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9th Questions AT&T’s Absence in IPhone Case

SAN FRANCISCO (CN) - An antitrust case over Apple's alleged conspiracy to lock customers into five-year wireless contracts may fail for excluding AT&T as a defendant, the 9th Circuit indicated at a hearing Tuesday.

Judge Milan Smith questioned whether the potential class of iPhone buyers would have also sued AT&T if their contract with the wireless provider had not contained an arbitration clause.

"If the wireless service agreements that exist between AT&T and customers did not contain an arbitration clause is there any question that plaintiffs would have sued AT&T as well as Apple?" Smith asked. "The lock in agreement seemingly primarily benefited AT&T," Smith noted.

Plaintiff lawyer Mark Rifkin conceded that they would likely have sued AT&T.

The plaintiffs in the case, led by iPhone user Zack Ward, claimed Apple and AT&T entered into a five-year exclusivity agreement shortly before the iPhone was introduced in 2007. Apple enforced the agreement by putting SIM card locks on iPhones without telling customers. If customers wanted an iPhone, they were unknowingly bound to use AT&T as their wireless carrier for five years, even though they signed two-year wireless service contracts with AT&T.

In 2012, U.S. District Judge James Ware dismissed the action, finding that AT&T was a necessary and indispensable party to the litigation for that litigation to go forward.

But Rifkin argued that the plaintiffs did not have to sue AT&T, saying Ware's ruling "ignored three-quarters of a century of jurisprudence" that has established that antitrust co-conspirators need not all be joined.

"Everybody knows that joint tortfeasors do not have to be joined in an antitrust case for the case to go forward," Smith said. The question is whether AT&T's interest is important enough that they absolutely must be joined. Our case law is pretty flimsy on this."

Apple attorney Daniel Wall said plaintiffs were deliberately excluding AT&T to avoid arbitration, specifically by dropping AT&T as a defendant in 2011. Before the U.S. Supreme Court upheld AT&T's arbitration agreement in AT&T Mobility v. Concepcion that year, Wall said, the plaintiffs had railed against AT&T as a monopolist for four years in front of Judge Ware.

"Then Concepcion comes out and they say it's not about AT&T," Wall said. "All of this is being done not in the name of ability to join, but the perceived tactical advantages or disadvantages of trying to resist arbitration and taking a case that was all about AT&T and making it not."

"The essence of this case is about AT&T's ability to control consumers and not have them go to other carriers for service," the Apple attorney added. "We aren't the monopolist. And we aren't the ones charging these fees. How are we to defend this case, which is about AT&T's pricing, its competitive dynamics against other carriers, its roaming fees, without AT&T at the table?"

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