Distribution, Competition, and Antitrust / Intellectual Property (IP) Law

iPhone Owners Not Necessarily Required to Arbitrate Monopolization Claims Against Apple

iPhone, iPhone 3G and 3GS

(Photo credit: Wikipedia)

In In re Apple iPhone Antitrust Litig., No. C 11-06714 JW (N.D. Cal. July 11, 2012) (Ware, J.), the court found that arbitration provisions in consumers’ service agreements with AT&T Mobility, LLC (“ATTM”) did not necessarily apply to antitrust claims brought by a class of consumers against Apple. Two of the plaintiffs’ three causes of action involved an alleged aftermarket for applications for the iPhone, and thus might pertain solely to Apple’s solitary actions with regard to applications for its iPhones. They thus might not be “intertwined with” the service agreement issued by ATTM. Because ATTM was a necessary party but had not been joined, the court gave the plaintiffs leave to amend their complaint to add ATTM, and denied Apple’s motion to compel arbitration without prejudice.

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N.D. Cal. Certifies Antitrust / Arbitration Estoppel Question to Ninth Circuit

In re Apple & AT&TM Antitrust Litigation, No. C 07-05152 JW (Feb. 1, 2012) (Ware, J.)

Judge Ware certified for interlocutory appeal the question of whether a non-signatory may assert equitable arbitration estoppel against a signatory plaintiff.

The case involves a Sherman Act Section 2 / aftermarket claim against Apple. The case arose from the plaintiff’s service contract with defendant ATTM. As part of that service contract, the plaintiff signed an arbitration agreement with defendant ATTM which precluded class arbitrations and class actions.

The district court initially followed Mundi v. Union Security Life Ins. Co., 555 F.3d 1042 (9th Cir. 2009), in finding that equitable estoppel required plaintiff to arbitrate with non-signatory Apple as well. The Mundi court had found a dearth of prior Ninth Circuit precedent, and had looked to other circuits for guidance — in particular, the Second Circuit in Sokol Holdings, Inc. v. BMB Munai, Inc., 542 F.3d 354 (2d Cir. 2008). The Ninth Circuit allowed the assertion of equitable estoppel where the dispute is “intertwined” with the contract and there is a sufficient “relationship” between the parties.

Plaintiff filed a motion for reconsideration. Because the Apple Court’s prior order “was premised on an interpretation of Mundi which required the Court to undertake an extensive analysis of both that opinion itself and the Second Circuit caselaw to which the Mundi court looked for guidance, and given the language in Mundi which indicates that the Ninth Circuit did not mean to extend the ‘concept of equitable estoppel of third parties’ beyond the ‘very narrow confines’ delineated in previous cases,” the Apple Court found reason to certify the issue of arbitration by equitable estoppel for interlocutory review.

 

American Express Can’t Enforce Arbitration Agreement Antitrust Class Action Waiver

The Supreme Court’s recent arbitration decisions have not yet killed the antitrust class action.

Yesterday, in a purported class action brought by merchants against American Express, the Second Circuit ruled that American Express could not enforce an arbitration agreement containing a class action waiver provision.  The Second Circuit distinguished the Supreme Court’s recent decisions in Concepcion and Stolt-Nielsen.  (Concepcion, in particular, had bolstered the enforceability of  arbitration provisions, ruling that the Federal Arbitration Act preempts certain state laws.)  The Second Circuit found that those cases did not address the issue of whether a class-action arbitration waiver clause is enforceable even if the plaintiffs are able to demonstrate that the practical effect of enforcement would be to preclude their ability to vindicate their federal statutory rights.

In so ruling, the Second Circuit relied upon evidence that showed that the cost of individually arbitrating the merchants’ claims would be prohibitive.  (The merchants had alleged that when American Express entered the commodity credit card business, American Express forced merchants to pay “excessive” rates equal to American Express’ more attractive business and personal charge cards by tying the credit and charge cards together.)

The decision is In re American Express Merchants’ Litigation, 2d Circuit Feb. 1, 2012.  A petition for certiorari is likely.

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