EXHIBIT 3 

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GRACE: JUSTINE S. HASTINGS, Ph.D. - CONFIDENTIAL - ATTORNEYS' EYES ONLY 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

CHRISTINA GRACE and KEN 

POTTER, Individually and 

on Behalf of All Others, 

Similarly Situated, 

) 

) 

) 

) 

) 

Plaintiffs, ) 

) 

Page 1 

vs. ) 

) 

) 

) 

) 

Case No.: 5:17-cv-00551-LHK-NC 

APPLE, INC . , 

Defendants. 

CERTIFIED 

TRANSCRIPT 

_______________) 

CONFIDENTIAL - ATTORNEYS' EYES ONLY 

DEPOSITION OF: 

JUSTINE S. HASTINGS, Ph.D. 

Friday, June 8, 2018 

8:33 a.m. - 5:18 p.m. 

Taken at: 

One California Street, Third Floor 

San Francisco, California 

REPORTED BY: April D. Heveroh, CSR NO. 8759 

hglitigation.com 

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1 A P P E A R A N C E S

2

3 FOR PLAINTIFFS:

4 PEARSON SIMON WARSHAW, LLP

5 BY: DANIEL L. WARSHAW, ESQ.

6 15165 Ventura Boulevard, Suite 400

7 Sherman Oaks, California 91403

8 (818) 788-8300

9 dwarshaw@pswlaw.com

10

11 FOR PLAINTIFFS:

12 STEYER LOWENTHAL BOODROOKAS ALVAREZ & SMITH, LLP

13 BY: JILL MANNING, ESQ.

14 One California Street, Third Floor

15 San Francisco, California 94111

16 (415) 421-3400

17 jmanning@steyerlaw.com

18

19 FOR DEFENDANT APPLE, INC.:

20 KIRKLAND & ELLIS, LLP

21 BY: R. ALEXANDER PILMER

22 333 South Hope Street

23 Los Angeles, California 90071

24 (213) 688405

25 alexander.pilmer@kirkland.com

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1 A P P E A R A N C E S

2 (Continued)

3

4 FOR DEFENDANT APPLE, INC.:

5 KIRKLAND & ELLIS, LLP

6 BY: JACOB H. JOHNSTON, ESQ.

7 555 California Street, 27th Floor

8 San Francisco, California 94104

9 (415) 439-1443

10 jacob.johnston@kirkland.com

11

12 FOR DEFENDANT APPLE, INC.:

13 DURIE TANGRI

14 BY: JOSH H. LERNER, ESQ.

15 217 Leidesdorff Street

16 San Francisco, California 94111

17 (415) 362-6666

18 jlerner@durietangri.com

19

20 ALSO PRESENT:

21 GABE ZELDIN, ESQ., Apple Inc.

22 SUNEEL JAIN, ESQ., for Plaintiffs

23 MARIAH NIEVES, Videographer

24

25 ---o0o---

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1 Q. All right. So if on a certain date AT&T

2 announced, "Trade in your iPhone and we'll give you $50

3 towards the purchase of a new iPhone," you would expect

4 that that would affect the supply side of the equation,

5 right?

6 A. It could, all else equal.

7 Q. And likewise, if somebody on the demand side,

8 the buyer's side of the trade-in market announced that

9 they would provide a subsidy for a trade-in, that would

10 affect the supply side, correct?

11 A. I'm sorry. What do you mean by a subsidy for a

12 trade-in?

13 Q. Well, if they offered to pay you more money for

14 the trade-in of your phone.

15 A. I'm sorry. I'm confused. So we have somebody

16 who's purchasing a phone? Is that correct? Somebody

17 who's purchasing a phone, a used phone?

18 Q. Yep.

19 A. And they say, "I'm going to -- I know that the

20 market-clearing price is only $50, but I'm willing to

21 pay $70 if anyone would like an extra free $20"?

22 Q. And so let's make it a little more concrete.

23 Says, "If you trade this phone in and use your trade-in

24 to buy another phone, we'll subsidize that new phone."

25 Are you with me?

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1 A. So I have a company that is a purchaser of used

2 phones and they are contacting consumers in this

3 hypothetical situation and they are saying, "We're

4 willing to pay you more for your phone"?

5 Q. Right.

6 A. In some format?

7 Q. Yes.

8 A. Okay.

9 Q. Does that not affect the supply side of the

10 equation?

11 A. That would affect -- so prices now go up and

12 more people should be willing to supply their phones

13 into the market since supply curves typically slope

14 upward.

15 Q. When you created your model, you did not

16 control for subsidies, did you?

17 A. We did not use trade-in prices in our model.

18 Q. And my question was when you created your

19 model, you did not control for subsidies, did you?

20 A. Which subsidies are you talking about?

21 Q. Any subsidies.

22 A. Subsidies for what?

23 Q. Did you, in your model, control for any

24 subsidies that would have been offered by any company to

25 incentivize the trade-in of a used iPhone?

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1 A. No. We controlled for -- in this example, in

2 this model, we controlled for fixed effects for the full

3 interaction of phone model, phone condition, phone

4 carrier and phone storage size, and we also controlled

5 for color of the phone and new releases of -- we

6 controlled for new releases of new models of phones, as

7 well as monthly controls, seasonal and holiday controls.

8 That is what is in these specific models presented in

9 Table 2.

10 Sorry. In addition to -- I apologize. In

11 addition to the variables that are explicitly the

12 coefficients are listed in Table 2. So that's in

13 addition to time, model age and measures for how well

14 the economy's doing, specifically US GDP.

15 Q. So when you say "time," what do you mean by

16 "time"?

17 A. That's just a variable that picks up time as it

18 goes on. It's lower at the beginning of the data set

19 and it's higher at the end of the data set.

20 Q. And model age is how long -- well, is measured

21 as of when?

22 A. When the model was released.

23 Q. When the model was released or when the

24 consumer bought the device?

25 A. The model was released.

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1 BY MR. PILMER:

2 Q. So for the record, Exhibit 89 is a one-page

3 document entitled "Verizon" page number 1. It's a

4 document we received in the course of this litigation

5 from Verizon.

6 Is this the document that you were referring to

7 earlier that you had reviewed from Verizon?

8 A. It could be.

9 Q. Does it look something like this?

10 A. I think it could -- maybe. It's hard for me to

11 recall because I think we looked at it, and I think I

12 remember sending an email back to counsel saying, "I

13 don't think these are data. This is a PDF. Is there

14 data?" And this seems consistent with that email that I

15 would have made to counsel. "Is there a data set? This

16 is a PDF."

17 Q. And so where there are trade-in values for an

18 iPhone 4, 8 gigabyte, in March 2014 and it has a value

19 of , you're saying that's not data?

20 A. It is not the data that we requested.

21 Q. If you look at, for example, Verizon's

22 reporting of trade-in values for an iPhone 4,

23 8 gigabyte, would you agree with me that for the

24 two months after April 2014, the trade-in value for that

25 device was higher than it was in April 2014?

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1 A. Yes, it looks like the iPhone 4, 8 gigabyte,

2 was in May 2014 and in June 2014, if I'm reading

3 the spreadsheet correctly, relative to in April of

4 2014.

5 Q. And likewise, the price of -- the trade-in

6 value of the 16 gigabyte iPhone 4 increased in May and

7 June, as compared to April, of 2014, correct?

8 A. Sorry. The 16-gigabyte iPhone 4?

9 Q. Yes.

10 A. Yes, the values in here are higher -- the

11 values displayed in this spreadsheet are higher in

12 May 2014 and June 2014 than in April 2014, and similarly

13 for the iPhone 4, 8 gigabyte, the values displayed in

14 this spreadsheet that we're looking at, so this is rows

15 1 and 2 in the -- what appears to be the trade-in value

16 box in this PDF, are and in May and April, and

17 in March.

18 Q. And you would also agree that Verizon's

19 trade-in value for a 32-gigabyte iPhone 4 was higher in

20 May and June 2014 than it was in April 2014, correct?

21 A. Well, I mean, I think this kind of displays the

22 challenge with the -- I'm just going to qualify how --

23 your question a little bit in that I don't really know

24 what this price is. Is it an average, is it a mode, is

25 it a median? I don't really know exactly how it was

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1 calculated, but the price that's displayed in this PDF

2 box, whatever this is, the trade-in value, is, in

3 April 2014, ; March 2014, ; and in May 2014 it was

4 for the row labeled "iPhone 4, 32 gigabyte".

5 Q. And you have expressed opinions in this case

6 that the April 16th, 2014, expiration of a digital

7 security certificate is an event that caused harm,

8 right?

9 A. Yes, it is an event, and I was asked to

10 determine whether there is economic evidence -- sorry,

11 evidence and economic methodologies common to the class

12 to determine class-wide impact and class-wide damages.

13 And I determined that those methodologies do exist and

14 are well relied on.

15 Q. Are you expressing the opinion that the

16 April 16th, 2014, expiration of the digital certificate

17 caused harm?

18 A. It caused a diminution in value of the iPhone

19 4, based on my analysis in the report.

20 Q. And what, other than correlation, leads you to

21 believe there was causation from the expiration of the

22 digital certificate?

23 MR. WARSHAW: Objection. Form.

24 THE WITNESS: I don't understand the question.

25 ///

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1 BY MR. PILMER:

2 Q. Well, correlation and causation are

3 two different things, right?

4 A. Yes.

5 Q. Okay. So what leads you to the conclusion that

6 the expiration of the digital certificate on April 16th,

7 2014, caused injury to the class members as that's been

8 defined?

9 A. So I am estimating a multivariate regression

10 model, and that multivariate regression model controls

11 for demand and supply factors, and it includes a dummy

12 variable or an indicator to capture the mean impact of

13 the period, the break, for iPhone 4s relative to other

14 phones versus before the break, and the assumption of

15 the break causing that harm is that conditional on those

16 demand and supply factors. The break was an event that

17 is -- is not -- was not caused by factors affecting

18 demand and supply.

19 Q. In fact, are you just not assuming that the

20 break caused the harm?

21 A. Well, every model has exclusion restrictions or

22 assumptions, and then you ask whether those are

23 reasonable, and it's reasonable to conclude that the

24 break was not caused by demand and supply factors, that

25 you can control for those demand and supply factors and

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1 correctly estimate a but-for price, and that but-for

2 price reflects what the value would have been for the

3 phone but for the break.

4 Q. Are you saying that your exclusion restrictions

5 lead you to conclude that there are no other

6 explanations for what you're calculating is the

7 diminution in value?

8 A. Other than the break?

9 Q. Yes.

10 A. What it's saying is that this dummy variable

11 for the break is picking up a mean change in price that

12 is attributable to the break.

13 Q. And when you say "a mean change in the price,"

14 you're talking about the price from April 16th, 2014,

15 through December 2016?

16 A. I believe it's December 2016. And it's

17 actually the log price.

18 Q. Explain to us what the difference is between

19 price and the log price.

20 A. Log price is just a transformation of price

21 that allows me to interpret the coefficient in the model

22 as a percentage diminution in value.

23 Q. Now, you picked the end date of your mean

24 damage period as December 2016, right?

25 A. That's the end date that is in the data.

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1 Q. If the end date was in -- well, strike that.

2 Is there any logical connection between the --

3 what you call the break in April 2014 and prices for

4 iPhone 4 and 4Ss in December 2016?

5 A. Sorry. Can you repeat the question?

6 Q. Yeah. What's the logical connection between

7 the -- what you call the so-called break in April 2014

8 and the price of the used iPhone 4 in December 2016?

9 A. The connection is that the break is picking up

10 the diminished mean value of the phone, and so that mean

11 shift in value impacts phones going forward in the --

12 you know, the level changes over time, time is in the

13 regression, but it's picking up, basically, a shift in

14 the path prices would have taken over time.

15 Q. Right. But you're saying that the expiration

16 of the digital security certificate caused a diminution

17 in value, and how is that expiration in April 2014

18 causative of a price impact in December 2016?

19 A. Well, if there's a mean value that people

20 attribute to this less-functioning phone, a mean

21 diminution in value, that mean diminution in value could

22 impact prices for a long time. It hasn't changed. It's

23 a characteristic of the phone that's constant.

24 Q. Well, you're assuming the phone is less

25 functioning, correct?

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1 A. I just threw that as an example. I'm

2 incorporating everything that happened as a result of

3 the break in this -- in this damages period.

4 Q. And my question is: You're assuming, as part

5 of that, that the iPhone 4 was less functioning in

6 December 2016 than it was in March 2014, right?

7 A. Well, I think that the diminution in value

8 doesn't require me -- I don't break up what factors led

9 to how much of each of the diminution in value. This is

10 a mean diminution in value based on competitive market

11 prices using well relied on methodologies and evidence

12 that economists typically use when estimating damages.

13 Q. And so you did not break out what impact, if

14 any, that you calculated was due to what you have

15 assumed was a less functioning phone, right?

16 A. I'm picking up the diminution in value from the

17 break, so how did the market respond with equilibrium

18 prices, conditional, on-demand and supply factors after

19 the break for the iPhone 4, versus other models relative

20 to before the break.

21 Q. How long did it take the market for used iPhone

22 4 and 4Ss to reach an equilibrium price after

23 April 16th, 2014?

24 A. I did not -- I do not know off the top of my

25 head.

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1 Q. Well, how would you find out?

2 A. I'd have to think about that.

3 Q. Can you give me an answer?

4 A. No, it's not a relevant -- relevant for any

5 analysis, and so I haven't thought about that.

6 Q. Well, did the phones have an immediate

7 diminution in value on April 17th, 2014?

8 A. Well, I wouldn't expect them to have a full --

9 fully incorporate information because, as we can see in

10 the search data, there were a lot of searches going on

11 for a while, so I'm not sure.

12 Q. Would the market have reached its equilibrium

13 by April 20th, 2014?

14 A. I don't know the answer to that question.

15 Q. How about by May 1st, 2014?

16 A. I don't know the answer to that question.

17 Q. We've seen data now from a number of sources

18 that showed that the trade-in prices for iPhone 4 and

19 4Ss actually increased in the month and two after

20 April 16th, 2014. Would the market have reached its

21 equilibrium by the time those prices were going up?

22 A. Well, I think -- I want to repeat again that

23 diminution in value isn't a change in a mean price; it

24 is the estimated difference between what prices were and

25 what they would have been in a but-for world, and the

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1 but-for world is what prices would have been controlling

2 for a panoply of demand and supply factors but for the

3 harmful act, and I -- that -- that is not in Exhibit 89.

4 Q. So in Exhibit 89, which is the Verizon

5 production, let's take the iPhone 4, 8 gigabyte,

6 trade-in value in May 2014 of . Do you see that?

7 A. Yes.

8 Q. Is your testimony that because of the event of

9 April 16, 2014, that that number should be

10 12.72 percent higher?

11 A. No.

12 Q. Would the trade-in value price data that's on

13 Exhibit 89 after April 14 -- April 2014 be, in your

14 mind, higher at any point in time?

15 MR. WARSHAW: Objection. Form.

16 THE WITNESS: I just -- I don't understand the

17 question.

18 BY MR. PILMER:

19 Q. Well, you've run a what you call a but-for

20 world, and my question is: Under your analysis and

21 assessment, should those numbers for May 2014 for the

22 iPhone 4 and 4S devices have been 12.72 percent higher?

23 A. I don't really know what these numbers are, so

24 unless you can explain to me exactly what these numbers

25 are, I don't think they're regression adjusted, I don't

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1 think they're any sort of point est -- I don't actually

2 know what they are. So my answer is I don't know what

3 these numbers are. I can't tell you anything about what

4 they should have been or what they are. I don't know

5 what they are.

6 Q. If you selected a different end date for your

7 damages period, let's say June 2014, would your

8 conclusions be different?

9 A. So my conclusions in the report are that there

10 exist common data -- or common evidence and

11 methodologies of the type well relied on by economists

12 which can be used to assess whether there is class-wide

13 impact and assess damages -- class-wide damages,

14 aggregate damages. And so my opinion is that those do,

15 in fact, exist. I demonstrate them, and that opinion

16 would not change.

17 Q. Would your conclusion that there was an implied

18 diminution in value of -12.72 percent be different if

19 you selected June 2014 as the end date of your damages

20 period?

21 A. The number -12.72 percent coming from this

22 regression, if we cut off the data in June 2014, would

23 likely be different.

24 Q. And in what way would it be different?

25 A. Well, numerically, it's picking up a mean

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1 difference, and so the probability that any two means

2 are exactly the same is almost nothing. It's a very

3 improbable event that you take two series of numbers and

4 they end up with exactly the same mean.

5 Q. Right. So would your implied diminution in

6 value be higher or lower if you picked the end date for

7 your damages period of June 2014?

8 A. I would have to look and see.

9 Q. Did you do that analysis?

10 A. I did not look at that analysis.

11 Q. Did you run other regression models where you

12 determined that there was no implied diminution in value

13 as a result of the April 16th, 2014, event?

14 A. In the Best Buy data?

15 Q. In any circumstance.

16 A. I don't think I ran any models, at least that

17 made any sense that gave me a zero damages estimate.

18 But I'd have to go back and look.

19 Q. Did you ever run any models that led you to

20 conclude there was no impact on the value of phones from

21 the expiration of the digital security certificate?

22 A. Is that the question you just asked? I thought

23 that was the question you just asked.

24 Q. So the answer is that you did or you did not?

25 A. I'm sorry. Repeat the question again.

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1 A. Again, I'm relying on the documents and on the

2 complaint and evidence in the complaint, so I don't --

3 this is my summary and background. It's not maybe

4 opinion in the case.

5 Q. So no lawyer gave you this language? You came

6 up with all this language yourself?

7 A. Well, I wrote this in conjunction with counsel

8 in referring to the complaint and understanding the

9 complaint put forth in the case in like a -- as much of

10 a layman's term as it can be put in.

11 Q. Are you confident that you wrote this language

12 and didn't take it from somebody else?

13 A. I am confident that this is my language, and I

14 may have been influenced by reading various documents,

15 maybe. I don't know. But this is language that I agree

16 with and the report is mine and I penned it, so . . .

17 Accelerated is kind of a nice, concise way to say it. I

18 think it's more concise than "moved forward to earlier

19 in time" or something like that.

20 Q. Or "coded"?

21 MR. WARSHAW: Objection. Form.

22 THE WITNESS: Well, I don't think "coded"

23 captures the fact that the time period got shorter.

24 Even though it does have less syllables.

25 ///

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1 REPORTER'S CERTIFICATE

2

3 I, the undersigned, a Certified Shorthand

4 Reporter of the State of California, do hereby certify:

5 That prior to being examined, the witness

6 named in the foregoing proceedings was by me duly sworn

7 to testify to the truth, the whole truth, and nothing

8 but the truth;

9 That said proceedings were taken by me

10 stenographically and were thereafter transcribed into

11 typewriting under my direction, said transcript being

12 a true and accurate transcription of my shorthand

13 notes.

14 I further certify that I am neither

15 financially interested in the action nor a relative or

16 employee of any attorney of any of the parties.

17 IN WITNESS WHEREOF, I have this date

18 subscribed my name.

19 Dated: _______________ _____, 2018.

20

21 _________________________________

 April D. Heveroh, CSR, RPR, CCRR

22 Certified Shorthand Reporter

 in and for the State of California

23 License No. 8759

 Expiration Date: December 31, 2018

24 Henjum Goucher Reporting Services

 1-888-656-DEPO

25

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