Van Zant v. Apple Inc.

229 Cal.App.4th 965

177 Cal.Rptr.3d 805

Ingrid VAN ZANT, Plaintiff and Appellant,

v.APPLE INC., Defendant and Respondent.

H039354

Court of Appeal, Sixth District, California.

Filed September 12, 2014

See 4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 182 et seq.

Santa Clara County Superior Court, Honorable James P. Kleinberg, Trial Judge. (Super. Ct. No. 1–10–CV–177571)

Altshuler Berzon LLP, Jonathan Weissglass, P. Casey Pitts, San Francisco, Branstetter, Stranch & Jennings, PLLC, Michael G. Stewart, J. Gerard Stranch, IV, James G. Stranch, III, for Plaintiff and Appellant.

Morrison & Foerster LLP, Miriam A. Vogel, Los Angeles, Penelope Preovolos, Suzanna Brickman, San Francisco, for Defendant and Respondent.

MÁRQUEZ, J.

This case concerns a question of procedure that may arise when a plaintiff sues a manufacturer for marketing and selling allegedly defective smartphones: If the plaintiff claims internal defects in the smartphone are the sole cause of its failure to perform as advertised, is the network carrier for the smartphone a necessary party to the lawsuit? We conclude the network carrier is not a necessary party.

Plaintiff Ingrid Van Zant brought a class action lawsuit against defendant Apple Inc. (Apple) alleging false advertising, breach of warranty, and other claims relating to Apple's marketing and sales of the iPhone 3G. Van Zant alleged that Apple falsely advertised the iPhone 3G to be “twice as fast” as its predecessor, the iPhone 2G. She claimed that hardware and software flaws inherent in the iPhone 3G prevented it from performing as advertised. The trial court sustained Apple's demurrer and granted its motion to dismiss on the ground that Van Zant failed to join AT & T Mobility LLC (ATTM)—the cellular network carrier for the iPhone 3G—as a necessary party under Code of Civil Procedure section 389, subdivision (a).

We hold that ATTM is not a necessary party. Accordingly, the trial court erred in sustaining the demurrer and dismissing the action. We will reverse the judgment.

I. Factual And Procedural Background

A. Allegations of the Operative Complaint

Van Zant filed her initial class action complaint in Santa Clara County Superior Court on July 21, 2010. On September 21, 2012, she filed her first amended complaint—the operative complaint—alleging seven causes of action: (1) violations of Business and Professions Code section 17200 et seq.; (2) violations of Business and Professions Code section 17500 et seq.; (3) breach of express warranty; (4) violation of the Song–Beverly Consumer Warranty Act (Civ.Code, § 1792 et seq.); (5) negligence; (6) negligent misrepresentation; and (7) unjust enrichment.¹ Van Zant's claims were brought “solely and strictly against Apple and do not nor are intended to seek any redress from [ATTM], operator of the 3G network on which the iPhone 3G was designed to operate.” The putative class includes “All persons who purchased one or more iPhone 3Gs from Apple and/or its authorized retailers in the State of California. Excluded from the Class are [Apple], its officers and directors at all relevant times, members of immediate families and their legal representatives, heirs, successors, or assigns and any entity in which [Apple] has or had a controlling interest, and all individuals pursuing arbitration against ATTM.”

Van Zant alleges Apple falsely represented the iPhone 3G to be “twice as fast” as the previous version of the iPhone. The complaint asserts: “Plaintiff undertook a side by side comparison of the performance of the iPhone 3G and her previous iPhone and found that the previous iPhone performed just as fast, or at times faster, then her new iPhone 3G device. This side by side suggests that the problems with the iPhone 3G are not related to the ATTM network, but with the device itself [ sic].” She claims the iPhone 3G's failure to perform as advertised stems from defects inherent in the iPhone 3G: “Because of hardware and software flaws inherent in the iPhone 3G, the iPhone 3G was incapable of meeting the promised performance standards Apple represented during its multimillion dollar advertising campaign, and the iPhone 3G would have failed to deliver on these promises regardless of the performance of the ATTM 3G network.” Specifically, Van Zant claims the poor performance was due either to internal hardware that demanded too much power or software flaws in the device's algorithms. She alleges that “These hardware and software flaws resulted in the iPhone 3G failing to deliver on Apple's ‘twice as fast’ performance promise, and the slower performance received by actual iPhone 3G users would have been experienced regardless of the performance of the ATTM network. As a result, this Complaint seeks redress solely and exclusively against Apple and does not implicate the performance speeds of the ATTM 3G network.”

B. The Federal Multi–District Litigation (MDL)

Van Zant's lawsuit in this case was preceded by litigation in federal court, wherein other plaintiffs around the country brought 13 lawsuits against both Apple and ATTM. Those actions raised similar but not identical claims to those at issue here regarding the advertising and performance of the iPhone 3G. In 2009, the Judicial Panel on Multidistrict Litigation (MDL) transferred the federal actions to the United States District Court for the Northern District of California.² Because the trial court in this case relied in part on the federal district court's rulings in the MDL case, we briefly summarize the MDL proceedings.

In 2009, the MDL plaintiffs filed a class action master complaint alleging that “Both Apple and ATTM uniformly advertised the iPhone 3G as ‘Twice as Fast’ in comparison to the ‘2G’ EDGE network on which the earlier iPhone operated. Through marketing to consumers, and even by the very name of the phone itself, [Apple and ATTM] engaged in a campaign to represent to consumers that the new iPhone would be significantly faster with regard to upload and download transfer rates and, therefore, superior to the predecessor iPhone, which operated on the slower 2G network.” (In re Apple iPhone 3G Products Liability Litigation (N.D.Cal.2010) 728 F.Supp.2d 1065, 1068.) The MDL plaintiffs claimed that both Apple and ATTM made false and misleading representations, and that both Apple and ATTM “profited by selling iPhone 3G devices without the appropriate infrastructure in place and the presence of defective hardware and software in the iPhone 3G.” (Ibid.) The MDL plaintiffs also claimed that “Apple and ATTM acted in concert to sell the iPhone 3G and either knew, should have known, or were obligated to understand that they were trying to sell more iPhone 3G devices than the existing ATTM 3G network could handle, and the iPhone 3G itself suffered from defective hardware and software.” (Ibid.)

The putative class of MDL plaintiffs consisted of “All persons in the United States of America, or in California and such other states within the United States as the Court determines to be appropriate, who purchased an iPhone 3G and entered into an ATTM 3G service contract between July 11, 2008 and the present.” The complaint set forth 13 causes of action under state law, and one claim under the federal Magnuson–Moss Warranty Act, 15 U.S.C. section 2301 et seq. (In re Apple iPhone 3G Products Liability Litigation,supra, 728 F.Supp.2d at p. 1068.)

Both Apple and ATTM moved for dismissal of the MDL complaint, and ATTM moved to compel arbitration. (In re Apple iPhone 3G Products Liability Litigation, supra, 728 F.Supp.2d at p. 1067.) The district court found that all claims against ATTM were preempted by federal law under the Federal Communications Act and thereby granted ATTM's motion to dismiss with prejudice. (Id. at p. 1077.) However, the court granted leave to amend the complaint for claims under the Federal Communications Act. The court also granted Apple's motion to dismiss on the ground that ATTM was an “indispensable party” under Federal Rule of Civil Procedure 19, subdivision (b). (Id. at p. 1076.)

Before amending their complaint, the MDL plaintiffs moved for reconsideration of the order granting Apple's motion to dismiss. The district court denied the motion and reaffirmed its ruling that the action could not proceed against Apple without ATTM since the latter was an indispensable party. (In re Apple iPhone 3G Products Liability Litigation (N.D.Cal., Dec. 1, 2011, MDL C 09–02045 JW) 2011 WL 6019217.)

In December 2010, in light of an intervening change in federal preemption law, the district court granted the MDL plaintiffs' motion for leave to file a third amended master complaint. At the same time, the court stayed the proceedings pending the outcome of the United States Supreme Court's then-forthcoming decision in AT & T Mobility LLC v. Concepcion (2011) –––U.S. ––––, 131 S.Ct. 1740, 1744, 179 L.Ed.2d 742 (Concepcion), which held that California's judicial rule regarding the unconscionability of class arbitration waivers is preempted by the Federal Arbitration Act. (In re Apple iPhone 3G Products Liability Litigation (N.D. Cal., Dec. 9, 2010, C 09–02045 JW) 2010 WL 9517400.) The order to stay the proceedings was based on the court's previous finding that “ ‘the claims against Defendant Apple are inextricably tied to the claims against Defendant ATTM.’ ” (Id. at p. *2, fn. omitted.)

In April 2011, the United States Supreme Court in Concepcion upheld the validity of ATTM's arbitration agreement, including the class action waiver. (Concepcion, supra, 131 S.Ct. at p. 1740.) The district court then lifted its stay of the MDL proceedings. (In re Apple iPhone 3G Products Liability Litigation, supra, 2011 WL 6019217.) In September 2011, the MDL plaintiffs filed a fourth amended master complaint alleging claims solely against Apple, without naming ATTM as a defendant. (Ibid.) Apple again moved to dismiss the complaint on the ground, among others, that the plaintiffs had failed to join ATTM as a...