Ever try to give a cat a bath? That’s the experience Judge Cote seems to be having trying to get Apple to play nice with its court-appointed antitrust monitor. She finally filed her opinion (PDF) on the decision she issued concerning Apple’s move for a stay and removal of Michael Bromwich yesterday. Computer problems at her court had prevented it from being filed earlier (PDF).
The decision weighs in at a whopping 64 pages. As with her original decision in the matter, Judge Cote clearly didn’t want to leave anything to chance in the appeal. Over the course of the opinion, she chronicles Apple’s history with a monitor, and with Bromwich in particular, explaining her rationale in imposing one in the first place, then recapitulating Bromwich’s declaration of his stormy history with the company so far. She concludes by demolishing Apple’s arguments in favor of a stay, and giving Apple until noon Saturday to file its appeal. (Apple has already filed a Notice of Appeal (PDF), in fact.)
Cote begins by explaining that she originally had not wanted to impose a monitor. She had given Apple at least a couple of chances to demonstrate that it understood how it had run afoul of antitrust laws and demonstrated a commitment to changing its culture to avoid future violations. However, Cote writes:
Disappointingly, Apple made little showing at or before the August 9 conference that it had taken to heart the seriousness of the price fixing conspiracy it orchestrated. Nor did Apple provide the Court with any evidence that it was seriously reforming its internal antitrust compliance policies to prevent a repeat of its violation. Apple’s submissions failed to demonstrate that it took seriously the burden that its participation in the price fixing conspiracy imposed on consumers and on the resources of the federal and state governments that were compelled to bring Apple and the publishers into federal court to put an end to that harm.
So she imposed one. Mindful of striking a balance between letting Apple off too lightly or imposing the kind of longer-term burden the Department of Justice wanted, she decided on a two year monitorship, renewable with one-year extensions as necessary. She describes crafting it with a narrow focus whereupon Bromwich was supposed to report on Apple’s moves toward greater antitrust compliance, and specifically not to seek out further wrongdoing.
In fact, Section VI.F expressly prohibits prosecutorial investigative activity. Section VI provides that, if in the normal course of his duties, the Monitor “discovers or receives evidence that suggests . . . that Apple is violating or has violated this Final Judgment or the antitrust laws,” the Monitor shall report that information to DOJ and “take no further action including seeking information from Apple . . . to investigate any such potential violation of the Final Judgment or the antitrust laws.”
Within that focus, he was to have the power to speak to any “any Apple personnel” without interference from Apple. He was to issue a report on Apple’s compliance program as of 90 days after beginning his monitorship, then report on its status at six-month intervals.
During the process of selecting and briefing the monitor, Cote notes, Apple didn’t make any objections that the court had no constitutional grounds for imposing one, though they had several chances to do so. They helped craft the final injunction order that gave him his powers, and didn’t make any objections at that time. However, once the monitorship began, Apple’s relations with Bromwich soon turned rocky.
The upshot is, over the 90 days, Bromwich was only able to conduct 13 hours of interviews with eleven people, seven of whom were lawyers, including only one board member and one senior executive. He only received 303 pages of documentation in response to his requests for documents related to Apple’s antitrust compliance program. And, of course, Apple complained publicly in its original request for a stay about his salary and that his wanting to talk to all these people would represent an undue distraction and harm its business. When Bromwich filed a declaration in response to these public complaints, Apple claimed that his defending himself against their allegations meant he was “biased” and should be removed.
In evaluating Apple’s request for a stay, Cote had a bit of work cut out for her, because it seems that over the course of filing several such requests, Apple kept shifting its arguments. First it claimed the court was impermissibly broadening the monitor’s brief through proposals it had suggested for discussion but never actually entered in an early meeting, that the injunction was unconstitutional as originally created (note that it didn’t raise this objection while they were creating it!) and that the monitor’s conduct has effectively broadened the scope as well rendering it unconstitutional as applied. But now it seems to be basing its request on Bromwich’s declaration in response to its original request.
Though Apple has dropped the argument, Cote nonetheless addresses the constitutional issue first, noting a number of precedents clearly establishing the court’s right to appoint such a monitor. And, of course, Apple never objected while they were taking part in writing it.
Another objection was Apple’s overly literal reading of the 90 day report as meaning the monitor shouldn’t actually start doing anything until that date. Cote notes that this was not meant to be the case, as the monitor was supposed to be using that time to learn all he could about Apple’s existing culture so he would be in a position to determine whether the program would be effective for that culture, (Apple’s stonewalling over this puts me in mind of a grade school student who, upon learning he has two weeks to write a report, doesn’t think he needs to get started until the 14th day.)
Cote also addresses Apple’s complaint that Bromwich’s salary is excessive and gives him incentive to stretch out his monitorship so as to pad his bill, that he has been acting more like an investigator than a monitor, and that his defensive declaration proves he is “biased.” Cote points out that his conduct so far has been in keeping with his brief to monitor, not investigate, and that Apple has not supported its complaints about Bromwich’s hourly wage with any authoritative sources suggesting he shouldn’t be. She also notes that the final order specifically includes a section meant to protect Apple from fee-increasing incentives, requiring the monitor “to act diligently [and] in a cost-effective manner,” and that if anyone has been stretching things out, it’s Apple.
Since the monitor and DoJ have both expressed a willingness to discuss their salary, Cote remands that discussion to a Magistrate Judge, though notes Apple should be prepared to provide that judge with benchmarks to judge the applicability of whatever salary they think is appropriate.
Such benchmarks should include the customary hourly rates for the Simpson Thacher attorneys whom Apple has hired to assist Apple in revising the compliance program that the Monitor will be reviewing, and any other benchmarks that Apple may wish to offer. […] So long as Apple participates in a good faith effort to resolve this dispute in a
conference before the Magistrate Judge, it may offer any benchmark it wishes.
She also puts to bed Apple’s claim that Bromwich’s declaration should disqualify him on grounds of bias. (Emphasis mine.)
The Monitor’s submission of a declaration was proper and necessary. When Apple filed the instant stay motion, it predicated its argument on several, serious attacks bearing on the conduct and the character of the Monitor in connection with his conduct of the monitorship. These allegations were grounded in factual statements. To evaluate the truth and understand the context of the assertions, it was essential to hear from the Monitor. In many instances, the Monitor was the only person who could confirm or deny the accuracy of Apple’s assertions. As this Court’s agent, it was the Monitor’s duty to provide the Court with his understanding of the full factual story so that the Court could render an informed judgment, address this motion, and oversee the monitorship. It would be surprising if a party subject to a monitor could escape the monitorship by launching a cascade of attacks on the monitor and then disqualify the monitor for responding.
Next, Bromwich looks at Apple’s claim that the monitor’s fees and conduct represent “irreparable harm” to the company. As for the fees, Apple and the DoJ are already going to be discussing remedying that, and further, if Apple wanted to minimize the fees, all they would have to do is stop trying to get in his way as he does his duties. As for the interview requests, if thirteen hours of interviews and 303 pages of documents “constitutes ‘irreparable harm’ to Apple, then the standard for irreparable harm is low indeed.”
Apple’s current complaints seem to be predicated on the idea that the monitor’s interviews will be time-consuming and interfere with normal business operations. Cote points out that there is a dispute mechanism in place for if Apple thinks Bromwich is overstepping his authority, Apple’s complaints seem to be based on speculation given that it’s been unable to show any such harm so far, and that she has thus far been sensitive toward the need to avoid interfering with Apple unduly, only imposing the monitor after Apple was not able to show it was unnecessary.
Cote writes that the limited term and narrow definition of the monitor’s authority is meant to give Apple “breathing room” to revise and improve its compliance programs on its own.
That said, the Monitor has important work to do, and where that work properly includes interviews of Board members or executives, then the Monitor must be permitted to conduct those interviews. After all, the Injunction permits the Monitor to interview “any Apple personnel” when he is doing so in the exercise of his responsibilities and on reasonable notice to Apple. Section VI.G. Again, Apple did not object to this clause or any other particular clause in Section VI.
She also addresses the matter of the public interest. This monitorship didn’t just come out of the blue; it’s in response to a price-fixing scheme fomented by Apple’s lawyers and highest executives, that did hundreds of millions of dollars in harm to consumers of e-books and cost the government’s taxpayer dollars to address. Since Apple has not shown an ability or willingness to put its house in order by itself, it is in the public interest for a monitor to be involved so the court can keep track of what Apple’s doing to fix things. "If anything, Apple’s reaction to the existence of a monitorship underscores the wisdom of its imposition," Cote wrote.
I’m no lawyer, so I don’t know how well this will do on appeal. It looks pretty conclusive to me, but I’m not the one who will be deciding these things.
When you get right down to it, it seems like the problem stems from Apple’s belief that it shouldn’t have to have a monitor at all, because it doesn’t feel like it did anything wrong. The weird thing is how badly Apple has managed the whole thing. You would think their lawyers should have been able to dissemble or play along—after all, that’s what lawyers are for. If they’d just presented more of a contrite face to the court and said they knew what they did wrong and were working on fixing it, even if they kept their fingers crossed behind their backs, they might have gotten by without a monitor at all.
And even not having been able to manage that, they had every opportunity to object to the things they didn’t like while they were in the process of defining the monitor’s duties and salary. Did they really look at those clauses saying he could talk to “any Apple personnel” and think they weren’t going to be used?
It’s pretty clear the reason Apple doesn’t want to cooperate with the monitor is that it doesn’t want to have to change anything. With the monitor there and doing his job, they’re going to have to show they’re making a real effort, just like a grade-schooler has to do his homework if his Mom is there looking over his shoulder. Which is the whole point of the monitorship, after all.
Anyway, this obviously isn’t going to change anything anybody already feels about the case. Look for the appeals court to decide whether or not Apple gets an emergency stay in a week or two.