In a legal twist that could throw the current trial schedule into flux, Penguin last week filed a motion demanding a jury trial in the e-book price-fixing cases filed by the states and the consumer class action, led by Seattle-based firm Hagens Berman. The motion comes as a June 3 bench trial date bears down, and after Macmillan settled all claims, leaving Penguin as the only remaining publisher that has not settled with the states or the consumer class. Penguin settled the DoJ part of the case in December, 2012, a settlement which mandated only injunctive relief.
It had been assumed—although not officially ordered, Penguin attorneys argued—that all three actions would be consolidated for a June 3 bench trial, with Apple and Penguin the remaining defendants. But, with money damages now at stake in the state and consumer class actions, and not merely injunctive relief, Penguin has asserted its right to a jury trial, while also admitting that the motion constituted, at the very least, an inconvenience for the court.
“To be sure, the Court at [an]October 26 conference seemed to reach a tentative decision that the States would be joining the DOJ’s June 3 trial,” Penguin attorneys acknowledge. “But that does not change the fact that there was never any written or oral response from Penguin that remotely approached “stipulati[ng]” to a waiver of its jury trial right for the States’ claims.”
In addition, Penguin argues, there was never “any formal order” consolidating the trials. “To the extent that Penguin’s conduct has in any way misunderstood this Court’s prior indications or has caused the Court any inconvenience, Penguin offers its sincerest apology to the Court. But at the end of the day, miscommunications and misunderstandings do not constitute an express waiver of a constitutional right.”
Penguin attorneys had previously objected to having the state and consumer claims heard as part of the June 3 bench trial. On February 19, Penguin attorneys noted, Judge Cote informed the publisher "for the first time" that the states still anticipated that "Penguin would be a defendant in the DOJ trial even though Penguin had settled the DOJ action." And in a February 26 telephone conference, Penguin objected to "participating as a defendant in the DOJ bench trial on the States’ claims."
In addition to demanding a jury trial, Penguin requested that it have the option of presenting “the live testimony” of Chief Executive Officer David Shanks and Chairman and Chief Executive, John Makinson, “in addition to, not in lieu of, trial declarations” already or still to be taken. That request, of course, seems to presume that a jury trial will be granted, as Penguin attorneys note that “the credibility of key witnesses” is central to the case, thus the need offer “live direct testimony of the two central Penguin decision-makers.”
Why ask for a jury trial? If granted, the jury trial would effectively sever Penguin from being tried at the same table with Apple, on June 3, before a judge who, in approving the settlements, has already called the underlying claims in the DoJ matter "a straightforward price-fixing case." Notably, when Penguin was still a defendant in the DoJ action, an action that was by law entitled to be heard at a bench trial, there was no reason to demand a separate, additional jury trial, since the underlying claims to be proven in all three cases were identical. “Yet the minute Penguin settled with DOJ on December 18, 2012,” Penguin attorneys noted, “all of those considerations materially changed.”
Specifically, the state and consumer claims that remain against Penguin, which ask for money damages, “are not entitled to a bench trial.” And because Penguin is no longer a defendant in the DoJ action, at a separate jury trial, “the DOJ will not be putting on evidence or otherwise trying to prove that non-defendant Penguin is culpable...The evidence against Penguin will have to come, if it comes at all, from the States themselves.”
It remains to be seen how Judge Denise Cote views the motion, and whether this might affect the trial schedule. A settlement between Penguin, the states and the consumer class, meanwhile, remains an option, although it is unclear whether such discussions have progressed or occurred at all.
Notably, Penguin has always forcefully rejected the price-fixing charges, and vowed to fight them. It settled with the DoJ, however, largely in order to smooth the path for its merger with Random House. With that merger now approved by the U.S. DoJ (though approvals in some other countries are pending), Penguin may have little desire to settle the remaining claims with the states’ and consumer classes, and a jury trial could give Penguin officials a chance to prove the innocence they’ve steadfastly voiced.
The question remains: is winning at trial worth the risk of losing? In its decision to settle, Macmillan, (the other publisher that had vowed to fight the charges) CEO John Sargent noted that the damages Macmillan could have been on the hook for had it lost was “was much more than the entire equity of our company.” Clearly, the newly formed Penguin Random House has more resources at its disposal, but with a new company to put together, will its legal team really want this fight?