Class Action Over IPhone 3G Revived in California

SAN JOSE, Calif. (CN) - An old battle over whether an outdated iPhone failed to perform as advertised will continue with the latest revival by a California appeals court.

Ingrid Van Zant is the lead plaintiff in the 2010 class action over the iPhone 3G, which she says failed to live up to promises that it would be "twice as fast" as its predecessor. Besides false advertising, Van Zant's action included warranty, negligence and unjust enrichment claims.

AT&T had been the iPhone's exclusive carrier at that time, but the class action expressly excluded that company from the mix, blaming the device's poor performance on either a processor that was not up to snuff or software flaws in the phone's algorithms.

The result, Van Zant claimed, was slow performance regardless of AT&T's 3G network capabilities.

In the meantime a federal multidistrict litigation against both Apple and AT&T Mobility claimed the companies "acted in concert" to sell more phones than the network could handle. Changes in federal pre-emption law and the U.S. Supreme Court's gutting of California unconscionability rules in favor of federal arbitration guidelines in AT&T Mobility LLC v. Concepcion led the plaintiffs to dump AT&T as a defendant - only to have the federal court order them to add the carrier again in a fifth amended complaint.

Apple seized on that in Van Zant's action and moved to dismiss the suit on grounds that AT&T was a necessary party to this action as well. The trial court agreed in light of the recent precedent and the similarity between Van Zant's lawsuit and the multidistrict litigation, which had been ordered to arbitration.

Van Zant filed an amended complaint in 2010 but did not add AT&T. Her lawyer told the court he could not ethically add the carrier even if ordered, given his belief that AT&T was not the cause of Van Zant's problems.

Given this and the fact that the multidistrict case had stalled in arbitration and likely been dropped, the trial court completely dismissed Van Zant's action in 2013. The judge in the case said that the "claims against Apple are necessarily intertwined with the issue of 3G connectivity, thereby necessarily implicating the operator of the only 3G network on which the iPhone 3G operated."

But the Golden State's civil code does not require AT&T's inclusion in Van Zant's litigation for it to continue against Apple, the Sixth Appellate District found

Friday, regardless of whether or not the carrier has an interest in the action.

AT&T's inclusion in Van Zant's complaint will not affect the company's ability to defend itself in similar proceedings, the three-judge panel held.

"Nothing in the record evidences any pending or ongoing arbitration proceedings against AT&T Mobility concerning the iPhone 3G," Judge Miguel Marquez wrote for the court. "Indeed, it appears such proceedings are unlikely. The federal district court granted the MDL defendants' motion to compel arbitration on an individual, non-class basis such that MDL plaintiffs would be required to enter individually into costly arbitration with Apple and AT&T. Given the limited recovery of damages available on an individual basis, the pursuit of arbitration is hardly worthwhile. Counsel for Apple speculated that an individual plaintiff might wish to complete arbitration for the right to appeal from the district court's orders, but counsel was unaware of any plaintiff actually doing so."

Marquez continued: "Second, Apple does not claim, and cannot claim, that findings or rulings in this action would have any preclusive effect on AT&T. In the absence of any preclusive effect, the mere possibility of unfavorable evidentiary findings is insufficient to require joinder."

And neither Apple nor the trial court showed how leaving AT&T out of the case might open Apple up to "double, multiple or otherwise inconsistent" obligations in the future, the panel stated.

"Even if arbitration proceedings were pending or ongoing in the MDL action, inconsistent rulings are not the same as inconsistent obligations," Marquez wrote. "Because the putative class in this action excludes 'all individuals pursuing arbitration against AT&T,' Apple can fully comply with the state court's orders while simultaneously complying with any obligations arising out of any MDL-related proceedings. Accordingly, the possibility of arbitration presents no risk of inconsistent obligations for Apple."

The trial court also "went beyond the four corners" of Van Zant's complaint - relying on findings in the multidistrict federal action - to find that the issues of 3G network connectivity and speed are intertwined enough to require adding AT&T, the panel said.

"In this case, Van Zant alleges that the iPhone 3G's performance deficiencies have nothing to do with AT&T's network," the 19-page ruling states. "She claims that the problem is inherent in the software and hardware of the iPhone 3G itself. Accepting this claim as true - as we must - the issue of the iPhone 3G's performance is not 'necessarily intertwined' with the functioning of AT&T's network. Van Zant's claim is analogous to a claim that her television gets poor reception solely because its cable input port is defective; this claim would not require her to sue her cable provider as a necessary party. At its core, Van Zant's complaint is no different from any other claim for defectively manufactured technology."

The trial court must overrule Apple's objection and deny the company's motion to dismiss, the appeals court concluded.

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