CORONAVIRUS REPORTER; CALID, INC.; PRIMARY PRODUCTIONS LLC v. APPLE, INC.; FEDERAL TRADE COMMISSION
No. 22-15166, No. 22-15167
United States Court of Appeals for the Ninth Circuit
November 3, 2023
D.C. No. 3:21-cv-05567-EMC.
SUMMARY*
Antitrust
The panel affirmed the district court‘s dismissal, for failure to state a claim, of an antitrust action against Apple, Inc., alleging monopolist operation of the Apple App Store.
The panel held that appellants failed to state an antitrust claim under Section 1 or Section 2 of the
The panel held that appellants failed to state a claim for breach of contract under California law because they did not identify relevant specific provisions of Apple‘s Developer Agreement or Developer Program License Agreement or show that Apple breached a specific provision.
Appellants also failed to state a claim under the Racketeer Influenced and Corrupt Organizations Act or for fraud.
COUNSEL
Keith Mathews (argued), American Wealth Protection, Manchester, New Hampshire; Stephan M. Kernan, The Kernan Law Firm, Beverly Hills, California; for Plaintiffs-Appellants.
Jeffrey D. Isaacs (argued), West Palm Beach, Florida, pro se Petitioner.
Julian W. Kleinbrodt (argued) and Rachel S. Brass, Gibson Dunn & Crutcher LLP, San Francisco, California; Cynthia E. Richman, Zachary B. Copeland, and Harry R.S. Phillips, Gibson Dunn & Crutcher LLP, Washington, D.C.; Mark A. Perry, Weil Gotshal & Manges LLP, Washington, D.C.; for Defendants-Appellee.
GOULD, Circuit Judge:
Plaintiffs-Appellants Coronavirus Reporter, CALID, Inc., Primary Productions LLC, and Dr. Jeffrey D. Isaacs sued Defendant-Appellee Apple for its allegedly monopolist operation of the Apple App Store. The district court dismissed the claims with prejudice for failure to state a claim under
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2008, a year after launching the iPhone, Apple introduced the App Store. In order to distribute apps on the App Store, app developers must abide by the App Store Review Guidelines (“the Guidelines“) and enter into two agreements with Apple: the Developer Agreement and the Developer Program License Agreement (“DPLA“). By signing these agreements, app developers expressly “understand and agree” that Apple has “sole discretion” to reject apps. The Guidelines provide developers with the standards Apple applies when it reviews apps.
Plaintiffs-Appellants developed a group of apps that they sought to distribute on Apple‘s App Store. Two of their apps—Coronavirus Reporter and Bitcoin Lottery—were not approved for distribution. The Coronavirus Reporter app sought to collect “bioinformatics data” from users about COVID-19 symptoms that the app would then share with “other users and [unidentified] epidemiology researchers.” The Coronavirus Reporter team allegedly included Dr. Robert Roberts, a former cardiologist for NASA. Apple rejected Coronavirus Reporter under Apple‘s policy requiring that any apps related to COVID-19 be submitted by a recognized health entity such as a government organization or medical institution.1 Apple rejected Bitcoin Lottery, a blockchain app, under its policy “generally block[ing] blockchain apps.”
Plaintiffs-Appellants brought claims against Apple for antitrust violations pursuant to Sections 1 and 2 of the 1
Sherman Act, breach of contract, racketeering, and fraud, challenging Apple‘s allegedly monopolist operation of the iPhone “App Store” through the “curation” and “censor[ship]” of apps. Plaintiffs-Appellants assert that they “seek to vindicate” the right of “the end users of Apple‘s iPhone” to “enjoy unrestricted use of their smartphones” to run “innovative applications, written by third party developers.”
The district court dismissed Plaintiffs-Appellants’ First Amended Complaint (“FAC“) with prejudice on November 30, 2021. The district court dismissed Plaintiffs-Appellants’ antitrust claims because they did not allege a plausible relevant market nor antitrust injury. The district court likewise dismissed the claims for breach of contract, racketeering, and fraud because the Plaintiffs-Appellants failed to plead required elements for each. Accordingly, the district court denied as moot Plaintiffs-Appellants’ two preliminary injunction motions, Plaintiffs-Appellants’ “motion to strike” Apple‘s motion to dismiss, and Plaintiffs-Appellants’ Notices for Discovery of Apple executives and FTC Chair Lina Khan, along with Defendant-Appellee‘s motion to quash these requests.
Plaintiffs-Appellants appeal the district court‘s dismissal of their claims, as well as the denial of their motions for reconsideration and for preliminary injunction.
II. STANDARDS OF REVIEW
We review de novo a district court‘s grant of a motion to dismiss under
Although decisions by the district court on the substance and merits of claims are reviewed de novo, see Ebner, 838 F.3d at 962, many matters that routinely come before a district court are committed to the sound discretion of the district court and reviewed for abuse of discretion. See e.g., Ordonez v. Johnson, 254 F.3d 814, 815 (9th Cir. 2001) (per curiam) (dismissal with prejudice); Pom Wonderful LLC v. Hubbard, 775 F.3d 1118, 1123 (9th Cir. 2014) (denial of a preliminary injunction); Kerr v. Jewell, 836 F.3d 1048, 1053 (9th Cir. 2016) (denial of a motion for reconsideration), cert. denied sub nom. Kerr v. Haugrud, 580 U.S. 1198 (2017); cf. Ryan v. Editions Ltd. W., Inc., 786 F.3d 754, 759 (9th Cir. 2015) (denying leave to amend), cert. denied, 577 U.S. 876 (2015).
III. DISCUSSION
A. Antitrust claims
An antitrust claim brought pursuant to Section 1 of the
An antitrust claim brought pursuant to Section 2 of the
“A threshold step in any antitrust case is to accurately define the relevant market.” Qualcomm, 969 F.3d at 992. For both Section 1 and Section 2 of the
A relevant market can be an aftermarket in which demand depends entirely upon prior purchases in a foremarket. Id. (citing Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 482 (1992) and Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1048 (9th Cir. 2008)). However, such a market generally shows that the defendant exploited consumers’ unawareness of the restrictions on the aftermarket and must still show the cross-elasticity required to define a market. Id.
The relevant market can also be a two-sided market, with consumers on both sides of a platform.2 PLS.Com, LLC v. Nat‘l Ass‘n of Realtors, 32 F.4th 824, 837-39 (9th Cir. 2022); see, e.g., Epic Games, 67 F.4th at 985 (discussing the “two-sided market for mobile-game transactions,” in which the relevant consumers are both game developers and users). Under these circumstances, an antitrust plaintiff must show anticompetitive impact on the “market
Here, Plaintiffs-Appellants have not adequately defined the relevant market. Plaintiffs-Appellants’ FAC alleged in scattergun fashion that there were at least fifteen “relevant markets” pertinent to its antitrust claims but made no effort at all to define the markets or to distinguish them from one another.3 For example, Plaintiffs-Appellants did not clarify
whether the markets that Plaintiffs-Appellants identified are completely different from one another or whether they overlap. Plaintiffs-Appellants later impermissibly tried through a Motion to Strike to narrow their relevant markets to “two foremarkets” and “four downstream markets,” but our “[r]eview is limited to the complaint.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (quoting Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir.1993)).
Even if we were to review the narrower set of markets posited in Plaintiffs-Appellants’ Motion to Strike, the alleged markets lack sufficient clarity to state an antitrust claim plausibly. See Am. Express, 138 S. Ct. at 2285. The FAC does not attempt to demonstrate the cross-elasticity of iOS end users’ demand either for Plaintiffs-Appellants’ rejected apps as compared to other apps, or for apps in general, as it must. See Kaplan, 611 F.2d at 291-92. The FAC fails to draw the market‘s boundaries to “encompass the product at issue as well as all economic substitutes for the product.” Hicks, 897 F.3d at 1120 (quoting Newcal, 513 F.3d at 1045).
Additionally, the Plaintiffs-Appellants allege downstream markets in a manner that implies that the Apple App Store‘s apps constitute their own market, which amounts to an allegation of a single-brand market. This allegation fails because Plaintiffs-Appellants did not allege the prerequisites for a single-brand market. For example, Plaintiffs-Appellants do not demonstrate that iOS end consumers lacked awareness that buying an iPhone constrains which apps would be available to them through the App Store. See Epic Games, 67 F.4th at 976–77 (“[T]o establish a single-brand aftermarket, a plaintiff must show ... the challenged aftermarket restrictions are ‘not generally known’ when consumers make their foremarket purchase.“). Nor do Plaintiffs-Appellants demonstrate that iOS end users would, if they could do so more readily, obtain apps through means other than Apple‘s App Store due to cost sensitivity or for other reasons. See id. at 976–77 (“[T]o establish a single-brand aftermarket, a plaintiff must show ... ‘significant’ monetary or non-monetary switching costs exist.“). To the extent that Plaintiffs-Appellants attempt to define a two-sided platform market, they fail to properly allege a relevant market (that is, a category of transactions between developers and consumers on a two-sided platform), given their reference to a broader market for smartphones and the corresponding ability to access apps
Because Plaintiffs-Appellants do not meet the threshold step of defining a relevant market, we reject their antitrust claims and need not proceed further with the analysis. Failing to define a relevant market alone is fatal to an antitrust claim. See Qualcomm, 969 F.3d at 992. Without a defined relevant market in terms of product or service, one cannot sensibly or seriously assess market power. See Epic Games, 67 F.4th at 975.
Because the Plaintiffs-Appellants did not define the relevant market, it follows that they could not, and did not, establish that the Defendant-Appellee created an agreement that unreasonably restrained trade, as required for a Section 1 claim. See Aerotec Int‘l, 836 F.3d at 1177–78; Qualcomm, 969 F.3d at 988. It also follows that they could not, and did not, establish that the Defendant-Appellee possesses a market share in a relevant market sufficient to constitute monopoly power, nor did they show that there were existing barriers to entry to that market, as required for a Section 2 claim. See Dreamstime.com, 54 F.4th at 1137.4
Further, Plaintiffs-Appellants did not demonstrate that the Defendant-Appellee undertook anticompetitive conduct in that market sufficient to harm the competitive process as a whole. See id.; see also Brunswick, 429 U.S. at 489. Two of Plaintiffs-Appellants’ five apps did not get approved for distribution for reasons explicitly set out in the Developer Agreement and the DPLA. Antitrust law does not seek to punish economic behavior that benefits consumers. See Dreamstime.com, 54 F.4th at 1137. Disapproval of these two apps on grounds ostensibly designed to protect consumers, absent factual allegations to believe that these disapprovals occurred for pretextual reasons, does not suffice to demonstrate anticompetitive conduct. Further, Plaintiffs-Appellants have not explained why or how they could not distribute their apps by other means, even if not by their most preferred means.
For all of these reasons, Plaintiffs-Appellants’ antitrust claims must fail.
B. Breach of contract
To state a breach of contract claim under California law, plaintiffs must show: (1) there was a contract, (2) plaintiff either performed the contract or has an excuse for nonperformance, (3) defendant breached the contract, and
(4) plaintiff suffered damages as a result of defendant‘s breach. Hamilton v. Greenwich Invs. XXVI, LLC, 126 Cal. Rptr. 3d 174, 183 (Cal. Ct. App. 2011).
Here, Plaintiffs-Appellants do not identify relevant specific provisions of the Developer Agreement or the DPLA, much less show that Apple breached a specific provision. Plaintiffs-Appellants contend that there is a “promise” in the Developer Agreement that “entities with ‘deeply rooted medical credentials’ were permitted to publish COVID apps on the App Store.” But neither the Developer Agreement nor any other contract between Plaintiffs-Appellants and Defendant-Appellee contains any such guarantee. Instead, and sharply to the contrary, the DPLA specifically states that Apple has “sole discretion” to approve or deny requests to distribute apps on the App Store. Plaintiffs-Appellants’ contract claim fails because there was no breach of contract. Similarly, in an attempt to make a claim for breach of the
C. RICO or fraud
To plead a civil claim under
Here, Plaintiffs-Appellants allege that Apple and individuals within Apple‘s App Store management, App Review, their counsel, and friends formed a RICO enterprise and engaged in predicate acts such as screening Plaintiffs-Appellants’ apps for purported compliance with the DPLA while appropriating Plaintiffs-Appellants’ ideas into Apple‘s own competing apps, as well as wire and mail fraud by assigning Apple‘s App Review employees to give false, pretextual reasons for rejecting the apps of small developers. These allegations center on the conduct of Apple and its employees without describing in any particularity conduct or activity outside of Apple as a corporation. As articulated, this claim makes Apple as a corporation both the enterprise and the RICO defendant, which is not permitted in a RICO claim. See Rae, 725 F.2d at 481. To the extent the Plaintiffs-Appellants attempt to make out a further claim for fraud, their allegations are vague and conclusory without the particularity required by FRCP 9(b). See Depot, Inc., 915 F.3d at 668.
D. Dismissal without leave to amend
Federal Rule of Civil Procedure 15(a) states that leave to amend “shall be freely given when justice so requires,” but “[a] district court acts within its discretion to deny leave to amend when amendment would be futile[.]” Chappel v. Lab‘y Corp. of Am., 232 F.3d 719, 725–26 (9th Cir. 2000). Here, the district court did not abuse its discretion in concluding that further amendment was not warranted. While the district court dismissed the Plaintiffs-Appellants’ first amended complaint in this case, Plaintiffs-Appellants were given a total of seven opportunities to amend similar complaints across jurisdictions and between various permutations of plaintiffs, but still failed to state their claims here adequately. It is within the district court‘s discretion to determine that an eighth opportunity would produce a similar result. See Ryan, 786 F.3d at 759.
E. Remaining motions
Because the district court properly dismissed with prejudice all of the claims against Apple, it correctly denied the remaining pending motions as moot. The court also properly denied the motions for reconsideration by finding that the Plaintiffs-Appellants simply reiterated their prior claims and did not present newly discovered evidence or controlling law, nor an error of law or manifest injustice. See Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); Kerr, 836 F.3d at 1053.
We affirm the decisions of the district court to dismiss Plaintiffs-Appellants’ FAC for failure to state any claim under
AFFIRMED.