Robert Pepper v. Apple, Inc.
846 F.3d 313
| 9th Cir. | 2017Background
- Plaintiffs (iPhone owners) alleged Apple monopolized the iPhone app market (2007–2013) by requiring all app sales through the App Store and taking a 30% commission; developers cannot sell apps outside the App Store and users are discouraged from installing unapproved apps.
- Plaintiffs amended multiple times; only in the fourth consolidated complaint (Complaint 4) did they allege they purchased apps (satisfying Article III injury) and that payments are made to Apple which remits 70% to developers.
- Apple filed four successive Rule 12 motions at different stages, ultimately moving under Rule 12(b)(6) to dismiss for lack of statutory standing under Illinois Brick (indirect-purchaser doctrine). The district court granted dismissal on Illinois Brick grounds and entered judgment with prejudice.
- On appeal, the Ninth Circuit considered (1) whether Rule 12(g)(2) barred Apple’s late Rule 12(b)(6) motion and (2) whether plaintiffs are direct purchasers from Apple under Illinois Brick.
- The Ninth Circuit concluded any Rule 12(g)(2) error in entertaining Apple’s late Rule 12(b)(6) motion was harmless and held that plaintiffs are direct purchasers from Apple (a distributor) and therefore have statutory standing to sue under Illinois Brick.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rule 12(g)(2) barred Apple from raising Illinois Brick in a later Rule 12(b)(6) motion | Rule 12(g)(2) prohibits successive Rule 12(b)(6) defenses not raised earlier; district court erred to consider it | Apple argued the motion was timely or that Rule 12(g)(2) should not force needless delay; district court could decide for judicial economy | Any error in considering the late Rule 12(b)(6) was harmless; Ninth Circuit forgave the procedural lapse to avoid delay and reached the merits |
| Whether plaintiffs lack statutory antitrust standing under Illinois Brick (i.e., are they indirect purchasers) | Plaintiffs argued they purchased apps directly from Apple via the App Store and thus are direct purchasers with standing | Apple argued it is a distributor of distribution services to developers (or akin to a mall owner) and plaintiffs bought from developers, making them indirect purchasers without standing | Plaintiffs are direct purchasers from Apple (Apple is the distributor selling apps via the App Store); plaintiffs have Illinois Brick standing |
Key Cases Cited
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (Sup. Ct.) (establishes direct-purchaser rule limiting antitrust damages to direct purchasers)
- Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (Sup. Ct.) (rejected defensive pass-on; direct purchaser presumed injured by overcharge)
- Kansas v. UtiliCorp United, Inc., 497 U.S. 199 (Sup. Ct.) (reaffirmed direct/indirect purchaser rule despite regulatory passthrough arguments)
- Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (Sup. Ct.) (federal courts must address Article III jurisdiction before reaching merits)
- Delaware Valley Surgical Supply, Inc. v. Johnson & Johnson, 523 F.3d 1116 (9th Cir.) (applies Illinois Brick bright-line rule: buyers from a distributor lack standing to sue upstream manufacturer)
- Campos v. Ticketmaster Corp., 140 F.3d 1166 (8th Cir.) (analyzed direct/indirect purchaser status; majority used antecedent-transaction approach criticized by Ninth Circuit)