5:20-cv-04812
N.D. Cal.Jun 13, 2022Background
- Nine named plaintiffs from various states allege they were victims of an App Store/iTunes gift‑card scam in which scammers obtained gift‑card redemption codes and converted card value into app/store purchases tied to developer accounts.
- Plaintiffs contend Apple (Apple Inc. and Apple Value Services LLC) controls redemption, knows which Apple IDs/developer accounts receive redeemed funds, and thus could identify and stop scammers or refund victims; Apple typically retains at least 30% of in‑app/App Store purchases and pays developers ≈70% after a payout delay.
- Plaintiffs point to Apple’s on‑card/package warnings, an Apple “About Gift Card Scams” webpage, and Terms & Conditions disclaimers stating Apple is not responsible for lost/stolen cards and reserving rights to void balances.
- Causes of action in the First Amended Complaint include violations of the CLRA, UCL, FAL, California Penal Code § 496 (receiving/withholding stolen property), conversion, aiding and abetting, and declaratory relief; plaintiffs seek class treatment for victims who received no refunds.
- Apple moved to dismiss under Rule 12(b)(6) and sought a protective order to stay a Rule 30(b)(6) deposition; the court resolved the motion to dismiss, granted in part/denied in part, and denied the protective order as moot.
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 496(a) (receiving/withholding stolen property) is pled | Apple received, withheld, and retained stolen gift‑card funds (or at least withheld after notice) and had knowledge once victims contacted Apple | § 496 requires property to be stolen before defendant received it; plaintiffs haven't pled Apple had actual knowledge at time of receipt | Court: Plaintiffs failed to plead receipt‑at‑time‑of‑theft for most plaintiffs, but four named plaintiffs (Martin, Marinbach, Qiu, Hagene) adequately pled withholding/concealment after timely notice; claim survives for those four only. |
| Conversion | Apple exercised dominion by processing/paying out redeemed funds and refusing refunds after victims notified it, thereby depriving owners | Apple’s processing and retention are mere payment‑processing acts, not affirmative conversion | Court: Conversion claim sustained only for the same four plaintiffs who notified Apple promptly; otherwise dismissed. |
| Aiding and abetting / third‑party liability for scammers (CLRA/UCL/FAL) | Apple substantially assisted scammers by enabling redemption, transferring funds to developer accounts, and profiting from commissions | Payment‑processing and profit alone are insufficient; plaintiffs haven’t pled Apple knowingly and substantially assisted scammers (per Schulz, Perfect 10) | Court: Third‑party liability allegations dismissed with prejudice; plaintiffs failed to allege substantial assistance or conscious decision to participate. |
| Fraud — affirmative misrepresentation and omission (CLRA/UCL/FAL) | Apple made affirmative misstatements (e.g., telling victims “there was nothing Apple could do”), and omitted material facts (Apple’s control over funds, payout timing, retention) on cards/packaging/web | Plaintiffs did not plead that they viewed/relied on specific statements or that omissions concerned product central functionality; reliance and causation are inadequately pled | Court: Fraud claims (both affirmative and omission theories) dismissed with prejudice for failure to plead reliance/causation; FAL omission theory also inapplicable. |
| Unconscionability of Apple’s disclaimer | The packaging/Terms disclaimers are unconscionable to the extent they purport to bar Apple’s liability for its own retaining/withholding of funds; adhesive nature and victims’ lack of meaningful choice support procedural unconscionability | Disclaimer is standard adhesive language and not unenforceable as to third‑party liability; no coercion by Apple caused purchases | Court: Disclaimer was substantively unconscionable to the extent it attempts to disclaim Apple’s own tortious conduct; unconscionability as to third‑party liability dismissed with prejudice; claim survives as to disclaiming Apple’s own conduct and supports CLRA/UCL and declaratory relief. |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading requires factual plausibility)
- People v. McFarland, 58 Cal. 2d 748 (possession of recently stolen property permits knowledge inference)
- Schulz v. Neovi Data Corp., 152 Cal. App. 4th 86 (profit/processing alone insufficient for aiding and abetting)
- Hodsdon v. Mars, Inc., 891 F.3d 857 (limits on omission‑based consumer claims; duty to disclose analysis)
- Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788 (payment processors not liable absent more affirmative assistance)
- Fiol v. Doellstedt, 50 Cal. App. 4th 1318 (elements for aiding and abetting intentional tort)
- OTO, L.L.C. v. Kho, 8 Cal. 5th 111 (adhesion contracts; procedural unconscionability factors)