IPhone Users Lose Class Standing in Carrier Suit

SAN FRANCISCO (CN) - A federal judge has decertified a class that claimed Apple and AT&T illegally restricted choice of carriers, saying the companies can arbitrate iPhone users' claims.

Lead plaintiffs Paul Holman and Lucy Rivello filed a federal complaint against Apple and AT&T Mobility (ATTM) 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.

AT&T and Apple fought the case, saying it should be arbitrated and the class should be decertified because the "entire theory rests on a single, unified course of conduct."

"Plaintiffs have wrapped themselves for years in the service contract and in allegations of a single ATTM-Apple conspiracy to survive motions to dismiss and obtain class certification," Apple said in an August motion to compel arbitration. "They cannot run from those theories now."

Apple attorney Daniel Wall said the plaintiffs' case has always been built around their wireless-service agreement, and they cannot use that agreement "to prop-up antitrust claims, then use it again to overcome obstacles to class certification, and yet deny they are bound by the arbitration clause found in the [agreement]."

Regardless of how the motions to compel arbitration were resolved, Wall said the class must be decertified because their entire theory was based on the wireless agreement. In their latest brief, the plaintiffs said that agreement was "merely background," Wall noted.

U.S. District Chief Judge James Ware agreed with Apple and AT&T, granting their motions to decertify the class and compel arbitration on Thursday.

The judge rejected the plaintiffs' argument that the arbitration agreement was unenforceable.

"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. (Brackets in original)

Apple can also compel the plaintiffs to arbitrate their claims, even though the company did not sign the arbitration agreement, according to the ruling.

Based on 9th Circuit precedent, Apple can compel arbitration under the doctrine of estoppel, because the subject matter of the dispute is intertwined with the contract, and there is a sufficient relationship between the parties, Ware found.

"Plaintiffs themselves have alleged that there is a 'relationship' between ATTM and Apple, inasmuch as plaintiffs' claim against defendant Apple centers on their allegations that defendants ATTM and Apple entered into an agreement prior to the commercial release of the iPhone whereby purchasers of the iPhone would 'be locked into using ATTM after the expiration of their initial two-year service contracts,'" Ware wrote.

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