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Owens v. Apple

December 21, 2009

DANIEL E. OWENS AND BARBARA S. OWENS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
APPLE, INC., DEFENDANT.



The opinion of the court was delivered by: Reagan, District Judge

MEMORANDUM AND ORDER

A. Introduction

On June 24, 2009, Daniel and Barbara Owens filed a class action complaint against Apple, Inc., (Apple). Plaintiffs seek to certify a nationwide class of individuals who purchased iTunes gift cards. On August 26, 2009, Apple moved to dismiss Plaintiffs' complaint. That fully-briefed dismissal motion (Doc. 17) comes now before the Court. For the reasons discussed below, the Court denies the motion.

B. Applicable Legal Standards and Analysis

Plaintiffs claim that Apple wrongfully marketed, distributed and sold iTunes gift cards and songs through its iTunes internet website. Specifically, Plaintiffs contend that Apple, having represented to consumers that they could use the gift cards to purchase songs for $.99 a song, raised the price on certain songs to $1.29 on April 7, 2009.

Plaintiffs allege that Apple's conduct constitutes breach of contract (Counts I and II), violated the Illinois consumer fraud statute, 815 ILCS § 505/1, et seq.(Count III) and violated consumer protection statutes of other states (Count IV). Plaintiffs seek a $.30 refund for each song that Plaintiffs and the putative class purchased using a $.99 iTunes card for which they were charged $1.29 plus attorneys' fees and costs.

Apple urges the Court to dismiss Plaintiffs' complaint for failure to state a claim pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). Dismissal is warranted under Rule 12(b)(6) if the complaint fails to set forth "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 590 U.S. 544, 570 (2007); EEOC v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007).

In making this assessment, the District Court accepts as true all well-pled factual allegations and draws all reasonable inferences in Plaintiffs' favor. Tricontinental Industries, Inc., Ltd. v. PriceWaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir.), cert. denied, 128 S.Ct. 357 (2007); Marshall v. Knight, 445 F.3d 965, 969 (7th Cir. 2006); Corcoran v. Chicago Park District, 875 F.2d 609, 611 (7th Cir. 1989).

Stated another way, the question on a Rule 12(b)(6) motion is whether the complaint gives the defendant fair notice of what the suit is about and the grounds on which the suit rests. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002); Mosely v. Board of Education of City of Chicago, 434 F.3d 527, 533 (7th Cir. 2006).

Additionally, although federal complaints need only plead claims not facts, the pleading regime created by Bell Atlantic requires the complaint to allege a plausible theory of liability against the defendant. Sheridan v. Marathon Petroleum Co., LLC, 530 F.3d 590, 596 (7th Cir. 2008). See also Limestone Dev. Corp. v. Village of Lemont, Ill., 520 F.3d 797, 803-04 (7th Cir. 2008).

Rule 9(b) requires a plaintiff to plead all averments of fraud with particularity.Vicom, Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 777 (7th Cir.1994). Providing the defendant with "fair notice is 'perhaps the most basic consideration' underlying Rule 9(b)."Vicom, 20 F.3d at 777-78 (quoting 5 Wright & Miller, Federal Practice and Procedure § 1298, at 648 (1969)). Rule 9(b) was designed to protect a defendant's reputation from unfair harm and to minimize "strike suits" and "fishing expeditions." Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 924 (7th Cir.1992). "The purpose (the defensible purpose, anyway) of the heightened pleading requirement in fraud cases is to force the plaintiff to do more than the usual investigation before filing his complaint." Ackerman v. Northwestern Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999).

In the instant case, Apple contends, first, that Plaintiffs' breach of contract claims fail because (1) Plaintiffs lack privity with Apple; (2) Plaintiffs did not plead facts demonstrating that a definite and certain contract term was breached; and (3) Plaintiffs suffered no damages. Second, Apple contends that Plaintiffs' claim under the Illinois Consumer Fraud and Deceptive Business Practices Act fails because (1) Plaintiffs failed to allege facts showing that Apple engaged in a deceptive practice or act; (2) Plaintiffs did not sufficiently plead materiality; (3) Plaintiffs did not sufficiently plead intent; (4) Plaintiffs did not suffer actual damages; and (5) Plaintiffs did not adequately plead proximate causation. Third, Apple argues that Plaintiffs' claim based on unspecified consumer protection statutes of other states fails because Plaintiffs have not alleged facts establishing that the laws of other states apply to their claims, and thus Plaintiffs have no standing to prosecute claims under other states' statutes that have no connection to the transaction of which they complain.

Apple submits that Plaintiffs' breach of contract claims cannot lie because Plaintiffs cannot establish privity of contract with Apple. While Apple recites general contract language and authority, it fails to provide any authority to support the concept that a corporation that sells a product (here, a gift card marketed by Apple that can only be used on the Apple website) through a third-party vendor has no privity of contract with the consumer who ultimately purchases the product. Apple has not met its burden of showing that it had no privity of contract with purchasers of the iTunes gift cards.

Plaintiffs have sufficiently pled facts demonstrating that a definite and certain contract term was breached to survive Rule 12(b)(6) scrutiny under Bell Atlantic, because Counts I and II provide sufficient detail to fairly notify Apple of what the claims are and the grounds on which they rest, and (b) these Counts contain allegations showing ...


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