Apple May Be Planting Seeds Of Doubt In Appellate Challenge Of Antitrust Monitor

By Allison F. Sheedy

Apple’s aggressive challenge to an external compliance monitor’s investigation into Apple’s antitrust compliance policies may be planting seeds of doubt that Apple hopes will bear fruit in its appeal of Judge Denise Cote’s decision in United States v. Apple, Inc. that Apple conspired to raise e-book prices.

Apple is charging that the court-appointed monitor has unreasonably demanded that he meet with Apple’s top executives, attempted to expand his reach far beyond Apple’s e-books line of business, and charged the company more per hour than Apple has ever paid an outside counsel.  After Judge Cote rejected Apple’s arguments in the U.S. District Court for the Southern District of New York last week, Apple immediately filed an interlocutory appeal of that decision.

On Tuesday the U.S. Court of Appeals for the Second Circuit granted Apple a temporary administrative stay of the monitor until a three-judge panel can rule on Apple’s motion for a full stay pending appeal.

Judge Cote hand picked Michael Bromwich in September to serve as an external compliance monitor “to review and evaluate Apple’s existing internal antitrust compliance policies and procedures, and to recommend to Apple changes to address any deficiencies in those policies and procedures.”  Although Bromwich lacked antitrust credentials, he had longstanding ties to the Judge herself.  Because of Bromwich’s lack of topical experience, Judge Cote appointed an assistant monitor with more antitrust experience, Bernard Nigro, to help him navigate the terrain.  In December, Apple complained to the Court about the monitor’s purportedly intrusive conduct.

The question is why did Apple pick this fight?  Is it only about the money?  Certainly not: Apple is going to pay its outside counsel enormous amounts to litigate this issue.  Is it about Apple executives being fed up with the breadth of the oversight?  Perhaps.  If Apple’s claims that the external monitor has roved well beyond his purview and has disrupted Apple’s business operations are accurate, Apple would have a legitimate gripe.  But the best explanation may be fairly simple:  Apple might be striving to create a record for the court of appeals.

Indeed, there may well be a tactical advantage to Apple’s complaints about the court-appointed monitor.  Apple has attacked the judgment and credibility – not just the legal opinion – of Judge Cote.  After all, it is Apple’s position that Judge Cote did not give Apple a fair hearing.  Apple may have begun papering the record for an eventual appeal on this point as early as the opening argument of the trial in June 2013, when Apple’s attorneys called into question Judge Cole’s impartiality in having issued a pre-trial statement that Apple argued indicated the court had prejudged the case.

It is not unprecedented for a judge in a high profile antitrust case to dig him or herself into a hole, leading to recusal.  (Remember Judge Jackson in the Microsoft case?)   Some observers of the case believe that Judge Cote may have committed reversible error by giving short shrift to a full blown rule of reason analysis.  Apple’s appeal, if successful, could result in a remand.  But how would Apple fare if the case were remanded to Judge Cote?  Based on the history of the case, Apple and its attorneys undoubtedly would prefer to take their chances with a different judge.

Whatever the merits of Apple’s complaints that the monitor is overly aggressive, Apple’s challenge may have its greatest significance in tactical terms, if it can convince the court of appeals to start looking at the case in terms of overreach by the trial court or its monitor.

— Edited by Gary J. Malone