Apple v Pepper
By: Charles M. Dalziel, Jr., Dalziel Law Firm, Marietta GA
Members of this Bar may have heard or read that one of Justice Kavanaugh’s first opinions was in an antitrust case involving Apple. The case is Apple Inc. v. Pepper, 587 U.S. ___(2019). What has been touted in the media and otherwise is that Justice Kavanaugh’s opinion overturned a long-standing Antitrust Law precedent, Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The decision was 6-3. Justice Gorsuch wrote a dissenting opinion joined by Justices Thomas and Alito. How the media has characterized the majority opinion is incorrect. Justice Gorsuch in the dissent specifically recognizes Illinois Brick was not overruled.
Very briefly, in Pepper, the case was on appeal from the granting by the District Court of an early motion to dismiss, and a reversal by the Ninth Circuit. The Pepper plaintiffs complain Apple has monopoly power in the sale of Apps through its store. Apps are created by independent developers, who choose their prices under a scheme developed by Apple, which requires the price to end in “.99.” Apple takes a 30% commission on each sale and pays the creator the other 70%. But there is no question in the facts as recited by Justice Kavanaugh that Apple is the seller to the plaintiffs.
To these facts Illinois Brick does not even apply. There it was held the State of Illinois, who had paid a general contractor for a large construction project--who had used masonry subcontractors the general contractor paid--who had bought concrete blocks from the defendant which the State claimed were overpriced--could not sue the block manufacturer. The overcharge on the blocks had passed through two other entities before allegedly damaging the State. The Court ruled indirect purchasers two or more steps removed from the initial overcharge could not sue. Justice Kavanaugh subtly shows Illinois Brick is in its own way aberrant, as the Court injected its own “proximate cause” element, not written into the statute, to deem the State not a party “injured” who could sue under Section 4 of the Clayton Act. The Pepper plaintiffs no doubt were giving Apple their credit card, so the injury suffered by them because of the monopoly increase in price was indisputably direct.
Both the majority opinion and the dissent are about 14 pages long, given how Supreme Court opinions are printed—so they are very quick reading. Justice Gorsuch’s opinion just represents a different interpretation of the facts, his interpretation being contrary to the plaintiffs’, on motion to dismiss. The legal conclusions in his opinion, with the case being considered on early motion to dismiss, are truly out of whole cloth. He does not consider the language of the statute, and instead injects his personal interpretation of how proximate cause should apply in Pepper to his interpretation of the facts. Justice Gorsuch writing the opinion, and Thomas and Alito joining him, do not appear to be strict constructionists, but instead the kind of Justices certain people complain about who disregard the language of the statute, in favor of their interpretation of what the statute should say. Justice Gorsuch uses informal language, including several contractions, and throws the gloves off with this quote: “After all, the Court not only displaces a sensible rule in favor of a senseless one;” Gorsuch’s dissent overall is rather jarring—confirming a New York Times article that deemed his writing “flashy.” His attitude is a bit less “folksy” than the demeanor he portrayed at the confirmation hearing.
We all need to be at least somewhat cognizant of what the Supreme Court is doing and who these Justices really are, even if just to be able to convey truthful information about them to our friends and associates when the Court comes up in conversation. Reading Pepper will give you some significant insight concerning Justice Kavanaugh and Justice Gorsuch.