Pepper v. Apple Inc. - Ninth Circuit

Headline: The Ninth Circuit Panel held that reviewing courts should be “forgiving” of a district court’s failure to follow Rule 12(g)(2), when granting late-filed Rule 12(b)(6) motions and held customers who buy iPhone applications are “direct purchasers” for purposes of standing in an antitrust suit against Apple, Inc.

Areas of Law: Federal Rules of Civil Procedure, Antitrust, Statutory Standing

Issues Presented: The panel’s opinion focused on two questions. First, whether the district court erred in granting Apple’s fourth motion to dismiss asserting the defense of lack of standing, when Rule 12(g)(2) by its terms may have barred Apple’s motion because that defense was omitted from Apple’s previous Rule 12 motion. Second, whether the plaintiffs were direct purchasers of Apple’s iPhone applications within the meaning of Illinois Brick.

Brief Summary: Plaintiffs brought a putative antitrust class action against Apple alleging monopolization, attempted monopolization, and conspiracy between Apple and AT&T Mobility LLC to monopolize the voice and data services market for iPhones. Plaintiffs that Apple has monopolized and attempted to monopolize the market for iPhone apps and further alleged that they were direct purchasers . Plaintiffs allege that claimed that were “direct purchasers” of Apple’s iPhone applications and thus suffered financial injury sufficient to satisfy Article III standing, as well as satisfying the statutory standing per Illinois Brick.

Plaintiffs claim Rule 12(g)(2) should have barred Apple’s late-filed 12(b)(6) motion because Apple omitted its lack-of-standing defense from an earlier Rule 12 motion; therefore, the district court erred when ruling on Apple’s 12(b)(6) motion. Noting a disagreement among the Circuits on the proper interpretation and application of Rule 12(g)(2), the panel sided with the Third and Tenth Circuits in concluding that the district court may have failed to apply Rule 12(g)(2), but the error was harmless and should be forgiven since the intent and policy of the Federal Rules are to ensure “just, speedy, and inexpensive determination of every action and proceeding.” By ruling on the merits of Apple’s Rule 12(b)(6) motion, the district court “materially expedited the district court’s disposition of the case, which was a benefit to both parties.” The panel found that Rule 12(g)(2) was designed to punish parties who unduly delay trial by strategically not filing motions, and Apple was found to have filed the motions in a timely manner. Therefore, any procedural error was harmless, and the panel then focused on the merits of the decision.

The United States Supreme Court case Illinois Brick stated, “the overcharged direct purchaser, and not others in the chain of manufacturer or distribution,” has standing to sue. The panel held Apple, and not the third-party developers, were the direct distributors of iPhone apps, so that the plaintiffs were direct purchasers of iPhone apps from Apple under Illinois Brick and, therefore, have standing to sue. The panel reversed the district court’s decision on the merits, and remanded the case for further proceedings.


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