throbber
Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 1 of 47
`
`SCOTT+SCOTT ATTORNEYS AT LAW LLP
`CHRISTOPHER M. BURKE (CA Bar No. 214799)
`ALEX M. OUTWATER (CA Bar No. 259062)
`600 W. Broadway, Suite 3300
`San Diego, CA 92101
`Telephone: 619-233-4565
`Facsimile: 619-233-0508
`cburke@scott-scott.com
`aoutwater@scott-scott.com
`
`CAFFERTY CLOBES MERIWETHER
`& SPRENGEL LLP
`Anthony F. Fata (pro hac vice admission anticipated)
`Nyran Rose Rasche (pro hac vice admission anticipated)
`Nickolas J. Hagman (pro hac vice admission anticipated)
`150 S. Wacker, Suite 3000
`Chicago, IL 60606
`Telephone: 312-782-4880
`Facsimile: 318-782-4485
`afata@caffertyclobes.com
`nrasche@caffertyclobes.com
`nhagman@caffertyclobes.com
`
`Attorneys for Plaintiffs and the Class
`
`[Additional Counsel on Signature Page.]
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`SAN JOSE DIVISION
`
`CARL BARRETT, MICHEL POLSTON,
`NANCY MARTIN, DOUGLAS WATSON,
`ERIC MARINBACH, MICHAEL
`RODRIGUEZ, and MARIA RODRIGUEZ,
`Individually, and on Behalf of All Others
`Similarly Situated,
`
`Plaintiffs,
`
`v.
`
`APPLE INC., a California Corporation;
`APPLE VALUE SERVICES LLC; and
`DOES 1 Through 10, Inclusive,
`
`Defendants.
`
`CLASS ACTION COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`CLASS ACTION COMPLAINT
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 2 of 47
`
`Plaintiffs Carl Barrett, Michel Polston, Nancy Martin, Douglas Watson, Eric Marinbach,
`Michael Rodriguez, and Maria Rodriguez (collectively, “Plaintiffs”), individually and on behalf
`of all others similarly situated, bring this Class Action Complaint (“Complaint”) against
`Defendants Apple Inc. and Apple Value Services LLC (collectively, “Apple”) and DOES 1
`through 10 (collectively, with Apple, “Defendants”). The following allegations are based upon
`personal knowledge as to Plaintiffs’ own facts, upon investigation by Plaintiffs’ counsel, and upon
`information and belief where facts are solely in possession of Defendants.1
`NATURE OF THE CASE
`This case arises from Apple’s knowing or reckless enabling of the “iTunes gift card
`1.
`scam.” Scammers have found a uniform way of tricking victims into paying them large sums of
`money via iTunes gift cards. Apple is incentivized to allow the scam to continue because it reaps
`a 30% commission on all scammed proceeds, and knowingly or recklessly, Apple plays a vital role
`in the scheme by failing to prevent payouts to the scammers.
`2.
`The iTunes gift card scam preys upon many, including the elderly and vulnerable.
`It is prevalent. Apple dedicates a webpage to it, but apparently does little more.
`3.
`Perhaps most alarming, Apple describes the scam as “formulaic,” yet does little to
`stop it or to return its 30% commission to scammed victims (much less other moneys that Apple
`can recover from the scammers).
`4.
`Despite the fact that Apple retains the funds from purchases made using iTunes gift
`cards for four to six weeks before paying App and iTunes store vendors and keeps a 30%
`commission on scammed proceeds, Apple’s webpage and other communications falsely inform
`the public that all scammed proceeds are irretrievable:
`A string of scams are taking place asking people to make payments over the phone for
`things such as taxes, hospital bills, bail money, debt collection, and utility bills.
`*
`*
`*
`Regardless of the reason for payment, the scam follows a certain formulaic: The victim
`receives a call instilling panic and urgency to make a payment by purchasing App Store
`
`1
`Plaintiffs will work with Apple on the timing of Apple’s response to this Complaint and
`other ways of reducing the burdens of litigation on the parties, their counsel, and the Court in light
`of the ongoing COVID-19 pandemic.
`
`1
`
`CLASS ACTION COMPLAINT
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 3 of 47
`
`& iTunes Gift Cards or Apple Store Gift Cards from the nearest retailer (convenience
`store, electronics retailer, etc.). After the cards have been purchased, the victim is asked
`to pay by sharing the code(s) on the back of the card with the caller over the phone.
`*
`*
`*
`Never provide the numbers on the back of a Gift Card to someone you do not know.
`Once those numbers are provided to the scammers, the funds on the card will likely
`be spent before you are able to contact Apple or law enforcement.
`See Apple, About Gift Card Scams, https://support.apple.com/itunes-gift-card-scams. [Emphasis
`added.]
`The last sentence is highly misleading, and falsely suggests that there is nothing
`5.
`Apple can do for consumers who report the scam to it. Apple retains 30% of the spent funds for
`itself. At all times, this amount remains retrievable to the consumer. Apple holds the remaining
`spent funds for four to six weeks before paying the third-party vendors on the App and iTunes
`stores on which the stored value was spent, meaning the remainder is also retrievable to the
`consumer.
`The iTunes gift card scam deprives consumers of hundreds of millions of dollars or
`6.
`more. The overwhelming majority of victims do not report the scam to the Federal Trade
`Commission (“FTC”). Yet even the limited iTunes gift card scams reported to the FTC during
`2015-2019 exceed $93.5 million, with the dollar amounts increasing significantly each year. These
`publicly reported dollar amounts include the losses of only the subset of victims who fill out a
`detailed online FTC form asking for their personal information. As a result, this $93.5 million
`figure appears to be only the tip of the iceberg. Even if only 10% of scam victims report to the
`FTC (versus local police, attorney general offices, Apple, or nobody at all), the iTunes gift card
`scam would approach $1 billion, with Apple retaining $300 million in commissions.
`7.
`As set forth in detail below, scammers monetize scammed gift card values in one
`of two ways. First, they can use the stored value on the iTunes gift cards they obtain through
`scams to purchase App and iTunes store content for apps that they control. Using this method,
`scammers receive payment from Apple (less Apple’s 30% commission) four to six weeks after
`spending the stored value from the wrongfully obtained iTunes gift cards. Apple has shut down
`apps for violating its fraud policies, begging the question of what happened to the fraudulently
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`2
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 4 of 47
`
`obtained proceeds. Second, scammers can sell the gift card numbers to third parties who then use
`them to purchase App store or iTunes products, but this latter method involves significant counter-
`party risk and steep discounts. Regardless of which method the scammers use, Apple keeps 30%
`of the scammed proceeds.
`8.
`Not only does Apple keep 30% of the scammed proceeds, it is able to track all key
`points in the scheme. Apple has long bragged about its App Store “ecosystem.” The App Store is
`a marketplace created by Apple, over which it has full control, and into which it has full visibility.
`There are four key steps in the iTunes gift card scam:
`9.
`Step One: The Point of Sale. Apple knows when, where, and in what amount the
`victim purchases the gift card. At the point of sale, the retailer must communicate with Apple to
`“activate” the gift card and record the stored value.
`10.
`Step Two: The Apple ID Upload. Apple knows the Apple ID onto which the gift
`card number is uploaded. An Apple ID is a unique Apple “account” identifier through which
`customers on the App and iTunes stores transact. Apple iTunes gift card numbers must be
`uploaded to an Apple ID before being used in the App and iTunes stores. The amounts associated
`with these gift card numbers are referred to as “stored value” or “stored credit.” Apple reserves
`the right to void the stored value if it merely “suspects” that the store credit was obtained
`fraudulently.
`Step Three: Spending Stored Value on an App. Apple also knows where the Apple
`11.
`ID spends stored value in the App store ecosystem because each purchase must be made from an
`Apple ID.
`Step Four: Payment of U.S. Dollars (Less Commission). Apple knows the identity
`12.
`and financial account information of the App and iTunes store proprietors who receive U.S. dollars
`from the gift card purchases because, four to six weeks after the purchase, Apple sends them the
`U.S. dollars (minus Apple’s commission).
`13.
`Reverse Mapping. If a victim calls Apple and provides the gift card number that
`was scammed, Apple can use the gift card number to find out which Apple ID(s) and which App
`or iTunes products were involved in converting the scammed gift card number into U.S. dollars.
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`3
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 5 of 47
`
`Apple can also interrogate the Apple ID and the App and iTunes transactional data to determine if
`there were other suspect transactions and, if so, suspend the Apple ID and the App. At minimum,
`Apple knows that it has kept 30% of the scammed gift card value.
`14.
`Rather than publicizing its omniscience in this Apple “ecosystem” and its 30% take,
`Apple, as noted above, falsely tells victims that 100% of their money is irretrievable.
`15.
`Plaintiffs bring this class action on behalf of themselves and an objectively
`identifiable class consisting of all victims of scams involving Apple iTunes gift cards.
`PARTIES
`Plaintiff Carl Barrett is a resident and citizen of Prince George’s County, Maryland,
`16.
`living in Hyattsville, Maryland. Plaintiff Barrett is 57 years old.
`17.
`Plaintiff Michel Polston is a resident and citizen of Marion County, Oregon, living
`in Salem, Oregon. Plaintiff Polston is 71 years old.
`18.
`Plaintiff Nancy Martin is a resident and citizen of Sarasota County, Florida, living
`in Nokomis, Florida. Plaintiff Martin is 61 years old.
`19.
`Plaintiff Douglas Watson is a resident and citizen of Butte County, California,
`living in Chico, California. Plaintiff Watson is 64 years old.
`20.
`Plaintiff Eric Marinbach is a resident and citizen of Queens, New York, living in
`Bayside, New York. Plaintiff Marinbach is 55 years old.
`21.
`Plaintiff Michael Rodriguez is a resident and citizen of Los Angeles County,
`California, living in Walnut, California. Plaintiff Michael Rodriguez is 50 years old.
`22.
`Plaintiff Maria Rodriguez is a resident and citizen of Los Angeles County,
`California, living in Walnut, California. Plaintiff Maria Rodriguez is 68 years old.
`23.
`Defendant Apple Inc. (“Apple”) is a business incorporated under the laws of the
`State of Delaware with its principal place of business at 1 Infinite Loop, Cupertino, California
`95014. Apple is engaged in the business of designing, manufacturing, distributing, and selling,
`inter alia, smartphones, tablet computers, wearable technology, headphones, laptops and desktop
`computers that come with software programs that Apple develops pre-installed. Apple designs its
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`4
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 6 of 47
`
`products in California, and its marketing efforts emanate from California. Defendant Apple is a
`citizen of the State of California.
`24.
`Defendant Apple Value Services LLC is a Virginia corporation with its principal
`place of business located at 1 Infinite Loop, Cupertino, California 95014. Defendant Apple Value
`Services is a citizen of the State of Virginia.
`25.
`The true names and capacities of the Defendants sued herein as DOES 1 through
`10, inclusive, are currently unknown to Plaintiffs, who therefore sue such Defendants by such
`fictitious names. Each of the Defendants designated herein as DOE is legally responsible in some
`manner for the unlawful acts referred to herein. Plaintiffs will seek leave of Court to amend their
`Complaint to reflect the true names and capacities of the Defendants designated herein as DOES
`when such identities become known.
`JURISDICTION AND VENUE
`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
`26.
`§1332 because: (1) there are 100 or more (named or unnamed) class members; (2) there is an
`aggregate amount in controversy exceeding $5,000,000, exclusive of interest or costs; and (3) there
`is minimal diversity because at least one Plaintiff and Defendants are citizens of different states.
`This Court has supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. §1367.
`27.
`This Court may exercise jurisdiction over Defendants because Apple is a citizen of
`this State and District and maintains its principle place of business in this District, has continuous
`and systematic contacts with this District, does substantial business in this State and within this
`District, receives substantial revenues from marketing, distribution, and sales of iTunes gift cards
`in this District, and engages in unlawful practices in this District as described in this Complaint,
`so as to subject itself to personal jurisdiction in this District, thus rendering the exercise of
`jurisdiction by this Court proper and necessary.
`28.
`Venue is proper in this judicial District pursuant to 28 U.S.C. §1391(b) because
`Apple is headquartered in this District, advertises in this District, receives substantial revenues and
`profits from the sale of iTunes gift cards which it directs into the stream of commerce in this
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`5
`
`CLASS ACTION COMPLAINT
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 7 of 47
`
`District; therefore, a substantial part of the events or omissions giving rise to the claims alleged
`herein occurred in this District.
`29.
`Intradistrict Assignment (L.R. 3-2(c) and (e) and 3-5(b)). This action arises in
`Santa Clara County, in that a substantial part of the events which give rise to the claims asserted
`herein occurred in Santa Clara County. Pursuant to L.R. 3-2(e), all civil actions that arise in Santa
`Clara County shall be assigned to the San Jose Division.
`FACTUAL ALLEGATIONS
`
`Apple’s Digital Products
`30.
`Apple owns and operates online platforms including the App and iTunes stores.
`Consumers who access the App and iTunes stores can purchase and download digital applications
`for mobile devices (“apps”) or digital multimedia (such as songs, movies, and television shows).
`Apple describes the App Store as an “ecosystem” it created and controls.2 The App
`31.
`Store hosts millions of apps that consumers purchase or download directly from the App Store.
`Apple separates the apps available on the App Store into different categories, including various
`types of free apps and paid apps.3
`Apple’s Oversight of Its Platforms
`32.
`Apple reviews all apps before they are made available for consumers. Before an
`app is available on the App Store, developers must submit the prospective app to Apple for review
`and approval.4 Apple “carefully review[s] each app” before it becomes available on the App Store
`using “a combination of automated systems and hundreds of human experts.”5 Apple may require
`the developer to modify or remove functions from the app.6
`
`2
`See, e.g., In re Apple iPhone Antitrust Litigation, 139 S. Ct. 1514 (2019), Petition for Writ
`of Certiorari at 6 (“Apple designed – from the ground up – an ecosystem for the use, development,
`sale, and distribution of apps.”).
`3
`See App Store – Principles and Practices, APPLE (https://www.apple.com/ios/app-
`store/principles-practices) (last visited July 16, 2020).
`4
`See App Review – App Store, APPLE (https://developer.apple.com/app-store/review) (last
`visited July 16, 2020).
`5
`See supra note 3.
`See supra note 4.
`
`6
`
`6
`
`CLASS ACTION COMPLAINT
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 8 of 47
`
`Apple represents that most apps are reviewed “within 24 hours of the developer’s
`33.
`submission.” Apple says it rejects 40% of app submissions for issues such as “minor bugs [and]
`privacy concerns.”7 Apple thus has knowledge of the contents and design of all apps available on
`the App Store.
`34.
`One of the purposes of Apple’s review process is to determine whether the app will
`be used for or facilitate illegal activity. Apple reserves the right to reject any app used for illegal
`or criminal activities.8 After Apple approves an app, it becomes available to purchase or download
`from the App Store. Apple reserves the right to suspend an approved app if it is suspected of
`facilitating illegal activity.9
`Payment for Apple’s Digital Products
`35.
`Apple receives a 30% commission on all sales of paid apps, purchases made within
`apps (often called “in-app purchases”), and paid subscriptions to apps.10 On information and
`belief, Apple take a similar 30 % commission for purchases from iTunes.11
`36.
`To purchase digital content from either iTunes or the App Store, consumers must
`create and register an account with Apple, called an “Apple ID.”12 Purchasing songs, movies, or
`apps from either iTunes or the App Store requires the purchaser to sign in with the user’s unique
`Apple ID and provide Apple with a valid method of payment.
`
`7
`
`See id.
`8
`APPLE
`Developer,
`Apple
`–
`Guidelines
`Review
`Store
`App
`See
`(https://developer.apple.com/app-store/review/guidelines) (last visited July 16, 2020); Apple
`Developer Agreement – English, APPLE (June 8, 2015) (https://developer.apple.com/terms/apple-
`developer-agreement).
`9
`See Apple Developer Agreement – English, supra note 8.
`10
`See id.; see also Apple Inc. v. Pepper, No. 17-204, 587 U.S. (2019), Brief of Petitioner
`to the Supreme Court of the United States at 9 (Apple acknowledges that it “review[s]apps for
`safety and compatibility, host[s] the App Store, act[s] as the developers’ sales and delivery agent,
`collect[s] the purchase price (if any) from consumers on the developers’ behalf, and remit[s]
`proceeds to developers from around the world” and that “developers agree to pay Apple an annual
`$99 membership fee, and a 30% commission on their sales revenue from paid apps and in-app
`purchases.”).
`11
`See e.g., iTunes Connect Resources and Help, APPLE (https://itunespartner.apple.com/
`en/music/faq/Payments%20and%20Financial%20ReportsReading%20Your%20Financial%20Re
`ports) (last visited July 16, 2020).
`12
`See Apple ID FAQ, APPLE (https://appleid.apple.com/faq/#!&page=faq) (last visited July
`16, 2020).
`
`7
`
`CLASS ACTION COMPLAINT
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 9 of 47
`
`To create an Apple ID, consumers must provide Apple with a valid email address,
`37.
`credit card or billing information, and their date of birth.13 Apple requires that all Apple ID
`accounts be verified with a telephone number or the email address associated with the Apple ID
`account.14
`Consumers make purchases from the App or iTunes stores by providing Apple with
`38.
`their credit or debit card information, through PayPal or Apple Pay, or with Apple iTunes gift
`cards.15 Even if consumers wish to use only Apple iTunes gift cards for purchases, Apple requests
`valid credit card or billing information.16
`App Developers
`39.
`Individuals and companies who develop apps distributed on the App Store are
`called “Apple Developers.” Apple Developers are required to create and register an Apple ID,
`enroll in the Apple Developer Program, enter into the Apple Developer Program License
`Agreement, and pay an annual fee of $99.17
`40.
`If Apple Developers wants to distribute an app which charges a fee for download
`and/or has in-app purchases, they must enter into Apple’s Schedule 2 agreement. By entering into
`the Schedule 2 agreement, Apple Developers appoint Apple as their agent relative to their apps
`made available on the App Store.
`41.
`Apple pays Apple Developers after a consumer purchases a Paid App from the App
`Store, makes an in-app purchase, or pays a subscription to an app downloaded from the App Store.
`Apple makes all payments to Apple Developers electronically.18 In order to be paid by Apple,
`
`13
`See Create Your Apple ID, APPLE (https://appleid.apple.com/ account#!&page=create)
`(last visited July 16, 2020); How to Create a New Apple ID, APPLE (https://support.apple.com/en-
`us/HT204316#macos) (last visited July 16, 2020).
`14
`See id.
`15
`that you can use with your Apple
`See Payment methods
`(https://support.apple.com/en-us/HT202631) (last visited July 16, 2020).
`16
`See Redeem App Store & iTunes Gift Card and content codes – Apple Support, APPLE
`(https://support.apple.com/en-us/HT201209) (last visited July 16, 2020).
`17
`– Apple Developer, APPLE
`See Purchase
`and Activation
`–
`Support
`(https://developer.apple.com/support/purchase-activation) (last visited July 16, 2020).
`18
`See iTunes Connect Resources and Help, APPLE (https://itunespartner.apple.com/en/
`movies/faq/Banking%20and%20Tax_Banking) (last visited July 16, 2020).
`8
`CLASS ACTION COMPLAINT
`
`ID, APPLE
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 10 of 47
`
`Apple Developers must provide Apple with their bank account information, and may also be
`required to submit tax forms to Apple.19
`42.
`Apple does not pay Apple Developers immediately after consumer transactions.
`Instead, Apple waits for its fiscal month (the monthly period during which the purchase was made)
`to close, and then waits up to 45 days after the close of that fiscal month before it electronically
`transfers the money to the Apple Developer’s bank account.20 Moreover, Apple will not transfer
`payment unless the Apple Developer meets the minimum payment threshold for that period.21 As
`such, there is a delay of several weeks between the time a consumer purchases an app from the
`App Store or makes in in-app purchase or subscription payment, and the time Apple pays the
`Apple Developer.
`iTunes Gift Cards
`
`Apple sells iTunes gift cards for use on iTunes, in the App Store, or inside of apps
`43.
`purchased or downloaded from the App Store (as noted, the latter are often called “in-app
`purchases”). iTunes gift cards are sold by Apple both directly to consumers, and indirectly to
`consumers through retailers.
`44.
`iTunes gift cards are country/region specific. iTunes gift cards sold in the United
`States cannot be used outside of the United States.22
`45.
`iTunes gift cards generally are sold for the amount shown on the face of the iTunes
`gift card (or an amount selected by the consumer within the range reflected on the face of the card),
`and generally reflect a stored value equal to the amount paid by the consumer.
`46.
`Every iTunes gift card has a unique redemption code and PIN on the back of the
`card. iTunes gift cards are not active until purchased. Once purchased, the retailer activates the
`card. Unless properly activated, an iTunes gift card cannot be redeemed. Accordingly, Apple
`
`19
`See Agreements, Tax, and Banking Overview – Apple Store Connect Help, APPLE
`(https://help.apple.com/app-store-connect/#/devb6df5ee51) (last visited July 16, 2020).
`20
`Help,
`See
`iTunes
`Connect
`Resources
`and
`(https://itunespartner.apple.com/en/apps/faq/app%20) (last visited July 16, 2020).
`21
`See id.
`22
`See If You Can’t Redeem Your App Store & iTunes Gift Card, Apple Music Gift Card, or
`Content Code, APPLE (https://support.apple.com/en-us/HT201195) (last visited July 14, 2020).
`9
`CLASS ACTION COMPLAINT
`
`APPLE
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 11 of 47
`
`knows the moment a particular iTunes gift card has been purchased and the amount of “stored
`value” on the card because the retailer must activate the card at the point of sale.
`Apple IDs
`
`A valid Apple ID is required to redeem iTunes gift cards. Consumers redeem
`47.
`iTunes gift cards by logging into their Apple ID account and entering the redemption code and
`PIN on the back of the card. The value of the iTunes gift card is then transferred to the consumer’s
`Apple ID account, and is immediately available to make purchases on iTunes, from the App Store,
`or in apps. Once an iTunes gift card has been redeemed, the physical card is worthless, as the
`entire value of the iTunes gift card has been transferred to the redeemer’s Apple ID account.
`48.
`Apple tracks redemption codes on iTunes gift cards to ensure that a single iTunes
`gift card is not redeemed multiple times. Therefore, when an iTunes gift card is redeemed, Apple
`knows which iTunes gift card was redeemed and which Apple ID account redeemed the iTunes
`gift card.
`The packaging for iTunes gift cards contains minimal terms and conditions.23 For
`49.
`example, the outer packaging, which is visible to consumers prior to purchase on iTunes gift card
`packaging, often provides:
`Terms and Conditions
`Valid only on purchases made in the U.S. from Apple Media Services. Use requires
`an Apple ID and prior acceptance of license & usage terms. Not redeemable for
`cash, for resale, for shipments outside the U.S. & no refunds or exchanges (except
`as required by law). Data collection and use subject to Apple’s Privacy Policy; see
`apple.com/privacy. Neither Apple nor Issuer is responsible for any loss or damage
`resulting from lost or stolen cards or for use without permission. Void where
`prohibited. Terms apply; see apple.com/us/go/legal/gc. App Store and iTunes gift
`cards are issued and managed by Apple Value Services (“Issuer”). © 2017 Apple
`Inc. All rights reserved.
`50.
`The web address on the back of the iTunes gift card packaging directs users to the
`full terms and conditions for iTunes gift cards (the “Online Terms and Conditions”). The Online
`Terms and Conditions, which apply to iTunes gift cards and their related codes (together, “Store
`Credit”) provide, inter alia, that:
`You agree to not use Store Credit in any manner that is misleading, deceptive,
`unfair, or otherwise harmful to Issuer, Apple or its customers. We reserve the right,
`
`23
`Apple occasionally changes the language on the iTunes gift card packaging, but the terms
`on all iTunes gift card packaging are all substantially similar.
`10
`
`CLASS ACTION COMPLAINT
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 12 of 47
`
`without notice to you, to void or deactivate [iTunes gift cards] (including a portion
`of your Account balance) without a refund, suspend or terminate customer
`accounts, suspend or terminate the ability to use the Services, cancel or limit orders
`and bill alternative forms of payment if we suspect Store Credit was obtained, used,
`or applied to an Apple ID fraudulently, unlawfully, or otherwise in violation of
`these terms and conditions.
`
`*
`*
`*
`Risk of Loss: Neither Issuer nor Apple is responsible for lost or stolen Store Credit
`or Content Codes. . . . Apple reserves the right to close accounts and request
`alternative forms of payment if Store Credit or a Content Code is fraudulently
`obtained or used on the Service.
`Governing Law Except [for residents of certain foreign countries], this Agreement
`and the relationship between you and Issuer shall be governed by the laws of the
`State of California, excluding its conflict of laws provisions. You and Issuer agree
`to submit to the personal and exclusive jurisdiction of the courts located within the
`county of Santa Clara, to resolve any dispute or claim arising from this
`Agreement.24
`51. When consumers purchase an iTunes gift card at retail, they become bound by the
`terms on the packaging, which incorporate the full Online Terms and Conditions. However, no
`victim of an iTunes gift card scam is bound by Apple’s attempt to limit its own liability for iTunes
`gift cards which are lost, stolen, or used without permission. Even if that limitation of liability
`applied by its terms – which it arguably does not – Apple cannot disclaim liability for loss or
`damage resulting from scams which it intentionally aids, abets, and perpetuates. Any attempt by
`Apple to disclaim liability for loss or damage resulting from iTunes gift card scams would be
`unconscionable and unenforceable in light of its role in those scams and the profit that it makes
`and retains from such scams.
`The iTunes Gift Card Scam Costs Hundreds of Millions of Dollars or More
`52.
`The overwhelming majority of iTunes gift card scam victims do not report the scam
`to the Federal Trade Commission (“FTC”). Yet even the losses of the small percentage of victims
`who do report to the FTC exceeded an estimated $93.5 million during 2015-2019, with the dollar
`amounts increasing significantly each year. According to FTC data, iTunes gift cards make up
`approximately 23.7% of all gift card scams. Applying this 23.7% figure to the total gift card scams
`reported results in the following estimated figures of scams reported to the FTC: 2015-
`
`24
`See Legal – iTunes Gift Cards and Codes, APPLE (Mar. 20, 2018) (https://www.apple.com/
`legal/internet-services/itunes/giftcards/us/terms.html).
`11
`
`CLASS ACTION COMPLAINT
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 13 of 47
`
`$4.7 million; 2016-$6.4 million; 2017-$9.5 million; 2018-$18.5 million; 2019: $24.4 million; and
`2020: $30 million; for a total of $93.5 million. This dollar amount is limited to consumers who
`fill out a detailed online FTC form asking for their personal information. Given the time required
`to fill out the FTC form and its potential privacy implications, it can reasonably be inferred that
`only a small percentage of victims submit a report to the FTC (versus another governmental entity).
`As a result, this publicly reported $93.5 million figure appears to be only the tip of the iceberg. If
`only 10% of scam victims reported to the FTC (versus local police, attorney general offices, Apple,
`or nobody at all), the iTunes gift card scam would approach $1 billion in scammed proceeds, with
`Apple retaining $300 million in commissions.
`53.
`Apple is aware of the widespread nature of the scam and has been for years. Apple
`has been receiving inquiries from victims (beginning on a date known only to Apple) and requests
`for information from law enforcement officials. Since July 1, 2016 (the date for which Apple first
`began separately disclosing this data), U.S. government entities have asked Apple to provide
`customer data related to more than 60,000 “specific financial identifiers,” such as credit card
`numbers or gift card numbers. Apple has noted in its public transparency reports that the “[h]igh
`number” of “financial identifier requests” from government entities in the United States is
`“predominantly due to iTunes Gift Card and credit card fraud investigations.”25
`54.
`Of course, the large number of financial identifiers included in law enforcement
`requests are, again, only the tip of the iceberg. Many victims don’t report gift card fraud to any
`law enforcement entity,26 and even if they do, there is no guarantee their information will be
`investigated, much less included in a law enforcement subpoena or other formal government
`request for information to Apple.
`
`25
`Apple Transparency Report: Government and Private Party Requests, January 1–June 30,
`2019 at 5, 20, APPLE (https://www.apple.com/legal/transparency/pdf/requests-2019-H1-en.pdf).
`26
`See, e.g., Tamara Lytle, Give Gift Cards to Friends and Family – Not Fraudsters, AARP
`(Nov.
`7,
`2019),
`(https://www.aarp.org/money/scams-fraud/info-2019/prevent-gift-card-
`fraud.html) (director of fraud victim support at the American Association for Retired Persons, or
`AARP, says that victims often do not contact law enforcement because “[t]hey are embarrassed
`and ashamed and they don’t think it does any good”).
`12
`
`CLASS ACTION COMPLAINT
`
`1 2 3 4 5 6 7 8 9
`
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 5:20-cv-04812-EJD Document 1 Filed 07/17/20 Page 14 of 47
`
`iTunes gift cards are the most re

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket