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In re Electronic Books Antitrust Litigation

United States District Court, S.D. New York

April 15, 2014

PENGUIN GROUP (USA) INC., et al., Defendants

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[Copyrighted Material Omitted]

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For Apple Inc., Defendant: Theodore J. Boutrous, Jr., Daniel G. Swanson, Gibson, Dunn & Crutcher, LLP, Los Angeles, California; Cynthia Richman, Gibson, Dunn & Crutcher, LLP, Washington, D.C.; Howard Heiss, Edward Moss, O'Melveny & Myers, LLP, Washington, DC.

For the State of Texas on Behalf of the Plaintiff States: Gabriel Gervey, David Ashton, Eric Lipman, Office of the Attorney General of Texas, Austin, TX.

For the State of Connecticut on Behalf of the Plaintiff States: Joseph Nielsen, Gary M. Becker, Office of the Attorney General of Connecticut, Hartford, CT.


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DENISE COTE, United States District Judge.

This Opinion addresses a motion to dismiss claims against Apple, Inc. (" Apple" ) following a trial on those claims. In an Opinion issued last July, this Court determined that plaintiff States, suing in parens patriae capacity, and the United States of America (" DOJ" ) had succeeded at trial in showing that Apple had violated the nation's antitrust laws. United States v. Apple Inc., 952 F.Supp.2d 638, 645 (S.D.N.Y. 2013) (" Liability Opinion" ). Apple now moves to dismiss the antitrust action filed by the States. Apple contends that the States lack standing to assert their claims against Apple or, at the very least, that the States should be required seek class certification under Rule 23 of the Federal Rules of Civil Procedure before seeking to recover damages from Apple due to its antitrust violations. For the following reasons, Apple's motion is denied.


In 2011 and 2012, thirty-one States, the District of Columbia, and the Commonwealth of Puerto Rico (collectively, the " States" and the " State Action" ), DOJ and a putative class (collectively, " the Plaintiffs" ) brought three separate lawsuits against Apple and five major book publishing companies for violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (" Sherman Act" ).[1] The Plaintiffs alleged that Apple and the book publishers conspired to unlawfully raise the retail price for trade e-books. All of the book publishers settled before a trial on liability that was held in June of 2013. The Plaintiffs who participated in the liability trial were DOJ and the States. Following the trial, this Court found that Apple had violated the Sherman Act in an Opinion issued on July 10. A permanent injunction was entered against Apple on September 5. United States v. Apple, Inc., 11 MD 2293 (DLC), 2013 WL 4774755 (S.D.N.Y. Sept. 5, 2013).

The States are now engaged in litigation to recover damages for consumers in their jurisdictions who were harmed by Apple's violation of the Sherman Act. The States and the class are scheduled to try their damages claims against Apple on July 14, 2014.[2]

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See generally In re Elec. Books Antitrust Litig., 11 MD 2293 (DLC), 2014 WL 1282298 (S.D.N.Y. Mar. 28, 2014).

On November 15, 2013, Apple filed this motion to dismiss for lack of jurisdiction or, in the alternative, to compel the States to seek class certification. The motion was fully submitted on December 13. In this motion, Apple argues that the States lack standing to pursue Apple for damages that will be awarded to their citizens.


Apple appears to argue that the States lack both Article III standing and standing pursuant to the judicially crafted doctrine known as prudential standing. Before separately examining both of these challenges to the ability of the States to pursue their claim for damages, it is important to consider the current procedural posture of the case. Connecticut v. American Elec. Power Co., Inc., 582 F.3d 309, 333 (2d Cir. 2009).

The issue of standing is customarily raised at the initial stages of a case. In this litigation, however, no party questioned the standing of the States to seek damages from the publishers and Apple for a violation of the antitrust laws. Indeed, each of the five publishers has settled with the States and paid significant sums of money to them. Apple first raised the issue of the States' standing after a liability and injunctive relief trial had been held between Apple and the States and a judgment entered against Apple. Because the issue of standing implicates this Court's jurisdiction over the claims raised by the States, Apple has not waived its right to raise the issue even at this late date and this Opinion carefully considers its challenge. Id.

The issue of standing is generally resolved on the basis of the pleadings. At that stage, " general factual allegations of injury resulting from the defendant's conduct may suffice." Id. (citation omitted). But, on occasion, factual issues remain to be explored, and in those circumstances, a court may draw on the " evidence adduced at trial" to resolve the standing issue. Gladstone Realtors v. Vill. of Bellwood, 441 U.S. 91, 115 n.31, 99 S.Ct. 1601, 60 L.Ed.2d 66 (1979). Since standing issues are " not mere pleading requirements but rather an indispensable part of the plaintiff's case, each element [of standing] must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation." Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Thus, while Apple and the States have relied during their discussions of the standing issue almost exclusively on the assertions made in the States' complaint, this Opinion will also draw freely from the record created at trial, and this Court's Liability Opinion, to address the questions of injury, causation, and redressability that underlie Apple's assertion that the States lack standing to seek damages here.

" [S]tanding jurisprudence contains two strands: Article III standing, which enforces the Constitution's case-or-controversy requirement, and prudential standing, which embodies judicially self-imposed limits on the exercise of federal jurisdiction." Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11, 124 S.Ct. 2301, 159 L.Ed.2d 98 (2004) (citation omitted). These two doctrines will be addressed in turn.

I. Article III Standing

Apple contends that the States lack Article III standing to maintain a damages

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action against Apple premised on its involvement in the e-books price fixing conspiracy. The duty to examine the standing of a plaintiff to pursue a claim in federal court arises from the Constitutional limitation of " federal court jurisdiction to 'Cases' and 'Controversies.'" Massachusetts v. E.P.A., 549 U.S. 497, 516, 127 S.Ct. 1438, 167 L.Ed.2d 248 (2007). These two words confine federal courts to examining questions presented " in an adversary context and in a form historically viewed as capable of resolution through the judicial process." Id. (quoting Flast v. Cohen, 392 U.S. 83, 95, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968)). This constitutional context explains the function of the standing inquiry. " [T]he gist of the question of standing is whether petitioners have such a personal stake in the outcome of the ...

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