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Apple’s $310 Million iPhone Settlement Rejected on Appeal (1)

Sept. 28, 2022, 4:50 PMUpdated: Sept. 28, 2022, 5:44 PM

A federal appeals court in San Francisco on Wednesday rejected Apple Inc.'s $310 million settlement of claims that the tech giant disguised certain iPhone battery defects by throttling their system performance.

The US Court of Appeals for the Ninth Circuit vacated a decision approving the agreement, which handed more than $80 million to counsel for the iPhone users who led the case. Although a lower court judge “took great care” in evaluating the deal, he applied the wrong legal standard, the appeals court said.

Judge Jacqueline H. Nguyen, writing for the Ninth Circuit, said there was no need for the court to look closely at most of the specific arguments put forward by iPhone users who opted out of the settlement and objected to its terms. That’s because Judge Edward J. Davila stated explicitly that he applied a “presumption of fairness” to the settlement, Nguyen said.

“As we have repeatedly admonished, settlement prior to class certification requires extra scrutiny,” not a presumption that the agreement passes muster, she wrote.

Although the ruling overturning Davila’s decision, it generally “commended” his handling of the settlement, finding that he properly resolved most objections to the pact. For instance, the judge was right to reject challenges to the settlement notice, the appeals court found.

There’s also no merit to the idea that iPhone users who didn’t suffer from device throttling constituted a separate class requiring their own counsel, the court said. Uncertainty about whether every potential class member actually suffered an injury is a standard part of class actions that would have been resolved at trial, Nguyen said.

“The risk that this uncertain outcome posed to the parties was one of the factors that induced them to settle,” she wrote.

But despite Davila’s “thoughtful and thorough analysis,” the fact remains that he admitted to having applied the wrong standard, the court concluded, remanding the case.

Judges Ryan D. Nelson and John B. Owens joined the ruling.

Objectors opposed to the settlement were variously represented by Kendrick Jan of San Diego; KamberLaw LLC; John J. Pentz III of Sudbury, Mass.; Jane L. Westfall of Menifee, Calif.; and the Hamilton Lincoln Law Institute’s Center for Class Action Fairness.

Apple is represented by Gibson, Dunn & Crutcher LLP. Cotchett, Pitre & McCarthy LLP and Kaplan Fox & Kilsheimer LLP are class counsel for the iPhone users.

The case is In re Apple Inc. Device Performance Litig., 9th Cir., No. 21-15758, 9/28/22.

(Updates with additional reporting about court ruling starting at paragraph five, and additional details throughout.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Carmen Castro-Pagán at ccastro-pagan@bloomberglaw.com; Brian Flood at bflood@bloomberglaw.com