Judge Denise Cote handed down two key rulings on Friday in the damages phase of Apple’s e-book price-fixing case. In one ruling, the judge granted class action status in the state and consumer cases pending before her. And in another decision, the judge rejected Apple’s two expert witnesses for trial.
The rulings are a double whammy for Apple, paving the way for the class action to continue, while all but knocking out Apple’s defense. “Apple, we believe, has very few arrows left in its quiver,” plaintiff lawyer Jeff Friedman told PW by phone Friday night.
In an 86-page opinion granting class certification, Cote called the case before her “a paradigmatic antitrust class action,” where “virtually all class members paid inflated prices for e-books as a result of a centralized price-fixing conspiracy." If certification were not appropriate in this case, she wrote, “no antitrust class action could be certified.”
As part of her granting class certification, Cote also denied Apple’s motion to strike the testimony of the plaintiff’s expert witness, Roger Noll, setting the stage for Noll's model to be used in determining a final damage award. In her opinion, Cote called Noll’s analysis “straightforward,” and rejected attempts by Apple’s expert witnesses—economists Joseph Kalt and Jonathan Orszag—to discredit Noll’s model.
Based on Noll’s estimate, the plaintiffs are seeking a damage award as high as $840 million after trebling, although, Friedman explained, the publishers’ $166 million in settlement funds would be subtracted from any final award.
In a separate order, Cote granted a plaintiff motion to strike Kalt’s and Orszag’s expert testimony from the upcoming damages trial—with one exception. “Orszag will be permitted to testify regarding his re-running of Noll’s regression analysis,” Cote held, “assuming that there is an adequate evidentiary basis to support that analysis at trial.”
In a searing 59-page opinion, Cote systematically took apart Kalt’s and Orszag’s findings on the effect of the alleged conspiracy, finding the analyses fundamentally flawed, and holding that they would only serve to confuse, or, in some cases, even mislead a jury.
The decisions are a major blow to Apple’s chances of avoiding a large damage award in its e-book price-fixing case, after being found liable in July of 2013. It could also increase the chance that Cote decides damages in a summary judgment—after all, with Apple's experts disqualified, what is left for trial?
Or, the decision could enable some kind of directed or partial verdict. Apple witness Jonathan Orszag did re-run Noll’s analysis, and came to a finding that e-book overcharges were about 14.9% of e-book sales, compared to Noll's finding of 18.1%. Thus, if Orszag's re-running of Noll's model is the one thing he is allowed to testify to, his 14.9% estimate could become a floor for damages.
In its filings for summary judgment, the plaintiffs claim that Apple has failed to show that any "triable issues of material fact exist," and that Apple instead is seeking a "do-over" of the facts decided in its liability trial. There is no "genuine dispute" that consumers were damaged by the price-fixing conspiracy, the plaintiffs' argue, only by how much. "Every expert who has opined on how much the conspiracy caused the Publisher Defendants' e-book prices to increase has landed within a few percentage points of Dr. Noll’s 18.1% damages figure, including Apple’s own experts."
Apple will almost certainly appeal both decisions, and it is possible the damage trial could be stayed again while class certification is reviewed. Apple has also appealed Judge Cote's July liability finding, arguing that she botched the case.
Meanwhile, in separate letters, both sides now agree that a May damages trial is not possible. The plaintiffs have asked for a schedule that would lead to a July trial, while Apple has asked for an extended 90-day notice process in the consumer class actions, which would mean the case would not be ready for trial until September.
Attorneys told PW that a decision is not expected on the plaintiffs' motion for summary judgment until after the class notice and certification process is complete, at minimum, some 65-70 days.