Unites States of America v. Apple, Inc. et al
DECLARATION of THEODORE J. BOUTROUS, JR. in Support re: 416 Order,,,,,,. Document filed by Apple, Inc.. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E)(Boutrous, Theodore)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------- - - - - -x
UNITED STATES OF AMERICA,
12 Civ. 2826(DLC)
APPLE INC., et al.,
--------------------------------- - - - -x
-------------------------------- - - - - -x
THE STATE OF TEXAS,
THE STATE OF CONNECTICUT,et al.,
12 Civ. 03394(DLC)
PENGUIN GROUP(USA)INC., et al.,
-------------------------------- - - - --X
REPLY DECLARATION OF THEODORE J. BOUTROUS,JR.
I, THEODORE J. BOUTROUS,JR., pursuant to 28 U.S.C. § 1746, declare:
I am an attorney duly licensed to practice law in the State of California. I
have been given permission to appear before the United States District Court for the
Southern District of New York pro hac vice. I am a partner at Gibson, Dunn & Crutcher
LLP and am one ofthe attorneys representing Apple Inc. in the above-captioned matter. I
respectfully submit this declaration in support ofthe Reply in Support of Defendant Apple
Inc.'s Motion by Order to Show Cause For a Stay of the Injunction filed on January 7,
2014. I have personal knowledge ofthe matters stated herein and, if called upon to do so,
could and would competently testify thereto.
In his declaration, the external compliance monitor appointed by this Court,
Michael Bromwich, makes a number of factual assertions that are inaccurate or
incomplete. For example, he misstates what occurred during the October 22 introductory
meeting in New York with Mr.Bromwich and his team. Bromwich Decl. ¶¶ 13-16. At that
meeting, Kyle Andeer from Apple, lawyers from Simpson Thatcher, and I made clear that
we want to work with Mr. Bromwich and his team to collaborate and ensure that Apple's
compliance and training programs are state ofthe art. But we were all extremely surprised
when Mr. Bromwich indicated that he wanted immediate interviews with everyone on
Apple's executive team and Board of Directors, beginning the week ofNovember 18. We
were even more surprised when he expressed his intent to interview these individuals
multiple times throughout his monitorship, irrespective of their connection to this case or
Apple's antitrust programs and policies. Mr. Andeer immediately objected that the timing
t_ -"__ _777 ~__u:~,_ -4,.
oz the requesi5 was ~rciiia~ui°e ~iveii ~iia~ r~~iy~c way ~uii ~u~uii~ ins iiew uv~~~~~~a~~~c a~~u
training programs in place in advance ofthe January 14 deadline. He also questioned why
it would be appropriate for Mr. Bromwich to interview individuals with no connection to
the issues in the case, such as Apple's lead designer Jony Ive. When Mr. Bromwich
requested documents from Apple at that same meeting, we raised the need to protect
privileged material. Mr. Bromwich responded by making clear he was going to seek
privileged material, and stated his view that producing such information to him would not
constitute a waiver of privilege because he was acting as an arm of the court, and he
suggested that we undertake legal research on the issue. Although we indicated we would
take his various requests and proposals under consideration, none of us indicated that we
agreed with Mr. Bromwich's interpretation ofhis mandate, his proposed plan for operating
as monitor, or his views on any ofthe legal issues that we discussed.
Contrary to Mr. Bromwich's suggestion (Bromwich Decl. ~ 25), my
October 31, 2013 letter on behalf of Apple to Mr. Bromwich echoed the objections raised
during the October 22 meeting. See Dkt. 419,Ex. A. Apple explained in the letter that his
request "to begin interviewing Apple's entire board and its executive team, as well as
additional senior executives on November 18 is premature, not authorized by the. Final
Judgment, and would not only be disruptive to Apple's business operations but also
directly contrary to Judge Cote's intent." Id. at 2. Apple explained that "[i]t makes no
sense ... to schedule those interviews before Apple has completed its internal assessment
and developed its new antitrust program." Id. at 3.
After Apple sent its October 31 letter to Mr. Bromwich and forwarded it to
plaintiffs to put them on notice of our objections, Apple met and conferred with plaintiffs
T__ "_'"_ —mot_•_ __1/ T __t__~ :.0 mil__
on i~ovem~er ~+. Lunn uii~ caii, 1 iIJKCU 11 U1G
T__._L.__ T..~..vaW .,...11....7 ._,.....«,..,,.,7 +1..,. F
JUJUI:G LG~JQ1L111G11611QU Q~J~/1VVGU Ulc 1GG
arrangement proposed by Mr. Bromwich. Lawrence Buterman said they had reviewed it.
When asked again whether they had actually approved it, he stated that they had. Mr.
Buterman agreed with Apple that the Final Judgment focused on the compliance policies
and practices that would exist 90 days after Mr. Bromwich's appointment. And he
expressed sympathy for Apple's position that there was no need to commence these
interviews immediately and certainly no need to complete them all the week ofNovember
18. He suggested a staggered interview schedule as a compromise. I reiterated that Apple
wanted to create state ofthe art compliance programs and policies, and stated that I would
reach out to Mr. Bromwich to discuss Apple's objections.
Mr. Bromwich mischaracterizes the discussion my partner Daniel Swanson
and I had with him on November 6. Far from conceding that Mr. Bromwich was entitled to
commence an immediate investigation as he suggests(Bromwich Decl. ¶ 30), I reiterated
Apple's objections, including that there was no need to interview Apple's top executives
and Board of Directors at this time. Throughout the call, however, I was conciliatory,
attempting to find a path that would avoid conflict with the monitor and ensure the
monitorship ran smoothly and as anticipated under the Final Judgment. I did say that
Apple was not taking the position that he could do no work until January 14, but
emphasized that any work he did needed to be tethered to the narrow mandate afforded him
by the Final Judgment. In that regard, I informed Mr. Bromwich that Apple was willing to
set up some initial interviews to provide him with background information that would
facilitate his assessment to commence after January 14; I made clear that the week of
November 18 would be difficult for scheduling reasons, but that perhaps the week after
I171~TIll WUTK. 1 d15U IUlU 1V1I'. Dl'UII1W1(:Il lllAl HIJIJIC WdJ W1111I1~ lU WVI'K UIl A l:VI111UCi11,1t1111,y
agreement, that we needed to ensure that privileged information was not disclosed to him,
and that, based on our call, I thought we would be able to work out an agreement that was
acceptable to all. With respect to Mr. Bromwich's fee proposal, I reiterated Apple's
objections from the October 31 letter. When discussing his 15%administrative fee, I noted
that Apple and I had never heard of such a fee being charged in this context and I tried to
lighten the mood by stating,"Why didn't I think of that?" .When I asked the basis for this
fee, Mr. Bromwich admitted that its purpose was to generate profits for his company. He
explained his view that law firms earn profits through fees billed by their associates, but
because the Bromwich Group is not a law firm and has no associates,the fee was necessary
to make up these revenues. I jokingly said that, as fellow lawyers, we are probably more
sympathetic to his fee request than Apple, but I emphasized that his rates and fees were
unreasonable and not appropriate for an agent of the Court. I expressed Apple's concern
with the potential for a runaway monitor with an unlimited budget. Mr. Bromwich said
that, other than possibly abiding by some ofApple's expense guidelines, he was not willing
to discuss or back down on any other aspect of his compensation structure.
Despite its good-faith and legitimate concerns, Apple nonetheless sought to
accommodate Mr.Bromwich's scheduling demands. In his discussion of my November 7,
2013 email (Bromwich Decl. ¶ 32), Mr. Bromwich ignores that I agreed to arrange
interviews with nine high-level business and legal executives if Mr. Bromwich was willing
to wait until the week of December 2. Dkt. 419, Ex. B. Despite the offer, Mr. Bromwich
continued to demand interviews with Apple's top executives, as well as three members of
Apple's Board ofDirectors—including Al Gore—who happen to live in or frequently visit
ivortnern ~aiizornia. la. iviost oz the executives ana tsvaru memoers ivir. rsr~mwicn
sought to interview are not even relevant to the issues in this case. By contrast, Apple's
proposed interviewees included key individuals in the relevant business unit and those
involved in rolling out Apple's enhanced compliance and training efforts. Nevertheless,
because Apple could not produce its entire slate of directors and board members on a few
weeks' notice, in an email dated November 9, 2013, Mr. Bromwich accused Apple of not
taking its obligations and Mr. Bromwich's responsibilities seriously.
Id. He then
demanded that Apple "[b)e prepared to support any representations concerning [the]
availability [of the individuals he wanted to interview] with detailed copies of their
schedulesfor that entire week." Id. He said he "was not prepared to drag things out any
longer" than the week of November 18. Id.
Surprised and disappointed that Mr..Bromwich was not willing to embark
on a productive and collaborative path,I explained to him in an email dated November 1 1,
2013 that his "demands and approach [were] unreasonable, unnecessary and unwarranted,
and [went] well beyond the scope ofthe Final Judgment and Judge Cote's guidance." Id. I
explained that the Final Judgment was clear "regarding the timing and scope of [his]
review and the need to avoid unduly intruding on Apple's business operations." Id. His
continued demands were "not in the spirit of our efforts and offer to host [him] at Apple
headquarters for a full slate ofinterviews and provide other information well in advance of
the date on which [his] review of the new compliance and training programs is to
commence under the Final Judgment (January 14)." Id. Later that day, Mr. Bromwich
reasserted his demand fora "slate ofinterviews and meetings next week"in an email to me.
Dkt. 419, Ex. E.
T. - '. _ w ,r - T'-------- -~-'- ----~=----_a .7_"__".7._ "'_ L_.7 .. .,~..,t:,,l ...t~.,.t........
LCSPILC 1Vli. t3I'VIIIWIGII S GUI1L1ilUGU UG111Q11UJ~ wG llau a uviuiai ~cic~uvuc
call later that evening, the details of which Mr. Bromwich glosses over in his declaration.
Bromwich Decl. ¶ 36. In that call, Mr. Bromwich proposed that Apple indicate which
individuals, even if there were only two, would be available for interviews the week of
November 18. Based on Apple's response, Mr. Bromwich said he would determine
whether it made sense for him to make the trip to California that week or instead make the
trip sometime later in the near future. I told him that I would check with Apple to see who
would be available.
In an email the next day, I explained to Mr. Bromwich that Apple was
willing to make available on November 18 for interviews its ChiefCompliance Officer and
Head of Global Security (Tom Moyer), and Associate General Counsel, Corporate Law
(Gene Levof~. Dkt. 419, Ex. F. I again urged Mr. Bromwich to postpose the meetings
until the week of December 2 or December 9 so that he could interview others, including
Bruce Sewell (Apple's General Counsel) and Deena Said (the new Antitrust Compliance
Officer). Id. I explained that this approach would "be more efficient and effective in
getting you the information you seek and in working together to ensure that the company
has comprehensive and effective antitrust compliance and training programs." Id.
Mr. Bromwich "accept[ed]" via email Apple's offer for interviews with
only Messrs. Moyer and Levoff the week of November 18. Id. But even though Apple's
offer was to provide only those two individuals for interviews that week,in the same email
Mr. Bromwich immediately sought more interviews during his trip. Id. And when he
learned that Apple General Counsel Bruce Sewell was attending the important Apple v.
Samsung trial during the week of November 18, Mr. Bromwich proposed to "stop by the
A 1 A
cour~nouse ana meet nim. Lxt.4i y, max. n. rvir. tsromwicn also again sougni to mierview
the new Antitrust Compliance Officer, even though the day ofthe interviews was literally
her first day on the job. Id.
Matthew Reilly, one of Apple's outside attorneys from Simpson Thatcher
working with the company to revise its antitrust compliance and training programs, wrote a
letter to Mr. Bromwich on November 22, 2013, explaining once again how "incredibly
disruptive" Mr. Bromwich's requests had become. Dkt. 419, Ex. I. Apple reminded Mr.
Bromwich that the "reason for th[e] three-month window is ofcourse to provide Apple and
its counsel with time to develop new, comprehensive antitrust training and compliance
materials in accordance with the Final Judgment, without hampering Apple's business."
Id. And Apple tried to persuade Mr. Bromwich that his "continual requests for additional
interviews and other information before January 14, 2014 affirmatively hamper Apple's
efforts to develop a new antitrust training and compliance program as efficiently and
effectively as possible within the deadline set by Judge Cote." Id. Nevertheless,"[i]n the
spirit of cooperation," Apple proposed a schedule for eleven additional interviews to take
place between December 4 and 6. Id.
Apple objected on the record to the Final Judgment before it was issued
(Dkt. 331 at 9-13), and it objected to Mr. Bromwich's appointment(Dkt. 419 ¶ 3). Apple
has also promptly raised objections to Mr. Bromwich's conduct since his appointment.
Apple raised objections with Mr. Bromwich at the October 22,2013 meeting, as well as in
my October 31, 2013 letter, my November 11, 2013 email, and the November 22, 2013
letter from Mr. Reilly. Apple forwarded the October 31 letter to plaintiffs, putting it on
notice of Apple's objections.
It also discussed these objections with plaintiffs in
ieieconzerences on ivovemner ~+ ana liecemoer y. tipple zur~ner aiscussea its on~ections
with plaintiffs in a letter dated December 6, 2013 (Dkt. 419 Ex. Q), as well as in letters
dated December 21,2013 and January 3, 2014. True and correct copies ofthese letters are
attached hereto as Exhibits A and B, respectively. Notwithstanding Apple's repeated
objections and the plaintiffs' expressions of sympathy for our position, the Justice
Department dragged its feet in the meet and confer process and took no real action. In a
December 17, 2013 letter from Noreen Krall to plaintiffs, Apple also made concrete
proposals for moving forward in the event a stay is not granted, including regarding fees
and costs, staffing, and how the monitorship should proceed. A true and correct copy of
this letter is attached hereto as Exhibit C. Plaintiffs rejected these proposals in a letter to
Ms. Krall dated December 24, 2013, a true and correct copy of which is attached hereto as
Mr. Bromwich's and plaintiffs' suggestions that he has not sought to
contact Apple's personnel directly(Bromwich Decl. ¶ 27; Opp. 10 n.3) is wrong. First, as
he admits in his declaration (Bromwich Decl. ¶¶ 26-27), Mr. Bromwich sent a letter
directly to CEO Tim Cook on November 1. See Dkt. 419,Ex. M. Mr. Cook received that
letter via Federal Express on November 4. The content of that letter demonstrates Mr.
Bromwich's concern that Apple's lawyers were getting in the way of his work and that he
was trying to contact Apple personnel directly to bypass outside counsel. See Dkt.419,Ex.
M. Second, Mr. Bromwich wrote a letter to the Boaxd of Directors dated November 22,
2013 (Dkt. 419, Ex. J), which his colleague Maria Cirincione emailed to Noreen Krall. A
true and correct copy of the email exchange between Ms. Cirincione and Ms. Krall is
attached hereto as Exhibit E. Ms. Cirincione asked Ms. Krall to email the letter to the
hoard of i~ireciors, bui sne also inaicaiea sne wouia ne maiimg naracopies io inem
directly. See Ex. E. When Ms. Krall told Ms. Cirincione that "hardcopies to their business
addresses are not necessary or customary in our communications with board members,"
Ms. Cirincione responded,"Thank you." Id. While it appears that Ms. Cirincione did not
ultimately send the hardcopies, the letter constituted an explicit effort to "promote" a
"relationship between the company liaisons and the monitoring team that is unfiltered
through outside counsel," and it inappropriately solicited responses from directors without
aid of Apple's counsel. Dkt. 419,Ex. J. Finally, Mr.Bromwich also pressed several times
for direct communications with the new Antitrust Compliance Officer that Apple
appointed pursuant to the Final Judgment.
On December 5, 2013, Mr. Bromwich interviewed Dr. Ron Sugar,
Chairman of Apple's Audit and Finance Committee. Dr. Sugar is the former president and
CEO of Northrop Grumman,and he also currently chairs Chevron's Audit Committee and
serves on Amgen's Compliance Committee. Dr. Sugar had to travel from Southern
California to Sunnyvale specifically for this interview, which took the bulk of his day, at
great inconvenience to himself and to the detriment of his other business obligations. I
attended Dr. Sugar's interview. Mr. Bromwich did not even mention Apple until about
fifteen minutes into the interview. He seemed to run out of questions, and he finished
early, before the one-hour time allotment ended.
During his interview, Dr. Sugar noted that there is no ambiguity in the mind
of the Board as to the current situation—there is a judgment, and although Apple is
appealing thatjudgment, Apple needed to and would comply with it. Dr. Sugar explained
that Apple would like to have the best compliance program possible, and also said it would
ne neiprui io know wnai, in ivir. rsromwicn s view, gooa aniiirust compliance programs
and policies will mean two years from now. Mr. Bromwich provided generic responses
about training, but then used the question as a springboard to describe his authority in
broad terms. He said he "will need to crawl into a company" to perform his duties as
monitor and expressed his view that Apple needed to "take down barriers" to his access.
He also noted that he needed direct contact with the principals and that this was his first
monitorship that has involved outside counsel. He emphasized that he needed to be able to
pick up the phone and call Dr. Sugar directly.
During the same December 5 interview with Dr. Sugar, Mr. Bromwich
asked questions that extended beyond the subject matter ofthis litigation. For example, he
asked Dr. Sugar what were the most significant compliance problems at the time Dr. Sugar
joined Apple's Audit Committee. I objected on the basis that this questioning went beyond
Mr. Bromwich's mandate, and I cautioned Dr. Sugar to avoid revealing privileged
information in any answer.
I declare under penalty of perjury, under the laws of the United States, that the
foregoing is true and correct.
Dated: January 7, 2014
Theodore J. Boutrous, Jr.