Trujillo v Apple & AT&T

In his original complaint filed in state court, Trujillo named AT&T Inc. as a defendant.

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In his amended complaint, filed after Apple removed the case to federal court, Trujillosubstituted AT&T Mobility LLC. The Court made an inquiry regarding AT&T Mobility’scitizenship and has determined, based on the results of that inquiry, that the minimal-diversity requirement of the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2),is met and that no grounds for abstention under that statute exist.

IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF ILLINOISEASTERN DIVISIONJOSE TRUJILLO, on behalf of himself )and all others similarly situated,))Plaintiff,))vs.)Case No. 07 C 4946)APPLE COMPUTER, INC. and)AT&T MOBILITY LLC,))Defendants.)MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:Jose Trujillo has sued AT&T Mobility LLC (ATTM) and Apple Computer, Inc.

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(Apple). His lawsuit concerns an iPhone that he purchased at an Apple retail store inOak Brook, Illinois in early July 2007 and then gave to Dawn Trujillo as a gift. ATTM is the exclusive provider of wireless service for the iPhone. A person whosigns up with ATTM for iPhone service must do so for a minimum of two years. TheiPhone’s battery, however, may not last that long; even though it is rechargeable, itmust be replaced after about 300 charges. To replace the battery, the iPhone user must send the device to Apple, incurring a $79 service fee plus shipping charges and

2an additional fee for the use of a loaner iPhone in the interim. The only alternative for the user is to cancel his service with ATTM before the end of the two year term, whichresults in a significant early termination fee.Trujillo contends that in marketing and promoting the iPhone before it waslaunched for sale, both Apple and ATTM hid information about the limited life of thebattery and what is required to replace it, thus misleading consumers about the truecost of the iPhone. He has sued both companies for fraud, breach of contract, breachof implied warranty, unjust enrichment, and violation of the Illinois Consumer Fraud Act. ATTM has moved to compel arbitration; it argues that pursuant to its servicecontract with Trujillo, his claims against ATTM must be submitted to arbitration on anindividual basis. The Court denies ATTM’s motion. The agreement that ATTMcontends requires arbitration of Trujillo’s claims was not available to Trujillo before or when he purchased the iPhone – a factor that, under Illinois law, is critical toenforceability.

Facts1.Outline of Trujillo’s claims

The iPhone is a combined wireless telephone and internet access device,manufactured by Apple. Both Apple and ATTM (known until January 2007 as Cingular Wireless) sold the iPhone at their respective retail stores at the relevant time. ATTM isthe sole licensed provider of wireless service for the iPhone. When a prospectiveiPhone user contracts for service with ATTM, he must sign up for a minimum of twoyears.

3Trujillo’s lawsuit concerns the durability of the iPhone’s battery. After rechargingthe battery about 300 times, a user must send his iPhone to Apple for batteryreplacement. This typically occurs, Trujillo alleges, inside of two years after purchase.When the user send in the device for battery replacement, he incurs a $79 service feeplus shipping charges and an additional fee for the use of a loaner iPhone in theinterim.Trujillo alleges that given ATTM’s two year minimum service term, the chargesconnected with battery replacement amount to “a de facto annual maintenance and/or service charge” worth nearly one-fifth of the iPhone’s purchase price. Am. Compl. ¶ 22.He alleges that in marketing and promoting the iPhone, both Apple and ATTM hidinformation about the iPhone battery’s limited life and the details of Apple’s batteryreplacement program until after the device was launched for sale to the public. This,Trujillo alleges, misled consumers about the “true nature of the iPhone and its actualexpense.” Am. Compl. ¶ 31. Trujillo asserts claims of common law fraud, breach of contract, implied warranty, and unjust enrichment, and violation of the Illinois Consumer Fraud Act.The facts relevant to ATTM’s motion to compel arbitration have emerged slowly. After the Court questioned the foundation for certain of ATTM’s contentions, ATTMsubmitted supplemental materials. Those materials revealed that ATTM’s initial factualsubmission had been false in several material respects. The Court will lay out thesecircumstances in some detail as it reviews the relevant facts.