Antitrust Conspiracy Case Against Google and Apple Partly Shifted to Arbitration

Late last week the court overseeing the fledgling lawsuit brought by an online advertisement purchaser against Google, Apple, and their current and former leaders sent claims against Google to arbitration. The decision denied Apple’s motion to stay the case pending resolution of the Google arbitration, finding that it would not “simplify the legal and factual issues … or otherwise promote the orderly course of justice.”

The antitrust action, which Google and Apple sought to consolidate with another action brought by a Google search user, asserts that “Google and Apple violated Sections 1 and 2 of the Sherman Act by engaging in an unlawful conspiracy to restrain trade in and monopolize the internet search market.” In particular, it says that Google and Apple entered into an anticompetitive agreement not to compete in the internet search business and have maintained the resolution for more than a decade.

The advertising purchaser plaintiff sought extraordinary relief, including breaking up both companies, which it said had too much power. The court denied the motion to relate the two cases, but in last week’s opinion, granted Google’s request to send the claims to arbitration.

The court said that when the plaintiff, a school that teaches people to operate cranes, signed up for paid advertisements it agreed to Google’s terms of use, including its comprehensive arbitration clause.

Judge Haywood S. Gilliam Jr. found no procedural or substantive unconscionability because the terms allow advertisers an opportunity to opt out.

The court also declined the plaintiff’s argument that the “so-called ‘McGill rule’ renders the parties’ arbitration agreement unenforceable.” The opinion explained the rule as “a California doctrine that protects a plaintiff’s right to seek ‘public injunctive relief’—[and] renders the parties’ arbitration agreement unenforceable.”

Judge Gilliam said it was “irrelevant” because, as interpreted by California courts, the rule is applicable to certain state unfair competition and consumer protection statutes only. Because the plaintiff’s amended complaint alleged solely federal law causes of action, the court said the McGill rule did not apply and amendment would be futile. “Plaintiff cannot evade its plainly valid arbitration agreement by tacking on the label of ‘public injunctive relief,’” the court opined.

The order declined Apple’s motion to stay because the company did not identify how time and effort could be saved by staying the non-arbitrable claims. “In these circumstances, where one alleged co-conspirator has an enforceable arbitration agreement and the other does not, the possibility that parallel proceedings could produce inconsistent results is simply inevitable,” Judge Gilliam said, adding that that risk alone was not enough to warrant a stay.

Consequently, the claims against Apple will proceed in the judicial forum while those directed against Google will head to arbitration.

The plaintiff and putative class are represented by Alioto Law Firm and Law Offices of Lawrence G. Papale, among others. Google and its executives are represented by Williams & Connolly LLP and Apple and Tim Cook by Skadden, Arps, Slate, Meagher & Flom LLP.