Apple Launches Attack on State AG Actions in E-Books Case

, The Litigation Daily

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What does same-sex marriage have to do with claims that Apple Inc. fixed prices for e-books? Plenty, according to Theodore Boutrous Jr. of Gibson, Dunn & Crutcher.

In a motion filed Friday in Manhattan federal court, Boutrous advanced a novel and untested argument in hopes of dismissing consumer antitrust claims against Apple brought by nearly three dozen state attorneys general. Apple contends in the motion that the U.S. Supreme Court's ruling this year in Hollingsworth v. Perry prohibits the A.G.s from pursuing the case because they don't have standing.

In Hollingsworth, the high court ruled that supporters of California's Proposition 8, a voter initiative that banned same-sex marriage, didn't have standing to challenge a federal court's ruling that the law is unconstitutional. (Gibson Dunn was one of the firms that successfully challenged the law.) In a 5-4 decision written by Chief Justice John Roberts Jr., the court held that the Prop 8 backers lacked "a concrete and particularized injury." The court stated: "We have repeatedly held that such a 'generalized grievance,' no matter how sincere, is insufficient to confer standing."

In Friday's brief, Boutrous argues that states likewise haven't suffered a concrete and particularized injury in the e-books case. Instead, they are trying to recover damages for injuries suffered by others—their residents. Under Hollingsworth, Apple says, they can't do that.

The e-books case was brought in 2010 by 31 states, the District of Columbia, and the Commonwealth of Puerto Rico against Apple and book publishers for allegedly conspiring to raise the price of e-books. The states' complaint was filed under Section 4C of the Clayton Act, which gives state A.G.s the power to bring so-called parens patriae claims seeking civil damages and remedies on behalf of their residents. The case is pending before U.S. District Court Judge Denise Cote in Manhattan.

As an alternative to Apple's standing argument, Boutrous maintains that state parens patriae claims must meet the requirements for class certification. In the past, courts have viewed cases brought under Section 4C of the Clayton Act as exempt from the class certification rules. But Boutrous argues there's no valid ground for this exemption. In the e-books case, he states, the plaintiffs will fail to meet class certification requirements because the circumstances of each of the 150 million e-book purchases are too varied. Some customers saved money on books under the alleged scheme, while others might have paid more, he claims.

We reached out to the attorneys general of Texas and Connecticut, who are leading this action, but did not hear back.

In a parallel price-fixing case brought by the Department of Justice, Cote in July found Apple and the publisher defendants liable for price fixing. (Apple has appealed.) A damages trial is set for next year. In September, the judge issued a permanent injunction against Apple, precluding it from engaging in certain activities and requiring a court-appointed monitor. All the targeted publishers have settled with the government.

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