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Maldonado v. Apple, Inc.

United States District Court, N.D. California

September 17, 2019

VICKY MALDONADO, et al., Plaintiffs,
v.
APPLE, INC, et al., Defendants.

          ORDER CERTIFYING CLASS AND DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT RE: DKT. NOS. 99, 100, 102, 103, 110, 111, 112, 121, 127, 128, 130, 132, 136, 138, 144, 147

          WILLIAM H. ORRICK, UNITED STATES DISTRICT JUDGE

         According to plaintiffs Vicky Maldonado and Justin Carter, defendants Apple, Inc., AppleCare Service Company Inc., and Apple CSC Inc. (collectively, “Apple”) breach the AppleCare and AppleCare agreements every time a consumer receives a remanufactured replacement device because those devices are not “equivalent to new in performance and reliability” as promised under the contract. Instead, the presence of non-new parts means remanufactured devices can never be as reliable as new ones. Plaintiffs move for class certification to pursue their claims against Apple, which opposes on predominance and other grounds and further contends that it is entitled to summary judgment on Maldonado's and Carter's claims. For the reasons set forth below, I will deny Apple's motion for summary judgment and grant plaintiffs' motion for class certification.

         BACKGROUND

         I. FACTUAL BACKGROUND

         A. AppleCare, AppleCare, and the Remanufacturing Process

         AppleCare and AppleCare (“AC/AC”) plans provide extended warranty and technical support for Apple consumers who wish for more than the standard one-year hardware warranty and 90 days of free technical support.[1] See Declaration of Steve Berman ("Berman Decl.") Ex. 1 [Dkt. No. 103-2] (AC Plan); Berman Decl. Ex. 2 [Dkt. No. 103-3] (AC Plan). Purchase of a plan entitles consumers to a second year of hardware coverage for non-accidental damage, two years of accidental damage coverage, and two years of free technical support. The contract provides that when a consumer submits a claim for hardware issues, Apple will either repair the device or replace it with a device that is "new or equivalent to new in performance and reliability and is functionally equivalent to the original product." AC Plan § 3.1.

         Replacement devices provided under the AC/AC plans can be either new or remanufactured.[2] New devices are made with only parts coming straight from vendors, while remanufactured devices use "a small quantity of components or parts recovered from the field-returned units." Deposition of Jason Fu ("Fu Depo."), Berman Decl. Ex. 7 [Dkt. No. 102-10] 19:20-20:1; see Deposition of Michael Lanigan ("Lanigan Depo."), Berman Decl. Ex. 3 [Dkt. No. 102-5] 21:25-22:6.

         When a customer returns a device, Apple disassembles it and performs tests to determine which parts, if any, can be recovered.[3] Lanigan Depo. 33:17-20, 37:5-8, 63:3-4; see Fu Depo. 22:24-23:12. Parts can be recovered if they pass Apple's tests without problems.[4] See Lanigan Depo. 73:14-16. Only the XXXXX will be repaired and retested if issues are found initially. Lanigan Depo. 73:2-16; Fu Depo. 43:5-14. Each individual part can be recovered XXXXX.[5] Lanigan Depo. 63:6-12. Apple exercises this limitation even if a component meets the applicable testing standards.[6] Id. at 65:9-20. There are some exceptions XXXXX; for example, where certain repairs on XXXXX. See Id. at 68:10-69:4. Remanufactured devices and new devices XXXXX to gather all the component parts along with the same assembly process. Id. at 24:21-25, 40:23-41:24, 56:11-17. The parts-whether new or recovered-that are used to build a particular device are selected at random from a common pool.[7] Id. at 57:9-16. Accordingly, each remanufactured device could have a different mix of recovered parts. Fu Depo. 30:5-8.

         The testing process and criteria are the same for both new and remanufactured devices. Id. at 36:1-7. Reliability tests are part of Apple's qualification process. Lanigan Depo. 33:10-17, 46:6-47:23 (describing "a set of physical tests to stress the device both electrically and mechanically';): id at 50:11-14 (noting that "[i]t's not [that] XXXXX") Devices that have gone through reliability testing are "scrapped." Id. at example. XXXXX); see also Fu Depo. 25:17-20 (noting that "[d]evices going through these stress tests are not shippable to customer").

         Apple performs reliability tests on test samples "with a clear understanding [of] what parts hi the remanufactured phones are recovered from field-returned units." Fu Depo. 27:5-15. Out of a sample of XXXXX with a certain recovered part, Apple might perform reliability tests on XXXXX. See Id. at 31:21-32:24. "Apple tests a sample of iPhones that have XXXXX."[8] Declaration of Jason Fu ("Fu Decl.") [Dkt. No. 112-16] ¶ 4; see Fu Depo. 31:3-32:17. If the testing shows no quality or reliability concerns, then the remanufactured devices with that non-new part can be sent to customers. Fu Depo. 107:2-4. If there are issues, Apple XXXXX. Id. at 107:10-14. If the issue is related to the recovered part, XXXXX. Id. at 107:15-23.

         B. Returns, Failure Rate, and Equivalence to New

         From an engineering perspective, Apple considers a device "equivalent to new" if it meets the same engineering specifications as a new device. Fu Depo. 21: 20-24. Apple has the same quality standards for new and remanufactured devices, and it goes through the same process to qualify the remanufactured products for distribution to consumers. See Id. at 21:11 -16. The difference between performance and reliability depends on the timing. Id. Performance refers to how the device functions when it leaves the factory, while reliability refers to its "lifetime in the field." Id. at 22:3-7. How long an iPhone lasts is "highly dependent on how the phones will be used." Id. at 110:2-7.

         Apple uses a few reference points to monitor products in the field and better understand device failure. See Declaration of Michael Lanigan ("Lanigan Decl.") [Dkt. No. 112-18] ¶ 15. One is XXXXX.[9] looper metric. A looper is a unit that has been returned to Apple after being out in the field. Lanigan Depo. 36:11-18. When a consumer returns a phone or seeks a replacement device, an Apple customer service representative XXXXX with the device by selecting a CompTIA code from a pull-down menu. Id. at 91:18-24, 36:11-18 (noting as one example, the consumer dropping the device): Declaration of Avijit Sen ("Sen Decl.") [Dkt. No. 112-14] ¶ 5. Apple has no control over the accuracy of these codes; they XXXXX. Deposition of Avijit Sen ("Sen Depo.") Berman Decl. Ex. 8 [Dkt. No. 102-12] 81:19-24; see Sen Decl. ¶ 5. Apple compares CompTIA codes for new and remanufactured devices, although the reliability tests are "a more controlled way to identify what's causing a device to fail, all the stress conditions." Fu Depo. 90:3-10, 91:5-8.

         Apple XXXXX all devices that customers return under AC/AC to determine XXXXX.[10] Lanigan Decl. ¶ 13. XXXXX. Id. Units can come back for genuine issues or because the consumer is "leveraging] the service environment for a new device." Lanigan Depo. 103:22-104:20; see also Fu Depo. 69:24-70:3 (noting "return rate is just a number" and a customer might return a device for reasons other than performance and reliability). Although a return does not necessarily mean the device has actually failed, Apple uses the return rate to help it understand device failure. See Lanigan Depo. 97:7-25, 108:6-109:8; see also Lanigan Decl. ¶ 15 (noting that Apple refers to return rate as failure rate "even where [it] has not yet conducted a root cause analysis or determined that a true failure occurred"); Fu Depo. 70:8-71:23 (noting that the return rate, while part of the discussion about remanufactured and new devices, is "not reliable information").

         II. NAMED PLAINTIFFS' EXPERIENCES WITH AC/AC

         Plaintiff Justin Carter paid $849 for an iPhone 6 Plus and $99 for AC. Deposition of Justin Carter ("Carter Depo."), Patel Decl. Ex. A [Dkt. No. 113-2] 91:15-19. Almost a year after he had purchased the phone. Carter began experiencing battery issues with it. Id. at 95:16-24. On May 26, 2016, Carter called Apple and set up a repair appointment due to the limited battery life and cosmetic damage.[11] Id. at 16:1-11; Declaration of Charlotte Gould ("Gould Decl.") [Dkt. No. 112-20] ¶ 3. On July 10, 2016, he canceled the repair and requested a replacement device because of the battery issues. Gould Decl. ¶ 4. The following day Apple shipped a replacement iPhone, which was remanufactured with XXXXX recovered parts: XXXXX. Id. ¶ 4; Lanigan Decl. ¶ 18. Carter also experienced battery issues with the first replacement. Carter Depo. 16:16-23. After Carter spoke with counsel about those problems, someone came to his work and visually inspected the phone on October 18, 2016. Id. at 134:21-25, 135:12-15, 139:10-16.

         Carter was experiencing the same problems a week later on October 25, 2016, so he called Apple about those problems. Gould Decl. ¶ 5; Carter Depo. 150:19-151:6. The following day Apple shipped a second remanufactured replacement device with a recovered XXXXX. Gould Decl. ¶ 5; Lanigan Decl.¶19. The same individual visually inspected the second replacement device. Carter Depo. 162:3-25. Carter then purchased a new iPhone from Verizon, which Apple shipped on November 2, 2016. Carter Depo. 172:6-12 (noting he paid for the phone and received reimbursement from counsel). On November 3, 2016, Carter received an email indicating that a third replacement had been shipped, and he received that device on November 4. Id. at 172:24-173:9; Gould Decl. ¶ 6. The third replacement device was new. Lanigan Decl.¶ 20.

         hi September 2013, Vicky Maldonado bought a fourth generation iPad and AC at the mall. Deposition of Vicky Maldonado ("Maldonado Depo."), Patel Decl. Ex. B [Dkt. No. 113-3] 66:12-15, 25. In the beginning it worked well, but after a while she brought it back to Apple because of technical issues. Id. at 67:11-19. At first Apple attempted to repair the iPad, but on May 8, 2015, they replaced it with a remanufactured replacement iPad with a recovered XXXXX. Id. at 67:13-19; Gould Decl. ¶ 7; Lanigan Decl. 121. She experienced the same problems with the replacement device. Maldonado Depo. 67:20-25. It functioned slowly, it turned off unexpectedly, and it had other people's information on it, namely a picture. Id. at 67:20-25, 69:4-8, 73:16-20. She brought the phone back to the store immediately. See Id. at 74:11-25. On May 22, 2015, Maldonado received a second remanufactured replacement iPad with a recovered XXXXX. Gould Decl. ¶ 8; Lanigan Decl. ¶ 22. That iPad was later stolen on a flight, and Maldonado was unable to locate it. Maldonado Depo. 78:5-10, 79:22-80:12.

         I. PROCEDURAL BACKGROUND

         Plaintiffs filed this case on July 20, 2016, and on August 12, 2016, I granted Apple's request for an order relating it to the earlier filed case before me, English v. Apple, 14-cv-1619. Dkt. Nos. 1, 21. On March 2, 2017, I granted in part and denied in part Apple's motion to dismiss.[12] Order on MTD [Dkt. No. 64]. After a few continuations of the case schedule, plaintiffs filed a motion for class certification on February 28, 2019.[13] Motion for Class Certification (“Cert. Mot.”) [Dkt. No. 102-4]. On March 29, 2019, pursuant to the parties' stipulation, I consolidated the hearings for the class certification motion and Apple's forthcoming motion for summary judgment. Dkt. No. 109. On April 8, Apple moved for summary judgment. Motion for Summary Judgment (“MSJ”) [Dkt. No. 110-4]. On June 10, plaintiffs filed a conditional motion for additional discovery under Federal Rule of Civil procedure 56(d). Dkt. No. 132. I heard argument on all the motions on August 7, 2019. Dkt. No. 149.

         LEGAL STANDARD

         I. SUMMARY JUDGMENT

         Summary judgment on a claim or defense is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party's claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to identify “specific facts showing there is a genuine issue for trial.” Id. The party opposing summary judgment must present affirmative evidence from which a jury could return a verdict in that party's favor. Anderson v. Liberty Lobby, 477 U.S. 242, 257 (1986).

         On summary judgment, the court draws all reasonable factual inferences in favor of the non-movant. Id. at 255. In deciding the motion, “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id. However, conclusory and speculative testimony does not raise genuine issues of fact and is insufficient to defeat summary judgment. See Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).

         II. CLASS CERTIFICATION

         “Before certifying a class, the trial court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23.” Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012) (internal quotation marks omitted). The party seeking certification has the burden to show, by a preponderance of the evidence, that certain prerequisites have been met. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348-50 (2011); Conn. Ret. Plans & Trust Funds v. Amgen Inc., 660 F.3d 1170, 1175 (9th Cir. 2011).

         Certification under Rule 23 is a two-step process. The party seeking certification must first satisfy the four threshold requirements of Rule 23(a). Specifically, Rule 23(a) requires a showing that: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a).

         Next the party seeking certification must establish that one of the three grounds for certification applies. See Fed. R. Civ. P. 23(b). Plaintiffs seek certification under Rule (b)(3), which requires them to establish that “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3). They also seek certification under Rule 23(b)(2) for injunctive relief.

         In the process of class-certification analysis, there “may entail some overlap with the merits of the plaintiff's underlying claim.” Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 568 U.S. 455, 465-66 (2013) (internal quotation marks omitted). However, “Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage.” Id. at 466. “Merits questions may be considered to the extent-but only to the extent-that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.” Id.

         DISCUSSION

         I. SUMMARY JUDGMENT

         Apple moves for summary judgment on Maldonado's and Carter's breach of contract claims and asserts that the remaining claims fall for the same reasons. According to Apple, plaintiffs lack evidence to prove their essential elements of their breach of contract claims, and Carter's conduct should prevent him from pursuing his claims.

         A. Plaintiffs' Theory of Liability and Damages

          The motion for summary judgment is based on three main arguments: (i) plaintiffs contend that they were entitled to new devices, in clear contradiction of the contract language; (ii) plaintiffs lack evidence showing that their remanufactured devices were not equivalent to new; (iii) plaintiffs cannot show that Apple's alleged breach caused their damages because the malfunctions they complained of do not relate to non-new part(s) in their devices. MSJ 8-16. These arguments are based on a misunderstanding of plaintiffs' theory of liability; none succeeds.

         According to Apple, plaintiffs' position boils down to an assertion that they were entitled to new devices rather than the remanufactured devices they received. MSJ 8-9 (contending that in their deposition testimony, plaintiffs “appear ultimately to take the position that ‘equivalent to new in performance and reliability' means ‘new'”). This theory contradicts the AC/AC language, which unambiguously states that consumers may receive one of two types of replacement devices under the contract: new or “equivalent to new.” MSJ 8-9.

         I agree with Apple that given the language of the contract, equivalent-to-new devices cannot be the same as new devices. But plaintiffs' theory does not amount to a contention that they were entitled to new devices. Their case rests on their ability to prove that remanufactured devices are not “equivalent to new.” See Carter Depo. 108:11-18 (testifying that he understood “equivalent to new” as meaning the phone would “operate exactly like [his] new phone did”).[14] If plaintiffs can prove this theory, consumers who received such devices did not receive the benefit of their bargain.

         Apple also challenges the evidence plaintiffs rely on to prove their theory: plaintiffs' interpretation of the contract is “unrealistic and unsupportable” because the expert opinion of Michael Pecht-that any device with a non-new component cannot be equivalent to new-“reads ‘equivalent to new' out of the AC contract.” Reply MSJ 3; see infra Section II.B - Plaintiffs' Classwide Theories (discussing Pecht's opinions in more detail). I disagree. Pecht's report sets forth reasons why remanufactured devices do not meet that mark; it does not read “equivalent to new” out of the contract. Apple's performance must match its promise, and a reasonable fact finder could rely on this evidence to conclude that it does not.

         Apple next contends that it is entitled to summary judgment because plaintiffs lack evidence showing that their specific devices were not equivalent to new in performance and reliability. MSJ 10-14. Instead, the evidence shows that remanufactured devices go through the same manufacturing and testing process as new iPhones and iPads. Id. at 11-12. Apple presents evidence of its remanufacturing and testing processes that could lead a fact finder to conclude that the resulting remanufactured devices are equivalent to new. But a fact finder could also credit the reports of Pecht and Robert Bardwell and conclude that remanufactured devices-including Maldonado's and Carter's-are inferior. Plaintiffs' theory of breach does not depend on the nature of any individual device. They assert that load conditions prevent all devices with non-new parts from being considered “equivalent to new.” See infra Section II.B.1 - Plaintiffs' Classwide Theories (discussing the Pecht and Bardwell reports in more detail).

         Finally, Apple claims that plaintiffs cannot show that a non-new part caused the problems they allegedly experienced, and thus there is no evidence to tie Apple's alleged breach with plaintiffs' alleged damages. MSJ 14-16. For the reasons discussed above, plaintiffs' success does not depend on the functioning or malfunctioning of individual devices. Oppo. MSJ 17. Apple promised plaintiffs equivalent-to-new devices under the AC contract. Plaintiffs assert that when they submitted claims under the contract, instead of receiving the benefit of their bargain they received inferior devices that were more likely to fail and have shorter lifespans. If a fact finder credits this theory, then Apple breached-and caused plaintiffs' damages-at the time of that exchange.

         Apple can challenge plaintiffs' evidence at trial, but material disputes of fact preclude summary judgment.

         B. ...


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