIr&b STATES DISTRICT COURT JUDGE