ZACK WARD; THOMAS BUCHAR, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants,
APPLE INC., Defendant-Appellee
Argued and Submitted, San Francisco California:
January 16, 2015.
Appeal from the United States District Court for the Northern District of California. D.C. No. 4:12-cv-05404-YGR. Yvonne Gonzalez Rogers, District Judge, Presiding.
The panel reversed the district court's dismissal of an antitrust action for failure to join an alleged co-conspirator as a defendant.
Plaintiffs filed a putative class action against Apple, Inc., alleging that Apple conspired with AT& T Mobility (ATTM) to violate federal antitrust law in connection with Apple's agreement with ATTM that ATTM would be the exclusive provider of voice and data services for Apple's iPhone. The district court dismissed plaintiffs' claims under Federal Rule of Civil Procedure 19 for failure to join ATTM as a defendant.
The panel held that it had jurisdiction under 28 U.S.C. § 1291 over plaintiffs' appeal from a final decision of the district court even though the current case, Apple III, had been consolidated with another case, Apple II, in which the district court had dismissed a voice and data aftermarket monopolization claim for failure to join ATTM as a party. The panel held that even though the parties in Apple III had stipulated to submit the Apple II briefs on the Rule 19 issue and had agreed that the district court should grant Apple's motion to dismiss if it decided to follow the decision in Apple II, the district court's judgment was adverse to plaintiffs and thus appealable.
On the merits, the panel held that the district court abused its discretion in finding that ATTM, an alleged antitrust coconspirator, was a necessary party under Rule 19. The panel held that although the allegation that an entity is a joint tortfeasor with the defendant does not mean the entity must be joined in one action under Rule 19(a)(1)(A), there may be circumstances in which an alleged joint tortfeasor has particular interests that cannot be protected in a legal action unless it is joined under Rule 19(a)(1)(B). The panel concluded that ATTM was not a required party under Rule 19(a)(1)(A), but the district court abused its discretion by failing to identify ATTM's interests in this action, or address how those interests, if any, might be impaired if this action were resolved in its absence, as required by Rule 19(a)(1)(B). In addition, the record did not disclose whether ATTM had an interest that was entitled to protection under Rule 19. The panel remanded the case to the district court for further proceedings.
Dissenting, Judge Wallace wrote that the court of appeals lacked statutory appellate jurisdiction because the district court's decision was not involuntary or adverse to plaintiffs. He wrote that even if the court had statutory jurisdiction, he would conclude that plaintiffs waived the Rule 19 issue by inviting the district court to adopt the very analysis they argued against on appeal.
Mark C. Rifkin (argued), Alexander H. Schmidt, and Michael Liskow, Wolf Haldenstein Adler Freeman & Herz LLP, New York, New York; Francis M. Gregorek and Rachele R. Rickert, Wolf Haldenstein Adler Freeman & Herz LLP, San Diego, California; Randall S. Newman, Randall S. Newman P.C., New York, New York, for Plaintiff-Appellant Zack Ward.
Adam J. Levitt, Grant & Eisenhofer P.A., Chicago, Illinois, for Plaintiff-Appellant Thomas Buchar.
Daniel M. Wall (argued) and Christopher S. Yates, Latham & Watkins LLP, San Francisco, California; J. Scott Ballenger and Roman Martinez, Latham & Watkins LLP, Washington, D.C., for Defendant-Appellee.
Before: J. Clifford Wallace, Milan D. Smith, Jr., and Michelle T. Friedland, Circuit Judges. Opinion by Judge Milan D. Smith, Jr.; Dissent by Judge Wallace.
M. SMITH, Circuit Judge:
Zack Ward and Thomas Buchar (Plaintiffs) filed a putative class action against Apple Inc. (Apple), alleging that Apple conspired with AT& T Mobility (ATTM) to violate federal antitrust laws. The Plaintiffs' claims relate to Apple's exclusivity agreement with ATTM that ATTM would be the exclusive provider of voice and data services for Apple's iPhone. The Plaintiffs appeal from the district court's order dismissing their claims under Federal Rule of Civil Procedure 19 for failure to join ATTM as a defendant.
In this opinion, we consider the contours of the general rule that antitrust co-conspirators need not be joined in one action. The Plaintiffs argue that the district court's determination that ATTM was a required party under Rule 19 runs counter to this rule. The Plaintiffs also contend that, even if ATTM could otherwise qualify as a required party, Apple has not shown that ATTM actually asserts any interests in this action, or that its interests warrant protection under Rule 19.
We reverse the district court's judgment, and remand for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
This appeal is from the third of three related putative class actions asserting antitrust claims against Apple in connection with its exclusivity agreement (Exclusivity Agreement) with ATTM.
I. Antitrust Allegations
Apple began selling the iPhone in June of 2007. Apple entered into an agreement with ATTM that ATTM would be the exclusive provider of voice and data services for the iPhone for five years. The Plaintiffs allege that Apple installed " software
locks" on each iPhone it sold in order to enforce ATTM's exclusivity. These locks prevented ATTM customers who used iPhones from switching to voice and data services providers who competed with ATTM. The Plaintiffs allege that they were not informed that they would be locked into ATTM's services for five years. They further allege that the Exclusivity Agreement enabled ATTM to charge supra-competitive prices for wireless services, and that Apple shared in ATTM's revenues pursuant to the Exclusivity Agreement.
II. Apple I
Nine Apple customers filed putative class actions against Apple and ATTM in the Northern District of California in the summer and fall of 2007. These actions were consolidated before Judge Ware as In re Apple AT& TM Anti-Trust Litigation, No. 5:07-cv-05152-JW (N.D. Cal.) ( Apple I ). The plaintiffs in Apple I asserted claims under § 2 of the Sherman Act, 15 U.S.C. § 2, among other claims.
In 2008 and 2009, the district court denied motions by Apple and ATTM to dismiss the plaintiffs' antitrust claims. The district court certified a class on July 8, 2010.
ATTM sought to compel arbitration pursuant to an agreement it entered into with its wireless customers. The district court denied the motion, citing the then-applicable Discover Bank rule. 596 F.Supp.2d 1288, 1297-99 (N.D. Cal. 2008) (citing Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100 (2005) (holding that, under some circumstances, class action waivers in consumer arbitration agreements are unconscionable)). In 2011, following the Supreme Court's decision in AT& T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), which abrogated Discover Bank, ATTM renewed its motion to compel arbitration. Apple also moved to compel arbitration under ATTM's agreement.
The district court granted both ATTM's and Apple's motions to compel arbitration. 826 F.Supp.2d 1168, 1179 (N.D. Cal. 2011). It held that because the plaintiffs asserted claims arising out of their agreements with ATTM, which contained arbitration clauses, the plaintiffs were " equitably estopped" from refusing to arbitrate " jointly" against ATTM and Apple. Id. at 1178-79.
III. Apple II
In 2011 and 2012, two new groups of Apple customers filed class action complaints in the Northern District of California. These actions were consolidated by Judge Ware as In re Apple iPhone Antitrust Litigation, No. 4:11-cv-06714-YGR (N.D. Cal.) ( Apple II ). The consolidated complaint in Apple II alleged antitrust claims that were similar to the claims in Apple I. However, unlike in Apple I, ATTM was not named as a defendant in Apple II. Apple moved to compel arbitration on the same grounds it asserted in Apple I. The district court denied Apple's motion, finding that the plaintiffs were not equitably estopped from refusing to arbitrate their claims against Apple. Unlike the Apple I plaintiffs, the court reasoned, the Apple II plaintiffs had pled their claims against Apple alone, without " intertwining" them with ATTM's wireless service agreement. 874 F.Supp.2d 889, 898-99 (N.D. Cal. 2012).
Apple also sought dismissal under Rule 12(b)(7), arguing that ATTM was a required party under Rule 19. Id. at 899. In support of its motion, Apple submitted a declaration from ATTM's counsel from the Apple I litigation. The declaration stated, in pertinent part:
ATTM is aware of this litigation . . . . ATTM has an interest in this case, since
the Consolidated Complaint alleges that ATTM is a monopolist and makes various allegations regarding the service ATTM provides to ATTM customers using iPhones . . . . However, ATTM has not intervened in this suit because, given the ruling in [ Apple I ], any such claims must be arbitrated. If ATTM were to be joined to this litigation, ATTM would move to compel arbitration . . . .
In response, the district court held that ATTM was a necessary party. The court reasoned:
[I]n order to evaluate Plaintiffs' antitrust claims in regard to the alleged conspiracy to monopolize the alleged iPhone Voice and Data Services Aftermarket, the Court will be required to evaluate ATTM's conduct, insofar as Plaintiffs allege, inter alia, that ATTM unlawfully achieved market power in that Aftermarket due to the conspiracy and thereby foreclosed other companies from entering the market. . . . Such an evaluation of ATTM's conduct would necessarily implicate the interests of ATTM, which means that ATTM is a necessary party pursuant to Rule 19(a).
Id. at 900 (citing Laker Airways, Inc. v. British Airways, PLC, 182 F.3d 843, 847-48 (11th Cir. 1999)). The district court ordered that the claim relating to monopolization of the voice and data aftermarket be dropped if ATTM was not joined. See id. at 902 n.29. Shortly thereafter, Apple II was reassigned to Judge Yvonne Gonzalez Rogers. The plaintiffs declined to join ATTM as a party in their amended complaint, which resulted in the dismissal of their voice and data aftermarket monopolization claim.
IV. Apple III
On October 19, 2012, the present Plaintiffs initiated this putative class action against Apple in Ward v. Apple Inc., 4:12-cv-05404-YGR (N.D. Cal.) ( Apple III ), asserting a single claim that Apple conspired to monopolize the aftermarket for iPhone voice and data services. ATTM was not named as a defendant. The case was consolidated with Apple II. The parties in Apple III stipulated to submit the Apple II briefs on the Rule 19 issue, and agreed that the district court should grant Apple's motion to dismiss under Rule 12(b)(7) if the court decided to follow Judge Ware's decision in Apple II. The district court granted the motion " for the reasons set forth in Judge Ware's July 11, 2012 Order," and entered judgment in favor of Apple. The Plaintiffs filed a timely notice of appeal.
JURISDICTION AND STANDARD OF REVIEW
We have appellate jurisdiction under 28 U.S.C. § 1291 because this is an appeal from a final decision of the district court. We respectfully disagree with the dissent's conclusion that the judgment below was not " adverse" to ...