Named Plaintiffs v. Feldman (In re Apple Inc. Device Performance Litig.), 21-15758

50 F.4th 769

IN RE APPLE INC. DEVICE PERFORMANCE LITIGATION,

Named Plaintiffs and Settlement Class Members, Plaintiff-Appellee,

v.Sarah Feldman ; Hondo Jan, Objectors-Appellants,

v.Apple Inc., Defendant-Appellee.

In re Apple Inc. Device Performance Litigation,

Named Plaintiffs and Settlement Class Members, Plaintiff-Appellee,

v.Best Companies, Inc., Objector-Appellant,

v.Apple Inc., Defendant-Appellee.

In re Apple Inc. Device Performance Litigation,

Named Plaintiffs and Settlement Class Members, Plaintiff-Appellee,

v.Deborah Pantoni, Objector-Appellant,

v.Apple Inc., Defendant-Appellee.

In re Apple Inc. Device Performance Litigation,

Named Plaintiffs and Settlement Class Members, Plaintiff-Appellee,

v.Anna St. John, Objector-Appellant,

v.Apple Inc., Defendant-Appellee.

No. 21-15758

No. 21-15761

No. 21-15762

No. 21-15763

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 11, 2022 Pasadena, California

Filed September 28, 2022

Kendrick Jan (argued), Kendrick Jan APC, San Diego, California, for Objector-Appellants Sarah Feldman and Hondo Jan.

Scott A. Kamber (argued), Kamber Law LLC, Denver, Colorado, for Objector-Appellant Best Companies, Inc.

John J. Pentz (argued), Law Offices of John J. Pentz, Sudbury, Massachusetts; Jan L. Westfall, San Diego, California; for Objector-Appellant Deborah Pantoni.

Theodore H. Frank (argued) and Anna St. John, Hamilton Lincoln Law Institute, Center for Class Action Fairness, Washington, D.C., for Objector-Appellant Anna St. John.

Mark C. Molumphy (argued), Joseph W. Cotchett, and Elle D. Lewis, Cotchett Pitre & McCarthy LLP, Burlingame, California; Laurence D. King, Kathleen A. Herkenhoff, and Matthew B. George, Kaplan Fox & Kilsheimer LLP, Oakland, California; Frederic S. Fox, Donald R. Hall, and Melinda C. Campbell, Kaplan Fox & Kilsheimer LLP, New York, New York; for Plaintiff-Appellee.

Christopher Chorba (argued), Theodore J. Boutrous Jr., and Wesley Sze, Gibson Dunn & Crutcher LLP, Los Angeles, California; Kory Hines and Catherine McCaffrey, Gibson Dunn & Crutcher LLP, New York, New York; for Defendant-Appellee.

Brett R. Nolan, Office of the Attorney General, Frankfort, Kentucky; Steve Marshall, Attorney General, Office of the Attorney General, Montgomery, Alabama; Mark Brnovich, Attorney General; Office of the Attorney General, Phoenix, Arizona; Leslie Rutledge, Attorney General, Office of the Attorney General, Little Rock, Arkansas; Ashley Moody, Attorney General, Office of the Attorney General, Tallahassee, Florida; Jeff Landry, Attorney General, Office of the Attorney General, Baton Rouge, Louisiana; Keith Ellison, Attorney General Office of the Attorney General, St. Paul, Minnesota; Douglas J. Peterson, Attorney General, Office of the Attorney General, Lincoln, Nebraska; Aaron D. Ford, Attorney General, Office of the Attorney General, Carson City, Nevada; Wayne Stenehjem, Attorney General, Office of the Attorney General, Bismarck, North Dakota; Dave Yost, Attorney General, Office of the Attorney General, Columbus, Ohio; Ken Paxton, Attorney General, Office of the Attorney General, Austin, Texas; Sean D. Reyes, Attorney General, Office of the Attorney General, Salt Lake City, Utah; for Amici Curiae Kentucky, Alabama, Arizona, Arkansas, Florida, Louisiana, Minnesota, Nebraska, Nevada, North Dakota, Ohio, Texas, and Utah.

Shiyang Huang, Topeka, Kansas, as pro se Amicus Curiae.

Before: Jacqueline H. Nguyen, John B. Owens, and Ryan D. Nelson, Circuit Judges.

NGUYEN, Circuit Judge:

In this multidistrict litigation against Apple Inc., the district court approved a $310 million class action settlement resolving allegations that Apple secretly throttled the system performance of certain model iPhones to mask battery defects. The court approved $80.6 million, representing 26% of the recovery, in fees to class counsel and also approved service awards to the named plaintiffs. Several class members who objected to these decisions now appeal.

The district court actively managed this difficult litigation, which involved the consolidation of dozens of federal lawsuits. Once the settlement was achieved following motions practice, discovery, and months of negotiations with the assistance of a mediator, the settlement administrator sent over 90 million class notices via email and over 5 million notices by postcard. About 99% of persons associated with potentially eligible devices received notice of the settlement. The settlement also received substantial press and social media coverage. We find that class members—including nonnatural persons—received adequate notice of the settlement. Any suggestion to the contrary is unsupported by the record.

The district court properly resolved most of the objections at issue on appeal. However, in finding the settlement fair, reasonable, and adequate, the district court committed legal error. As we have repeatedly admonished, settlement prior to class certification requires extra scrutiny. While we commend the district court's thoughtful and thorough analysis, which suggests that the court took great care in considering the terms of the settlement, its written order explicitly states that the court applied a presumption that the settlement was fair and reasonable. Because the district court cited the wrong legal standard, we vacate and remand for it to reconsider settlement approval under the correct standard. See Roes, 1–2 v. SFBSC Mgmt., LLC , 944 F.3d 1035, 1049 (9th Cir. 2019) (holding that the district court committed reversible error in approving a settlement negotiated prior to class certification by starting its analysis with a presumption of fairness and reasonableness).

I. Background

In January and December 2017, Apple released updates for its iPhones' system software ("iOS") that under certain conditions slowed the performance of certain phones. At the time of the iOS releases, Apple acknowledged only that the updates provided "improvements" and fixed "bugs." On December 20, 2017, after independent researchers published findings that the iOS updates degraded system performance, Apple publicly acknowledged as much.

Apple explained that as iPhone batteries age, they become less capable of supplying a phone's peak demands for electric current,¹ and that the iOS updates smoothed out a phone's electrical demands when necessary to avoid unexpected shutdowns. The following week, Apple disclosed that the smoothing feature affected the "the maximum performance of some system components." However, Apple insisted that "[t]he level of perceived change depends on how much power management is required for a particular device" and that "[i]n some cases, a user may not notice any differences in daily device performance."

Following Apple's disclosures, consumers around the country filed class action lawsuits concerning the unexpected shutdowns and iOS updates. The Judicial Panel on Multidistrict Litigation consolidated the 67 federal actions in the Northern District of California. The Judicial Council of California coordinated the four state court proceedings into a single action in the San Francisco Superior Court (the "JCCP action"), which proceeded parallel to the federal litigation.

In May 2018, the district court consolidated the individual federal cases, see Fed. R. Civ. P. 42(a)(2), and selected one of three competing proposals for the litigation's leadership structure. The court established a protocol for attorney work and expenses that required any compensable activity to be reasonable, non-duplicative, beneficial to the prosecution of the multidistrict litigation, and authorized by one of three attorneys managing the litigation. The court required plaintiffs' counsel to maintain contemporaneous records and provide quarterly reports for in camera review. And the court appointed a special master to oversee the discovery process who resolved several issues during the next two years.

In the consolidated amended complaint, a total of 122 named plaintiffs from every state and several territories and foreign countries alleged 76 claims against Apple. Plaintiffs asserted various fraud-based theories, breach of contract, trespass to chattels, and violation of the federal Computer Fraud and Abuse Act, 18 U.S.C. § 1030, California's Data Access and Fraud Act, Cal. Penal Code § 502, and several states' unfair competition and consumer protection statutes.

The district court eliminated many of the claims at issue in its rulings on Apple's two motions to dismiss. The court dismissed plaintiffs' claims regarding alleged battery defects but concluded that plaintiffs had viable claims relating to the iOS updates. In particular, the court concluded that plaintiffs could proceed on a "computer intrusion" theory for trespass to chattels and under the California and federal computer fraud statutes.

In February 2020, the parties reached a settlement. The settlement agreement resolved the claims of "all former or current U.S. owners" of certain iPhone models that ran specified versions of iOS by the time Apple first publicly disclosed that the iOS updates slowed phone performance under certain conditions.² The agreement resolved not only the federal multidistrict litigation, but also the JCCP action in California.

Apple agreed to pay $25 per eligible iPhone to settlement class members with approved claims, subject to two limitations. First, Apple agreed to pay the settlement class a minimum of $310 million and a maximum of $500 million. This meant that if the number of eligible iPhones with approved claims was less than about 12 million or more than 20 million, then the payment per device would be proportionately more or less than $25. Second, Apple's payment to settlement class members was subject to a deduction for any court-ordered attorney's fees, expenses, and service awards to the named plaintiffs.

To receive a cash payment, settlement class members had to certify under penalty of perjury that "they experienced diminished performance on [an] eligible device when running [the...