In newly released filings, Apple attorneys detailed their argument for a stay pending its appeal of Judge Denise Cote’s July 10 ruling, but suggested it could be ready for a damages trial in 14 months should its request be denied.
“This Court's July 10 decision finding a violation of Section 1 of the Sherman Act raises substantial and important issues concerning how the antitrust laws, as interpreted by Supreme Court decisions thirty or more years old, apply to efforts of companies to enter new markets in the rapidly changing, always evolving technology sector,” Apple attorneys write in their brief. “Apple plans to appeal this Court’s final judgment and respectfully submits that it has a strong chance of prevailing in the Second Circuit and the Supreme Court.”
In short, a stay will save everyone “enormous time and effort” without posing a risk to the public or the parties, Apple argues, since the publishers' consent decrees have already taken force. In addition, Apple attorneys said that the States and the Settlement Class have "informed the Court that they would like to move forward with finalizing and distributing" the $166 million in settlements funds paid by the publishers so far.
If the court declines to issue a stay in the state and consumer class action cases, however, Apple has proposed a schedule that would that lead to a single jury trial in October of 2014 to determine the liability and damages in both cases.
“Although plaintiffs repeatedly characterized this as a “garden variety” price-fixing case, it is no such thing,” Apple attorneys argue. “Apple has at the very least a substantial possibility of success on the important issues it will raise on appeal, including the proper legal standards to apply. Those issues include how controlling Supreme Court authority applies in these circumstances, whether the 'per se' rule of antitrust liability applies here, whether Apple can prevail under the rule of reason, and whether evidence was improperly admitted, excluded, or disregarded.”
U.S. Opposes Stay
Meanwhile, the DoJ along with the States Attorneys filed a letter opposing Apple’s request for a stay in the proceedings while an appeal is considered.
Apple falls well short of the requisite “strong showing of success” needed to justify a stay, the DoJ attorney Lawrence Buterman argues. “In its scheduling proposal, Apple offers little to suggest that its appeal would be successful,” he writes, adding that case law demonstrates that “a mere rehash of what the losing party argued at trial” does not equate to a strong chance of success.
In addition, Buterman maintains that Apple cannot show that it would be irreparably harmed absent a stay. “The substantive issues in the law enforcement action have been decided, with only the terms of the permanent injunction itself to be decided,” Buterman writes. “Thus, Apple’s only conceivable harm is the costs of compliance with the terms of that judgment. But Apple may not cite the costs of complying with the final judgment as irreparable harm.”
In a response, Apple attorneys say Buterman's objection is premature and that its stay request is addressed "solely to further proceedings in the States' action and the putative class action." Apple has not requested a stay of an injunction since the court has not yet issued one. Given the strong objections Apple has to the DoJ's proposed injunction, however, that request is surely coming.
Apple may truly believe it has a shot at overturning Judge Denise Cote’s verdict against them, but if it is to win on appeal, it will not likely to be on evidentiary grounds.
In response to an order from the court, Apple yesterday submitted a list of examples of evidence it believes was "improperly admitted, excluded, or disregarded" before or at trial, and on which the company will partly base its appeal. None of them, however, appear likely to even dent the judge’s decisive opinion.
Among the stronger objections Apple raises is that Random House COO Madeline McIntosh was not called to testify. In one of the trial’s more dramatic moments, Apple lead counsel Orin Snyder erupted when U.S. attorneys pulled McIntosh from the slate and procedural rules agreed to by the parties prevented Apple from calling her.
Although she submitted written testimony, Apple says it lacked the opportunity to question McIntosh further on a number issues, including Apple’s contention that Random House “moved to agency based on its discussions with Barnes & Noble,” not because Apple rejected Random House e-book apps. But given the weight of evidence—including records of Apple executives indicating that its app store actions were used to pressure Random House—it's highly unlikely that questioning McIntosh on the stand would help Apple.
Among the other “errors” Apple alleges:
- That the court “disregarded” B&N executive Theresa Horner' s testimony that Barnes & Noble was the first retailer to “propose agency and pursued agency with publishers for the same independent business reasons as Apple.”
- That the Court found that publisher call records were evidence of conspiracy and were a “departure from the ordinary pattern of calls among them” without more deeply examining the ordinary patterns of calls among the big six CEOs. With the mountain of evidence collected, however, including e-mails and direct testimony, the call records (including the now infamous spider web illustration) are a small piece of the puzzle.
- That the court “made specific findings” of what transpired at a dinner held on January 20, 2010 involving representatives of Apple, including Eddy Cue and Macmillan CEO John Sargent. At that dinner, the court believed that Cue in fact did explain to Sargent that Macmillan had to move Amazon to agency, which Sargent relayed to Amazon the very next afternoon. Sargent emphatically denies this happened at the dinner, but unfortunately he could not recall many details in his testimony, and Eddy Cue’s live testimony pertaining to that dinner was riddled with inconsistencies and differed from his deposition taken just weeks earlier.
- That the Court excluded expert testimony from Apple witnesses while allowing the testimony of “scientifically unreliable testimony” from DoJ expert witnesses, including Apple's expert testimony on the “procompetitive” aspects of agency, and “the purpose and effect of the MFN on publisher actions.”
- That the Court disregarded “serious credibility issues” with the Google and Amazon witnesses, Apple’s “direct competitors.”
- Apple attorneys also claim that the Court made “several material findings concerning Amazon’s business strategies and decisions, including Amazon’s e-book pricing strategies and ultimate decision to sign agency agreements” but excluded from discovery “evidence of Amazon’s internal business deliberations underlying those strategies and decisions, and evidence of Amazon's pricing algorithms.”
From the outset, Judge Cote declined to put Amazon’s practice on trial and instead focused intently on the alleged collusive behavior. Apple attorneys now say that the denial of this discovery and exclusion of this evidence materially prejudiced Apple’s ability to address these issues at trial and rebut the Government’s evidence.”
Apple’s appeal filing is expected shortly.