Apple was dealt another setback in its e-book price-fixing case late Friday afternoon, as Judge Denise Cote denied Apple a stay of all proceedings pending its appeal. And in a ruling that led to a tense exchange with Apple lead counsel Orin Snyder, the judge also denied Apple’s proposed schedule for its damages trial, and ordered the parties to finish discovery by the end of December, 2013 with summary judgment motions to be fully briefed by February 28, 2014.
Snyder protested that the schedule was excessively aggressive for such a complicated case, and was not fair to Apple as it prepared to defend itself against “hundreds of millions” in potential damages. Snyder insisted that he was not trying to “filibuster” the trial proceedings, noting that his proposed schedule would have the case ready for trial in months, not years.
But Judge Cote held firm, telling Snyder that Apple has been collecting data and expert analysis for over a year, dating back to the start of the DoJ’s litigation. “The defenses are either there,” the judge said bluntly, “or they’re not.”
In arguing for a longer schedule, Snyder raised the specter of basically re-litigating Apple’s liability for the state and consumer class action cases. Snyder said Apple disagreed intently on the extent to which collateral estoppel applied, that is how much Judge Cote’s ruling in the DoJ action infers liability in determining damages for the state and consumer classes.
In addition, Snyder said Apple would fight the consumer class certification, arguing that the recent Supreme Court decision in Walmart indicated a “sea change” in class action cases, with questions of commonality now requiring “rigorous” analysis to determine injury. In short, Snyder asserted that since Apple’s entry into the e-book market lowered the prices of some books, and raised prices for others, its experts are entitled to finely parse the data to determine a damages model that accurately reflects the real injury to consumers. “Trial by formula,” he told the judge, is no longer allowed for class actions.
Not surprisingly, attorneys for the consumer class offered a far swifter and simpler view of the case. Jeff Friedman, an attorney for Hagens Berman, the firm representing the consumer class, told the court that he eventually envisioned a trial of one or two days, based on expert testimony. He also warned of Apple’s desire to create an alternate “but, for” model—that is, to try and develop a model that would calculate the harm e-book consumers would have felt had Apple not entered the market.
On the question of the DoJ’s proposed injunctive relief, Judge Cote deferred, and asked the parties to confer and see if they could come closer to agreement. But in a long preamble, she cited four lines of thinking, which included citing numerous cases that give the court wide latitude to fashion a strong injunction, as well as her own takeaways from the case—including her belief that the parties were “unrepentant” and that the publishers wanted higher e-book prices, and that they would likely to go back to price-fixing in the e-book market.
Cote said she was going to issue an injunction—but in a ray of hope for the defendants, she said she understood that the technology was moving fast and that no one could predict the future. As such, she said did not want to fashion a lengthy injunction that could inhibit innovation. The judge also said she had no desire to regulate the App Store, but noted that Apple’s claim that the app store was not involved in Apple’s anticompetitive behavior was not true. She stressed the need to ensure that the app store could not be used as “an end run” around any injunction pertaining to the iBookstore.
As to the publishers, Cote offered a proposal. The DoJ's proposal that Apple have the power to discount for five years could be cut to two years, and the publishers could afterward be staggered, six to eight months apart, in renegotiating new deals as a guard against future collusion. As for Apple's compliance, Cote said she would rather not have to order an external monitor, but said she was concerned about the company's inability to take up its own vigorous antitrust program.
In one of the more interesting moments of the hearing, Shepard Goldfein, a lawyer for HarperCollins, took issue with Judge Cote’s characterization that the publishers were "unrepentant" but seemed to come dangerously close to admitting the publisher’s role in the conspiracy. Noting that HarperCollins “stepped up to the plate” and settled immediately, Goldfein said not admitting liability was standard procedure, but that the publishers’ “actions spoke louder that its words.”
Cote said she understood that three publishers settled their cases immediately, but said she was not aware of any statement of contrition.
The parties will reconvene later this month to discuss the next proposal for injunctive relief.