Apple Faces Appeal on Defense to Antitrust Suit

SAN FRANCISCO (CN) - A class that claimed Apple and AT&T illegally restricted choice of carriers can appeal Apple's defense strategy as the case proceeds to arbitration, a federal judge ruled.

Lead plaintiffs Paul Holman and Lucy Rivello filed a federal complaint against Apple and AT&T Mobility in October 2007, claiming the companies illegally controlled consumer choices by limiting iPhone users to AT&T plans. A San Jose federal judge certified their class action last year.

Pointing to an arbitration clause in AT&T contracts, however, the companies rejected the court's jurisdiction.

When the U.S. Supreme Court reached that very conclusion in a similar case involving AT&T's arbitration contracts, Concepcion v. AT&T Corp, Ware disbanded Holman-Rivello class.

"The Supreme Court has specifically considered the very arbitration agreement at issue in this case, and has determined that it is enforceable, on the grounds that the agreement 'essentially guarantee[d]' that 'aggrieved customers who filed claims' would 'be made whole,'" Ware wrote in December.

Though Apple's own contracts with customers pushed for a "court" decision of claims, Ware said arbitration could resolve its alleged liability as well since AT&T had the relevant contract.

But in a new decision Wednesday, Ware said the plaintiffs can appeal Apple's invocation of the doctrine of equitable estoppel. The appeal claims Apple is not eligible to make this claim since it never signed AT&T's contract with the arbitration provision.

In granting leave for the appeal, Ware cited Mundi v. Union Security Life Insurance Co., which is the controlling 9th Circuit case that addresses how a nonsignatory to an agreement can compel a signatory to arbitrate claims.

In that case, the court saw "no basis for extending the concept of equitable estoppel of third parties in an arbitration context beyond the very narrow confines [already] delineated."

But Ware said there is room for debate, "given the fact that the court's December 1 order was premised on an interpretation of Mundi which requires the court to undertake an extensive analysis of both that opinion itself and the Second Circuit caselaw to which the Mundi court looked for guidance, and given the language in Mundi which indicates that the Ninth Circuit did not mean to extend the 'concept of equitable estoppel of third parties' beyond the 'very narrow confines' delineated in previous cases."

This difference of opinion warrants certification of the issue for immediate appeal. The plaintiffs' other arguments did not fare as well, however.

Among them, the plaintiffs argued that AT&T had abandoned its right to demand arbitration because the company failed to appeal a previous order, and it was not equitable for the court to allow Apple to demand arbitration.

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