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Summary:

Apple is fighting a court order that imposes a monitor to investigate the company — at Apple’s expense. On Tuesday, Apple and the Justice Department sparred over whether the monitor should go. Here are some highlights.

A three-judge panel rebuked lawyers for Apple and the federal government on Tuesday morning, as the two sides argued over what to do about a court-appointed monitor that Apple claims is running an unconstitutional investigation into the company’s business practices.

Apple complained that Bromwich, who has no experience in antitrust law, has already billed Apple over $130,000 to investigate the company, and that he has made premature demands to meet with everyone from lead designer Jony Ive to former U.S. Vice President Al Gore, who sits on Apple’s board. The government countered that Apple does not want to comply with the law.

In hearing arguments from Apple and the Justice Department, the judges expressed skepticism for both sides’ positions, and hinted they may issue an order to spell out the duties of the monitor. More broadly, the fight over the monitor is the latest twist in Apple’s ongoing effort to challenge a federal judge’s ruling last fall that it organized a conspiracy with publishers to fix the price of ebooks.

“You wouldn’t be in this situation in the first place…”

Apple’s lawyer, Theodore Boutros, told the appeals court judges that Bromwich’s behavior raised constitutional questions because, in his investigation, he has been combining the roles of both judge and prosecutor.

“This is a separation of powers issue,” claimed Boutros, arguing that Bromwich is supposed to be a neutral agent of the judge, but has instead launched an inquisitorial investigation and even volunteered himself as a witness against Apple. He also complained of the monitor’s demands for multiple meetings with senior Apple executives, and argued Bromwich should be removed to prevent “irreparable harms.”

The judges did not appear especially sympathetic. They pushed Boutros to explain why Apple executives could not spare a few hours to meet with the monitor, and what harm was coming of his activities.

“Maybe if they had spent more time keeping the company from violating antitrust laws, you wouldn’t be in this situations,” one of the judges told Boutros.

apple-legal-justice

The judges also suggested that the real source of Apple’s objection to the monitor lay in his billing rates; this a problem from a legal standpoint because, when considering a request for a stay, courts typically don’t consider money to be a form of “irreparable harm.”

Boutros responded by stressing that the monitor’s activities were unconstitutional, especially as the order setting out his duties did not set meaningful limits of his investigation. He noted that Bromwich can make demands about Apple’s private business dealings and report them to the court and the government.

No money back

After pressing Boutros to explain how Apple was being harmed by the monitor, the judges pushed the Justice Department’s lawyer, Finnuala Tessier, to explain what — if any — limits the lower court had imposed on Bromwich’s investigation.

The judges questioned the government’s suggestion that Bromwich was simply there to confirm that Apple was developing compliance policies, noting that the actual words of the order imposing the monitor don’t appear to do that. As a result, the monitor could demand information about new Apple product lines; as an example, one judge gave the example of a hypothetical “Granny Smith computer.”

The appeals court also pointed out that money is normally not considered an “irreparable harm” because a party can eventually recover it if they win on appeal. But, in this case, Apple will be stuck paying Bromwich’s bill whatever the outcome since, as Tessier acknowledged, there are no examples of the U.S. issuing refunds in this sort of situation.

“Apple is one of the richest entities in the world,” observed Justice Pierre Leval, but noted that not every company in its position would be able to afford to pay such a bill.

Boutros, Apple’s lawyer, also noted that Bromwich, as a private lawyer, had an incentive to run up high bills whereas a government lawyer would not. The judges countered that this suggested that Apple was just concerned about the cost of investigation.

An awkward spotlight

At the conclusion of the 45-minute hearing, the judges said they would take the arguments under advisement and issue a final ruling on the stay later on. Their ultimate decision is likely to be informed not only by the law but by protecting the image of the courts in the face of a flagrant — but possibly correct — challenge by Apple.

Antitrust experts have noted that the monitor’s activities are indeed unusual, and appear to elide the roles of prosecutor and judge. Moreover, the optics of the situation are awkward because not only does Bromwich lack antitrust credentials, he is apparently a personal friend and political ally of Judge Denise Cote, who appointed him.

The situation has led the Wall Street Journal to issue two withering editorials calling Cote a “disgrace,” and urging the appeals court to remove Bromwich. In a broadside last week, it noted:

The case has grown into an unusual challenge to the legal and constitutional authority of court-appointed monitors, which were rare as recently as a decade ago. They’ve since become multimillion-dollar operations that can loot companies and are a fabulous gig for white-shoe lawyers with the right judicial contacts. Mr. Bromwich has an unlimited budget and wants to bill at $1,100 an hour to lecture Tim Cook and Al Gore about the appropriate “tone” to take about bogus antitrust charges.

In response to such media scrutiny and Apple’s ongoing legal challenges, the appeals court judges will likely look for a way to respond to the separation-of-powers concern while also preserving the dignity of the federal court. The most likely outcome, then, is that the judges will refuse Apple’s request to remove the monitor, but provide an order that strictly delineates what Bromwich can and can’t do.

In the meantime, Apple’s long running battle against the antitrust charges will continue. The company is currently preparing its appeal of the original ruling to the Second Circuit, while also fighting off class action lawyers and state attorneys general seeking hundreds of millions in fines in the lower court before Judge Cote.

Thumbnail image courtesy of Thinkstock/Jim Lopes

  1. You mean “fix the price of e-books” but wrote “fix the price of e-prices.”

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    1. Thanks for flagging, Electric Monk. That’s been fixed

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  2. How is this any different than music and iTunes? There are other sources to purchase books….even ebooks.

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    1. The issue is the wrote in their contract that the publisher got to set the price and chould not let anyone else sell for less. That’s why its anti-trust.

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  3. Apple needs to show more backbone and business savvy. It has the resources to get at the source of this lawsuit and it certainly isn’t the DOJ. The law firm that put the DOJ onto Apple and the Big Six publishers is, literally, about a 10-minute walk from Amazon’s corporate headquarters in Seattle’s South Lake Union area. This is about Amazon using the feds to crush major publishers and cripple its number one competitor.

    Apple could easily make Amazon rue the day it inspired this legal assault and it could do so in a way that, in the long run, makes it money. I know. Years ago, the Tolkien estate got hot and bothered by my soon-to-be-published Lord of the Rings chronology, Untangling Tolkien, and took me to federal court in Seattle, alleging copyright infringement. At the start I made nice to establish a good contrast to their nastiness and bullying for the judge. Some 11 months later, the judge dismissed their dispute ‘with prejudice’–her way of saying “You lost bozos.”

    At that time, the Tolkien estate has a reputation for being sue-crazy. When they sued me, the Times of London noted, “The Tolkien estate is on the warpath again.” I decided that I wanted to teach them a lesson they would not forget. From that ‘with prejudice’ dismissal on, I became very difficult. My goal was to make their loss as costly and painful as possible to protect future Tolkien authors. And that seems to have worked. In the decade since, I’ve not read of their going ‘on the warpath’ against another author.

    Apple doesn’t need to go to court to make life so difficult for their arch rival Amazon that it leaves Apple alone in the future. There’s a hundred ways they can do that. Possibilities include:

    1. Give everyone who registers their iPad, iPhone, iPod touch a substantial coupon good for ebooks purchased through iBookstore. That’d sell more hardware, particularly iPads, and it’ll establish in all those Apple customers the habit of going to Apple first for ebooks rather than Amazon. Inflicting pain on those who inflict pain on you is a good business move.

    2. Give iTunes credits for iBookstore purchases. Buy an ebook from Apple and get 10 percent of its price credited to your iTunes account. It’d make buying from Apple cheaper than from Amazon as well as increase all the iTunes stores sales and Apple hardware sales.

    The hardware angle is particularly important. Ebooks from the iBookstore only display on Apple products, so discounts on ebooks help Apple hardware sales and no other. In contrast, Amazon’s ebooks display on almost every platform. A counter discount by Amazon would sell more iPads, with Amazon paying for the incentive.

    3. Go after authors. Apple already has the best payments in the industry for authors. Draw attention to that and offer still more advantages. Look for ways to make publishing on the iBookstore even better. Do what Amazon does for authors and more. Speed up processing time for new books. Offer more ways to discount books, including reader coupons and an easier way to distribute review copies. Even help with advertising. There must be slots when iAd goes unused. Look for ways to offer authors free iAds for their ebooks. Let them select one of their ebooks for those free iAds.

    In short, don’t take this Amazon-driven bullying lightly. Look for ways to make Amazon’s ebook business more difficult and less profitable. When Apple focuses on squabbling with the DOJ, Jeff Bezos smiles happily. But burn Amazon badly in their lucrative ebook business, and Amazon will learn to back off. Never let a bully get away scot-free.

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  4. It is obvious that the fix is in. Google and Amazon have deep hooks into this administration. Certainly, the DOJ has been used as a club with which to beat Apple, and the logic involved in Cote’s decision making is tortured and obviously biased. Cote has a reputation for pre-judging cases, cronyism, and being less than competent in her understanding of the law.

    This is not a first for the administration. The DOJ is its primary tactical weapon against those it does not favor. Eric Holder (head of the DOJ) has been held in contempt of Congress for his involvement in the BATF’s illegal operations, and his refusal to explain his, and his department’s involvement the situation. The IRS has been caught punishing this administration’s political opponents with unwarranted audit and paperwork delays. It takes little imagination to believe a scenario where Google pressures the administration, the administration responds by activating a DOJ investigation of Apple, and at the same time paying a friendly visit to the judges involved in federal cases involving Apple. Standard Chicago politics.

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  5. The “You wouldn’t be in this situation in the first place…”, coming from an appeals court judge, BEFORE the appeal is, frankly, disappointing.

    The USA doesn’t deserve Apple.

    I suggest that they look for a home with a more legitimate legal system.

    They would be welcomed with open arms, pretty much anywhere they fancy.

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  6. Judge Denise Cote is/ was sharing a Condominium with Mr. Bromwich,who she appointed as the Court’s Monitor of Apple? Is this true?
    If so, the Appeals Court Judges should have immediately ruled to remove both Judge Cote and Mr. Bromwich.

    Why do the Appeals Court Judges have to even “take the arguments under advisement”if such a flagrant Conflict of Interest is a matter of public record?

    The”Dignity of the Court” is now doubly compromised. What a Joke! Who are these fools?

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  7. When Judge Cote said she felt Apple was guilty before the trial started, she should have been removed from the case. Then after the case, she appoints a friend of hers to investigate Apple. He charges over $1,000 an hour but because he does not have an anti-trust background another lawyer in his firm is appointed at $1,000 hr more to provide what Bromwich is missing. Then add another $150 hr for administrative fees. Not hard to see what is going on here!

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    1. Funny how the only people complaining about Judge Cote issuing a “pre-trial view” (in which she noted that the EVIDENCE SHE HAD ALREADY SEEN as part of the publishers’ anti-trust settlement hearings put Apple on very shaking ground) are not, as far as I know, lawyers or judges themselves. Apparently such pre-trial views are actually very common in this sort of case, and represent the judge trying to do her job by nudging parties toward settlements that free up the court’s time to deal with other cases.

      People are trying to make out that Judge Cote had some kind of unfounded vendetta against Apple, when in fact she had actually already seen pretty much the whole paper trail of evidence from the publishers’ end showing how they had conspired with Apple. That’s not an unfounded vendetta, that’s a professional legal opinion based on the self-same evidence that would later be used in the trial. Indeed, given that almost all of Apple’s witnesses proved completely unreliable on the stand (they would say one thing until the DoJ produced documentary evidence clearly contradicting it, then very rapidly backtrack to avoid perjuring themselves), she ended up relying largely on this evidence in the end.

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  8. Is it true that Judge Cote and Mr Bromwich share/have shared a Condominium, as the WSJ reported ? Wouldn’t such a “close and personal”relationship be a clear conflict of interest warranting a summary removal of Judge Cote and Mr Bromwich from this case or any case involving Apple?
    What do the Judges of the Appeals Court have to deliberate over? Especially if they are concerned about the “Dignity of the Court”?

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    1. Sorry everyone. I didn’t mean to double post. My first post didn’t seem to go thru, so I rewrote it .

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  9. Nikato Muirhead Sunday, February 9, 2014

    Government regulators will tend to overreach if they are given a free hand. This antitrust monitor is clearly over-reaching.

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