Case5:07-cv JW Document531 Filed09/09/11 Page1 of 19

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1 Case:0-cv-0-JW Document Filed0/0/ Page of 0 LATHAM & WATKINS LLP Daniel M. Wall (Bar No. 00) Alfred C. Pfeiffer, Jr. (Bar No. 0) Christopher S. Yates (Bar No. ) Sadik Huseny (Bar No. ) 0 Montgomery Street, Suite 000 San Francisco, California - Telephone: () -000 Facsimile: () -0 Dan.Wall@lw.com Al.Pfeiffer@lw.com Chris.Yates@lw.com Sadik.Huseny@lw.com Attorneys for Defendant APPLE INC. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 0 IN RE APPLE & AT&TM ANTI-TRUST LITIGATION CASE NO. C 0- JW (PVT) DEFENDANT APPLE INC. S REPLY IN SUPPORT OF MOTION TO COMPEL ARBITRATION AND FOR DECERTIFICATION Date: October, 0 Time: :00 AM Place: Courtroom, th Floor The Honorable James Ware SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

2 Case:0-cv-0-JW Document Filed0/0/ Page of 0 TABLE OF CONTENTS PAGE I. INTRODUCTION... II. III. PLAINTIFFS MADE THE ATTM WSA CRITICAL TO THEIR CLAIMS AND CLASS CERTIFICATION THEORIES... EQUITABLE ESTOPPEL MANDATES ARBITRATION OF PLAINTIFFS CLAIMS AGAINST APPLE... IV. APPLE HAS NOT WAIVED ITS RIGHT TO ARBITRATION... V. THE ITUNES CONTRACT IS IRRELEVANT TO PLAINTIFFS CLAIMS AND DOES NOT PRECLUDE ARBITRATION... VI. THE ATTM WSA IS ENFORCEABLE... VII. THE CLASS MUST BE DECERTIFIED... VIII. CONCLUSION... 0 SAN F RANCISCO i CASE NUMBER: C 0-0 JW (PVT)

3 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 TABLE OF AUTHORITIES CASES Am. Bankers Ins. Group v. Long, F.d (th Cir. 00)... Amisil Holdings Ltd. v. Clarium Capital Mgmt. LLC, F. Supp. d (N.D. Cal. 00)... Arellano v. T-Mobile USA, Inc., 0 WL (N.D. Cal., May, 0)... Bernal v. Burnett, 0 U.S. Dist. LEXIS (D. Col., Jun., 0)... Brantley v. Republic Mortg. Ins. Co., F.d (th Cir. 00)... Brown v. General Steel Domestic Sales, LLC, 00 U.S. Dist. LEXIS (C.D. Cal. May, 00)... Bryant v. Serv. Corp. Int l, 0 U.S. Dist. LEXIS 0 (N.D. Cal., July, 0)... Comer v. Micor, Inc., F.d 0 (th Cir. Cal. 00)... Cruz v. Cingular Wireless, LLC, 0 U.S. App. LEXIS (th Cir. Aug., 0)..., D Antuono v. Serv. Rd. Corp., 0 WL (D. Conn. May, 0)... Discover Bank v. Superior Court, Cal. th (00)..., Fisher v. A. G. Becker Paribas, Inc., F.d (th Cir. )... Fujian Pac. Electric Co. Ltd. v. Bechtel Power Corp., 00 U.S. Dist. LEXIS (N.D. Cal., Nov., 00)... 0 Green Tree Financial Corp. Alabama v. Randolph, U.S. (000)... Grigson v. Creative Artists Agency, L.L.C., 0 F.d (th Cir. 000)... 0 Hallwood Group, Inc. v. Belestri, 00 U.S. Dist. LEXIS (N.D. Tex. October, 00)... 0 Hawkins v. KPMG LLP, F. Supp.d 0 (N.D. Cal. 00)..., 0 In re American Express Merchants Litigation, F.d (d. Cir. 0)... SAN F RANCISCO ii CASE NUMBER: C 0-0 JW (PVT)

4 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 In re Currency Conversion Fee Antitrust Litig., F. Supp. d (S.D.N.Y. 00)... Letizia v. Prudential Bache Secur., Inc., 0 F.d (th Cir. )... Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., U.S. ()..., Morse v. Servicemaster Global Holdings, Inc., 0 U.S. Dist. LEXIS 0 (N.D. Cal. July, 0)... MS Dealer Serv. Corp. v. Franklin, F.d (th Cir. )..., 0 Mundi v. Union Sec. Life Ins. Co., F.d 0 (th Cir. 00)...,,, Murphy v. Directv, Inc., 0 U.S. Dist. LEXIS (C.D. Cal. Aug., 0)... Nakano v. Servicemaster Global Holding, Inc., 0 U.S. Dist. LEXIS (N.D. Cal. July, 0)... Noodles Dev., L.P. v. Latham Noodles, LLC, 00 U.S. Dist. LEXIS (D. Ariz., Aug., 00)... NS Holdings LLC Inc. v. Am. Int'l Group, Inc., 00 U.S. Dist. LEXIS 0 (C.D. Cal. Nov., 00)... 0 Shroyer v. New Cingular Wireless Services, F.d (th Cir. 00)...,, Sokol Holdings, Inc. v. BMB Munai, Inc., F.d (d Cir. 00)... Stolt Nielsen S.A. v. AnimalFeeds International Corp., 0 S. Ct. (00)... Swift v. Zynga Game Network, Inc., 0 U.S. Dist. LEXIS (N.D. Cal. Aug., 0)... United Steel, Paper & Forestry, Rubber, Manuf. Energy, Allied Indus. & Serv. Workers Int l Union v. ConocoPhillips Co., F.d 0 (th Cir. 00)... ValueSelling Assocs., LLC v. Temple, 00 U.S. Dist. LEXIS 0 (S.D. Cal. Nov., 00)... Wal-Mart Stores, Inc. v. Dukes, 0 U.S. LEXIS (June 0, 0)... SAN F RANCISCO iii CASE NUMBER: C 0-0 JW (PVT)

5 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 I. INTRODUCTION Plaintiffs stretch advocacy beyond the breaking point in an effort to convince the Court that their claims against Apple should not be arbitrated. It begins with plaintiffs attempts to distinguish this case from AT&T Mobility, LLC v. Concepcion, S.Ct. 0 (0), the Supreme Court s decision that dealt with the same arbitration provision and considered and rejected the policy arguments that plaintiffs make in this case. Concepcion answers plaintiffs contention that arbitration of these claims is improper because it would preclude them from vindicating their statutory rights. That is just not enough where, as the Supreme Court found with respect to this arbitration clause, an arbitration provision is correctly structured. There is not a different rule for federal claims unless Congress has determined that arbitration is incompatible with the relevant statute which is not the case with the antitrust laws. Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., U.S. (). Anything to the contrary in In re American Express Merchants Litigation, F.d (d. Cir. 0) ( AmEx II ), the case which forms the basis for plaintiffs opposition to ATTM s motion, cannot stand. Plaintiffs arguments regarding Apple and the doctrine of equitable estoppel demonstrate their willingness to say anything to pursue their claims, even if it is the direct opposite of what they have proclaimed before or know to be true. Plaintiffs told this Court for years that their antitrust claims are based on what is and is not contained in the ATTM wireless service agreement (the WSA ) including what the WSA says about the length of time plaintiffs must use ATTM wireless service and the meaning of the WSA s Early Termination provision. The WSA was not merely background to Plaintiffs antitrust allegations, (Pls. Opp. Apple Mot., Dkt. No. at - (emphasis in original)), it was plaintiffs answer to every challenge defendants raised. For example, there is no more fundamental issue than how Apple and ATTM who have many competitors could be monopolizing some legally relevant antitrust market. Plaintiffs answer, on the merits and at class certification, has always been, because of the WSA : the definition of the aftermarket in this case depends upon whether Plaintiffs or any other members of the Class entered into binding written contracts that obligated them to use ATTM for voice and data service for the life of the iphones. Pls. Reply Mem. In Support of Class Cert., Dkt. No. at (emphasis added). the iphone voice and data aftermarket is predicated on those two-year service agreements Id. at, fn.. SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

6 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 Plaintiffs could not have made a better case for how the WSA is intertwined with their claims if they were trying to invoke the equitable estoppel doctrine themselves. Plaintiffs about-face in response to this motion is beyond the pale. Plaintiffs cannot use the WSA to prop-up antitrust claims, then use it again to overcome obstacles to class certification, and yet deny they are bound by the arbitration clause found in the WSA. The paradigm case for applying equitable estoppel against a plaintiff is exactly the one plaintiffs here have constructed, where plaintiffs claims are intertwined with and rely on the contract containing the arbitration clause. To try to remain in this Court, plaintiffs make a series of specious arguments. First, they completely distort the Ninth Circuit s decision in Mundi v. Union Sec. Life Ins. Co., F.d 0 (th Cir. 00). Plaintiffs claim that Mundi holds that a non-signatory such as Apple cannot apparently ever obtain equitable estoppel against a signatory plaintiff, even if the signatory brings a claim that relies on or is intertwined with the agreement containing the arbitration provision. Mundi did not hold anything like that; if it had, it would be the only district or circuit to do so. Mundi merely determined that since the plaintiff s claims in that case were not intertwined with the contract with the arbitration provision, did not arise out of or relate directly to that contract, and were based solely on the non-signatory s actions, without any claim of conspiracy with a signatory, equitable estoppel did not apply. Id. at 0. To get to that conclusion, the Ninth Circuit implicitly accepted that all these factors are relevant indeed, they are the test for whether equitable estoppel applies. District courts since Mundi have so read the case and estopped signatories applying precisely the analysis plaintiffs say Mundi forecloses. Second, plaintiffs make much of the fact that Apple is not a party to the ATTM WSA and has no rights under that contract. (Pls. Opp. Apple Mot., Dkt. No. at.) Apple does not claim to be a party to that contract. However, that is always the case when equitable estoppel comes into play. The doctrine exists for those cases, like this one, where a non-signatory to a contract with an arbitration provision is seeking to compel a signatory to arbitrate its claims. Third, plaintiffs argue that Apple has waived its right to seek arbitration because it did not file a joinder in ATTM s 00 failed motion to compel arbitration. That is erroneous. As SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

7 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 plaintiffs Opposition to ATTM s 00 motion to compel argued, the California Supreme Court s Discover Bank opinion and the Ninth Circuit s opinion in Shroyer required the Court to deny the motion. (Pls. Opp. ATTM 00 Mot. Compel Arb., Dkt. No. at, -.) Indeed, multiple courts in this District have rejected the waiver argument that plaintiffs now put forth, holding that prior to Concepcion there was no right to arbitration if a contract contained a class action waiver. Any claim of prejudice falls flat since Apple simply relied on the then-existing case law and exercised its right to seek arbitration as soon as Concepcion was decided. There also could not possibly be any prejudice to plaintiffs, since the Court sided with them, rejected ATTM s motion to compel arbitration, and the litigation thus proceeded in this Court until Concepcion was decided. Fourth, plaintiffs advance an extraordinarily misleading argument that Apple itself chose to have claims between iphone customers and itself litigated in court rather than arbitrated. Plaintiffs supposed evidence for this is the Terms of Service for Apple s itunes Store (which do not contain an arbitration provision). Plaintiffs ignore the fact that the itunes Store Terms of Service cover (not surprisingly) itunes Store Service, not the iphone or the network service from ATTM that is at issue in this case. Apple does not have a contract with iphone customers covering Voice and Data services they obtain from ATTM; that is governed by the WSA. And that is why plaintiffs have for years cited to the ATTM WSA and why it is clear that plaintiffs claims depend on the contents of the ATTM WSA. The itunes Terms of Service are irrelevant. Finally, plaintiffs arguments make clear that the Court must decertify the class no matter how the Court resolves the motions to compel arbitration. If the Court grants either or both motions, then decertification is plainly warranted since some or all of the certified claims will be subject to arbitration. And if the Court finds, for whatever reason, that all or a portion of plaintiffs claims against defendants are not arbitrable, plaintiffs emphatic renunciation of any claimed reliance on the WSA means that plaintiffs survived a motion to dismiss and obtained certification by misleading defendants and the Court about the nature of their claims, the alleged common issues, and how they intend to try their claims on a common basis. This requires, at a minimum, that the Court revisit both its prior orders on Apple s motion to dismiss and on class certification SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

8 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 and Apple submits decertification of the class certified on July, 00. II. PLAINTIFFS MADE THE ATTM WSA CRITICAL TO THEIR CLAIMS AND CLASS CERTIFICATION THEORIES In their effort to avoid arbitration, plaintiffs assert that the alleged misconduct in this case is in no way intertwined with the WSA, is not depend[ent] on the WSA in any way whatsoever, and does not rely on the ATTM WSA at all. (Pls. Opp. Apple Mot., Dkt. No. at 0-; Pls. Opp. Defs. Mot. Decertify, Dkt. No. at.) Plaintiffs go so far as to contend that [a]ny reference to the WSA is merely background to Plaintiffs antitrust allegations. (Pls. Opp. Apple Mot., Dkt. No. at.) These assertions contradict dozens of earlier representations plaintiffs made to the Court, including statements made in order to obtain certification. To an outsider, the idea that Apple and ATTM are monopolizing anything must seem strange. Apple has numerous competitors (Samsung, Motorola, RIM, Nokia, Sony Ericson, etc.), and so does ATTM (Verizon, Sprint, T-Mobile, Metro PCS, etc.). Neither is a monopolist in any normal sense of the term. The case has survived solely because of the aftermarket theory plaintiffs developed, which in plaintiffs own words is expressly predicated on those two-year service agreements that consumers have with ATTM that is, the ATTM WSA and the notion that those agreements gave rise to a legally meaningful iphone aftermarket. (Pls. Reply Mem. In Support of Class Cert., Dkt. No. at,.) Over and over again, plaintiffs characterized the ATTM WSA as what this case is about and claimed that the WSA alone provided a sufficient basis to determine whether [plaintiffs] contractually agreed to give monopoly power to Apple and ATTM in the iphone voice and data aftermarket knowingly and voluntarily or otherwise. (Id.) The ATTM WSA is so critical to plaintiffs theory of the case as well as their class certification theory that they relied on the Early Termination provision of the WSA and the claimed absence of disclosures in the WSA as their proposed means to establish their antitrust claims on a common basis. (See Apple s Mot. Compel Arb., Dkt. No. at -.) There is no credible, good faith basis for plaintiffs present contention that their claims do not rely on the WSA or that the WSA is merely background. Having relied on the WSA SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

9 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 throughout this case, plaintiffs cannot now avoid its arbitration provision and certainly not without undermining the prior rulings they invited the Court to make based on the WSA. III. EQUITABLE ESTOPPEL MANDATES ARBITRATION OF PLAINTIFFS CLAIMS AGAINST APPLE Plaintiffs emphatically contend that Mundi v. Union Sec. Life Ins. Co., F.d 0 (th Cir. Cal. 00), prohibits a court from applying equitable estoppel against a plaintiff signatory to an agreement containing an arbitration clause. (Pls. Opp. Apple Mot., Dkt. No. at.) Plaintiffs argument is wrong, and illogical. Mundi does not so hold and plaintiffs argument ignores both post-mundi precedent in the Ninth Circuit and the many cases from other Circuits applying equitable estoppel against a plaintiff signatory. The discussion of equitable estoppel in Mundi begins with the fundamental rule that [e]quitable estoppel precludes a party from claiming the benefits of a contract while simultaneously attempting to avoid the burdens that contract imposes. F.d. at 0. The decision then proceeds to carefully sort past cases into those that involve signatories and nonsignatories in different combinations. The court noted that past Ninth Circuit cases had not considered the issue of a nonsignatory [defendant] seeking to enforce an arbitration agreement against a signatory [plaintiff]. Id. at 0. The decision then goes on, however, to examine the treatment of that issue by other courts. It does not say, this is not something we will consider. It considers it at length, deriving important principles from other cases, and applying them. The most important concepts Apple relies on that the subject matter of the dispute was intertwined with the contract providing for arbitration, whether the claims arise out of or relate to the contract that contained the arbitration agreement are all found in Mundi. Id. at 0-. It is true that arbitration was not ordered in Mundi, but that is because there were not intertwined claims, claims that arise[ ] out of or relate[ ] directly to the contract containing the arbitration clause, and no allegations of collusion or of misconduct by Wells Fargo, the signatory to the arbitration agreement. Id. at 0. All of that is present here. Since Mundi, Ninth Circuit courts have prevented non-signatory defendants from compelling arbitration with signatory plaintiffs on equitable estoppel grounds. See, e.g. Noodles SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

10 Case:0-cv-0-JW Document Filed0/0/ Page0 of 0 0 Dev., L.P. v. Latham Noodles, LLC, 00 U.S. Dist. LEXIS at *-0 (D. Ariz., Aug., 00) (citing Mundi in holding that [a] nonsignatory to an arbitration agreement, such as Mark Matteo, may estop a signatory from refusing to arbitrate its claim against the nonsignatory where the dispute is intertwined with the contract providing for arbitration. ); NS Holdings LLC Inc. v. Am. Int l Group, Inc., 00 U.S. Dist. LEXIS 0 at *- (C.D. Cal. Nov., 00) (compelling plaintiff signatories to arbitrate claims against defendant non-signatories on equitable estoppel grounds because plaintiffs claims were intertwined with the agreement containing the arbitration provision); ValueSelling Assocs., LLC v. Temple, 00 U.S. Dist. LEXIS 0 at *- (S.D. Cal. Nov., 00) ( a non-signatory [defendant] to a contract containing an arbitration provision can compel arbitration under an equitable estoppel theory ); Brown v. General Steel Domestic Sales, LLC, 00 U.S. Dist. LEXIS at *- (C.D. Cal. May, 00) (non-signatory defendants may invoke equitable estoppel). These decisions are in complete harmony with Mundi s holding, and plaintiffs do not cite a single decision supporting their claim that Mundi operates as an express bar preventing nonsignatory defendants from compelling arbitration with signatory plaintiffs. Mundi also favorably reviewed cases from other circuits confirming that a non-signatory defendant may equitably estop a signatory plaintiff from refusing to arbitrate when the plaintiff s claims relied on the agreement containing the arbitration clause or allege interdependent conduct between a signatory and non-signatory. Id. at 0 (reviewing Sokol Holdings, Inc. v. BMB Munai, Inc., F.d (d Cir. 00) (explaining that a signatory may be compelled to arbitrate its claims against a non-signatory where the subject matter of the dispute was intertwined with the contract providing for arbitration. ), Brantley v. Republic Mortg. Ins. Co., F.d (th Cir. 00) (agreeing with MS Dealer s holding that a non-signatory may compel arbitration when the claims are either intertwined with the agreement or the claims allege interdependent conduct between a signatory and non-signatory)). Mundi also incorporated the holding in Am. Bankers Ins. Group v. Long, F.d (th Cir. 00), where the court reversed a district court s denial of a non-signatory defendant s motion to compel arbitration. Plaintiffs mischaracterization of Mundi would also lead to an absurd result. Under SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

11 Case:0-cv-0-JW Document Filed0/0/ Page of plaintiffs theory, a signatory can compel a non-signatory to arbitrate claims, but a non-signatory is barred from ever requiring a party who is an actual signatory to an arbitration agreement from arbitrating their claims. That is not the law and for good reason. Courts recognize that a party 0 to an arbitration agreement whether a plaintiff or defendant is more readily estopped than a non-party. That is not surprising since Courts are simply requiring parties, such as plaintiffs here, to act in accordance with their agreement. See Amisil Holdings Ltd. v. Clarium Capital Mgmt. LLC, F. Supp. d, (N.D. Cal. 00) ( courts have generally found there is a difference [between a signatory and non-signatory seeking arbitration]: arbitration is more likely to be attained when the party resisting arbitration is a signatory ). Should this Court construe Mundi as plaintiffs suggest, it will be contrary to both the analysis in Mundi and every other circuit that has considered the question. IV. APPLE HAS NOT WAIVED ITS RIGHT TO ARBITRATION Plaintiffs argue that Apple has waived any right to seek arbitration because: () Apple 0 should have joined in ATTM s motion; () Apple acted inconsistently with any right to demand arbitration; and () plaintiffs will be prejudiced if arbitration is permitted now. At the heart of all three arguments is the contention that to avoid waiver, Apple should have filed a one-sentence joinder in ATTM s 00 motion and then refrained from defending itself when ATTM s motion was denied. Plaintiffs position, which would encourage the filing of futile motions, is wrong. Arbitrability was not an open legal question in the Ninth Circuit in 00. As plaintiffs argued in their brief in opposition to ATTM s motion, both the Ninth Circuit and the California Supreme Court had held that arbitration clauses with class action waivers were unconscionable and unenforceable. (See Pls. Opp. ATTM 00 Mot. Compel Arb., Dkt. No. at, -, citing Discover Bank v. Superior Court, Cal. th (00) and Shroyer v. New Cingular Wireless Services, F.d, (th Cir. 00) among other cases.) Indeed, in Shroyer, the Ninth Plaintiffs cite Comer v. Micor, Inc., F.d 0 (th Cir. Cal. 00), as supposed support for their position. However, as the Amisil court explained: In Comer, the Ninth Circuit acknowledged this theory of estoppel although it did not apply the theory because, there, a signatory was invoking estoppel against a nonsignatory i.e., the converse of the situation here. F. Supp. d at. See Apple s Mot. Compel Arb, Dkt. No. at, fn. (identifying cases across the circuits applying equitable estoppel to compel a signatory to arbitrate claims against a non-signatory). SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

12 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 Circuit held that an earlier version of ATTM s arbitration provision was unconscionable and unenforceable. The law in the Ninth Circuit at the time was thus plain ATTM s arbitration provision was unenforceable, as plaintiffs made clear in their 00 brief: Discover Bank and Shroyer are directly applicable to and dispositive of this case. (Pls. Opp. ATTM 00 Mot. Compel Arb., Dkt. No. at.) It was not until the Supreme Court issued its decision in Concepcion that Apple had any non-futile motion to compel arbitration to make. As soon as Concepcion issued, Apple asserted a right to compel arbitration and filed a motion to compel arbitration. This set of facts does not permit plaintiffs to meet their heavy burden of establishing that Apple had knowledge of an existing right to compel arbitration and acted inconsistently with that existing right. Fisher v. A. G. Becker Paribas, Inc., F.d, (th Cir. ). Nor can Apple s choice to defend itself in this Court until Concepcion was decided constitute prejudice. Indeed, the Ninth Circuit would have decided Fisher and Letizia v. Prudential Bache Secur., Inc., 0 F.d, (th Cir. ), differently if plaintiffs position were valid. In Letizia, for example, defendants did not seek arbitration until after the close of discovery; the Ninth Circuit nonetheless rejected plaintiffs claim of waiver because an intervening Supreme Court decision changed the law. That is exactly what occurred here, as Judge Illston recognized in Bryant v. Serv. Corp. Int l, 0 U.S. Dist. LEXIS 0 at * (N.D. Cal., July, 0): A similar change in the law with regard to arbitration agreements has just occurred. Court after court in this district and elsewhere has rejected the waiver argument that plaintiffs advance here because Concepcion changed the law in this Circuit. See also Murphy v. Directv, Inc., 0 U.S. Dist. LEXIS at *- (C.D. Cal. Aug., 0) (Nguyen, J.) (defendants did not waive right to arbitrate because prior to Concepcion, the arbitration provision was not enforceable); Swift v. Zynga Game Network, Inc., 0 U.S. Dist. LEXIS at *- (N.D. Cal. Aug., 0) (Laporte, J.) (same); Nakano v. Servicemaster Global Holding, Inc., 0 U.S. Dist. LEXIS at *- (N.D. Cal. July, 0) (Illston, J.) (same); Morse v. Servicemaster Global Holdings, Inc., 0 U.S. Dist. LEXIS 0 at *-0 (N.D. Cal. July, 0) (Illston, J.) reconsideration denied 0 U.S. Dist. LEXIS 0 (N.D. Cal. Aug., 0) SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

13 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 (same). In short, not a single sister court in this District (or anywhere else to Apple s knowledge) has agreed with plaintiffs waiver argument. Apple acted promptly after Concepcion changed the law and plaintiffs cannot, accordingly, sustain their burden of establishing that Apple has waived its right to seek arbitration. V. THE itunes CONTRACT IS IRRELEVANT TO PLAINTIFFS CLAIMS AND DOES NOT PRECLUDE ARBITRATION Plaintiffs trumpet the Terms of Service for Apple s itunes Store as if it were dispositive of Apple s motion because it contains a choice of California law and California courts provision. It is irrelevant, not dispositive, for multiple reasons. First, the itunes Store Terms of Service explicitly state that the provisions of that contract govern your [the user s] use of the itunes Store services. (Schmidt Decl., Dkt. No., Ex. I at, 0.) itunes Store Service is defined as the Service permitting the user to purchase downloads of digital content such as sound recordings and videos under certain terms and conditions as set forth in this Agreement. (Id.) Plaintiffs claims in this litigation have nothing to do with the itunes Store or the itunes Store Terms of Service. Instead, plaintiffs claims hinge upon the ATTM WSA and what is contained (e.g., the Early Termination provision) or allegedly not disclosed in that contract. See page, supra. Accordingly, the itunes Terms of Service is irrelevant to the claims in this case as are the Terms of Use governing Apple s website, its computer warranty, and myriad of other agreements plaintiffs have not made part of the case. Second, the itunes Store Terms of Service are irrelevant because arbitration with a class action waiver was not a possibility before Concepcion issued. The fact that Apple designated California as the venue for the only enforceable option then available did not operate to waive its ability to request arbitration of claims once arbitration became an enforceable option post- Concepcion. Third, plaintiffs erroneously assert that Hawkins v. KPMG LLP, F. Supp.d 0 (N.D. Cal. 00), is directly on point. That case involved fraud claims involving a tax shelter. Though KPMG s tax-advice engagement letter did not provide for arbitration, KPMG sought to compel arbitration based on a clause in one of several documents (a warrant) under which the SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

14 Case:0-cv-0-JW Document Filed0/0/ Page of 0 shelter took effect. Judge Patel denied the motion to compel because KPMG did not claim that the plaintiffs claims relied on the warrant with the arbitration provision and because there was no claim made against the other party to the warrant. Id. at 0. Judge Patel also declined to do so because the warrant containing the provision was fraudulent (id at 0-): What defendants ask this court to do -- enforce an arbitration clause in a fraudulent contract, not signed by defendants, involving a phantom, now-defunct company, and bearing only an incidental relationship to the dispute at the heart this lawsuit -- would make a mockery of this court s equitable powers. In sum, Hawkins is nothing like this case. Plaintiffs entered into the ATTM WSA and then brought a suit based on the terms of the WSA. The Early Termination provision and other provisions of the WSA are of critical importance to plaintiffs substantive claims and class certification theories. Courts do not hesitate to find equitable estoppel in such circumstances 0 even when the non-signatory entered into other contracts with the party to be estopped. Grigson v. Creative Artists Agency, L.L.C., 0 F.d (th Cir. 000) (compelling arbitration despite a separate contract between the signatory and non-signatory that did not have an arbitration provision); MS Dealer Serv. Corp. v. Franklin, F.d (th Cir. ) (compelling signatory to arbitrate with non-signatory where the parties had also entered into a separate contract); NS Holdings LLC Inc. v. Am. Int'l Group, Inc., 00 U.S. Dist. LEXIS 0 (C.D. Cal. Nov., 00) (compelling arbitration between non-signatory defendant and signatory plaintiff where parties had entered into other contracts). That is because permitting parallel litigation and arbitration would mean that the arbitration proceedings between the... signatories would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted. Fujian Pac. Electric Co. Ltd. v. Bechtel Power Corp., 00 U.S. Dist. LEXIS at * (N.D. Cal., Nov., 00). Plaintiffs reliance on Hallwood Group, Inc. v. Belestri, 00 U.S. Dist. LEXIS (N.D. Tex. October, 00), is misplaced for similar reasons. In that case, an agreement without an arbitration provision was the central agreement to the dispute. Id. at *. SAN F RANCISCO 0 CASE NUMBER: C 0-0 JW (PVT)

15 Case:0-cv-0-JW Document Filed0/0/ Page of VI. THE ATTM WSA IS ENFORCEABLE Plaintiffs contend that thewsa s arbitration provision is unenforceable, notwithstanding 0 0 Concepcion. In an effort to escape Concepcion, plaintiffs counsel and two of their experts have declared that no rational plaintiff would bring this antitrust claim in arbitration. This argument cannot survive the controlling U.S. Supreme Court law, including Concepcion. The contention that a class action should be permitted, notwithstanding an arbitration provision, because of the small size of potential individual recoveries was a major issue in Concepcion, addressed in both the majority decision and the dissent. The majority of the Supreme Court was singularly unmoved, responding to the dissent s articulation of this point tersely and definitively: The dissent claims that class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system. See post, at. But States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons. Concepcion, S. Ct. at ; see also Cruz v. Cingular Wireless, LLC, 0 U.S. App. LEXIS at * (th Cir. Aug., 0) (holding that lawyers declarations claiming that they would not represent the plaintiffs because of the small amount at issue goes only to substantiating the very public policy arguments that were expressly rejected by the Supreme Court in Concepcion namely, that the class action waiver will be exculpatory, because most of these small-value claims will go undetected and unprosecuted. ). In fact, a decision from this District has already come to the same conclusion. In Arellano v. T-Mobile USA, Inc., 0 WL (N.D. Cal., May, 0) the plaintiff argued that the prohibitive costs associated with arbitration would preclude an individual from bringing claims under the California Unfair Competition Law, California Consumer Legal Remedies Act, California False Advertising Act, and the Federal Communications Act. The Court sympathized with the argument, but held that Concepcion has trumped these considerations, explaining: First, plaintiff argues that the arbitration clause is void because it agrees to forego substantive rights afforded by statute. Such is accomplished... by the fact that the arbitration clause in question would preclude an individual from ever bringing these types of claims by foisting prohibitive costs on the individual plaintiff. Perhaps regrettably, this argument was rejected by Concepcion. Id. at *; see also Bernal v. Burnett, 0 U.S. Dist. LEXIS at * (D. Col., Jun., 0) SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

16 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 (compelling arbitration despite assertions that the underlying claim takes time and upfront work to develop, and that no attorney will be willing or able to do that on an individualized basis, because under Concepcion, the court cannot be persuaded in this case by the fact that ordering the parties to arbitration may impact Plaintiffs ability to recover. ). The Supreme Court s position on this issue is grounded in logic and precedent. It begins with the federal policy in favor of arbitration, and a long history of attempts to carve out exceptions to that policy. Among those efforts are many cases claiming that other federal statutes reflect policies that require class actions in court rather than any kind of arbitration (even class arbitrations). A key decision in this line is Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., U.S. (), dealing with the antitrust laws the same laws at issue here. Mitsubishi holds that arbitration agreements are enforceable in antitrust cases, primarily because Congress had not indicated otherwise. Id. at ( Having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue. ). Contrary to plaintiffs argument that their federal claim allows them to evade Concepcion, it actually means they run headlong into Mitsubishi and its determination that antitrust claims are fully arbitrable. A footnote in Mitsubishi is the source of plaintiffs argument. It addresses the possibility that a combination of choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party s right to pursue statutory remedies for antitrust violations, which in context meant that the arbitration tribunal would find the U.S. antitrust laws not to apply at all to the plaintiff s claim. Id. at, n.. The Court said that if this happened, we would have little hesitation in condemning the agreement as against public policy. Id. From this (and dicta from the Supreme Court s opinion in Green Tree Financial Corp. Alabama v. Randolph, U.S. (000)), certain courts have read a broad exception into the FAA for when, without a class action, individual claims might not be economically viable. Neither the Supreme Court nor the Ninth Circuit, however, has ever accepted this, and in both Stolt Nielsen S.A. v. AnimalFeeds International Corp., 0 S. Ct., - (00), and Concepcion, the Supreme Court has held that the FAA preempts these public policy concerns as a ground for denying arbitration. SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

17 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 That is the context for the Supreme Court s examination, in Concepcion, of the precise arbitration provision in the WSA. The Court found that under this provision, it was most unlikely that the plaintiffs claims would go unresolved, because the arbitration agreement provides that AT&T will pay claimants a minimum of $,00 and twice their attorney s fees if they obtain an arbitration award greater than AT&T s last settlement offer. The same is necessarily true here; this Court cannot second-guess the Supreme Court on this point. Mr. Holman and the other plaintiffs would be entitled to an amount more than 0 times the supposed individual damages calculated by Professor Wilkie if they obtained an arbitration award that exceeded ATTM s last settlement offer. And, under the ATTM arbitration provision, plaintiffs counsel would receive double their attorney s fees in the arbitration in such a circumstance. In fact, the Eleventh Circuit rejected in Cruz the same sort of vindication argument plaintiffs make here, in light of Concepcion: even if it [the statutory vindication theory] could be applied to strike down a class action waiver in the appropriate circumstance, such an argument is foreclosed here, because the Concepcion Court examined this very arbitration agreement and concluded that it did not produce such a result. Cruz, 0 U.S. App. LEXIS at *0. Plaintiffs opposition relies heavily on the Second Circuit s opinion in AmEx II, F.d (d. Cir. 0), even copying the strategy in that case a declaration from an expert retained by plaintiffs counsel in constructing their opposition. But AmEx II cannot be reconciled with and thus cannot survive Concepcion. In fact, the Second Circuit recently announced that it was sua sponte considering rehearing AmEx II in light of Concepcion. See also D Antuono v. Serv. Rd. Corp., 0 WL at * (D. Conn. May, 0) (in which the court expressed doubt about the continuing viability of AmEx II and said this Court reads the AT & T Mobility decision as casting significant doubt on virtually any device [or] formula which might be a vehicle for judicial hostility toward arbitration. ). Plaintiffs contentions about the size of their expert s bills and attorneys fees are ultimately irrelevant and misplaced. As noted above, that some individuals might choose to forego remedies if they could not pursue them collectively is not enough to preclude arbitrability, and the test for arbitrability certainly cannot turn on whether the plaintiffs lawyers submit self- SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

18 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 interested declarations contending that they would not represent the plaintiffs on an individual basis. Second, if the relative costs and benefits of arbitration can properly factor in to the Court s analysis after Concepcion (which is not the case), the evidence before the Court includes the declaration of the late Professor Richard A. Nagareda (Dkt. No. 0 and attached as Ex. to the Declaration of Sadik Huseny). Professor Nagareda s declaration assesses the WSA s arbitration provision and, among other things, notes that he has never seen an arbitration provision that has gone so far as this one to provide incentives for consumers and their prospective attorneys to bring claims. (Id. at.) Third, plaintiffs counsel refer to fees and costs involved in a proposed class action that asserted novel aftermarket and bricking theories not the costs that would be involved in an arbitration with the streamlined processes. Plaintiffs choice to run up expert bills and attorneys fees to pursue novel class claims (including claims on which summary judgment was granted) does not mean that plaintiffs would not be able to pursue any legitimate claims through arbitration. Indeed, much of the costs attested to by Professor Wilkie not only have already been incurred, but were to create his aftermarket theory for the purposes of class certification in district court. And, that aftermarket theory has proven baseless in the real world because the end of ATTM exclusivity and the availability of the iphone on other carriers did not drive ATTM s prices to T-Mobile levels, as Professor Wilkie predicted would necessarily follow. VII. THE CLASS MUST BE DECERTIFIED An order certifying a class is always tentative and the Court retains the flexibility to address problems with a certified class as they arise, including the ability to decertify. United Steel, Paper & Forestry, Rubber, Manuf. Energy, Allied Indus. & Serv. Workers Int l Union v. ConocoPhillips Co., F.d 0, 0 (th Cir. 00). No matter what the Court decides on either motion to compel arbitration, it is clear that the class must be decertified. If the Court, as it should, grants ATTM s and Apple s motions to compel arbitration, decertification is mandatory because there will be no class representatives and the plaintiffs will need to pursue their claim in accordance with their agreement to arbitrate any claims related to the WSA. See, e.g., In re Currency Conversion Fee Antitrust Litig., F. Supp. d, (S.D.N.Y. 00) (modifying class and subclasses to exclude members subsequently determined to SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)

19 Case:0-cv-0-JW Document Filed0/0/ Page of 0 0 be subject to arbitration). Even if the Court were to deny ATTM or Apple s motion to compel arbitration, it should still decertify the class. Plaintiffs entire class certification theory rested on the ATTM WSA. But, plaintiffs now disclaim any reliance on the ATTM WSA. According to plaintiffs latest brief, the ATTM WSA is merely background and their claims do not depend or rely upon the WSA in any way whatsoever. That means that plaintiffs misled both defendants and the Court about their theory of the case, the way that they intended to prove their claims on a class basis, and obtained certification based on false arguments and premises. Decertification is plainly appropriate in such circumstances. Indeed, absent reliance on the ATTM WSA, plaintiffs have no credible argument that they met their burden of establishing the requirements of Rule. Apple noted in its motion to decertify that the Supreme Court issued its decision in Wal- Mart Stores, Inc. v. Dukes, 0 U.S. LEXIS (June 0, 0), after the Court directed the parties to brief the issues related to arbitration and decertification based on Concepcion. Apple s footnote simply noted a future issue that may need to be addressed. Plaintiffs brief makes clear that they do not like the Wal-Mart opinion, what it says about the requirements for class certification, and its implications for this case. As Apple briefly noted in its motion to compel arbitration, it is clear that under Wal-Mart, the plaintiffs cannot meet Rule s requirements. We will not respond in this brief to plaintiffs false assertions about their class certification theories, their expert s opinions, and the implications of Wal-Mart since questions of arbitrability must be decided first; however, should the Court deny Apple s motion to compel and to decertify based on Concepcion, Apple intends to file a motion to decertify based on the Supreme Court s decision in Wal-Mart, since it especially in conjunction with plaintiffs now admittedly false prior representations to this Court makes clear that certification is not appropriate in this case. VIII. CONCLUSION Plaintiffs antitrust claims against ATTM and Apple must be arbitrated in accordance with that arbitration provision and the class must be decertified. Dated: September, 0 Respectfully submitted, By /s/ Daniel M. Wall Daniel M. Wall Attorneys for Defendant APPLE INC. SAN F RANCISCO CASE NUMBER: C 0-0 JW (PVT)