In a case about exposing user data, Apple suffered a setback due to its concealment of information in litigation.  Last week, in the multi-district litigation, In Re iPhone Application Litigation, Judge Lucy Koh of the Northern District of California denied Apple’s motion for summary judgment in a putative class action by iPhone and iPad owners who allege that Apple enabled violations of their privacy rights through “apps.”  The court also ordered plaintiffs to withdraw their motion to certify two different classes and re-file the motion later.  Both rulings were the results of Apple’s failure to fully comply with its discovery obligations.  The eventual outcome of these motions could have a far-reaching impact on privacy class actions nationally.  Judge Koh, the judge who broke new ground in the Facebook “sponsored stories” privacy litigation (Fraley v. Facebook) and in prior rulings in the In Re iPhone case, is in a position to reshape the landscape of privacy class actions.

In Re iPhone was brought by users who contend that Apple allows advertisers and others to obtain their personal information.  The users allege that Apple’s App Store sells applications for iDevices (iPhones and iPads) that, without consent of the users, allows third parties to track and use personally identifying information – such as plaintiffs’ WiFi network, address book, phone numbers, geolocation and photographs – and that the App Store click-through agreement did not put them on notice of this.  Plaintiffs seek certification of a second class based on the contention that even when users turn off “geolocation services” on an iPhone, the device continues to transmit their location to Apple’s servers.

The key issues in the case concern plaintiffs’ standing to bring claims under California’s Unfair Competition Law (“UCL”) and other statutes—which turns in part on what damages or harm they suffered—whether Apple’s terms of service promised to safeguard users’ private information, what specific data was leaked, and with whom it was shared.

In September 2011, Judge Koh granted Apple’s motion to dismiss based in part on lack of UCL standing because plaintiffs failed to allege any “lost money or property”  as a result of using the no-cost App Store services.  Having paid for some of the downloaded apps did not suffice because plaintiffs did not sue the app developers.

Less than a year later, Judge Koh denied in large part a motion to dismiss the amended complaint.  Based on plaintiffs’ expanded allegations, the court found a sufficient basis for Article III and UCL standing.  Plaintiffs alleged that the cost of their iDevices was inflated because, had Apple disclosed the inability to disable the sharing of geolocation data or that free apps in its App Store allowed third parties to collect consumers’ personal information, the values of the iDevices would have been materially less than what plaintiffs paid.  In Re iPhone Application Litigation, 844 F.Supp.2d 1040, 1072 (N.D. Cal. 2012).   Judge Koh found these contentions –along with claims of actual injury through diminished device resources, like storage, battery life and bandwidth—sufficient to survive a motion to dismiss.

In the pending motions, plaintiffs attempted to provide evidence supporting these allegations.  Plaintiffs also faced high hurdles in trying to demonstrate predominating common questions sufficient to certify either of the two proposed classes.  The court held a two-hour hearing on the summary judgment and class certification motions on February 28, 2013.

But due to a March 6, 2013, ruling by Magistrate Judge Grewal granting a motion to compel plaintiffs, Judge Koh was able to postpone considering the substantive summary judgment and class certification issues.  Her March 8 order “concurs” with Judge Grewal’s conclusion that Apple failed to comply with its discovery obligations by not producing all required documents and not accurately representing that noncompliance to the court at the February 28 hearing.  It thus denied Apple’s summary judgment motion under Rule 56(d) and barred filing another such motion until after Apple complies with all of its discovery obligations.  The court also decided that, rather than considering supplemental briefing on the class certification motion, the motion should be withdrawn and re-filed after a case management conference on April 10.

Having now shown its cards on grounds for its dispositive motion and for opposing class certification, Apple could be in a quandary.  It cannot realistically pursue summary judgment while resisting plaintiffs’ discovery efforts, but it will risk jeopardizing its chances of prevailing on either motion if plaintiffs can now obtain discovery laser-targeted to defeat Apple’s arguments for summary judgment or against class certification.   It is difficult to see Apple’s chances of success on either motion improving from those it faced on February 28.