Thursday, January 24, 2019

Judge Koh will stay consumer class action pending Qualcomm's Ninth Circuit appeal of certification

Given that Qualcomm is under massive pressure in the FTC's antitrust case in the Northern District of California (with its exorbitant royalties--towering above all other licensors--being indefensible, virtually the entire industry apart from Nokia complaining about it sconduct, and key questions relating to its refusal to license rival chipset makers having been decided on summary judgment), its lawyers will be glad to have some preliminary good news to report to their client:

The United States Court of Appeals for the Ninth Circuit has just granted Qualcomm's October 2018 petition to appeal Judge Lucy H. Koh's certification of a class of up to 250 million consumers. Attorneys for the consumer class are seeking $5 billion for their clients--an average of $20 per class member. The class is defined as people (apart from a few exceptions) who bought one or more smartphones in the U.S. during (roughly) the last eight years.

The consumer case was consolidated with the FTC case in the Northern District of California. The current trial is exclusively about the FTC's case, but the consumer case builds on top of it. The FTC isn't seeking monetary damages (just injunctive relief to "redress and prevent" certain types of conduct. With injunctive relief being an equitable remedy (as opposed to a remedy at law like damages), there's no need for a jury, which is why it's a bench trial. But the consumer case is about money.

A trial in the consumer case had been scheduled for June, but at least the schedule is thrown into doubt by the latest developments. Judge Koh's prompt reaction to the Ninth Circuit grant of Qualcomm's petition to appeal was to announce, by way of an order, that her district court "intends to stay the case after [Qualcomm] perfects its Ninth Circuit appeal."

Just to explain: Qualcomm firstly had to petition for the right to appeal. The appeals court has now decided that it will hear the appeal at this interlocutory stage (= prior to a final judgment). On the basis of the petition having been granted, Qualcomm now has to file an opening brief. Obviously, the positions Qualcomm is going to take are already pretty well-known from the petition as well as the prior proceedings in district court. But Qualcomm has the chance to strengthen its appellate argument.

The fact that the petition has been granted is, at a minimum, procedurally positive for Qualcomm. The appeals court may decide either way, but Qualcomm's chances of defeating the class certification have increased versus where they were earlier today (before the appeals court's decision).

The presence of the class action in the consolidated action is undesirable for Qualcomm for various reasons. It's not just about the money, or about the reputational harm of being held liable for having forced, through anticompetitive behavior, consumers to overpay. It's also about a potential settlement. Settlements of cases involving class actions require judicial approval, giving Judge Koh even more power over Qualcomm's fate than she already has.

While Qualcomm is embroiled in litigation with Apple in multiple jurisdictions, today's decision by the Ninth Circuit has an odd side effect (though not at all unusual in litigation): Qualcomm will now keep its fingers crossed for Apple's App Store case heard by the Supreme Court last year (Apple v. Pepper). If the highest court in the land overruled the Illinois Brick doctrine that makes it harder for consumers to sue for antitrust damages, it would up the ante for Qualcomm's Ninth Circuit appeal. When I read the Apple v. Pepper hearing transcript, which I'm obviously interested in as an app developer (though I'd be concerned about consumers collecting money that we--the developers--are entitled to), I thought Justice Kavanaugh (whose confirmation I supported through modest contributions via Twitter hashtags) was among the justices who would love to do so on this occasion. The Chief Justice appeared to take a more institutional position and would like to uphold Illinois Brick. But young conservatives are less tradition-minded, and the liberals on the court don't like large corporations too much. So if Apple prevailed on that appeal, you'd hear sighs of relief not only in Cupertino, but also in San Diego.

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