May 16, 2013
The suit, filed last Friday, claims that the iPhone 4 suffers (and has always suffered) from a latent defect in a flex cable that connects the power button to the phone. This part is a “relatively simple component.”
The defect causes “premature deterioration of the flex cable,” which, in turn, “causes the power button to become harder and harder to depress until eventually it becomes entirely unresponsive requiring costly repair.”
According to the complaint, “costly” repair is somewhere in the neighborhood of $149.99 (plus $6.95 in shipping and handling). Moreover, the complaint alleges that this defect only manifests itself in the majority of cases after the phone’s one year limited warranty period expires.
There doesn’t seem to be a workaround to this problem either. The failure of the power button precludes the phone’s user from ever turning it back on, making the piece of sophisticated technology useful for little more than a paperweight.
The complaint goes on to state that “Apple routinely denies that any defect with the power button, flex cable, or any of its associated component parts exists,” and, as such, has “refused to repair” any affected iPhones that are older than 12 months.
Perhaps even more disturbing is the allegation that Apple knew “that this defect existed as of the time of the phone’s manufacture,” knows that it continues to exist, and that “it would be substantially certain to exhibit itself within approximately 18 months’ of the phone’s first use.” Even with this knowledge, Apple only warrants iPhones against defects for 12 months.
The complaint then presents a litany of testimonies from online message forums that describe the similar experience of a defective power button on their iPhone 4.
One of these testimonies is from a user claiming to be “in the business of repairing iPhones.” This user states his belief that the power button defect is an “intentional breakdown.”
Hot Doc: Hilton v. Apple Inc.
I’ll deal with the easy one first. The UCL prohibits “unfair business competition,” which includes any “unlawful, unfair or fraudulent” act or practice.
The complaint alleges that Apple’s nondisclosure of the existence of the power button defect to consumers “amounts to a ‘fraudulent’ act or practice within the meaning of the UCL.”
Now for the RICO claims: RICO prohibits the use of “criminal enterprises” to engage in “patterns of racketeering activity.”
Translation: there are three elements required to sustain a RICO civil action.
The first is the existence of an enterprise, which typically (but not always) consists of two or more distinct individuals or legal entities working together for a “common purpose.” Not all parties to the enterprise must be aware of the illicit activity for an enterprise to exist under the law.
The second element is the existence of “predicate acts” – the commission of one or more federal crimes from a specific set laid out by statute. “Mail fraud” and “wire fraud” are most commonly alleged because of the broad scope of each.
The final element is that there must be a “pattern” of these predicate acts. In other words, the enterprise must have engaged in the predicate act on more than one occasion.
The complaint alleges those elements as follows:
- Apple and AT&T formed an enterprise with the common purpose to market and sell as many iPhones as possible. Among these marketing materials were statements touting the “superior attributes of the iPhone 4” while “craftily and fraudulently” omitting any mention of the power button defect.
- Apple used mail and wire communication channels to perpetrate this “fraud” (wire fraud can occur through any electronic means of communication – email, websites, etc).
- Apple committed these mail and wire frauds repeatedly over many years.
Although the facts and legal theories are complex, the suit’s success hinges significantly on whether this “latent defect” actually exists, and whether there is any actual evidence that Apple knew of the existence of this defect at any point during the manufacture of the iPhone 4.
If Apple did know about this defect, there are going to be records to show this, and discovery will reveal them.
If this turns out to be the case, it seems likely that the earlier mentioned allegation of the defect being an “intentional breakdown” might have truth behind it, which would make Apple look like quite the “racketeer,” in that it was intentionally building a design defect into its products that would force its consumers to either pay a premium price to repair the defect or purchase a brand new one.
However, it’s quite unlikely that the suit will get as far as discovery. If Apple was aware of this defect, it would want to prevent that information from reaching the public sphere through the discovery process, and would likely seek to settle the case before it got to that point.
In any case, hopefully this will mean that these power button defects will soon be a thing of the past.