Court Dismisses Three Claims in Apple Gift Card Scam Class Action

A Southern District of California judge has sided with Apple Inc. and Apple Value Services LLC in a case arising from an alleged ongoing scam whereby Apple gift card funds are fraudulently redeemed by third parties prior to their use by the bona fide purchaser. Monday’s opinion, the case’s second dismissal ruling, found that the consumer plaintiff failed to adequately plead certain violations of the California Legal Remedies Act (CLRA), the state’s Unfair Competition Law (UCL), and their claim for breach of warranty.

The plaintiff asserted that Apple is responsible for the valueless gift cards. She reportedly purchased one from Walmart for her son that she found had no funds on it when he sought to redeem it. Allegedly, when the plaintiff contacted Apple, she was told that the funds were associated with an unrelated account, that there was nothing else the company could do, and that “any further contact would go unanswered.”

The plaintiff filed suit seeking to certify a class of nationwide consumers and a separate class of California consumers who fell victim to the alleged ruse. The court granted in part and denied in part Apple’s first motion to dismiss in January 2021. Thereafter, the plaintiff filed her second amended complaint.

In its analysis of equitable relief under the CLRA and UCL, the court first determined that binding circuit precedent, Sonner v. Premier Nutrition Corp., holds that a plaintiff must allege that she lacks an adequate remedy at law before obtaining equitable restitution for past harm under the UCL and CLRA. According to the opinion, the plaintiff’s only new allegation states that the equitable relief she seeks is contingent on the legal remedies’ failure. This, the court held, was insufficient to support an equitable relief claim under Sonner.

As to the breach of merchantability claim, California law dictates that an end consumer who buys from a retailer is not in privity with a manufacturer, subject to exceptions, the opinion explained. The court determined that the plaintiff was not exempt from the rule because she neither alleged the existence of a contract between Walmart and Apple for her benefit, nor that any other exception applied. Consequently, the complaint failed to plead the existence of a contract, and, like the other two, was dismissed without leave to amend.

The plaintiff is represented by James Hawkins APLC, and Apple Inc. and Apple Value Services LLC are represented by Jenner & Block.

Another class action against Apple similarly alleging that it is responsible an illegal gift card scheme is in dismissal briefing. The hearing is scheduled for May 8 in San Jose, California.