Saturday, October 13, 2018

Qualcomm files appeal to avoid potential $5 billion payout to 250 million American smartphone buyers (1.2 billion transactions)

On Thursday I thought Munich, where Qualcomm just lost a case against Apple (and, by extension, Intel), was going to be the venue where the cellular chipset maker would file its first appeal in a litigation between private parties that is part of the current globe-spanning host of lawsuits. But it turns out that on the same day Qualcomm filed a petition to the Ninth Circuit appealing Judge Lucy H. Koh's recent class certification (this post continues below the document):

18-10-11 Qualcomm Petition ... by on Scribd

In its third question presented for review, Qualcomm describes this consumer class that was certified in the Northern District of California--up to 250 million people and, according to Qualcomm's estimate, approximately 1.2 billion claims (since people, on average, bought multiple smartphones during the roughly 8-year period the claims relate to)--as "quite likely the biggest class action in history."

That may be true with respect to membership size. It certainly isn't in economic terms since the $4.99 billion demand Qualcomm is facing ('s Scott Graham found out) is dwarfed by the $206 billion tobacco settlement in 1998 or the $20 billion Gulf of Mexico oil spill settlement in 2016. Still, $5 billion is a very significant number, which would amount to approximately $20, on average, per class member. The exact amount per member would obviously depend on the particular smartphone purchases made by each consumer. It would be the amount of each buyer's overpayment due to Qualcomm's practices (which regulators on three continents have already held to be anticompetitive), possibly enhanced by a factor of up to three. Just imagine how many people--outside of its own organization and apart from its shareholders--Qualcomm would make happy with such an involuntary gift...

One of the reasons for which Qualcomm wants the United States Court of Appeal for the Ninth Circuit to overturn Judge Koh's class certification is plain feasibility. Qualcomm argues, as it did (unsuccessfully) in San Jose, that the consumer plaintiffs "provided no plan whatsoever to process, verify, and administer more than one billion claims—a herculean task for any claims administrator." However, Qualcomm does mention that an attorney declaration submitted to the district court said that effective notice could be provided to 70% of all members of the class (approximately 175 million people).

My answer to this has two parts, neither of which Qualcomm will want to hear:

  • A $5 billion payout justifies, and effectively pays for, a whole lot of administrative effort.

  • Technology--Qualcomm knows a thing or two about it--can work wonders. In the Internet Age you can handle classes that appeared unmanageable decades ago. That's a major reason for which I'm underwhelmed by Qualcomm's citation to a 1983 Second Circuit decision. Times have changed since then. That was in the middle of Ronald Reagan's first presidential term, and most of us used to listen to vinyl records since the compact disc had just been released the year before (and nowadays music is streamed and downloaded for the most part).

    The Ninth Circuit is particularly aware of technological progress due to the cases it gets.

But manageability is not the first point Qualcomm raises. Its petition argues that Judge Koh shouldn't have applied California law to this decision since two dozen other states don't allow indirect purchaser claims on antitrust grounds; it also takes aim at the consumer plaintiffs' damages model; and argues that "large numbers of consumers" are included in the class definition but, in Qualcomm's view, "suffered no antitrust impact."

I'll wait for plaintiffs' responsive brief before looking more closely at those issues. At first sight it appears that Judge Koh had taken everything into account.

On the subject of Judge Koh's decision-making, she's just decided to take under submission (decide in writing without an oral hearing) all pretrial motions pending in FTC v. Qualcomm, including the FTC's motion for partial summary judgment regarding Qualcomm's obligation to extend FRAND licenses to rival chipset makers.

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