Apple CEO Steve Jobs introduces the iBooks store during the launch of the iPad in January 2010.
Photograph by Kimberly White — Reuters

Government recommended no extension of court-appointed overseer's 2-year term

By Roger Parloff
October 13, 2015

[This story has been updated to reflect an order entered by Judge Denise Cote at 1:04 pm on Tuesday, October 13, 2015.]

Apple’s contentious, two-year slog bridling under the yoke of a court-appointed antitrust monitor will expire Friday.

The monitor, former U.S. Department of Justice inspector general Michael Bromwich, was appointed by U.S. District Judge Denise Cote in October 2013 after she found that Apple AAPL had orchestrated a conspiracy to fix the prices of ebooks when it launched the iPad and iBooks store in 2010. Cote’s verdict was upheld on appeal last June, and Apple has indicated that it will seek U.S. Supreme Court review later this month.

In a brief ruling issued Tuesday afternoon, Judge Cote said she had decided not to extend Bromwich’s term. “The monitor has ably performed a significant public service in a difficult environment,” she wrote. “Due to the injunction and the monitorship, Apple has entirely revamped its antitrust compliance program. It is to be hoped that this program will benefit not only the American public but Apple as well.”

Judge Cote’s ruling follows the filing of a letter to her Monday in which attorneys for the U.S. Department of Justice and 33 state attorneys general said that, while their decision “was not an easy one,” because “Apple never embraced a cooperative working relationship with the monitor,” they had decided not to ask for Bromwich’s term to be extended.

“Although the Monitor faced a challenging relationship with Apple,” wrote Antitrust Division attorney Nathan Sutton, “that did not prevent him from fulfilling the fundamental purpose of the monitorship: ensuring that Apple implemented a significantly strengthened antitrust compliance program.”

In the same letter, Apple’s attorneys, led by Theodore Boutrous of Gibson, Dunn & Crutcher, also—if less surprisingly— urged Cote to permit the monitorship to expire. While acknowledging that the company’s relationship with Bromwich “has been rocky at times,” Boutrous said that, together, they had fulfilled Judge Cote’s “challenge to create a world-class antitrust compliance program.”

A spokesperson for Bromwich declined comment.

The root of the strife between Bromwich and Apple appears to be this: Ordinarily, court-appointed monitors are set up as part of consent decrees, with the defendant agreeing to such oversight because it’s less burdensome than some far less attractive alternative—like facing potential criminal sanctions.

In Apple’s case, in contrast, the company has never acknowledged any wrongdoing. Accordingly, to it, the whole notion of being subjected to the disruption of a monitor’s interventions—and having to pay for them at a $1,000 per hour rate (knocked down after arbitration from the $1,265-an-hour rate Bromwich originally sought)—was anathema. (For the first six months of the monitorship—the only period for which Bromwich’s invoices have been made public—his team billed more than $869,000.)

Bromwich, in turn—accustomed to acting as a monitor in consent-decree situations, where he was treated with great deference—appeared to be incensed by what he took to be Apple’s unprecedented arrogance and recalcitrance. “I have experienced a surprising and disappointing lack of cooperation from Apple and its executives that is rare in my oversight experience,” he wrote to Apple’s board in November 2013.

The next month, by which time Apple realized how expansively Bromwich was interpreting his assignment—demanding to interview every member of Apple executive team and board, including designer Jony Ive and former vice president Al Gore—it formally challenged the scope and even constitutionality of Bromwich’s appointment, and it eventually moved to disqualify him, too, for bias.

Judge Cote rejected all of Apple’s objections. Apple appealed, but its petition was beset with an array of technical procedural problems: it had waived certain issues by failing to protest them immediately; other issues were nonappealable; and so on.

Apple’s appeal of Cote’s rulings on the monitor was heard separately from its appeal of Judge Cote’s finding that it had violated the antitrust laws—though, confusingly, the latter appeal also challenged aspects of the monitorship, too.

The appeal focusing on the monitor was decided last May. Writing for a 2-1 panel of the U.S. Court of Appeals for the Second Circuit, Circuit Judge Dennis Jacobs seemed empathetic to some of Apple’s complaints—finding, for instance, that Bromwich had at one point, by coordinating with the government’s attorneys in defending his own conduct against Apple’s attacks, acted in a manner that could raise “an appearance of impropriety.” Nevertheless, he upheld Cote’s discretion to deny the disqualification motion and rejected the other challenges without prejudice to re-raising them if issues persisted.

Then last June, in a dissenting opinion to the ruling upholding Judge Cote’s price-fixing verdict, Jacobs criticized the manner in which Judge Cote had structured Bromwich’s appointment, saying that it “warps the role of a neutral, court-appointed referee into that of an adversary party.” But on that occasion, Judge Jacobs wrote for himself only, with the other two judges on the panel finding, again, that Apple’s challenges to the monitorship had not been preserved for technical reasons.

Though the monitorship will now go away, Apple continues to seek Supreme Court review of Judge Cote’s price-fixing verdict both because of its reputational stain and related damages that it may have to pay to class action plaintiffs and state attorneys general.

Under a contingent settlement previously reached with the latter, if Cote’s ruling is upheld by the Supreme Court (or the Court declines to hear the case), Apple will have to pay $450 million in damages and attorneys fees.

In addition, the company said last June, “the case is about principles and values. We know we did nothing wrong back in 2010.”

 

 

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