Ninth Circuit revives consumer protection claims against Apple over phishing app

SAN FRANCISCO (CN) — A Ninth Circuit panel said Wednesday that Apple cannot escape liability for consumer protection claims from a class of App Store users who lost money from a malicious app until they can improve their case in federal court.

The Ninth Circuit only partially agreed with federal judge's decision to dismiss with prejudice all claims against Apple over the application “Toast Plus” that plaintiffs say they downloaded from the tech giant's App Store. U.S. District Judge Phyllis Hamilton ruled in September 2022 to dismiss and close the case.

The class action comes from cryptocurrency users who downloaded a Apple application called "Toast Plus" and saw their money disappear. They say that Apple allowed hackers to place a spoof or "phishing" application disguised as a cryptocurrency wallet in its online App Store, inducing the named plaintiff and others to download and install a criminal portal into their crypto accounts. 

Following arguments from both sides on Feb. 14, the three-judge panel ruled that Hamilton properly dismissed a majority of the class action on the grounds that they were barred under section 230 of the Communications Decency Act, which provides limited immunity to interactive online platforms.

However, the panel determined that the users' consumer protection claims are not barred by section 230 and vacated the judge’s finding on those claims.

U.S. Circuit Judge Sidney Thomas, authoring the court's 10-page opinion, said Hamilton concluded "in error" that Apple’s app store terms are enforceable against unfair competition claims and other counts, regarding breach of warranty, of contract and third-party torts.

“Apple cannot disclaim liability for its own false, misleading, or fraudulent statements. These state law consumer protection claims do not arise from Apple’s publication decisions as to whether to authorize Toast Plus," the Bill Clinton appointee wrote. "Rather, these claims seek to hold Apple liable for its own representations concerning the App Store and Apple’s process for reviewing the applications available there. Because Apple is the primary ‘information content provider’ with respect to those statements, section 230 does not apply."

However, the judge noted that plaintiffs did not show how Apple’s conduct offends “public policy” or is “substantially injurious to consumers.”

“Although plaintiffs do identify a number of Apple’s statements they allege to be ‘misleading,’ they do not explain why those statements would be misleading to a reasonable consumer, whether and how those statements induced reliance, or why reliance was reasonable,” Thomas said. “Plaintiffs also fail to explain why they should have statutory standing as ‘consumers’ under the California Consumers Legal Remedies Act.”

He said that the plaintiffs also did not explain, in either their opposition to Apple’s motion to dismiss or on appeal, how they could fix the defects in their case on these counts if given a chance.

Thomas did allow the plaintiffs the the opportunity to amend their consumer protection claims though, and vacated the federal judge’s dismissal with prejudice due to “legal error.”

However, the panel — which also included U.S. Circuit Judges David Hamilton and Morgan Christen, Bill Clinton and Barack Obama appointees, respectively — determined that a majority of the claims over Apple’s authorization, monitoring or failure to remove Toast Plus from the App Store, were properly dismissed, citing its Section 230 immunity. 

“Those counts alleged that Apple violated statutory duties to 'implement reasonable security procedures and practices' to protect the personal information of App Store users. We need not decide whether violations of such duties can be boiled down to publication activities in every instance," Thomas wrote.

Attorneys for both sides did not immediately respond to requests for comment.

In September 2021, the class plaintiffs claimed that Apple is liable because it failed to vet the software distributed by its online store, which it tightly controls by allowing only approved vendors and previously extracting a 30% commission on every sale although the boilerplate disclaimers in its user agreement don't apply.

That year, Apple announced a settlement in another class action suit filed by U.S.-based software developers, promising better terms for the people who make much of the software that iPhone users run. 

Follow @nhanson_reports

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