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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`CARL BARRETT, et al.,
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`Case No. 5:20-cv-04812-EJD
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`Plaintiffs,
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`v.
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`APPLE INC., et al.,
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`Defendants.
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`AMENDED ORDER GRANTING IN
`PART AND DENYING IN PART
`MOTION TO DISMISS FIRST
`AMENDED COMPLAINT; DENYING
`MOTION FOR PROTECTIVE ORDER
`TO STAY 30(B)(6) DEPOSITION
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`Re: Dkt. No. 61
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`Plaintiffs Carl Barrett, Michel Polston, Nancy Martin, Douglas Watson, Eric Marinbach,
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`Michael Rodriguez, Maria Rodriguez, Guanting Qiu, and Andrew Hagene bring this putative class
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`action against Defendants Apple, Inc., Apple Value Services LLC (collectively, “Apple”), and
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`Does 1-100. In their First Amended Complaint (“FAC”), Plaintiffs assert the following claims:
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`(1) unfair practices in violation of the California Consumers Legal Remedies Act (“CLRA”), Cal.
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`Civ. Code § 1750 et seq.; (2) unfair practices in violation of the California Unfair Competition
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`Law (“UCL”), Cal. Bus. & Prof. Code § 17200; (3) unlawful practices in violation of the CLRA;
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`(4) unlawful practices in violation of the UCL; (5) deceptive practices in violation of the CLRA;
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`(6) deceptive practices under the UCL; (7) violation of the California False Advertising Law
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`(“FAL”), Cal. Bus. & Prof. Code § 17500; (8) receiving, retaining, withholding, or concealing
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`stolen property in violation of California Penal Code § 496; (9) conversion; (10) aiding and
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`abetting intentional torts; and (11) declaratory judgment under 28 U.S.C. § 2201. First Am. Class
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`Action Compl. (“FAC”), Dkt. No. 59.
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`Before the Court is Apple’s motion to dismiss the FAC pursuant to Federal Rule of Civil
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`Procedure 12(b)(6), as well as Apple’s motion for a protective order to stay depositions pursuant
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`to Rule 30(b)(6). Defs. Apple Inc. and Apple Value Servs., LLC’s Not. of Mot. and Mot. to
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`Dismiss First Am. Compl. (“Mot.”), Dkt. No. 61; Defs. Apple Inc. and Apple Value Servs., LLC’s
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`Not. of Mot. and Mot. for Protective Order to Stay 30(b)(6) Deposition, Dkt. No. 85. The Court
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`finds the matter suitable for resolution without oral argument. Civ. L.R. 7-1(b). Having
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`considered the parties’ written submission, the Court GRANTS IN PART and DENIES IN PART
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`the motion to dismiss and DENIES the motion for a protective order.
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`I.
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`BACKGROUND
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`A.
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`Factual Background
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`Defendant Apple Inc. is a California corporation with its principal place of business in
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`Cupertino, California. FAC ¶ 16. Apple Value Services, LLC, is a Virginia corporation with its
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`principal place of business in Cupertino, California. Id. ¶ 17. Plaintiffs are residents of Maryland,
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`Oregon, California, New York, Massachusetts, and Missouri, all of whom fell victim to scams
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`involving the purchase of Apple’s App Store & iTunes gift cards. Id. ¶¶ 7-15, 112-177.
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`The Federal Trade Commission has reported that, between 2015 and 2019, scammers stole
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`more than $93.5 million by carrying out a formulaic gift card scam. FAC ¶ 58. FTC data
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`indicates that gift card scammers steal more and more money with each passing year. Id. Gift
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`card scammers stole approximately $24.4 million in 2019 alone, and $29.4 million in 2020 alone.
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`Id. These figures may indicate only a fraction of the theft occurring each year, as many scam
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`victims may not file a report. Id. About a quarter of all reported gift card scams involve Apple
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`gift cards. Id.
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`According to Plaintiffs, the scam works as follows: The scammer contacts an individual.
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`Id. ¶¶ 63-71. The scammer induces panic or urgency in the individual or otherwise induces the
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`individual to give money to the scammer. Id. The scammer may, for example, tell the individual
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`that the individual has a time-sensitive opportunity to receive a vaccine for COVID-19. Id. The
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`scammer tells the individual that the individual can transfer money to the scammer by using
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`iTunes gift cards. Id. The scammer tells the individual to go to a nearby retailer to buy one or
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`more gift cards. Id. The scammer tells the individual to give to the scammer the unique code(s)
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`located on the back of the gift card(s). Id. If the individual complies, the scammer may ask the
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`individual to purchase more gift cards and share their codes as well. Id.
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`Once the scammer is in possession of a gift card code, the scammer is in possession of the
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`value associated with the gift card—at least until the individual who was the victim of the scam or
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`someone else with access to the code uses up that value. Id. At this point, the scammer does one
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`of two things. Id. The scammer may sell the code to a third party in exchange for money. Id.
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`Alternatively, the scammer may input the code into an Apple ID account controlled by the
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`scammer. Id. If the scammer inputs the code into their Apple ID account, the scammer can use
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`the value of the gift card as if it were their own and carry out transactions in either the iTunes
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`Store or the App Store. Id. For example, the scammer may purchase songs or movies on iTunes,
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`or they may spend the money on or within applications (“apps”) controlled by a third party. Id.
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`Some apps are free but some cost money to download; moreover, some apps allow or induce users
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`to pay money within the app itself—for example, to get access to special features of the app. Id.
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`In a typical version of the scam, however, the scammer will not spend the gift card value in
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`the iTunes Store or on or within third-party apps. Id. Instead, scammers spend the value on or
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`within an app that the scammer theirself controls. Id. This means that, prior to contacting the
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`individual and inducing the individual to buy a gift card, the scammer has often already created
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`their own app or otherwise obtained control over an app someone else created. Id. In order to
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`create an app offered in Apple’s App Store, one must become an Apple Developer. Id. ¶¶ 33-36.
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`To become an Apple Developer, one must create an Apple ID, enroll in the Apple Developer
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`Program, enter into the Apple Developer Program License Agreement, and pay a fee of $99 per
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`year. Id. Whenever a purchase is made on or within an app (either with gift card value or with
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`other loaded monetary value), Apple retains 100% of the value of that purchase until
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`approximately 45 days after the end of the fiscal month, at which point Apple either pays 70% of
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`the value to the Apple Developer controlling the app or retains the entire amount based on indicia
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`of fraud. Id. ¶¶ 5-6, 71. Either way, Apple retains at least 30% of the value. Id. The scam, or at
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`least one cycle of the scam, is complete when the Apple Developer-scammer receives their
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`payment from Apple. The scammer has at this point effectively converted gift card codes into
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`money.
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`Plaintiffs allege that Apple has control of its iTunes and App Store such that it knew or
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`should have known about specific iTunes gift card scams as they were occurring or soon after they
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`occurred. See, e.g., id. ¶ 25. Plaintiffs allege that Apple knew or should have known: which
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`Apple IDs had uploaded the codes of stolen gift cards; which iTunes Store or App Store purchases
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`had been made with the value uploaded from stolen gift cards; and which Apple Developer
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`accounts were associated with purchases made with the value uploaded from stolen gift cards. See,
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`e.g., id. ¶ 73. More generally, Plaintiffs allege that Apple knew or should have known how the
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`iTunes gift card scam works, and that it is a widespread and impactful phenomenon. See, e.g.,
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`FAC ¶ 63. Plaintiffs allege that Apple could have used its knowledge and control of its online
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`stores to suspend Apple ID accounts and Apple Developer accounts associated with suspicious
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`activity, to refuse to pay Apple Developer accounts that seemed to be involved with scams, and to
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`refund to scam victims Apple’s 30% commission on purchases associated with scams (if not the
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`full 100% loss of the stolen gift card value). Id. ¶¶ 97-98. Plaintiffs point out that in 2012 Apple
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`started producing gift cards in $500 denominations, potentially increasing the impact of individual
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`scams. Id. ¶ 106. Plaintiffs allege that Apple’s actions or failures to act indicate that Apple is
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`aiding and abetting the scams, or is otherwise violating California fair competition statutes by
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`knowingly paying scammers and keeping funds received because of the scams. See, e.g., id. ¶¶
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`108-110.
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`Apple provides warning language in bold red lettering on the backs of iTunes gift cards.
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`Id.; see also Req. for Jud. Not. in Supp. of Apple’s Mot. to Dismiss Plfs.’ First Am. Compl.
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`(“RJN”), Dkt. No. 62, Ex. 1.1 This warning language reads as follows: “Do not share your code
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`1 As discussed below, the Court grants Apple’s motion to request judicial notice of this language
`and the other exhibits referenced throughout this Order. See infra Section III.A.
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`with anyone you do not know.” Id.; FAC ¶ 110. Apple has created a webpage on which it shares
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`information regarding gift card scams, including information about how to avoid scams and what
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`to do in case a scam has occurred. RJN, Ex. 3. This webpage is titled “About Gift Card Scams.”
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`Id. The language on the website states, among other things: “If you believe you’re the victim of a
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`scam involving Apple Gift Cards, App Store & iTunes Gift Cards, or Apple Store Gift Cards, you
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`can call Apple at 800-275-2273 (U.S.) and say ‘gift cards’ when prompted.” Id. at 1. The
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`website also includes the following language: “Never provide the numbers on the back of a Gift
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`Card to someone you do not know. Once those numbers are provided to the scammers, the funds
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`on the card will likely be spent before you are able to contact Apple or law enforcement.” Id.
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`Apple gift cards are subject to Terms and Conditions. See, e.g., id. ¶¶ 43-46. A partial
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`version of the Terms and Conditions appears on the back of the packaging sleeve for iTunes gift
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`cards. RJN, Ex. 1. This partial version refers users to the full Terms and Conditions on Apple’s
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`website. See, e.g., FAC ¶¶ 43-46. There is also a reference to the Terms and Conditions website
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`on the back of the gift card itself. RJN, Ex. 1. The Terms and Conditions language on the gift
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`card packaging includes the following: “Neither Apple nor Issuer is responsible for any loss or
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`damage resulting from lost or stolen cards or for use without permission.” FAC ¶¶ 43-46. The
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`Terms and Conditions on Apple’s website includes the following:
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`We reserve the right, 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.
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`Id. ¶ 44. The version of the Terms and Conditions at issue here state that California law applies.
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`Id.
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`Plaintiffs cite an April 2016 NBC News report, in which an Apple spokesperson stated:
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`[I]f someone contacts Apple Support after sending off the gift card
`code – and the money has not been drained from the card – [the
`scam victim] can freeze the account and have the money refunded to
`them. If the money is already gone, Apple advises people to file a
`complaint with the FTC.
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`Id. ¶ 94. Plaintiffs claim that this news report indicates, among other things, that “Apple
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`deceptively suggests to scam victims that their money is ‘gone,’ even when [Apple] will retain a
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`30% commission, and, in many cases, has not yet paid or will not pay the remaining 70% into the
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`scammer’s bank account.” Id.
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`Plaintiffs allege that Apple has violated California unfair competition statutes by
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`committing affirmative misrepresentation and/or fraud by omission via its red warning language,
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`its “About Gift Card Scams” webpage, its Terms and Conditions, its communications with news
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`media, and its communications with gift card users who contacted Apple after having been
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`scammed. See, e.g., id. ¶¶ 79, 100.
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`Plaintiffs bring this action individually and also on behalf of a proposed nationwide class
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`of persons in the United States who were victims of the iTunes gift card scam and who did not
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`receive a refund from Apple. Id. ¶¶ 181-302. Plaintiff proposes one subclass that includes scam
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`victims who contacted Apple following the scam. Id. There are nine named Plaintiffs, all of
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`whom fell victim to a typical version of the scam as described above. Id. ¶¶ 112-177. Four of the
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`named Plaintiffs contacted Apple after being scammed, two contacted law enforcement, and two
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`contacted both the police and a district attorney. Id. One named Plaintiff apparently sought no
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`remedy. Id. According to the FAC, the four individual Plaintiffs who did not contact Apple
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`“[were] informed that once the scammers redeemed the iTunes gift card there [was] nothing that
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`Apple would do for them.” Id. Those who contacted Apple were informed that after the cards had
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`been redeemed, “there was nothing Apple could do.” Id.
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`B.
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`Procedural Background
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`Plaintiffs filed this action on July 17, 2020, asserting claims for violations of the UCL,
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`CLRA, FAL, as well as claims for breach of contract, quasi-contract, and state elder abuse laws.
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`Dkt. No. 1. The Court granted Apple’s motion to dismiss the original complaint with leave to
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`amend, except for the breach of contract claim (which Plaintiffs withdrew) and the quasi-contract
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`claims. Order Granting Defs.’ Mot. to Dismiss (“MTD Order”), Dkt. No. 51. In the operative
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`FAC, Plaintiffs dropped the elder abuse claims and instead added claims for violation of
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`California Penal Code § 496 and conversion. Dkt. No. 59. The motion to dismiss the FAC now
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`before the Court followed. Dkt. No. 61.
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`II.
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`LEGAL STANDARD
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`Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with enough
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`specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which
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`it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). A
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`complaint which falls short of the Rule 8(a) standard may therefore be dismissed if it fails to state
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`a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule
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`12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts
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`to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097,
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`1104 (9th Cir. 2008). When deciding whether to grant a motion to dismiss, the Court must accept
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`as true all “well pleaded factual allegations” and determine whether the allegations “plausibly give
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`rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). The Court must also
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`construe the alleged facts in the light most favorable to the plaintiff. Love v. United States, 915
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`F.2d 1242, 1245 (9th Cir. 1989). While a complaint need not contain detailed factual allegations,
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`it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
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`plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp., 550 U.S. at 570).
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`A court generally may not consider any material beyond the pleadings when ruling on a
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`Rule 12(b)(6) motion. If matters outside the pleadings are considered, “the motion must be treated
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`as one for summary judgment under Rule 56.” Fed. R. Civ. P. 12(d). However, documents
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`appended to the complaint, incorporated by reference in the complaint, or which properly are the
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`subject of judicial notice may be considered along with the complaint when deciding a Rule
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`12(b)(6) motion. Khoja v. Orexigen Therapeutics, 899 F.3d 988, 998 (9th Cir. 2018); see also Hal
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`Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990).
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`Likewise, a court may consider matters that are “capable of accurate and ready determination by
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`resort to sources whose accuracy cannot reasonably be questioned.” Roca v. Wells Fargo Bank,
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`N.A., No. 15-cv-02147-KAW, 2016 WL 368153, at *3 (N.D. Cal. Feb. 1, 2016) (quoting Fed. R.
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`Evid. 201(b)).
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`III. DISCUSSION
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`A.
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`Request for Judicial Notice
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`Apple requests the Court take judicial notice of six exhibits: (1) a set of photographs of an
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`Apple $50 gift card; (2) an AppleCare Support article entitled
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`; (3) an article entitled “About Gift Card Scams” from Apple’s website;
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`(4) an October 2018 press release from the FTC entitled “Paying Scammers with Gift Cards,”
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`available on the FTC’s website; (5) a November 24, 201 press release from the FTC entitled “FTC
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`Has Gift Card Tips for Holiday Buying,” available on the FTC’s website; and (6) a December
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`2019 press release from the Federal Deposit Insurance Corporation entitled “FDIC Consumer
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`News: What You Should Know About Gift Cards,” available on the FDIC’s website. RJN. The
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`Court previously granted Apple’s request for judicial notice of Exhibits 1, 3, 4, 5, and 6. Dkt. No.
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`51 at 7–10. Plaintiffs oppose only the request for judicial notice of Exhibits 1 and 2. Plfs.’ Opp’n
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`to Apple’s Req. for Jud. Not. (“RJN Opp’n”), Dkt. No. 68.
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`Exhibit 1 includes three photographs of a $50 iTunes gift card purchased on August 18,
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`2020. RJN, Ex. 1. One of the photographs depicts the front of the gift card while it is still in its
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`packaging; one depicts the back of the gift card while it is still in its packaging; and one depicts
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`the back of the gift card once it has been removed from its packaging. Id. The Court previously
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`took judicial notice because the disclaimer language on the back of the gift card packaging
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`matched verbatim the language quoted in the complaint, and Plaintiffs did not assert that the
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`language and formatting of the gift card shown in Exhibit 1 was different from the gift cards they
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`purchased. Dkt. No. 51 at 8–9. In the FAC, Plaintiffs now allege that no such warning language
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`appeared on the cards purchased by Barrett, Marinbach, the Rodriguezes, and Qiu. FAC ¶¶ 116-
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`117, 149-150, 157-158, 167-168. Plaintiffs further allege that the warning language was not
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`added to Apple gift cards until midway through the class period. Id. ¶ 53. However, Plaintiffs do
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`not allege that the language did not appear on the cards purchased by Polston, Martin, Watson, and
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`Hagene. The Court’s earlier ruling thus still applies to those four named Plaintiffs and to putative
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`class members who purchased gift cards in the first half of the class period. Accordingly, the
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`Court grants the request for judicial notice of Exhibit 1 as incorporated in the complaint. Id. ¶¶
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`51-55.
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`Accordingly, the Court grants Apple’s request for judicial notice of Exhibits 1, 2, 3, 4, 5,
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`and 6.
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`B.
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`Rule 12(b)(6)
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`1.
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`California Penal Code § 496 (Claim 8)
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`California Penal Code § 496 provides a civil cause of action to “[a]ny person who has been
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`injured” by a defendant “who buys or receives any property that has been stolen or that has been
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`obtained in any manner constituting theft or extortion, knowing the property to be so stolen or
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`obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any
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`property from the owner, knowing the property to be so stolen or obtained.” Cal. Penal Code §
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`496(a), (c). A criminal conviction is not necessary for civil liability to attach. Switzer v. Wood,
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`247 Cal. Rptr. 3d 114, 121 (2019). To state a claim for a violation of section 496(a), Plaintiffs
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`must plead that: (1) the property was stolen or obtained in a manner constituting theft, (2) the
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`defendant knew the property was stolen or so obtained, and (3) the defendant received or had
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`possession of the stolen property. Id. For the purposes of section 496(a), stolen property extends
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`to property that has been stolen by conversion or false pretense, and the same allegations giving
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`Case No.: 5:20-cv-04812-EJD
`AMENDED ORDER GRANTING MOT. TO DISMISS FIRST AM. COMPL.
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`Case 5:20-cv-04812-EJD Document 97 Filed 06/13/22 Page 10 of 28
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`rise to Plaintiffs’ conversion claim may suffice to state a claim under section 496. Casamassima
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`v. Cuadra, No. 20-cv-04071-JSC, 2020 WL 7482214, at *4 (N.D. Cal. Nov. 16, 2020) (citing Bell
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`v. Feibush, 212 Cal. App. 4th 1041, 1048 (2013); Sustainable Pavement Techs., LLC v. Holiday,
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`No. 2:17-cv-02687-WBS-KJN, 2019 WL 2483294, at *3 (E.D. Cal. June 14, 2019)).
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`The parties do not dispute that Plaintiffs’ gift card funds are property within the meaning
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`of section 496(a), nor do they dispute that the funds are stolen or obtained in a manner constituting
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`theft. Instead, Apple argues that Plaintiffs have not stated a section 496 claim for three reasons:
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`(1) section 496 applies only to property that has already been stolen or obtained in a manner
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`constituting theft, but Plaintiffs’ purchase of the gift cards was a lawful transaction; (2) Plaintiffs
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`have not pled Apple’s actual knowledge that the money was stolen; and (3) Apple has a refund
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`policy despite having no duty to offer a refund. Mot. at 10–13. In response, Plaintiffs argue that
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`(1) the precise moment Apple receives the funds from the gift card retailer is a question for
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`discovery, and that even if the funds were not stolen at the time of purchase, Apple still
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`subsequently concealed and withheld them in violation of section 496; (2) Apple obtained
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`knowledge once named Plaintiffs contacted Apple and informed Apple the funds were stolen; and
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`(3) Apple’s current refund policy does not negate Apple’s past failure to provide refunds. Opp’n
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`at 3–7.
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`As to Apple’s first argument, California courts are split on whether the property in
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`question must already be stolen before it is received, concealed, or withheld. Compare, e.g.,
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`Lacagnina v. Comprehend Sys., Inc., 25 Cal. App. 5th 955, 971 (2018) (no liability under section
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`496 where property was not stolen at the time defendant obtains it) and Hueso v. Select Portfolio
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`Servicing, Inc., 527 F. Supp. 3d 1210, 1231–32 (S.D. Cal. 2021) (same) and Instant Brands, Inc.
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`v. DSW Solutions, Inc., No. EDCV 20-399 JGB (KKx), 2020 WL 5947914, at *3–5 (C.D. Cal.
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`Aug. 20, 2020) (same) with Farms v. Calcot, Ltd., No. F077565, 2021 WL 236326, at *10–11
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`(Cal. Ct. App. Jan. 25, 2021) (rejecting Lacagnina’s holding as “an erroneous interpretation of the
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`statute”). Based on a plain reading of the statute’s use of past tense, the Court agrees with the
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`Case No.: 5:20-cv-04812-EJD
`AMENDED ORDER GRANTING MOT. TO DISMISS FIRST AM. COMPL.
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`Case 5:20-cv-04812-EJD Document 97 Filed 06/13/22 Page 11 of 28
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`courts holding that the property must be stolen before receipt.2 Plaintiffs contend that the exact
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`point at which Apple receives the gift card funds after purchase is a question for fact discovery,
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`but that is beside the point—the question is whether Plaintiffs have adequately pled that the
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`property was stolen before Apple received it. Opp’n at 3–4. Plaintiffs argue that they do so
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`allege, but the paragraphs to which they cite do not support that proposition. Compare id. at 4
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`(citing FAC ¶¶ 63-65, 75) with FAC ¶¶ 63-65 (describing how scammers may induce victims into
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`purchasing gift cards) and id. ¶ 75 (“Apple thus knows that it has, or soon will have, possession
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`and control of stolen property . . . .” (emphasis added)). The scammers mislead victims into
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`purchasing the cards, but the theft is not complete until the scammers obtain the redemption codes
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`and redeem the funds for their own purposes. Accordingly, the Court finds that Plaintiffs have not
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`pled that the property was stolen before Apple received the funds.
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`Receipt of stolen property, however, is not the only way to violate section 496(a)—
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`concealing or withholding stolen property is also actionable. See, e.g., Cal. Jury Instr. – Crim.
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`14.65 (distinguishing between purchasing or receiving stolen property, selling or aiding in selling
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`stolen property, or concealing or withholding stolen property); Grouse River II, 848 F. App’x at
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`243 n.4 (“[T]he withholding of funds after demand is an alternative basis for liability . . . .”);
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`Switzer, 35 Cal. App. 5th at 132 (noting that one purpose for the proposed legislation creating
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`section 496(c) was to “[e]stablish a civil remedy for persons who have been injured by another’s
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`purchase, concealment, sale, or withholding of property where such person knows the property has
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`been stolen” (emphasss added)); Bell v. Feibush, 212 Cal. App. 4th 1041, 1049 (2013) (finding
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`that evidence established that defendant violated section 496(a) not only by receiving property by
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`false pretenses, but also by withholding that property when the owner asked for it back). Here,
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`2 Plaintiffs contend that Lacagnina, Hueso, and Instant Brands rely on the district court’s decision
`in Grouse River Outfitters Ltd. v. NetSuite, Inc. (“Grouse River I”), No. 16-cv-02954-LB, 2016
`WL 5930273 (N.D. Cal. October 12, 2016), which the Ninth Circuit reversed. Grouse River
`Outfitters, Ltd. v. Oracle Corp. (“Grouse River II”), 848 F. A’ppx 238 (9th Cir. 2021). The Ninth
`Circuit in Grouse River II does not directly address the question of whether property must be
`stolen at the time of receipt. See id. at 242–43.
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`Case No.: 5:20-cv-04812-EJD
`AMENDED ORDER GRANTING MOT. TO DISMISS FIRST AM. COMPL.
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`Case 5:20-cv-04812-EJD Document 97 Filed 06/13/22 Page 12 of 28
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`Martin, Marinbach, Qiu, and Hagene contacted Apple the same day or within one week of falling
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`victim to the scam, but Apple refused to refund the stolen gift card funds. FAC ¶¶ 135, 152, 169,
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`176-177. Plaintiffs have alleged that Apple retains 100% of app purchases until approximately 45
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`days after the end of the fiscal month, when Apple pays 70% of the value to the app developer or
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`retains the entire amount based on indicia of fraud. Id. ¶¶ 5-6, 71. Either way, Apple retains at
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`least 30% of the value stolen from Plaintiffs. Id.
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`This potential alternative theory of liability leads to Apple’s second argument, which is
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`that Plaintiffs have only pled that Apple has “knowledge of a claim of theft—not actual
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`knowledge that a theft had taken place.” Mot. at 11 (citing Freeney v. Bank of Am. Corp., No. 15-
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`2376-JGB-PWJx, 2016 WL 5897773, at *12 (C.D Cal. Aug. 4, 2016); Kidron v. Movie
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`Acquisition Corp., 40 Cal. App. 4th 1571, 1586 (1995)). The cases Apple relies on are inapposite
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`or otherwise unpersuasive. California courts have long held that the knowledge element of a
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`conversion claim is typically proven not through direct evidence but rather by inference through
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`circumstantial evidence, such as a defendant’s failure to explain how they came to possess a stolen
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`item or suspicious circumstances concerning the possession of the item. See, e.g., Yates v.
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`Marshall, No. ED CV 08-398-AHM(E), 2008 WL 4809413, at *9–10 (C.D. Cal. Nov. 4, 2008)
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`(citing cases). “Possession of recently stolen property is so incriminating that to warrant
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`conviction there need only be, in addition to possession, slight corroboration in the form of
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`statements or conduct of the defendant tending to show his guilt.” People v. McFarland, 58 Cal.
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`2d 748, 754 (1962). Here, Plaintiffs have pled direct knowledge: Martin, Marinbach, Qiu, and
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`Hagene directly informed Apple that they had been scammed and their money had been stolen.
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`Plaintiffs have also pled indirect suspicious circumstances: that Apple stands to benefit from
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`proliferation of the scam, that Apple is fully capable of determining which accounts redeemed the
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`stolen gift card funds and preventing payout of those funds, and that Apple nevertheless informed
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`Martin, Marinbach, Qiu, and Hagene that there was nothing it could do for them despite those
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`Case No.: 5:20-cv-04812-EJD
`AMENDED ORDER GRANTING MOT. TO DISMISS FIRST AM. COMPL.
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`Case 5:20-cv-04812-EJD Document 97 Filed 06/13/22 Page 13 of 28
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`Plaintiffs’ prompt notification of the theft.3 Accordingly, the Court finds that Martin, Marinbach,
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`Qiu, and Hagene have adequately pled a claim for concealing or withholding stolen property under
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`section 496(a).
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`Apple’s reliance on its refund policy is misplaced.
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`. Even if the refund policy existed before
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`Plaintiffs fell victim to the scam, the refund policy does not in negate the knowledge element.
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`[T]he mere receipt of stolen goods with knowledge that they have
`been stolen is not itself a crime if the property was received with
`intent to