Coronavirus Reporter v. Apple, Inc.

                  FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

CORONAVIRUS REPORTER;                    No. 22-15166
CALID, INC.; PRIMARY
PRODUCTIONS LLC,                        D.C. No. 3:21-cv-
                                          05567-EMC
               Plaintiffs-Appellants,

and                                        OPINION

JEFFREY D. ISAACS, Dr.,

               Plaintiff,

 v.

APPLE, INC.,

               Defendant-Appellee,

and

FEDERAL TRADE COMMISSION,

               Defendant.
2             CORONAVIRUS REPORTER V. APPLE, INC.




JEFFREY D. ISAACS, Dr.,                      No. 22-15167

                Plaintiff-Appellant,       D.C. No. 3:21-cv-
and                                          05567-EMC

CORONAVIRUS REPORTER;
CALID, INC.; PRIMARY
PRODUCTIONS LLC,

                Plaintiffs,

    v.

APPLE, INC.,

                Defendant-Appellee,

and

FEDERAL TRADE COMMISSION,

                Defendant.

         Appeal from the United States District Court
            for the Northern District of California
          Edward M. Chen, District Judge, Presiding

           Argued and Submitted March 29, 2023
                San Francisco, California

                   Filed November 3, 2023
              CORONAVIRUS REPORTER V. APPLE, INC.                  3


    Before: Ronald M. Gould, Marsha S. Berzon, and Sandra
                   S. Ikuta, Circuit Judges.

                    Opinion by Judge Gould


                          SUMMARY *


                            Antitrust

    The panel affirmed the district court’s dismissal, for
failure to state a claim, of an antitrust action against Apple,
Inc., alleging monopolist operation of the Apple App Store.
    The panel held that appellants failed to state an antitrust
claim under Section 1 or Section 2 of the Sherman Act,
arising from Apple’s rejection of their apps for distribution
through the App Store, because they did not sufficiently
allege a plausible relevant market, either for their rejected
apps as compared to other apps, or for apps in general.
    The panel held that appellants failed to state a claim for
breach of contract under California law because they did not
identify relevant specific provisions of Apple’s Developer
Agreement or Developer Program License Agreement or
show that Apple breached a specific provision.
    Appellants also failed to state a claim under the
Racketeer Influenced and Corrupt Organizations Act or for
fraud.


*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4            CORONAVIRUS REPORTER V. APPLE, INC.


                        COUNSEL

Keith Mathews (argued), American Wealth Protection,
Manchester, New Hampshire; Stephan M. Kernan, The
Kernan Law Firm, Beverly Hills, California; for Plaintiffs-
Appellants.
Jeffrey D. Isaacs (argued), West Palm Beach, Florida, pro se
Petitioner.
Julian W. Kleinbrodt (argued) and Rachel S. Brass, Gibson
Dunn & Crutcher LLP, San Francisco, California; Cynthia
E. Richman, Zachary B. Copeland, and Harry R.S. Phillips,
Gibson Dunn & Crutcher LLP, Washington, D.C.; Mark A.
Perry, Weil Gotshal & Manges LLP, Washington, D.C.; for
Defendants-Appellee.



                        OPINION

GOULD, Circuit Judge:

    Plaintiffs-Appellants Coronavirus Reporter, CALID,
Inc., Primary Productions LLC, and Dr. Jeffrey D. Isaacs
sued Defendant-Appellee Apple for its allegedly monopolist
operation of the Apple App Store. The district court
dismissed the claims with prejudice for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6) and
denied the remaining motions as moot. Plaintiffs-Appellants
appealed. We have jurisdiction under 

, and
we affirm.
                CORONAVIRUS REPORTER V. APPLE, INC.                      5


    I. FACTUAL AND PROCEDURAL BACKGROUND
    In 2008, a year after launching the iPhone, Apple
introduced the App Store. In order to distribute apps on the
App Store, app developers must abide by the App Store
Review Guidelines (“the Guidelines”) and enter into two
agreements with Apple: the Developer Agreement and the
Developer Program License Agreement (“DPLA”). By
signing these agreements, app developers expressly
“understand and agree” that Apple has “sole discretion” to
reject apps. The Guidelines provide developers with the
standards Apple applies when it reviews apps.
    Plaintiffs-Appellants developed a group of apps that they
sought to distribute on Apple’s App Store. Two of their
apps—Coronavirus Reporter and Bitcoin Lottery—were not
approved for distribution. The Coronavirus Reporter app
sought to collect “bioinformatics data” from users about
COVID-19 symptoms that the app would then share with
“other users and [unidentified] epidemiology researchers.”
The Coronavirus Reporter team allegedly included Dr.
Robert Roberts, a former cardiologist for NASA. Apple
rejected Coronavirus Reporter under Apple’s policy
requiring that any apps related to COVID-19 be submitted
by a recognized health entity such as a government
organization or medical institution.1 Apple rejected Bitcoin
Lottery, a blockchain app, under its policy “generally
block[ing] blockchain apps.”
    Plaintiffs-Appellants brought claims against Apple for
antitrust violations pursuant to Sections 1 and 2 of the

1
  Guidelines § 5.1.1(ix): “Apps that provide services in highly-regulated
fields (such as banking and financial services, healthcare, and air travel)
or that require sensitive user information should be submitted by a legal
entity that provides the services, and not by an individual developer.”
6            CORONAVIRUS REPORTER V. APPLE, INC.


Sherman Act, breach of contract, racketeering, and fraud,
challenging Apple’s allegedly monopolist operation of the
iPhone “App Store” through the “curation” and
“censor[ship]” of apps. Plaintiffs-Appellants assert that they
“seek to vindicate” the right of “the end users of Apple’s
iPhone” to “enjoy unrestricted use of their smartphones” to
run “innovative applications, written by third party
developers.”
    The district court dismissed Plaintiffs-Appellants’ First
Amended Complaint (“FAC”) with prejudice on November
30, 2021. The district court dismissed Plaintiffs-Appellants’
antitrust claims because they did not allege a plausible
relevant market nor antitrust injury. The district court
likewise dismissed the claims for breach of contract,
racketeering, and fraud because the Plaintiffs-Appellants
failed to plead required elements for each. Accordingly, the
district court denied as moot Plaintiffs-Appellants’ two
preliminary injunction motions, Plaintiffs-Appellants’
“motion to strike” Apple’s motion to dismiss, and Plaintiffs-
Appellants’ Notices for Discovery of Apple executives and
FTC Chair Lina Khan, along with Defendant-Appellee’s
motion to quash these requests. The district court later
rejected Plaintiffs-Appellants’ motions for reconsideration.
    Plaintiffs-Appellants appeal the district court’s dismissal
of their claims, as well as the denial of their motions for
reconsideration and for preliminary injunction.
             II. STANDARDS OF REVIEW
    We review de novo a district court’s grant of a motion to
dismiss under Rule 12(b)(6), “accepting all factual
allegations in the complaint as true and construing them in
the light most favorable to the nonmoving party.” Ebner v.
Fresh, Inc., 

 (9th Cir. 2016) (quoting
             CORONAVIRUS REPORTER V. APPLE, INC.             7


Skilstaf, Inc. v. CVS Caremark Corp., 

(9th Cir. 2012)). The complaint must “plausibly give rise to
an entitlement to relief.” Ashcroft v. Iqbal, 

 (2009).       “Conclusory allegations and unreasonable
inferences” do not provide such a basis. Sanders v. Brown,

 (9th Cir. 2007). A dismissal may be
affirmed on any proper ground that is supported by the
record. See Johnson v. Riverside Healthcare System, LP,

 (9th Cir. 2008); Adams v. Johnson, 

 (9th Cir. 2004); Papa v. United States, 

 (9th Cir. 2002).
    Although decisions by the district court on the substance
and merits of claims are reviewed de novo, see Ebner, 

, many matters that routinely come before a
district court are committed to the sound discretion of the
district court and reviewed for abuse of discretion. See e.g.,
Ordonez v. Johnson, 

 (9th Cir. 2001) (per
curiam) (dismissal with prejudice); Pom Wonderful LLC v.
Hubbard, 

 (9th Cir. 2014) (denial of a
preliminary injunction); Kerr v. Jewell, 

(9th Cir. 2016) (denial of a motion for reconsideration), cert.
denied sub nom. Kerr v. Haugrud, 

 (2017); cf.
Ryan v. Editions Ltd. W., Inc., 

 (9th Cir.
2015) (denying leave to amend), cert. denied, 

(2015).
                     III. DISCUSSION
 A. Antitrust claims
   An antitrust claim brought pursuant to Section 1 of the
Sherman Act requires a plaintiff to show: “(1) the existence
of an agreement, and (2) that the agreement was in
unreasonable restraint of trade.” Aerotec Int’l, Inc. v.
Honeywell Int’l, Inc., 

, 1177–78 (9th Cir.
8            CORONAVIRUS REPORTER V. APPLE, INC.


2016) (quoting Am. Needle, Inc. v. Nat’l Football League,

, 189-90 (2010)); FTC v. Qualcomm Inc., 

 (9th Cir. 2020) (citing Ohio v. Am. Express
Co., 

 (2018)).
    An antitrust claim brought pursuant to Section 2 of the
Sherman Act requires proving the following two elements:
“(1) the defendant has monopoly power in the relevant
market, and (2) the defendant has willfully acquired or
maintained monopoly power in that market.”
Dreamstime.com, LLC v. Google LLC, 

(9th Cir. 2022) (citing United States v. Grinnell Corp., 

, 570–71 (1966)). To meet the first element, a
plaintiff must “(1) define the relevant market, (2) establish
that the defendant possesses market share in that market
sufficient to constitute monopoly power, and (3) show that
there are significant barriers to entering that market.” 

The second element requires showing that the defendant
undertook anticompetitive conduct that harms the
competitive process as a whole, rather than the success or
failure of individual competitors. Id.; see also Brunswick
Corp. v. Pueblo Bowl-O-Mat, Inc., 

, 488–89
(1977).
    “A threshold step in any antitrust case is to accurately
define the relevant market.” Qualcomm, 

.
For both Section 1 and Section 2 of the Sherman Act, a
relevant market defines “the field in which meaningful
competition is said to exist.” Image Tech. Servs., Inc. v.
Eastman Kodak Co., 

, 1202 (9th Cir. 1997).
Market definition is essential to any antitrust case because
“[w]ithout a definition of [the] market there is no way to
measure [the defendant’s] ability to lessen or destroy
competition.’” Am. Express, 

 (quoting
Walker Process Equip., Inc. v. Food Mach. & Chem.
             CORONAVIRUS REPORTER V. APPLE, INC.             9


Corp., 

 (1965) (alternations in original).
“The principle most fundamental to product market
definition is ‘cross-elasticity of demand’ for certain products
or services.” Kaplan v. Burroughs Corp., 

(9th Cir. 1979). Cross-elasticity of demand refers to the
extent to which consumers view two “products [as] be[ing]
reasonably interchangeable” or substitutable for one another.
Gorlick Distrib. Ctrs., LLC v. Car Sound Exhaust Sys., Inc.,

 (9th Cir. 2013) (citing Brown Shoe Co.
v. United States, 

 (1962)). Products or
services that are “reasonably interchangeable” should be
considered as being in the same market for the purpose of an
antitrust claim. Kaplan, 611 F.2d at 291–92 (citing U.S. v.
E.I. DuPont De Nemous & Co., 

 (1956)). “A
relevant market contains both a geographic component and
a product or service component.” Epic Games, Inc. v. Apple,
Inc., 

 (9th Cir. 2023) (citing Hicks v. PGA
Tour, Inc., 

 (9th Cir. 2018)). Courts also
consider the “practical indicia” of a market, including
industrial or public recognition of a market as a separate
entity or sensitivity to price changes. 

 at 976 (citing
Brown Shoe Co., 

).
    A relevant market can be an aftermarket in which
demand depends entirely upon prior purchases in a
foremarket. 

 (citing Eastman Kodak Co. v. Image Tech.
Servs., Inc., 

 (1992) and Newcal Indus.,
Inc. v. Ikon Office Sol., 

 (9th Cir. 2008)).
However, such a market generally shows that the defendant
exploited consumers’ unawareness of the restrictions on the
aftermarket and must still show the cross-elasticity required
to define a market. 

10              CORONAVIRUS REPORTER V. APPLE, INC.


    The relevant market can also be a two-sided market, with
consumers on both sides of a platform. 2 PLS.Com, LLC v.
Nat’l Ass’n of Realtors, 

, 837–39 (9th Cir.
2022); see, e.g., Epic Games, 

 (discussing the
“two-sided market for mobile-game transactions,” in which
the relevant consumers are both game developers and users).
Under these circumstances, an antitrust plaintiff must show
anticompetitive impact on the “market as a whole.” 

 at
839 (quoting Am. Express, 

).
    Here, Plaintiffs-Appellants have not adequately defined
the relevant market. Plaintiffs-Appellants’ FAC alleged in
scattergun fashion that there were at least fifteen “relevant
markets” pertinent to its antitrust claims but made no effort
at all to define the markets or to distinguish them from one
another. 3 For example, Plaintiffs-Appellants did not clarify

2
  “[A] two-sided platform offers different products or services to two
different groups who both depend on the platform to intermediate
between them.” PLS.Com, LLC, 

 (quoting Am. Express
Co., 

). In American Express, the Supreme Court gave
two examples of two-sided platforms: credit card companies and
newspapers. “Credit card companies, the Court explained, sell credit to
consumers on one side of the market and sell transaction-processing
services to merchants on the other side of the market. Newspapers are
also ‘arguably’ two-sided platforms: they sell advertising space to
advertisers and news to subscribers.” 

 (citing Am. Express, 

).
3
   Plaintiffs-Appellants’ alleged “relevant markets” are: (1) a
“Smartphone Enhanced National Internet Access Devices” market; (2) a
“smartphone market”; (3) a “single-product iOS Smartphone Enhanced
Internet Access Device” market; (4) “[t]he iOS market”; (5) the “market
for smartphone enhanced commerce and information flow (devices and
apps) transacted via the national internet backbone”; (6) the “institutional
app market”; (7) the “iOS institutional app market”; (8) the “iOS notary
stamps” market; (9) the “iOS onboarding software” market; (10) the
market for access rights to the iOS userbase; (11) the “national
              CORONAVIRUS REPORTER V. APPLE, INC.                11


whether the markets that Plaintiffs-Appellants identified are
completely different from one another or whether they
overlap. Plaintiffs-Appellants later impermissibly tried
through a Motion to Strike to narrow their relevant markets
to “two foremarkets” and “four downstream markets,” but
our “[r]eview is limited to the complaint.” Lee v. City of Los
Angeles, 

 (9th Cir. 2001) (quoting
Cervantes v. City of San Diego, 

 (9th
Cir.1993)).
    Even if we were to review the narrower set of markets
posited in Plaintiffs-Appellants’ Motion to Strike, the
alleged markets lack sufficient clarity to state an antitrust
claim plausibly. See Am. Express, 

. The
FAC does not attempt to demonstrate the cross-elasticity of
iOS end users’ demand either for Plaintiffs-Appellants’
rejected apps as compared to other apps, or for apps in
general, as it must. See Kaplan, 

. The
FAC fails to draw the market’s boundaries to “encompass
the product at issue as well as all economic substitutes for
the product.” Hicks, 

 (quoting Newcal, 

).
    Additionally,     the    Plaintiffs-Appellants     allege
downstream markets in a manner that implies that the Apple
App Store’s apps constitute their own market, which
amounts to an allegation of a single-brand market. This
allegation fails because Plaintiffs-Appellants did not allege
the prerequisites for a single-brand market. For example,
Plaintiffs-Appellants do not demonstrate that iOS end
consumers lacked awareness that buying an iPhone

smartphone app distribution market”; (12) the “iOS App market”; (13)
the “US iOS Device App market”; (14) the “market of COVID startups”;
and (15) “the App Market.”
12           CORONAVIRUS REPORTER V. APPLE, INC.


constrains which apps would be available to them through
the App Store. See Epic Games, 67 F.4th at 976–77 (“[T]o
establish a single-brand aftermarket, a plaintiff must show
. . . the challenged aftermarket restrictions are ‘not generally
known’ when consumers make their foremarket purchase.”).
Nor do Plaintiffs-Appellants demonstrate that iOS end users
would, if they could do so more readily, obtain apps through
means other than Apple’s App Store due to cost sensitivity
or for other reasons. See 

 at 976–77 (“[T]o establish a
single-brand aftermarket, a plaintiff must show . . .
‘significant’ monetary or non-monetary switching costs
exist.”). To the extent that Plaintiffs-Appellants attempt to
define a two-sided platform market, they fail to properly
allege a relevant market (that is, a category of transactions
between developers and consumers on a two-sided
platform), given their reference to a broader market for
smartphones and the corresponding ability to access apps
outside of the Apple App Store’s two-sided platform. See
id. at 976, 985.
    Because Plaintiffs-Appellants do not meet the threshold
step of defining a relevant market, we reject their antitrust
claims and need not proceed further with the analysis.
Failing to define a relevant market alone is fatal to an
antitrust claim. See Qualcomm, 

. Without a
defined relevant market in terms of product or service, one
cannot sensibly or seriously assess market power. See Epic
Games, 

.
    Because the Plaintiffs-Appellants did not define the
relevant market, it follows that they could not, and did not,
establish that the Defendant-Appellee created an agreement
that unreasonably restrained trade, as required for a Section
1 claim. See Aerotec Int’l, 836 F.3d at 1177–78; Qualcomm,

. It also follows that they could not, and did
               CORONAVIRUS REPORTER V. APPLE, INC.                  13


not, establish that the Defendant-Appellee possesses a
market share in a relevant market sufficient to constitute
monopoly power, nor did they show that there were existing
barriers to entry to that market, as required for a Section 2
claim. See Dreamstime.com, 

. 4
    Further, Plaintiffs-Appellants did not demonstrate that
the Defendant-Appellee undertook anticompetitive conduct
in that market sufficient to harm the competitive process as
a whole. See id.; see also Brunswick, 

. Two
of Plaintiffs-Appellants’ five apps did not get approved for
distribution for reasons explicitly set out in the Developer
Agreement and the DPLA. Antitrust law does not seek to
punish economic behavior that benefits consumers. See
Dreamstime.com, 

. Disapproval of these
two apps on grounds ostensibly designed to protect
consumers, absent factual allegations to believe that these
disapprovals occurred for pretextual reasons, does not
suffice to demonstrate anticompetitive conduct. Further,
Plaintiffs-Appellants have not explained why or how they
could not distribute their apps by other means, even if not by
their most preferred means.
    For all of these reasons, Plaintiffs-Appellants’ antitrust
claims must fail.
    B. Breach of contract
    To state a breach of contract claim under California law,
plaintiffs must show: (1) there was a contract, (2) plaintiff
either performed the contract or has an excuse for
nonperformance, (3) defendant breached the contract, and

4
  We do not address whether, under different circumstances, a complaint
alleging antitrust claims could define a cognizable market encompassing
the Apple App Store.
14           CORONAVIRUS REPORTER V. APPLE, INC.


(4) plaintiff suffered damages as a result of defendant’s
breach. Hamilton v. Greenwich Invs. XXVI, LLC, 

 (Cal. Ct. App. 2011).
    Here, Plaintiffs-Appellants do not identify relevant
specific provisions of the Developer Agreement or the
DPLA, much less show that Apple breached a specific
provision. Plaintiffs-Appellants contend that there is a
“promise” in the Developer Agreement that “entities with
‘deeply rooted medical credentials’ were permitted to
publish COVID apps on the App Store.” But neither the
Developer Agreement nor any other contract between
Plaintiffs-Appellants and Defendant-Appellee contains any
such guarantee. Instead, and sharply to the contrary, the
DPLA specifically states that Apple has “sole discretion” to
approve or deny requests to distribute apps on the App Store.
Plaintiffs-Appellants’ contract claim fails because there was
no breach of contract. Similarly, in an attempt to make a
claim for breach of the covenant of good faith and fair
dealing, Plaintiffs-Appellants simply repeat their breach
allegations. This claim likewise fails.
  C. RICO or fraud
    To plead a civil claim under 

(c) of the
Racketeer Influenced and Corrupt Organizations (“RICO”)
Act, Plaintiffs must allege “(1) conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity (known as
‘predicate acts’) (5) causing injury to plaintiff’s business or
property.” Living Designs, Inc. v. E.I. Dupont de Nemours &
Co., 

, 361 (9th Cir. 2005) (quotation marks
omitted). If a corporation is the enterprise, it cannot also at
the same time be the RICO defendant. See Rae v. Union
Bank, 

 (9th Cir. 1984). Parties must allege
fraud with particularity under Federal Rule of Civil
             CORONAVIRUS REPORTER V. APPLE, INC.            15


Procedure 9(b), including the “who, what, when, where, and
how of the misconduct charged . . . .” See Depot, Inc. v.
Caring for Montanans, Inc., 

 (9th Cir.
2019) (internal quotations and citations omitted).
    Here, Plaintiffs-Appellants allege that Apple and
individuals within Apple’s App Store management, App
Review, their counsel, and friends formed a RICO enterprise
and engaged in predicate acts such as screening Plaintiffs-
Appellants’ apps for purported compliance with the DPLA
while appropriating Plaintiffs-Appellants’ ideas into Apple’s
own competing apps, as well as wire and mail fraud by
assigning Apple’s App Review employees to give false,
pretextual reasons for rejecting the apps of small developers.
These allegations center on the conduct of Apple and its
employees without describing in any particularity conduct or
activity outside of Apple as a corporation. As articulated,
this claim makes Apple as a corporation both the enterprise
and the RICO defendant, which is not permitted in a RICO
claim. See Rae, 

. To the extent the Plaintiffs-
Appellants attempt to make out a further claim for fraud,
their allegations are vague and conclusory without the
particularity required by FRCP 9(b). See Depot, Inc., 

.
 D. Dismissal without leave to amend
    Federal Rule of Civil Procedure 15(a) states that leave to
amend “shall be freely given when justice so requires,” but
“[a] district court acts within its discretion to deny leave to
amend when amendment would be futile[.]” Chappel v.
Lab’y Corp. of Am., 

, 725–26 (9th Cir. 2000).
Here, the district court did not abuse its discretion in
concluding that further amendment was not warranted.
While the district court dismissed the Plaintiffs-Appellants’
16            CORONAVIRUS REPORTER V. APPLE, INC.


first amended complaint in this case, Plaintiffs-Appellants
were given a total of seven opportunities to amend similar
complaints across jurisdictions and between various
permutations of plaintiffs, but still failed to state their claims
here adequately. It is within the district court’s discretion to
determine that an eighth opportunity would produce a
similar result. See Ryan, 

.
  E. Remaining motions
    Because the district court properly dismissed with
prejudice all of the claims against Apple, it correctly denied
the remaining pending motions as moot. The court also
properly denied the motions for reconsideration by finding
that the Plaintiffs-Appellants simply reiterated their prior
claims and did not present newly discovered evidence or
controlling law, nor an error of law or manifest injustice. See
Sch. Dist. No. 1J v. ACandS, Inc., 

, 1263 (9th
Cir. 1993); Kerr, 

.
                     IV. CONCLUSION
    We affirm the decisions of the district court to dismiss
Plaintiffs-Appellants’ FAC for failure to state any claim
under Federal Rule of Civil Procedure 12(b)(6) and to deny
Plaintiffs-Appellants’ motions for reconsideration and for
preliminary injunction.
     AFFIRMED.