Unites States of America v. Apple, Inc. et al
OPINION AND ORDER 103897. Apple's motion to suspend operation of Section VI of the Injunction because the Monitor must be disqualified, or on any other grounds preserved and argued to this Court is denied. Apple's motion for a stay of this ruling pending its appeal to the Second Circuit is denied with the following exception. Apple is granted a stay of Section VI of the Injunction from the filing of this Opinion until Tuesday, January 21, 2014, at noon, in order to pursue an appeal of this Opinion and Order denying a stay, on the condition that Apple file its motion for a stay by Saturday, January 18, 2014 at noon. (Signed by Judge Denise L. Cote on 1/16/2014) (gr) Modified on 1/28/2014 (nt).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA,
APPLE INC., et al.,
THE STATE OF TEXAS, et al.,
PENGUIN GROUP (USA) INC., et al.,
12 Civ. 2826 (DLC)
OPINION & ORDER
12 Civ. 3394 (DLC)
For the plaintiff the United States:
Mark W. Ryan
Lawrence E. Buterman
United States Department of Justice
450 Fifth Street, N.W., Suite 4000
Washington, DC 20530
For the plaintiff States:
For State of Texas, Liaison Counsel for Plaintiff States
Office of the Attorney General of Texas
P.O. Box 12548
Austin, TX 78711
For State of Connecticut, Liaison Counsel for Plaintiff States
W. Joseph Nielsen
Gary M. Becker
Office of the Attorney General of Connecticut
55 Elm Street
Hartford, CT 06106
For the defendant Apple, Inc.:
Theodore J. Boutrous, Jr.
Daniel G. Swanson
Gibson, Dunn & Crutcher, LLP
333 South Grand Avenue
Los Angeles, CA 90071
Gibson, Dunn & Crutcher, LLP
1050 Connecticut Ave, N.W.
Washington, DC 20036
DENISE COTE, District Judge:
On December 14, 2013, defendant Apple, Inc. (“Apple”) filed
a motion by order to show cause for a stay of one aspect of the
injunctive relief granted by this Court’s Final Judgment of
September 5, 2013 (“Judgment”).
The motion is addressed to the
External Compliance Monitor (“Monitor”) position created in the
Apple originally premised its motion for a stay of the
monitorship on several arguments that it is no longer pursuing.
By the time Apple filed its reply brief and presented its oral
argument on the motion, Apple’s motion for a stay was premised
on an application to disqualify the Monitor, along with its
contention that it would be irreparably harmed if the Court
denied that application.
It contends that the millions of
dollars in fees that it expects to be paying the Monitor over
the course of the next two years, and the Monitor’s desire to
interview company executives and Board members constitutes
On Monday, January 13, during oral argument
on this motion, the Court advised Apple that it would be denying
its application and would be filing an Opinion shortly to
explain its reasons.
This Opinion, together with the Court’s
observations at the January 13 conference, contains those
In brief, many of the arguments which Apple once made (and
is no longer pursuing) have been waived or are moot.
addition, Apple has access to a dispute resolution mechanism
which has and will be in place to ensure that the Monitor does
not exceed the bounds of the Injunction.
Finally, there has
been no showing that the Monitor should be disqualified or that
Apple will suffer irreparable harm.
For these and all of the
other reasons stated herein, Apple’s request for a stay is
On July 10, 2013, following a bench trial, this Court found
that Apple had violated Section 1 of the Sherman Act by
participating fulsomely in a price fixing conspiracy with
various book publishers, in which Apple facilitated and
encouraged the publishers to collectively raise e-book prices in
an illegal restraint of trade.
United States v. Apple Inc., 12
Civ. 2826 (DLC), 2013 WL 3454986 (S.D.N.Y. July 10, 2013)
The Court issued a Final Judgment and Order
Entering Permanent Injunction (“Injunction”) on September 5.
Among other things, the Injunction created the position of
See Injunction § VI.
To put Apple’s stay motion in context, it is helpful to lay
out the factual circumstances surrounding the adoption of the
Monitor provision in the Injunction, the terms of Injunction
that concern the Monitor, the process by which a Monitor was
chosen, the interactions between the Monitor and Apple in the
months following the Monitor’s appointment, and the procedural
history associated with the filing of this motion for a stay.
The Adoption of the External Monitor Provision in the
Injunction and Apple’s Involvement in the Injunction
On the day the Trial Opinion was filed, the Court issued a
scheduling Order requiring the plaintiffs to submit a proposed
injunction (“Proposed Injunction”) by July 19, and for Apple to
submit any submissions related to the Proposed Injunction by
Pursuant to that Order, the plaintiffs submitted on
July 19 their Proposed Injunction, which provided inter alia,
for the creation of an “External Monitor” position.
described in the Proposed Injunction, the External Monitor would
for a period of ten years “have the power and authority to
monitor Apple’s compliance with the terms of this Final
Judgment, to review and evaluate Apple’s existing internal
antitrust compliance policies and procedures, and to recommend
to Apple changes to address any deficiencies in those policies
Apple submitted its memorandum of law setting forth its
objections to the Proposed Injunction on August 2.
filing, Apple did not object to the Court’s authority –constitutional or otherwise -- to appoint an External Monitor
according to the terms set forth in the Proposed Injunction.
Instead, Apple objected, in sum, that the Court should not
impose an External Monitor because “[e]xternal monitorships can
be extremely costly and burdensome, and in a case like this
would have few benefits.”
Apple acknowledged that the
Government could properly obtain injunctive relief in an
antitrust case not only to cure the ill effects of past illegal
conduct, but also to “‘assure the public freedom from its
continuance.’” (quoting United States v. Glaxo Grp., 410 U.S.
52, 64 (1973) (citation omitted)).
It emphasized, however, its
view that several provisions in the Proposed Injunction were
punitive, vague or unnecessary.
A conference was held on August 9 to discuss, among other
things, Apple’s motion to stay all further proceedings against
it as well as the terms of any injunction.
After the request
for a stay was denied, the Court addressed the schedule for
remaining proceedings, the terms of the Proposed Injunction, and
Apple’s objections to it.
Before addressing the particular
terms of the Proposed Injunction, the Court described in detail
the legal standard it would apply.
As of the date of the conference, Apple had been on notice
of the plaintiffs’ proposal for an External Monitor for two
The Court had hoped that Apple would submit evidence of
antitrust compliance reform which would render the appointment
of an External Monitor unnecessary.
As the Court said at the
My preference would be to appoint no external
compliance monitor. I would prefer that Apple adopt a
vigorous in-house antitrust enforcement program and
convince the plaintiffs, and this Court, that there is
no need for a monitor.
The Court emphasized the narrow scope of its aim, explaining
I don’t want to do more than necessary here. I want
to protect the market, protect the consumer, encourage
price competition, and . . . allow this market to
develop and change and prosper in ways we all can’t
imagine today. And that goes for Apple as well.
Disappointingly, Apple made little showing at or before the
August 9 conference that it had taken to heart the seriousness
of the price fixing conspiracy it orchestrated.
Nor did Apple
provide the Court with any evidence that it was seriously
reforming its internal antitrust compliance policies to prevent
a repeat of its violation.
Apple’s submissions failed to
demonstrate that it took seriously the burden that its
participation in the price fixing conspiracy imposed on
consumers and on the resources of the federal and state
governments that were compelled to bring Apple and the
publishers into federal court to put an end to that harm.
Instead, as the Court noted at the August 9 conference, “[a]ll I
have [from] Apple’s submission is a very cryptic reference to
the fact that it enhanced some compliance program it adopted at
some point during this litigation.”
The Court explained that
would have appreciated a presentation by Apple that a
monitor is unnecessary. At this point, it has made no
such showing. There is no admission of wrongdoing.
There is no contrition. There is no showing of any
In its August 2 submission, Apple stated that is “has an
antitrust compliance program, which it has enhanced with a
special antitrust legal department since the conduct that the
Court found violated Section 1 in this case occurred.”
awareness of illegality or the danger of collusion
publisher defendants to raise eBook prices. There
no showing of institutional reforms to ensure that
executives will never engage again in such willful
blatant violations of the law.
After hearing the Court’s comments on their disputes
regarding several provisions in the Proposed Injunction, the
parties agreed to confer with each other further regarding its
On August 23, Apple and the plaintiffs each filed a
revised proposed injunction in anticipation of a conference to
be held on August 27.
In a supporting submission, Apple
acknowledged the Court’s expressed preference that Apple itself
adopt a “vigorous in-house antitrust enforcement program.”
its letter to the Court, it explained that it had hired, since
the underlying activities which formed the basis of the
litigation, two seasoned antitrust lawyers with extensive
experience at both the Department of Justice (“DOJ”) and the
Federal Trade Commission (“FTC”), that it had improved its
compliance programs, and that the lessons it had learned from
this lawsuit would be incorporated into advising its employees.
An attachment to the letter added, inter alia, that Apple
intended to establish an annual formal antitrust compliance
training program, publish a revised compliance guide, and
institute regular auditing by an “Antitrust Compliance
In light of these steps, Apple argued that the
appointment of an External Monitor was “unreasonable and
unjustified” and would be punitive.
Apple made no argument that
the appointment of an External Monitor would be beyond the
On August 27, the Court held another conference to finalize
the terms of an injunction.
The Court made a set of proposals
regarding several sections of the parties’ most recent drafts of
When it came to a discussion of the appointment
of an External Monitor, the Court cited legal authority for the
appointment of an External Monitor, and described the legal
standards that governed such an appointment as well as the
limitations on the role of an External Monitor.
The Court also
observed that the trial had demonstrated a “blatant and
aggressive disregard at Apple for the requirements of the law.”
The Court noted that “Apple executives used their considerable
skills to orchestrate a price-fixing scheme that significantly
raised the prices of E-Books” and that “[t]his conduct included
Apple lawyers and its highest-level executives.”
It then noted
that, even after the Court’s August 9 admonition that Apple
should provide evidence of a robust internal antitrust
compliance program so that the Court would not be forced to
impose an External Monitor, Apple had failed to make such a
The Court explained that:
Apple has been given several opportunities to
demonstrate to the Court that it has taken the lessons
of this litigation seriously. I am disappointed to
say that it had not taken advantage of those
The Court also described how it had invited a presentation by
Apple that a monitor was unnecessary at the August 2 conference,
but that Apple still had made no such presentation:
I invited and expected a detailed and persuasive
presentation of the steps Apple was committed to take
to ensure that the government need never again expend
its resources to bring Apple into court for violations
of the Country’s antitrust laws. Apple’s August 19
letter to the government is its most detailed response
in this regard and it is inadequate.
Consequently, the Court explained that:
[A]lthough I have been reluctant to appoint a monitor
for several reasons . . . I believe based on the
record before me now that I should. I believe that a
monitor with a carefully defined role can help ensure
that competition is restored and preserved.
In deciding to make the creation of an Monitor position a
part of the Injunction, the Court tailored the Monitor’s role
narrowly -- departing from the more expansive monitorship the
Department of Justice had proposed –- and reduced the
presumptive term from five years to two.2
As the Court explained
at the August 27 conference:
I am giving the monitor a somewhat different function
than that proposed by the plaintiffs. The monitor
will not be charged with assessing Apple’s compliance
The plaintiffs’ August 23 proposal was for an injunction,
including the term of an External Monitor, to run for five
generally with the terms of the final judgment. This
could be a very expensive and intrusive undertaking.
The monitor, however will have two other important
tasks . . . . The monitor will evaluate Apple’s
internal antitrust compliance policies . . . [and]
will evaluate Apple’s antitrust training program.
The Court finally noted its hope that Apple’s professed
commitment to reforming its antitrust compliance policies and
maintaining a culture of respect for the antitrust laws of this
country was genuine:
I am hopeful that Apple will bring its culture of
excellence and exceptionalism to this task . . . .
But, even if it chooses not to create a model program,
it must create a meaningful training program, one that
is comprehensive and effective. To ensure that it
does so, I will use a monitor. . . . Apple could, of
course, think of this training and any improvements to
its policies and procedures as mere window dressing,
the price it must pay to appear to comply with the
injunction. I trust, however, that it will make a
sincere commitment to reform its culture.
After the Court described each of its proposed revisions to
the parties’ drafts, there was a break in the conference so that
the parties could reflect on the proposals and address the Court
The Court noted that all of the parties’ previously
expressed objections were preserved.
After that break, Apple
made a number of requests regarding other provisions in the
proposed injunction, but it did not take issue with any of the
Court’s remarks concerning the rationale for the appointment of
a Monitor or with the Court’s proposals for the tasks to be
undertaken by such a person.
On September 5, DOJ provided the Court with a revised
proposed injunction, “the form of which has been agreed to by
While the letter noted that Apple was reserving
all of its appellate rights, Apple did not separately raise with
the Court any additional objection about the substance or
wording of the revised proposed injunction.
Among other things,
it made no objection to the description of the tasks assigned to
the Monitor or to the description of his compensation.
The Terms of the External Monitor Component of the
On September 5, the Court entered the Injunction which
included the Monitor component.
The appointment of the Monitor
was for a period of two years, subject to one year extensions by
the Court if the Court deemed such extensions necessary.
Injunction § VI.A.
Under the terms of the Injunction, the Monitor has two main
Reviewing and producing recommendations and reports
about: 1) Apple’s antitrust compliance policies and procedures;
and 2) Apple’s antitrust training program.
provided that the Monitor would submit a written report to
Apple, the plaintiffs, and the Court 180 days after the
Monitor’s appointment assessing Apple’s antitrust compliance
policies, procedures and training.
Id. § VI.C.
The Monitor was
directed to provide additional reports at six month intervals
thereafter, and Apple was provided with a mechanism to object to
The Injunction provided for the setting of the Monitor’s
compensation, as approved by DOJ.
Section VI.I provided that
The compensation of the [Monitor] and any persons
hired to assist the [Monitor] shall be on reasonable
and customary terms commensurate with the individuals’
experience and responsibilities and consistent with
reasonable expense guidelines.
The Injunction also required Apple to assist the Monitor in
the discharge of his or her responsibilities.
provided that “Apple shall assist the External Compliance
Monitor in performance of the responsibilities set forth in [the
Injunction],” and that “Apple shall take no action to interfere
with or to impede the [Monitor’s] accomplishment of its
responsibilities.” Id. § VI.G.
It allowed the Monitor “on
reasonable notice to Apple” to interview “any” Apple personnel,
and permitted Apple personnel to have counsel present.
gave the Monitor the right to inspect and copy “any” documents.
Finally, the Injunction set forth a process to govern the
resolution of any of Apple’s objections to the Monitor’s
Section IV.H of the Injunction provided that prior to
bringing any objection to the Court:
Any objections by Apple to actions by the External
Compliance Monitor in fulfillment of the External
Compliance Monitor’s responsibilities must be conveyed
in writing to the United States and the Representative
Plaintiff States within ten calendar days after the
action giving rise to the objection.
Id. at VI.H.
III. The Selection of a Monitor
On September 27, the Court issued an Order providing a
process for the plaintiffs to propose candidates for the
position of External Monitor, requiring prompt service of notice
of the proposed candidates on Apple, and allowing for Apple to
have the opportunity to object to the candidates proposed.
September 30, the plaintiffs submitted the names of two
candidates to the Court to serve as the Monitor.3
letter, the plaintiffs suggested that the Court conduct in
person interviews with the candidates.
One of the proposed
candidates was Michael Bromwich (“Bromwich”).
suggested that Bromwich be assisted by antitrust specialist
Bernard Nigro (“Nigro”).
On October 7, Apple submitted a letter objecting to both of
Its objection to Bromwich was brief, and
essentially confined to the argument that Nigro was an antitrust
specialist and that a dual-monitor structure was unnecessary.
The plaintiffs’ candidate proposals, and Apple’s objections,
were to be submitted to the Court in camera to protect the
reputations of the candidates.
Apple, however, made a lengthy objection to the other candidate.4
Apple did not object to the Court conducting in-person
interviews in aid of selection of a Monitor.
Injunction made Apple responsible for reasonable expenses
incurred by the candidates for any interview by the Court.
at § VI.A.
Following interviews with both of the Monitor
candidates by the Court, the Court appointed Michael Bromwich as
Monitor on October 16.
The Monitor’s Interactions with Apple
The record shows that Apple’s relationship with the Monitor
began on a hopeful and collaborative note, but promptly
deteriorated on the basis of a number of disagreements.
these disagreements concerned the Monitor’s requests to
interview members of Apple’s Board and certain Apple executives,
and the Monitor’s fee schedule.
To put Apple’s objections to
the Monitor’s conduct into context, it will be helpful to lay
out in some detail the Monitor’s interactions with Apple as set
out in the record the parties have submitted to the Court in
connection with Apple’s application for a stay.
The Monitor’s Initial Efforts to Schedule Preliminary
Interviews with Apple Executives and Board Members
On October 17, the day after the Monitor was appointed,
Apple’s Kyle Andeer, a Senior Director for Competition Law &
The objection was without merit and concerned asserted
conflicts of interests.
Policy and for Commercial & Retail Law (“Andeer”), seized the
initiative and wrote to the Monitor to suggest an early call or
He explained that he was committed to working with the
Monitor to develop a “best of class” antitrust compliance
program for iTunes, and that Apple was already hard at work
developing that program in consultation with Keven Arquit
(“Arquit”) and Matt Reilly (“Reilly”), two Simpson Thacher
The Monitor had his first meeting with Apple in New York on
Present at the meeting were Andeer, Gibson Dunn’s
Theodore J. Boutrous, Jr. (“Boutrous”),5 and Simpson Thacher’s
Arquit and Reilly.
The Monitor addressed his staffing and
approach to monitoring.
He acknowledged that his authority was
limited to the scope of the Judgment and that he wanted to use
the initial ninety day period to understand the company’s
oversight structure for antitrust compliance, its existing
policies and procedures, the role of the Board’s Audit and
Finance Committee’s in compliance matters, among other things.
The Monitor requested preliminary meetings or interviews with
members of the Board of Directors and senior management the week
of November 18 –- just shy of a month away -- and described
Boutrous had appeared at the August 27, 2013 conference to
discuss the terms of the Injunction.
documents that he believed were relevant that he would like to
The Monitor received the first push-back from Apple in
response to this initial request for interviews.
the Monitor on notice of its objection to his meeting with
members of its Board or company executives.
representative explained, inter alia, that its Board members and
senior executives were very busy and that there was “a lot of
anger” about the case within Apple.
He added that Apple’s
senior executives did not expect to have to deal with the
He also informed the Monitor that the Board would be
meeting during the week of October 28 and would not be meeting
again for another six months.
Apple assured the Monitor,
however, that the company was committed to ensuring that it had
an effective and robust compliance program.
On October 24, the Monitor wrote to Andeer and offered to
have a “brief initial phone call” with the Board and/or its
Audit Committee the following week since Andeer had advised the
Monitor that there would not be another meeting again for six
The Monitor explained that this would give Board
members the opportunity to ask any questions they might have.
Andeer responded with a request that Simpson Thacher’s Reilly be
copied on all future communications and indicated that there
would was no Board meeting scheduled for the following week.
The Monitor and Apple Disagree as to the Terms of the
Implementation of the Monitorship.
On October 23, the Monitor sent Andeer a draft letter
setting forth a description of the duties and responsibilities
of the Monitor under the Judgment.
The draft included
information about the Monitor’s fee and issues of
The next day, Andeer sent the Monitor a
lengthy response to the October 23 draft letter describing the
In the response, Apple objected to the
Monitor’s fee of $1,100 per hour and the fee for Mr. Nigro of
$1,025 per hour.
Apple offered to compensate them at the rate
of $800 and $700, respectively, and indicated that “like all of
Apple’s legal service providers” that the Monitor must comply
with Apple’s Outside Service Provider Policy and its standard
Over the next few days, Apple and the Monitor continued to
disagree with each other over the Monitor’s fees.
26, the Monitor responded that the October 23 draft had been
provided to give Apple an opportunity to revise the
confidentiality provisions, not to negotiate fees since the
Monitor was serving as an independent compliance monitor and not
as a provider of legal services to Apple.
On October 28, Andeer
responded that he was disappointed by the Monitor’s position on
rates and other fees.
On October 29, Nigro explained his view
that it was inappropriate for the Monitor to engage in a
negotiation regarding fees with the entity that it is
Nigro also represented that the October 23 draft,
which recited the Monitor’s fees, had been shared with DOJ
before being provided to Apple.
Then, following up on the Monitor’s request for documents
made on October 22, the Monitor requested in writing on October
29 that Apple provide materials related to its past and current
antitrust compliance policies, procedures, and training
materials, among other things.
The Monitor did not receive any
of these materials until after his first visit to Apple, which
occurred on November 18.
On October 31, Apple’s outside counsel Boutrous wrote to
the Monitor to present formal objections to his fees and
He also assured the Monitor that Apple was
fully committed to ensuring that its training program and
procedures for antitrust compliance were “robust and effective.”
The letter raised three issues.
First, Boutrous represented
that it would be “extremely disruptive,” would make no sense,
and would be premature for the Monitor to interview Apple Board
members or executives until ninety days after the beginning of
Boutrous relied on Section VI.C of the
Judgment, which requires the Monitor to review Apple’s policies
and procedures as they exist ninety days after his appointment.6
As for the Monitor’s proposed fees, Boutrous took the position
that they were not reasonable and customary for a lawyer or
monitor, and that it appeared that the DOJ had not yet approved
Finally, he asked the Monitor to execute an attached non-
Boutrous advised the Monitor to direct
any future communication on these issues to him and that he had
provided the plaintiffs with notice of Apple’s three objections.
As Boutrous had represented, on October 31, he wrote to
plaintiffs to complain about certain actions taken by the
Monitor, including a request to interview the entire Board and
He also objected to the Monitor’s fees as
“well above” those typically paid to law firm partners.
Boutrous and plaintiffs’ counsel discussed these objections on
The Monitor’s November 1 Letters to Apple CEO Cook and
General Counsel Sewell
The Monitor responded to the Boutrous letter on November 1.
He declined to execute Apple’s proposed confidentiality
agreement for several reasons, including the fact that it could
Apple does not contend in this motion that the Injunction did
not permit the Monitor to begin work until ninety days after his
appointment. While the Injunction requires the Monitor to
review the substance of Apple’s compliance program as it exists
ninety days after his appointment, the monitorship began with
the appointment. Any monitor would be expected to prepare
diligently upon appointment to perform all assigned tasks.
strip this Court of jurisdiction over any dispute.
noted that he had still received none of the materials requested
on October 22.
He explained that he wanted to get off to a fast
start, and hoped that Apple would reconsider its position
blocking any interview with anyone from the company other than
The Monitor enclosed letters to be provided to
Tim Cook (“Cook”) and Bruce Sewell (“Sewell”), Apple’s CEO and
General Counsel, respectively.
In those letters, the Monitor
introduced himself, shared some information about his
responsibilities, expressed hope for a constructive
relationship, and voiced concerns about his initial interactions
with the company.
Among other things, the Monitor expressed his
belief that his relationship with Apple need not and should not
He informed these executives that he had not
yet received any of the materials he had requested and had been
denied access to executives and Board members.
represented that he had assured Apple’s counsel that any initial
interviews would be limited to one hour.
On Monday, November 4, Boutrous assured the Monitor that
the letters to Cook and Sewell had been delivered, attached a
response from Sewell, and asked to speak to the Monitor by
telephone to find a “smooth path to our shared objectives.”
his letter, Sewell reported that Apple’s new internal Antitrust
Compliance Officer (“ACO”) would dedicate the next two months to
developing new training material and redesigning Apple’s
compliance program, but that that officer needed to work without
interruption in doing so.7
Sewell assured the Monitor that the
ACO would eventually reach out to the Monitor to provide a
comprehensive report “so you can begin your monitoring
While Sewell expressed a desire to collaborate with
the Monitor, he explained that he had a disagreement with the
Monitor over the scope and timing of any meetings and referred
to the request for documents about antitrust policies and
practices as a request for “voluminous historical documents”.
That same day, the Monitor renewed his request to schedule
preliminary meetings during the next two weeks with Apple
In a November 5 letter to Sewell, the Monitor
explained that in each of the four monitorships with which he
had been involved over the past eleven years, the Monitor had
met with top management within two weeks of appointment.
Monitor also described the documents which he had requested, and
argued that they were narrowly drawn requests.
He added that no
one had previously suggested that the request was anything other
than modest and reasonable and expressed a willingness to
discuss the issue further.
There is no other evidence that any
Section V of the Injunction requires Apple to hire an ACO who
will report to the Board’s Audit Committee and be responsible
for supervising Apple’s antitrust compliance efforts.
representative of Apple ever took issue with the scope of the
Monitor’s document request.
On November 6, the Monitor spoke with Boutrous and Daniel
G. Swanson of Gibson Dunn.
In that discussion, Boutrous stated
that it was not Apple’s position that the Monitor should not
start work, including interviews, before January 14, 2014.
Boutrous suggested that the Monitor interview Sewell and others
during the week of November 18 or in early December to help
bring the Monitor up to speed, even though Apple employees would
view the interviews as “formidable” in concept.
acknowledged that the interviews might ease the road going
But, Boutrous then wrote to the Monitor on November 7 to
propose that any interviews occur the week of December 2.
listed nine potential persons for interviews.
responded that same day that he wanted to keep trying to
schedule interviews for the week of November 18.
asked to add Messrs. Cook, Phil Schiller, Eddie Cue and two to
three Board members who he believed were based near Apple’s
headquarters to the list of nine persons.8
In making this motion for a stay, Apple contends that the
Monitor made a particular effort to interview Vice President Al
Gore, who is now an Apple Board member. The parties’
submissions only reveal a single request by the Monitor to
interview Gore in particular, and that was made in the Monitor’s
request of November 7 to interview two or three Board members
list of nine persons, and the Monitor’s request for an
additional five to six persons, this constitutes a list of
fourteen to fifteen persons for interviews by the Monitor.
The Tone in the Interactions between Apple and the
Monitor Shifts Again.
On Saturday, November 9, Boutrous acknowledged that the
Monitor had planned to be out of the country the week of
December 2, but requested that the Monitor rearrange his
schedule to conduct any interviews that week.
that the nine persons listed in his November 7 email would be
available for interviews and the new ACO will be “up and
That same day the Monitor insisted that the visits occur
the week of November 18, or if Apple preferred, the week of
Noting that Apple had been on notice since October
22 that the Monitor intended to visit that week, the Monitor
asked Apple to confirm which of the 15 persons identified in
their exchange of correspondence was “unavailable for as little
as an hour any day the week of November 18.”
This email of
November 9 and the Boutrous response of November 11 reflect a
shift in tone.
They both express disappointment with the other.
Boutrous characterized the Monitor’s approach as “unreasonable,
who the Monitor believed were based near Apple’s headquarters.
The Monitor’s request listed the three by name; one of those
names was Gore.
unnecessary and unwarranted.”
He argued that it went well
beyond the scope of the Judgment and this Court’s guidance to
the parties and Monitor.
The Monitor proposed a telephone call,
and on November 11 the Monitor and Boutrous spoke.
In a brief conversation on November 11, the Monitor asked
that Apple make additional efforts to arrange interviews for the
week of November 18, and advised Boutrous that a failure to
permit a single interview within a month of appointment was
inconsistent with Apple’s stated commitment to cooperate with
Boutrous describes the conversation as cordial.
On November 12, Boutrous continued to urge the Monitor to
make the trip to Apple in December, when a “fuller slate of
folks” would be available for interviews, including Sewell and
He did, however, offer to have two individuals
available for interviews the week of November 18.
promptly accepted the offer to interview the two individuals,
but expressed the hope that others in the list of fifteen would
become available for interviews and that the materials requested
on October 22 could be made available.
Boutrous assured the
Monitor on November 13 that the materials would be provided,
identifying outside counsel Matt Reilly from Simpson Thacher as
the attorney who would be coordinating that production.
On Friday, November 15, the Monitor advised Boutrous that
he had not yet received any of the materials.
Apple’s counsel advised the Monitor that three interviews had
been scheduled for Monday morning to discuss confidentiality,
Apple’s compliance program, and to give the Monitor an overview
of the Audit Committee for the Board.
On November 18, the Monitor conducted one-hour interviews
with (1) Chief Compliance Officer Tom Moyer, and (2) Gene
Levoff, an attorney with responsibilities relating to the Audit
and Finance Committee and risk management.
Boutrous and two
Simpson Thacher attorneys were present during the interviews.
Apple had also arranged for the Monitor to meet Noreen Krall,
its Chief of Litigation, to discuss fees and confidentiality
The Monitor’s Efforts to Interview Apple Board Members
and Executives Following November 18
The Monitor advised Apple on November 18 that the morning’s
interviews had gone smoothly and been informative.
hope that additional interviews could be arranged for that week,
or if necessary the period between December 4 to 6.
promptly advised the Monitor that no more interviews would be
scheduled for that week, but that it had started to work on a
schedule for December 4 to 6.
On November 19, the Monitor asked to meet with two Apple
Board members -– Andrea Jung and Dr. Ronald Sugar (“Sugar”) -in New York and Washington, D.C. in the next few days.
November 21, Apple asked the Monitor to be patient, and said
that it would check to see if Sugar would be available for an
interview in California during the Monitor’s early December
On November 21, Apple provided some of the documents
responsive to the Monitor’s requests on October 22 and 29.
is the only production Apple has made to the Monitor.
The Monitor’s November 22 Letter to Board Members
On November 22, the Monitor sent Apple’s counsel a letter
for its Board of Directors and asked that it be circulated to
The letter described the Judgment and expressed
disappointment at the lack of cooperation he had received from
He explained that he had wanted to have initial
interviews with executives and members of the Board to introduce
himself, lay the foundation for a relationship, and learn some
basic facts about Apple’s compliance framework.
proposing on October 22 that he visit Cupertino for those intial
interviews the week of November 18, Apple only made two
individuals available for interviews during that trip and in
advance of the trip did not provide any of the materials the
Monitor had requested.
On November 22, Simpson Thacher’s Reilly wrote to the
He characterized the Monitor’s requests for interviews
as “inconsistent with Judge Cote’s direction and counter27
productive to Apple’s extensive efforts to develop a
comprehensive new antitrust training and monitoring program,” as
well as disruptive.
Reilly noted that Apple had already made
two senior Apple attorneys available for interviews in November
and had provided the Monitor with some documents and would be
Reilly proposed a schedule for twelve
interviews in early December, and suggested that a small number
of additional interviews with executives and content managers
take place in early February.
He noted that counsel would
attend any meetings between the Monitor and an Apple business
executive or manager.
Sewell wrote to the Monitor on November 25, expressing hope
that Apple and the Monitor could work cooperatively to conduct
He noted that Apple had now confirmed interviews
with approximately a dozen senior Apple witnesses for December.
The Monitor promptly thanked Sewell for his note, but continued
to express hope that the other executives and Board members with
whom he had asked to meet could be made available.9
The Interviews between December 4 and 6
Between December 4 and 6, the Monitor interviewed Sugar,
Apple’s Chair of the Board of Director’s Audit Committee, and
nine Apple employees.
Two of the nine were employees that the
The Monitor questioned the relevance of four out of the twelve
of Apple’s proposed interviewees.
Monitor had already interviewed in November; the Monitor had not
asked for second interviews of these individuals.
10, the Monitor interviewed Sewell by telephone.
counsel for Apple attended each interview, as well as Apple’s
On December 6, Apple wrote to the plaintiffs for a second
time to complain about the Monitor.
Since his appointment, Apple has permitted the Monitor to
conduct 13 hours of interviews of eleven persons during two
visits to California.
These interviews have included one Board
member and one senior executive.
interviewed are lawyers.
Seven of the eleven people
In response to the request for
documents, the Monitor has been provided with 303 pages of
The Proposals in the Court’s November 20 Order
Unaware of any of these interactions between the Monitor
and Apple, that the Monitor was having difficulty obtaining
cooperation from Apple, or that Apple had complaints about the
Monitor, the Court issued an Order dated November 20 pursuant to
Federal Rule of Civil Procedure 53(b)(2) to give the parties
notice of a “proposed” amendment to the Order of October 16
appointing Bromwich as Monitor (“November 20 Order”).
53(b)(2) provides that an “appointing order . . . must state,”
certain enumerated characteristics of “the master’s duties,”
including inter alia whether the master may communicate ex parte
with the Court or with the parties.
The Order included
proposals for clarifying each of the terms of the monitorship
that Rule 53(b)(2) enumerates.
These included a proposal that
the Monitor could brief the Court ex parte and orally at least
once a month.
The Court solicited objections as to each
proposal from the parties.
The November 20 Order was issued in
the hope that the further definition of the Monitor’s duties
would be a collaborative process consistent with Apple’s stated
commitment to reforming its antitrust compliance policies.
On November 27, Apple submitted objections to the
Apple alleged that entry of the proposals would
constitute a litany of purported constitutional violations, and
contended that ex parte oral briefings as to the state of
Apple’s antitrust compliance and training program “is grounds
for disqualification of a judge presiding over continuing
proceedings in the matter and in related litigation.”
also raised a number of objections unrelated to the proposals,
which related to the Monitor’s conduct so far.
None of the proposals in the Order of November 27 were ever
In light of Apple’s particularly strong objections to
the ex parte oral briefing proposal, the Court issued an Order
dated December 2, in which it stated that it would not enact the
proposal to allow ex parte communications between the Monitor
and the Court in light of Apple’s objection.10
In response to
Apple’s complaints about the Monitors conduct, the Court
reminded the parties, through that same Order, that any
objections to the Monitor’s performance must be addressed
through the procedure set forth in Section VI.H of the
Injunction, i.e., that any concerns must be raised with the
other party within ten days of the event being objected to.
the extent Apple had not made timely objections about the
Monitor, the Order advised Apple that the Court would entertain
its current objections after Apple consulted with DOJ, but would
require Apple in the future to comply with the provisions of the
Injunction regarding any complaints.
The Court reminded the
parties that after consultation between DOJ and Apple about any
timely objection to the Monitor’s conduct, the Court would, per
its normal procedures of which all parties are aware, “promptly”
schedule a conference to resolve any dispute.
Apple Files the Instant Stay Motion.
Apple did not choose to use the opportunity offered by the
December 2 Order to conclude the meet and confer process with
DOJ in an effort to resolve any outstanding complaints about the
Monitor, and then to bring remaining objections to the Court’s
Instead, on December 13, Apple filed the instant
November 27 was the Wednesday before Thanksgiving; December 2
was the Monday following Thanksgiving.
motion by order to show cause for a stay of Section VI of the
injunction pending appeal.
Despite the absence of any order
adopting any of the proposals in the November 20 Order, Apple
predicated its motion for a stay in significant part on
objections to those proposals.
Apple also predicated its motion
for a stay on its stated view that the term “ex parte” as used
in the proposals in the November 20 Order meant “uncounseled”
rather than “outside of the presence of the opposing party
(i.e., Apple or DOJ).”
The motion was also predicated on
objections as to how the Monitor has acted thus far.
submitted a responsive letter that same day.
In response to the parties’ submissions, the Court held a
telephone conference to schedule briefing on Apple’s motion for
In that conference, the Court reminded the parties that
the proposals in the November 20 Order had not been entered, and
explained that the term ex parte as used in the November 20
Order carried its ordinary meaning, i.e., that Apple or the
plaintiffs need not be present during the Monitor’s
communications with the other side –- and did not mean
Apple was given an opportunity to amend its
motion in light of these statements.
It declined to do so.
On December 30 the plaintiffs submitted their opposition to
Apple’s stay motion.
Attached to the plaintiffs’ opposition was
a declaration by the Monitor disputing Apple’s characterization
of his conduct and attaching additional documents to supplement
On January 7, Apple submitted its reply, in which
it largely abandoned the arguments in its initial memorandum,
which relied on the un-entered proposals and on Apple’s stated
prior understanding that ex parte meant uncounseled.
incorporated new arguments into its motion for a stay and
focused exclusively on the Monitor’s conduct in discharging his
duties under the Injunction and on his submission of a
declaration attached to the plaintiffs’ opposition to this stay
It argued that the Monitor must be disqualified and
that Apple was entitled to a stay in the event the Court denied
Also on January 7, Apple submitted along with its reply a
letter making objections to the Monitor’s conduct to be resolved
through the procedure set forth in the Injunction (and not as
part of the stay application).
Through the letter, Apple
contends: 1) that the Monitor should be disqualified because he
filed an affidavit attached to the plaintiffs’ opposition; 2)
the scope of the Monitor’s activities violates Apple’s rights;
3) the Monitor seeks impermissible direct contact with Apple
personnel; and 4) the Monitor’s fee structure is impermissible.
DOJ contends that Apple has not met and conferred with DOJ on
In support of its motion for a stay, Apple had submitted only
some of its correspondence with the Monitor.
several of these issues before bringing them to the Court’s
attention, as required both by the terms of the Injunction and
this Court’s general practice.
On January 13, oral argument was held in connection with
this stay motion.
At oral argument, Apple continued to argue
for the Monitor’s disqualification, and that it was entitled to
a stay if the Court disagreed.
The Court denied the application
to disqualify the Monitor or to grant a stay but agreed to a 48
hour stay following the filing of this Opinion to allow Apple to
appeal this Order.
The standard in evaluating a stay application is well
(1) whether the stay applicant has made a strong showing
that he is likely to succeed on the merits; (2) whether
the applicant will be irreparably injured absent a stay;
(3) whether issuance of the stay will substantially
injure the other parties interested in the proceeding;
and (4) where the public interest lies.
S.E.C. v. Citigroup Global Markets Inc., 673 F.3d 158, 162 (2d
Cir. 2012) (per curiam) (citation omitted).
“[The third and
fourth] factors merge when the Government is the opposing
Nken v. Holder, 556 U.S. 418, 435 (2009).
factors operate as a “sliding scale” where “[t]he necessary
‘level’ or ‘degree’ of possibility of success will vary
according to the court’s assessment of the other stay factors .
. . [and] [t]he probability of success that must be demonstrated
is inversely proportional to the amount of irreparable injury
plaintiff will suffer absent the stay.”
Thapa v. Gonzales, 460
F.3d 323, 334 (2d Cir. 2006) (citation omitted).
“A stay is an
“intrusion into the ordinary processes of administration and
judicial review, and accordingly is not a matter of right.”
Nken, 556 U.S. at 427 (citation omitted); see also MaldonadoPadilla v. Holder, 651 F.3d 325, 327-28 (2d Cir. 2011) (quoting
Nken, 556 U.S. at 427).
Likelihood of Success on the Merits
The first factor, a strong showing of a likelihood of
success on the merits, requires “more than a mere possibility of
Nken, 556 U.S. at 434 (citation omitted).
demonstrate a “strong showing that it is likely to succeed on
the merits” Apple has the burden of demonstrating “a substantial
possibility, although less than a likelihood, of success” on
Mohammed v. Reno, 309 F.3d 95, 101 (2d Cir. 2002)
Apple’s arguments in support of a stay have shifted
significantly in the course of briefing this motion and even
more so at oral argument.
In addition, Apple has at times
conflated different arguments.
So, this Opinion will attempt to
isolate which arguments have not been abandoned and determine
their precise form.
As described in the foregoing, Apple initially predicated
its stay motion on a hybrid claim that: 1) the Court had
impermissibly expanded the Injunction through its never-entered
proposals in the November 20 Order; 2) Section VI of the
Injunction itself was unconstitutional as ordered; and 3) the
Monitor’s conduct has had the practical effect of expanding the
scope of the Injunction and rendering it unconstitutional as
By the time of its reply, and as it emphasized at oral
argument, it now bases its request for a stay principally, if
not entirely, on the Monitor’s submission of a declaration in
response to Apple’s motion for a stay.
It argues that that
submission reflects that the Monitor “is not disinterested,
[but] . . . has taken an adversarial, rather than judicial,
stance towards Apple,” and requires that he be disqualified.
These arguments, even those Apple has waived or abandoned, will
be addressed in turn.
The Proposals in the November 20 Order
Apple initially argued in this motion that the Injunction
had been modified impermissibly through the adoption of
proposals outlined in the November 20 Order.
The proposals were
made to address topics outlined in Rule 53(b)(4), Fed. R. Civ.
As recited above, the Court never issued an Order
implementing those proposals, and promptly issued an Order to
respond to Apple’s particularly vociferous objection that the
Monitor and the Court not engage in ex parte communications.
previously stated above, following the Court’s observation in a
telephone conference of December 13 that the proposals had never
been adopted, Apple was given an opportunity to amend its motion
for a stay.
It declined that opportunity, but abandoned these
arguments in its reply.
Consequently, they need not be
addressed any further.
Section VI of the Injunction as Ordered
Apple initially contended that Section VI of the Injunction
was unconstitutional as ordered.
In its reply, Apple drops this
argument as well and focuses entirely on the manner in which the
monitorship is being implemented.12
A court’s inherent equitable power to appoint a monitor
under the terms set forth in Section VI of the Injunction is, of
course, well established.
And Rule 53 of the Federal Rules of
Civil Procedure provides an additional source of authority -supplementing a court’s inherent power to craft its equitable
Apple makes no argument in its reply that Section VI of the
Injunction is unconstitutional as ordered. Although one header
of Apple’s reply reads “[The Monitor’s] support of plaintiffs in
opposition to Apple’s motion also highlights the injunction’s
and [The Monitor’s] violation of the separation of powers”
(emphasis added), there is no argument in the text of that
section that the Injunction itself, separate from the Monitor’s
implementation of it, violates the separation of powers.
remedies -- to appoint a monitor with powers set forth in the
“The power of the federal courts to appoint special masters
to monitor compliance with their remedial orders is well
City of New York v. Mickalis Pawn Shop, LLC, 645
F.3d 114, 145 (2d Cir. 2011) (citation omitted). “[A]s with any
other [equitable] remedial tool” a district court has “broad
discretion” to appoint a compliance monitor.
United States v.
Yonkers Bd. of Educ., 29 F.3d 40, 44 (2d Cir. 1994) (per
Because “the relief” in an antitrust case must be
“effective to redress the violations” and “to restore
competition,” United States v. E.I. Du Pont De Nemours & Co.,
366 U.S. 316, 326 (1961), “[t]he District Court is clothed with
‘large discretion’ to fit the decree to the special needs of the
Ford Motor Co. v. United States, 405 U.S.
562, 573 (1972)(citation omitted).
In particular, external
monitors have been found to be appropriate where consensual
methods of implementation of remedial orders are “unreliable” or
where a party has proved resistant or intransigent to complying
with the remedial purpose of the injunction in question.
Yonkers Bd. of Educ., 29 F.3d at 44.
Thus, “a monitor may
report on a defendant’s ‘compliance with the district court’s
decree and help implement that decree.”
United States v. Philip
Morris USA Inc., 566 F.3d 1095, 1150 (D.C. Cir. 2009) (per
curiam) (citation omitted); see also, e.g., Local 28 of Sheet
Metal Workers' Int'l Ass'n v. E.E.O.C., 478 U.S. 421, 481-82
(1986) (affirming as permissible a district court’s “appointment
of [a monitor] with broad powers to supervise  compliance with
the court’s orders”).
Comparison of the limitations the law imposes on the powers
of a monitor with the narrowly tailored terms of the Monitor’s
powers in the Injunction confirms that Section VI of the
Injunction is a clearly permissible exercise of judicial power.
The law requires that a monitor’s actions must always be
conducted subject to “careful review by the trial judge.”
Mickalis Pawn Shop, LLC, 645 F.3d at 145 (citation omitted).
Here, the Monitor’s actions are subject to oversight by the
Court and Apple has a procedure to bring any disputes to the
Court for resolution.
Section VI.E of the Injunction requires
Apple to bring any complaints about the Monitor promptly to the
attention of DOJ in an attempt to resolve them with DOJ.
Pursuant to the practices of this Court, with which Apple is
well familiar, the Court will act promptly to resolve any
disputes that remain.
Rule 53 of the Federal Rules of Civil Procedure provides
additional authority for appointment of a compliance monitor in
addition to a court’s inherent equitable authority.
[A] court may appoint a master . . . [to] address
pretrial and posttrial matters that cannot be effectively
and timely addressed by an available district judge or
magistrate judge of the district.
Fed. R. Civ. P. 53(a)(1)(C) (emphasis added).
committee notes to Rule 53 provide context for understanding the
Post-Trial Masters. Courts have come to rely on masters
to assist in framing and enforcing complex decrees . . .
Amended Rule 53 authorizes appointment of post-trial
masters for these and similar purposes. . . . Reliance
on a master is appropriate when a complex decree requires
complex policing, particularly when a party has proved
resistant or intransigent. This practice has been
recognized by the Supreme Court, see Local 28, Sheet
Metal Workers’ Internat. Assn. v. EEOC, 478 U.S. 421,
Id. advisory committee notes (2003 amendments).
Committee Notes to Rule 53 also state that:
The master's role in enforcement may extend to
investigation in ways that are quite unlike the
traditional role of judicial officers in an adversary
The role of Rule 53 as a supplement, and not a substitute,
to a court’s inherent authority to appoint a monitor has been
[R]ule 53 does not terminate or modify the district
court's inherent equitable power to appoint a person,
whatever be his title, to assist it in administering a
remedy. The power of a federal court to appoint an agent
to supervise the implementation of its decrees has long
Ruiz v. Estelle, 679 F.2d 1115, 1161 (5th Cir. 1982) (collecting
In any event, although Apple was integrally involved in the
Injunction drafting process following the liability trial, it
never raised during that process the constitutional issues it
raised in its initial memorandum in support of a stay here, and
any such arguments addressed to the terms of the Injunction as
ordered would be waived for purposes of this stay motion.
described above, the plaintiffs put Apple on notice that they
were seeking an External Monitor on July 19, through their
Apple had from July 19 until September 5
(when the Injunction was entered) to make an objection about the
constitutionality of Section VI of the Injunction.
specifically solicited objections from Apple and Apple
comprehensively raised its objections about the creation of the
monitor position in a filing of August 2.
Nowhere in that
filing, nor in any other place, did Apple contend that the Court
was without authority to appoint a monitor in this case.
Instead, Apple objected to the appointment of an external
monitor as burdensome.13
Apple tacitly acknowledges that it has waived this argument in
its statement in its reply that its objections are “primarily
the way in which the injunction is being implemented.” This
statement was Apple’s response to the plaintiffs’ contention
that Apple had waived its arguments as to the constitutionality
of the terms of Section VI itself.
In its initial stay memorandum, Apple appeared as well to
object to the terms of the Injunction that allow the Monitor to
interview Apple employees and inspect Apple documents as an
unconstitutional exercise of the Court’s authority.
reflected in its reply and its oral argument on January 13,
however, Apple has also abandoned this objection.
As was true with its broader constitutional argument about
a court’s power to appoint a monitor in this case, Apple never
argued prior to the entry of the Injunction that any specific
component of Section VI was beyond the Court’s power to include
in the Injunction.
In fact, on the day of the entry of the
Injunction on September 5, the Court received a letter from DOJ
with a proposed injunction –- which was entered unmodified -- in
which DOJ represented that “the form of which has been agreed to
by the parties.”
Section VI.G allows the Monitor “in connection
with the exercise of [his] responsibilities under this Section
VI, and on reasonable notice to Apple . . . [to] 1. Interview,
either informally or on the record any Apple personnel, who may
have counsel present . . . [and] 2. Inspect and copy any
documents in the possession, custody or control of Apple.”
A court’s power to permit a monitor to conduct interviews
and request documents, constrained by court supervision, is well
See, e.g., Sheet Metal Workers' Int'l Ass'n, 478
U.S. at 481-82.
A monitorship would be of little use at all if
a monitor were only permitted to receive, review and opine on
Apple cites to no case holding that a
monitor may never conduct interviews and there are many examples
to the contrary.
For example, Apple relies principally in this motion for a
stay on the decision by the Court of Appeals for the District of
Columbia in Cobell v. Norton, 334 F.3d 1128 (D.C. Cir. 2003).
Cobell concerned “the propriety of a federal court authorizing
its agent to interfere with the affairs of another branch of the
Id. at 1142.
In Cobell, the monitor was
appointed to investigate the Department of the Interior.
even in that very different context which raised serious
separation of powers concerns, the Cobell court endorsed the use
of a monitor to interview employees and inspect documents.
Discussing with approval the monitor imposed in the case of
Ruiz, 679 F.2d 1115 (5th Cir.), the Cobell court said:
Ruiz illustrates the limits of the mandate a district
court may permissibly give its agent. There the district
court . . . entered an injunction and appointed a special
master, assisted by several monitors to monitor
implementation of the relief ordered. The special master
was given unlimited access to [the defendants'] premises
and records as well as the power to conduct confidential
Cobell, 334 F.3d at 1142 (citation omitted) (emphasis added).
There is therefore no legal basis for Apple to object to
the Injunction’s provisions which permit the Monitor to conduct
interviews and inspect documents.
Apple never suggested that
there was a legal basis to make such an objection prior to the
entry of the Injunction and no longer pursues that line of
The Monitor’s Conduct Since his Appointment
In its motion for a stay, Apple argued that the Injunction
did not authorize the Monitor to conduct interviews during the
first ninety days of his appointment.
That ninety day period
has now passed, and any complaints regarding it are now moot and
could provide no basis for a motion for a stay.
In making this objection about the monitorship, Apple
relied principally on that portion of Section VI of the
Injunction that requires the Monitor to review Apple’s
compliance policies and procedures as they exist ninety days
following his appointment.
Section VI.C. provides that the
[S]hall conduct a review to assess whether Apple’s
internal antirust compliance policies and procedures, as
they exist 90 days after his or her appointment, are
reasonably designed to detect and prevent violations of
the antitrust laws.
The Monitor was appointed on October 16 and the ninety days were
up on January 14.
Even if this objection were not moot,
however, it would be without merit for several additional
Apple’s argument that the Monitor should not have begun his
work during the first ninety days of his appointment, including
conducting interviews and reviewing documents, is predicated on
a strained and unreasonable reading of the Injunction.
in Section VI contemplates that the Monitor should not start
work until three months following his appointment.
day window was created for a different purpose.
suggested to the parties, when the Injunction’s terms were being
fashioned, that Apple have the opportunity of ninety days to
revise its policies and procedures, and that the Monitor be
required to comment on those revised practices.
Apple has taken
advantage of that window of opportunity to retain Simpson
Thacher counsel to assist it in crafting an improved compliance
Apple is to be commended for doing so.
decision by Apple to seek outside assistance and amend its
compliance program will, it is to be hoped, be of benefit to
Apple and the public.
It is a decision that is directly
traceable to the creation of the monitorship.
But, this window of opportunity for Apple does not suggest
that the Monitor was expected to, or authorized to, sit idle for
the first three months of his appointment.
In order for a
Monitor to be in a position to evaluate and comment on Apple’s
revised compliance program in a meaningful and timely way, any
monitor would be expected to use the intervening period between
his appointment and the ninetieth day to become familiar with
the relevant aspects of the company, its personnel and
He would need to be in a position to assess whether
the revised program was an adequate program not in an abstract
sense, but whether it might be an effective program for Apple.
After all, as the Injunction explicitly states, the Apple
policies, procedures and training all have a single purpose:
“ensuring antitrust compliance” by Apple as it moves forward
with its business.
Moreover, to the extent that Apple had any objection to a
specific request or practice of the Monitor, it had available to
it the procedure for making objections that are described in the
Injunction and with which Apple is thoroughly familiar from its
appearances before this Court for roughly two years.
avoidance of doubt, the Court reminded the parties at the oral
argument on January 13, 2014, that Apple must promptly raise any
objection about the Monitor’s conduct with the Monitor, and if
the objection remains unresolved, with DOJ.
If the Monitor,
DOJ, or Apple are dissatisfied with the outcome of those
discussions, they must promptly bring the dispute to the
attention of the Court by letter.
All parties must participate
in good faith in this meet and confer process, and act in a
It is important that complaints not fester and
that the working relationship between the Monitor and Apple
proceed as smoothly as possible so that the important work of
the Monitor can be completed on schedule.
Perhaps in recognition that its purported reading of the
Injunction –- that the Monitor should not conduct interviews or
obtain Apple documents during the first ninety days of his
appointment -- was unlikely to have any traction, Apple
ultimately did not stand on this objection during the ninety-day
It provided the Monitor with some, limited access to
personnel and documents.
Moreover, while it presented this
objection to the Monitor and to DOJ, it did not raise it with
the Court in a timely fashion.
Finally, as was true with its constitutional arguments, by
the time it submitted its reply and made its oral presentation
in Court, Apple had abandoned this purported violation of the
Injunction as a ground on which it was seeking a stay.
for each of these reasons, Apple has not shown that the
Monitor’s work during the first ninety-days of his appointment
requires a stay.
Disqualification of Bromwich as Monitor
As currently structured, the core of Apple’s argument for a
stay is its contention that Bromwich must be disqualified as a
It makes essentially two arguments in this regard.
argues that his financial stake in his appointment as a Monitor
requires his disqualification.
Secondly, and it is this ground
which Apple emphasizes, it contends that Bromwich’s submission
of a declaration in connection with this motion practice
demonstrates that he may not serve as an impartial monitor.
Apple has not shown even a possibility of success with either
As already noted, many of the arguments that Apple
presented in its original motion for a stay are no longer being
pursued by Apple as a reason for the issuance of a stay.
reply, Apple emphasizes Bromwich’s submission of a declaration
in connection with DOJ’s filing of its opposition to the request
for a stay, and argues that that submission is evidence that
Bromwich has taken on an “adversarial, rather than judicial,
stance towards Apple.”
Similarly, at oral argument, Apple
focused its argument that it had shown a likelihood of success
on this motion for a stay on the argument that Bromwich must be
disqualified from serving as the Monitor.
In addition to the
Monitor’s filing of a declaration, Apple stressed that Bromwich
was pursuing a broader mandate that that authorized by the
Injunction’s terms and that he is relying on ex parte
communications with the Court to define the parameters of his
The law in this Circuit regarding disqualification largely
arises in the context of the disqualification of a judicial
Section 455 of Title 28 of the United States Code,
upon which Apple relies, reads as follows:
(a) Any justice, judge, or magistrate judge of the
United States shall disqualify himself in any
proceeding in which his impartiality might reasonably
(b) He shall also disqualify himself in the following
(1) Where he has a personal bias or prejudice
concerning a party, or personal knowledge of disputed
evidentiary facts concerning the proceeding; . . .
(4) He knows that he . . . has a financial
interest in the subject matter in controversy or in a
party to the proceeding, or any other interest that
could be substantially affected by the outcome of the
28 U.S.C. § 455.
“The standard for disqualification under 28
U.S.C. § 455(a) is an objective one; the question is whether an
objective and disinterested observer, knowing and understanding
all of the facts and circumstances, could reasonably question
the court's impartiality.”
S.E.C. v. Razmilovic, 2013 WL
6172543, at *12 (2d Cir. July 22, 2013) (citation omitted).
Apple first contends that the Monitor must be disqualified
because the way the Monitor is implementing Section VI deprives
Apple of its constitutional right to a “disinterested
prosecutor” who is without “a personal interest, financial or
otherwise" as required by, inter alia, Young v. United States ex
rel. Vuitton et Fils S.A., 481 U.S. 787, 808 (1987) (citation
This reference to Vuitton and the “disinterested
prosecutor” criterion is of little assistance, however, since
the Monitor is not a prosecutor.
In fact, Section VI.F
expressly prohibits prosecutorial investigative activity.
Section VI provides that, if in the normal course of his duties,
the Monitor “discovers or receives evidence that suggests . . .
that Apple is violating or has violated this Final Judgment or
the antitrust laws,” the Monitor shall report that information
to DOJ and “take no further action including seeking information
from Apple . . . to investigate any such potential violation of
the Final Judgment or the antitrust laws.”
The Monitor’s status as a court-appointed monitor is material
because Young turned on the impropriety of a prosecutor having a
financial interest in the outcome of a prosecution, as opposed
to a monitor or special master being merely paid for his time on
a basis that is not contingent on the outcome.
Apple’s argument is ultimately that it is unconstitutional
to pay a court-appointed monitor at an hourly rate because that
creates an incentive for the Monitor to conduct as lengthy of an
investigation as possible.
But Apple cites no authority for the
proposition that a monitor cannot be paid at an hourly rate.
Under the terms of the Injunction, it is the United States that
must approve the “terms and conditions” on which the Monitor
The compensation is set at
“reasonable and customary terms commensurate with the
individual[‘s] experience and responsibilities.”
made no objection to this or any other wording or particular
component of Article VI.
It simply opposed the appointment of
In any event, this is a dispute that may be resolved by
parties acting in good faith.
As already explained, when it
comes to the hourly rate for the Monitor’s compensation, Apple
has already offered to pay $800 per hour instead of the $1,100
approved by DOJ.
As recently as December 30, DOJ reached out to
Apple to reiterate its offer to adjust the terms of the
Monitor’s compensation, and conveyed to Apple that the Monitor
is willing to adjust his current fee structure.
While Apple had
previously made its own proposals for Bromwich’s hourly rate,
Apple did not respond to either the initial DOJ offer or the
renewed December 30 offer to discuss and resolve the matter.
Once again, this is an issue on which the Injunction’s and
this Court’s normal dispute resolution process have been and are
available to Apple.
At the January 13 oral argument on this
motion, the Court advised the parties that it would refer them
to a Magistrate Judge to attempt to resolve this fee dispute.14
In making that reference, the Court added that Apple should be
prepared to provide appropriate benchmarks to the Magistrate
If the parties cannot agree on mutually acceptable terms then
they can petition this Court through the normal process to
resolve the dispute.
A stay motion is not a proper vehicle for
Moreover, Apple’s “disinterested prosecutor” argument is
belied by the fact that Section VI has various provisions to
protect Apple from any fee-increasing incentive.
requires the Monitor to “act diligently [and] in a costeffective manner.”
Apple has a mechanism to make any objections
to the plaintiffs and ultimately the Court as to whether the
Monitor is acting efficiently pursuant to that Section, and the
Court is charged with ultimate adjudication of any complaints
that the Monitor is acting pursuant to a perverse incentive.
Judge in the event it continues to argue that the Monitor’s fees
are excessive for an attorney with his experience and
responsibilities in this monitorship. Such benchmarks should
include the customary hourly rates for the Simpson Thacher
attorneys whom Apple has hired to assist Apple in revising the
compliance program that the Monitor will be reviewing, and any
other benchmarks that Apple may wish to offer. Apple may no
longer be contending, however, that the Monitor’s rates are too
high when judged against the customary rates in the profession
for comparable work. It argued on January 13 that a lower rate
should be paid here since Apple has not consented to the
retention of a monitor, and the Monitor is serving the Court and
the public in taking on this assignment. So long as Apple
participates in a good faith effort to resolve this dispute in a
conference before the Magistrate Judge, it may offer any
benchmark it wishes.
The Monitor’s Declaration
In its reply, and again on January 13, Apple shifted the
focus of its attacks on the Monitor to an argument that the
Monitor’s declaration filed in connection with the plaintiffs’
opposition to a stay renders him “Apple’s litigation adversary”
and demonstrates that he must be removed as Monitor pursuant to
28 U.S.C. § 455(b)(1).
Apple contends that the Monitor “has a
personal bias or prejudice concerning a party, [and] personal
knowledge of disputed evidentiary facts concerning the
This is now the principal focus of Apple’s
application for a stay.
Apple has not shown, however, that it
is likely to succeed in obtaining a stay of the monitorship by
disqualifying the Monitor on this ground either.15
The Monitor’s submission of a declaration was proper and
When Apple filed the instant stay motion, it
predicated its argument on several, serious attacks bearing on
the conduct and the character of the Monitor in connection with
his conduct of the monitorship.
in factual statements.
These allegations were grounded
To evaluate the truth and understand the
context of the assertions, it was essential to hear from the
In many instances, the Monitor was the only person who
Apple has not provided any legal authority to support the
proposition that the denial of a disqualification motion of a
monitor, particularly one made months after the appointment and
on the ground that the monitor filed an affidavit about his
efforts to conduct the monitorship, is an appealable order.
could confirm or deny the accuracy of Apple’s assertions.
this Court’s agent, it was the Monitor’s duty to provide the
Court with his understanding of the full factual story so that
the Court could render an informed judgment, address this
motion, and oversee the monitorship.
It would be surprising if
a party subject to a monitor could escape the monitorship by
launching a cascade of attacks on the monitor and then
disqualify the monitor for responding.
The declaration provides no basis to find that the Monitor
is acting out of personal bias or prejudice, as Apple asserts.
In making this argument, Apple misreads the meaning of § 455’s
“personal knowledge” and “personal bias or prejudice”
As the Second Circuit recently reiterated:
To be disqualifying under § 455, [t]he alleged bias
and prejudice . . . must stem from an extrajudicial
source and result in an opinion on the merits on some
basis other than what the judge has learned from his
participation in the case.
Razmilovic, 2013 WL 6172543, at *12 (emphasis supplied)
Here, the Monitor’s declaration stemmed
from facts acquired in connection with the discharge of his
duties as Monitor.
Scope of Monitorship
Finally, in connection with the disqualification argument,
Apple complains as well about the manner in which the Monitor
has performed his duties.16
As described in this Opinion, there
is a mechanism in place to protect Apple’s rights.
If Apple has
reason to believe that the Monitor is exceeding the scope of his
duties, as defined in the Injunction, Apple must discuss it
promptly with the Monitor, if necessary with DOJ, and if still
unsatisfied, bring it to the Court’s attention.
such application to the Court was in a letter of January 7, long
after it filed its motion for a stay.
Apple has not shown,
therefore that it is likely to prevail on an application for a
stay on the ground that Bromwich should be disqualified from
serving as the Monitor for this reason either.
As for the suggestion that the Monitor has engaged
improperly in ex parte communications, this appears to be a
reference to two events.
The first is the Court’s own interview
with Bromwich during the selection process.
This was permitted
by the terms of the Injunction, and the parties were informed at
the time that it had occurred.
Apple made no objection to this
provision of the Injunction or at the time of the Monitor’s
There was nothing exceptional or disqualifying
Apple’s objections in this regard include a question that the
Monitor asked Dr. Sugar, which Apple’s counsel instructed him
not to answer; the Monitor’s pursuit of interviews before
January 14, including an interview with Board member Gore; and
his ex parte interview with the Court during the selection
process. None of these actions alone or together would suggest
disqualification is warranted, and Apple makes no developed
argument that they do.
from the fact that the Court conducted ex parte interviews of
candidates in selecting a Monitor and this provides no basis for
disqualifying the chosen candidate.
Nor is that interview
process a basis to suggest that the scope of the Monitor’s
duties were in some way altered from those defined in the
Apple has never made any objection to the
Injunction’s description of the discrete tasks assigned to the
Monitor, and makes none now.
The Monitor’s own letters to Apple
consistently refer to the Injunction as the instrument that
defines his authority, and it is that document to which the
Court will refer in resolving any dispute about the scope of his
The second context in which there is a reference to ex
parte communications arises from the following.
sent letters addressed to Cook and Sewell directly to those
addressees at the same time that he sent them to Apple’s counsel
and asked them to forward a copy.
Apple has objected.
unclear from the parties’ submissions whether they have
conferred regarding this objection and whether it remains
If Apple is unable to resolve this dispute with the
Monitor and DOJ, then the Court will promptly address it.
Again, this is not a ground for disqualification or for finding
a substantial likelihood that Apple will succeed in obtaining
his disqualification and a stay of the Monitor’s work.
clear, the Injunction permits Apple officers, employees or
agents to have “counsel present” during any interviews, Section
VI.A.2, and Apple’s counsel has been present at each of the
interviews that the Monitor has conducted.
In sum, Apple has largely abandoned the grounds on which it
brought this application for a stay.
right to raise many of grounds.
It has also waived its
It now principally contends
that it will succeed on appeal because it has shown the Monitor
should be disqualified.
It has failed to make a showing that it
is substantially likely to succeed in any application for a stay
on this ground or any other ground it has asserted.
To demonstrate ongoing “irreparable harm” such that a stay
is proper, a party must show that it will suffer injury which
“cannot be remedied” absent a stay.
Grand River Enter. Six
Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir. 2007) (per
curiam) (citation omitted).
The party seeking the stay has the
burden of showing “injury that is not remote or speculative but
actual and imminent, and for which a monetary award cannot be
Dexter 345, Inc. v. Cuomo, 663 F.3d 59,
63 (2d Cir. 2011) (citation omitted).
Apple has not made any
showing that it will be irreparably harmed.
In its reply, Apple asserts two grounds for finding that it
will be irreparably harmed if its application for a stay is not
First, any fees it might pay the Monitor will be
unrecoverable; and second, the Monitor’s requests for interviews
are “time-consuming and intrusive” and “interfere with the
company’s business operations.”
What these two irreparable harm
arguments “have in common is that they are speculative,
hyperbolic, and” at least somewhat “of [Apple’s] own making.”
NML Capital, Ltd. v. Republic of Argentina, 727 F.3d 230, 246
(2d Cir. 2013).
These arguments will be addressed in turn.
The Monitor’s Fees Do Not Constitute “Irreparable
Apple asserts that paying the Monitor according to the
terms of the compensation DOJ approved constitutes ongoing
The provisions in the Injunction describing
the compensation of the Monitor have already been described in
And, as further described, Apple did not object
to these provisions in the Injunction, and both DOJ and the
Monitor have offered to engage in a negotiation with Apple
regarding the Monitor’s compensation.
The Court has also
ordered the parties to participate in settlement discussions
with the Magistrate Judge in an effort to resolve this dispute.
Apple has already offered to pay an hourly rate of $800 to the
Monitor, which leaves a spread of $300 between Apple’s proposed
rate and the rate approved by DOJ.
There is simply no showing
that the existence of this dispute constitutes irreparable harm
Apple has also failed to show that it will be irreparably
harmed by any final amount it must ultimately pay because of the
existence of a monitorship.
If the Monitor’s bills are
unreasonable, Apple may object using the dispute mechanism
Moreover, Apple can assist in making the
Monitor’s use of his time “cost-effective”, as required by the
It can do so by following the
Injunction’s requirement that it “take no action to interfere
with or to impede the External Compliance Monitor’s
accomplishment of its responsibilities.”
all, an entity cannot claim irreparable harm because of
increased expenses where its cooperation would have resulted in
a more cost-effective process.
See NML Capital, Ltd., 727 F.3d
at 246 (declining to find irreparable harm when the injury was
“almost entirely of the [defendant’s] own making”).
In sum, Apple has failed to show that the payment of the
Monitor’s fees constitutes irreparable harm.
fees to comply with a remedial order is typically not cognizable
as “irreparable harm” because “ordinary compliance costs are
For obvious reasons, Apple has not attempted to show that any
payment to the Monitor in this case will constitute a material
typically insufficient to constitute irreparable harm.”
Holdings, Inc. v. Spitzer, 408 F.3d 112, 115 (2d Cir. 2005); see
also Am. Hosp. Ass'n v. Harris, 625 F.2d 1328, 1331 (7th Cir.
1980) (“[I]njury resulting from attempted compliance with
government regulation ordinarily is not irreparable harm.”).
And Apple has not shown that this case should qualify as an
exception to that ordinary rule.
Requests for Interviews
Apple also argues in its reply that the Monitor’s requests
for interviews of its executives constitute irreparable harm.
In its initial memorandum in support of a stay, Apple asserted
that the Monitor’s interview requests “has already inflicted
significant and irreparable harm by interfering with Apple’s
ability to manage its business.”
Apple further contended that
the Monitor’s conduct has affected Apple’s “ability to identify
and exploit new business opportunities” and threatened Apple
with “loss of market share growth” and “the development and
marketing of new and innovative products.”
Over three months, Apple has permitted the Monitor to
conduct thirteen hours of interviews spread across two visits to
Seven of the eleven people interviewed have been
The Monitor has also been provided with 303 pages of
If this limited amount of access constitutes
“irreparable harm” to Apple then the standard for irreparable
harm is low indeed.
In its reply, Apple appears to have backed away from its
claim that the effort required to prepare for and participate in
thirteen hours of interviews with predominately Apple attorneys
is harming its market growth and product innovation.
It is now
tailoring its irreparable harm argument more narrowly.
argues in its reply that any interviews that the Monitor might
have with its executives and Board members will be a “timeconsuming and intrusive process that interferes with the
company’s business operations.”
There are at least three reasons why this does not
constitute irreparable harm.
First, in the event Apple believes
that any future request of the Monitor exceeds the scope of his
authority under the Injunction, it has recourse to the dispute
resolution mechanism described above.
Second, without any
showing of substantial injury to its business to date, Apple’s
argument amounts to little more than speculation about future
harm to its business.
And third, Apple has every reason to
expect that the Court, which is responsible for supervising the
Monitor’s work, is sensitive to the need not to interfere
unnecessarily with Apple’s business.
The Court only imposed a
Monitor after Apple failed to show that the appointment was
The Court sua sponte limited the length of the
Monitor’s term and narrowed the definition of his assignment.
The Court created breathing room for Apple to unilaterally
revise and improve its compliance program, even after Apple had
failed to take the opportunities which were given to it this
past summer to show that it would do so without the imposition
of a Monitor.
That said, the Monitor has important work to do, and where
that work properly includes interviews of Board members or
executives, then the Monitor must be permitted to conduct those
After all, the Injunction permits the Monitor to
interview “any Apple personnel” when he is doing so in the
exercise of his responsibilities and on reasonable notice to
Again, Apple did not object to this
clause or any other particular clause in Section VI.
III. The Public Interest
“[T]he public interest in vigilant enforcement of the
antitrust laws” is indisputable.
Lawlor v. Nat'l Screen Serv.
Corp., 349 U.S. 322, 329 (1955).
At trial, this Court found
that Apple’s lawyers and its highest executives orchestrated a
price fixing scheme with blatant and aggressive disregard for
the requirements of the law.
Consumers of e-books -– including
Apple’s own consumers -– suffered hundreds of millions of
dollars in harm, and the federal Government and the plaintiff
States were forced to expend taxpayer money to bring the harm to
Section VI was imposed to ensure that Apple reformed
its policies such that this would never happen again.
While Apple would prefer to have no Monitor, it has failed
to show that it is in the public interest to stop his work.
anything, Apple’s reaction to the existence of a monitorship
underscores the wisdom of its imposition.
A monitorship is
nothing less than “a necessary and . . . unavoidable
consequence” of Apple’s violation of the antitrust laws.
Soc. of Prof'l Engineers v. United States, 435 U.S. 679, 697
“The District Court is not obliged to assume, contrary
to common experience, that a violator of the antitrust laws will
relinquish the fruits of his violation more completely than the
court requires him to do.”
Int'l Salt Co. v. United States, 332
U.S. 392, 400 (1947).
The deterioration of the relationship between Apple and the
Monitor is unfortunate and disappointing.
relationship can be “reset” and placed on a productive course.
But it is strongly in the public’s interest for the Monitor to
remain in place.
A monitorship which succeeds in confirming the
existence of a genuine and effective antitrust compliance
program within Apple, is in the interest of not only the
American public, but also Apple.
Apple’s motion to suspend operation of Section VI of the
Injunction because the Monitor must be disqualified, or on any
other grounds preserved and argued to this Court, is denied.
Apple’s motion for a stay of this ruling pending its appeal to
the Second Circuit is denied with the following exception.
Apple is granted a stay of Section VI of the Injunction from the
filing of this Opinion until Tuesday, January 21, 2014, at noon,
in order to pursue an appeal of this Opinion and Order denying a
stay, on the condition that Apple file its motion for a stay by
Saturday, January 18, 2014 at noon.
New York, New York
January 16, 2014
United States District Judge