Apple Fights Broad Reach of Court Appointed Monitor

, The Litigation Daily

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Apple Inc. and its defense lawyers at Gibson, Dunn & Crutcher are once again butting heads with Southern District Judge Denise Cote (See Profile), who ruled that the company fixed e-book prices.

Apple's latest objections, filed on Nov. 27, relate to the external monitor Cote tasked with ensuring Apple's compliance with antitrust laws, Michael Bromwich of Goodwin Procter. According to Gibson Dunn, Cote blindsided Apple with an unconstitutional order that would grant Bromwich "wide-ranging, intrusive, and excessive inquisitorial powers of a sort reserved to prosecutors."

"The unilateral investigation the Court has empowered Mr. Bromwich to undertake is not a judicial function, and therefore cannot be delegated by the Court," Apple's lawyers argue in United States v. Apple, 12 Civ. 2826. "Roving investigations with a commission to ferret out wrongdoing are…prosecutorial powers vested in the President."

Following a bench trial that pitted Apple against the U.S. Department of Justice and state attorneys general, Cote ruled in July that the iPad-maker violated antitrust laws when it negotiated agreements with book publishers that revolutionized the way e-books are priced and distributed. Apple has appealed to the U.S. Court of Appeals for the Second Circuit. A parallel consumer class action lawsuit against Apple is pending.

Cote has not yet ruled on damages, but she did enter an injunction that, among other things, barred Apple from entering into new agreements with publishers that restrict the lowering of prices. In October, Cote appointed Bromwich to ensure Apple's future compliance with antitrust laws.

In last week's motion, a Gibson Dunn team led by Theodore Boutrous Jr. argues that Bromwich quickly "abused" the relatively narrow scope of his authority by demanding interviews with company executives like CEO Tim Cook and board member Al Gore on short notice. Apple said it has done its best to comply with Bromwich's requests, but argues that they are premature because Cote's final judgment gives the company until Jan. 14 to implement new compliance measures. According to Apple, Bromwich is billing $1,100 an hour, and has retained Bernard Nigro Jr. of Fried, Frank, Harris, Shriver & Jacobson to assist him at a rate of up to $1,025 an hour. Apple is footing the bill for Goodwin Procter and Fried Frank's services.

On Nov. 21, Cote circulated a proposed order that would grant Bromwich the ability to communicate directly with Apple personnel, rather than through the litigation process. The next day, Bromwich sent a letter to Apple board members encouraging them to promote a "direct relationship between the company liaisons and the monitoring team that is unfiltered through outside counsel."

In its filing, Apple argues that Cote's proposed order would make a bad situation worse. "The proposed amendments would allow Mr. Bromwich to then take such 'unfiltered' information to the Court, again without Apple's counsel present, and the Court would be allowed in turn to disclose the information to the public, including, of course, Apple's adversaries in the…putative class action seeking nearly $1 billion."

Bromwich, who did not return a request for comment, has defended himself in publicly available letters to Apple's lawyers. "In my interviews during the monitor selection process with the Department of Justice and the Plaintiff states, and separately with Judge Cote, I made clear that one of the keys to a successful monitorship was getting off to a fast start and promptly making contact with top executives at the company," Bromwich wrote to Gibson Dunn. "There was no suggestion at any time from anyone that these activities needed to be deferred."

Boutrous of Gibson Dunn was not immediately available for comment. His partner Orin Snyder, who represented Apple during the bench trial, declined to comment.

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