Unites States of America v. Apple, Inc. et al

Filing 430

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)

EXHIBIT D

Lawrence E. Buterman
Direct Dial: [phone]
Fax: [phone]
e-mail: [e-mail]

Liberty Square Building
450 5th Street, NW
Suite 4000
Washington, DC 20530

December 24, 2013
Noreen Krall, Esq.
Vice President, Chief Litigation Counsel
Apple Inc.
1 Infinite Loop
Cupertino, CA 95014

Re:

United States v. Apple, Inc., et al., No. 12-cv-2826 (DLC)
State of Texas v. Penguin Group (USA), Inc., No. 12-cv-3394 (DLC)

Dear Ms. Krall:
Thank you for your letter of December 17, 2013. As you know, Plaintiffs have
thoroughly reviewed all of Apple’s filings regarding the External Compliance Monitor, and have
spoken at length with both Apple and Mr. Bromwich concerning all issues that Apple has raised.
In our December 13 letter to the Court, we expressed generally our conclusions concerning
Apple’s objections. While we disagree with Apple regarding the legitimacy of the objections it
has made, please know that that in no way affects our commitment to ensuring that the terms of
the Final Judgment are abided by in all respects by all parties, and that Apple and the External
Compliance Monitor work cooperatively going forward. The remainder of this letter responds to
the specific issues identified in your December 17 letter.
1. Scope of Monitor’s Responsibilities
In your letter, you state that “Mr. Bromwich must refrain from further efforts to expand
his mandate beyond the sharply delineated tasks set forth in the Final Judgment.” (Emphasis
added). However, as noted in our December 13 letter to Judge Cote, the United States and
Plaintiff States are unaware of any instance in which Mr. Bromwich has acted outside the scope
of his authority under the Final Judgment—and your December 17 letter does not identify any.
The Final Judgment explicitly provides that Mr. Bromwich may, in connection with the
exercise of his responsibilities under Section VI of the Final Judgment, “interview, either
informally or on the record, any Apple personnel.” FJ § VI.G.1 (emphasis added). While we
understand that Apple’s complaints center on Mr. Bromwich’s requests to interview Apple
senior executives and Board members, such interviews are standard practice in a monitor

assignment. Here, given that the Court determined that “Apple lawyers and its highest level
executives” orchestrated a price-fixing scheme and exhibited “a blatant and aggressive disregard
[] for the requirements of the law,” Aug. 27, 2013 Tr. at 17:1-6, interviews with Apple’s senior
executives and Board members are not only appropriate under the Final Judgment, but are
critical. That said, our understanding is that to date, Mr. Bromwich has interviewed only one
Apple senior executive, General Counsel Bruce Sewell, and one Apple Board member, the Chair
of Apple’s Audit and Finance Committee, Dr. Ronald Sugar. Neither during those interviews,
nor during any other interviews, has Apple objected to any question posed by Mr. Bromwich as
veering outside the scope of his responsibilities.1
Turning to Apple’s proposed schedule and procedures for Mr. Bromwich to adhere to, I
think we all agree that Apple and Mr. Bromwich should work together to minimize future
disputes. We believe that opening a line of communication on matters such as scheduling and
confidentiality could prove beneficial. However, many of Apple’s proposals go well beyond
creating a dialogue, and in effect would operate to neuter the monitorship. An External
Compliance Monitor was appointed by the Court because Apple failed to demonstrate that it was
committed to taking steps on its own to ensure that the government need never again expend its
resources to bring Apple into court for violations of the country’s antitrust laws. See, e.g., Aug.
27, 2013 Tr. at 17:7-16. As such, it is both inappropriate and likely ineffective for Apple to act
as a gatekeeper—preventing Mr. Bromwich from seeking interviews or conducting his work
unless he receives advance approval from Apple. Mr. Bromwich must have the flexibility to
carry out his responsibilities, consistent with the Final Judgment, in the manner that he deems
most appropriate. Of course, in the event Mr. Bromwich seeks to engage in specific actions that
Apple believes are outside the scope of his permitted activities, we request that, consistent with
Section VI.H of the Final Judgment, you notify us at once.
2. Timing of Monitor’s Assignment
The appointment of the External Compliance Monitor is for a period of two years, with
the possibility of one or more one-year extensions. FJ § VI.A. Nowhere in the Final Judgment
does the Court provide that the Monitor must wait 90 days before beginning his work—nor
would it make any sense for him to do so. Section VI.C. of the Final Judgment only clarifies that
Mr. Bromwich is to review Apple’s policies, procedures and training programs as they exist 90

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Your letter also states that “Mr. Bromwich must cease his requests for ex parte access to Apple Board members
and executives.” For reasons unknown, Apple continues to argue that this Court’s orders permit
Mr. Bromwich to speak with Apple executives without counsel present—even though Plaintiffs, Mr. Bromwich and
the Court have all been steadfast in making clear that is not what the Final Judgment says. See FJ § VI.G.1 (the
External Compliance Monitor may “interview, either informally or on the record, any Apple personnel, who may
have counsel present.”). You were on the December 13 teleconference where the Court specifically stated that it
had not authorized, and was not authorizing, Mr. Bromwich to speak to Apple executives without counsel present,
and you received the Court’s Order that same day that explicitly stated that the Court was not using the term exparte to mean “uncounseled.” Dec. 13, 2013 Order (Dkt. No. 416). And, to our knowledge Mr. Bromwich has
never requested or sought to deprive Apple of counsel at any interview.

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days after his appointment. FJ § VI.C. Mr. Bromwich’s work to date has been undertaken in
order to allow him to properly make his assessments, and is wholly appropriate.2
Notwithstanding, Mr. Bromwich has proposed to Apple that the next round of interviews
with its personnel not take place until after Apple’s revised policies, procedures and training are
in place. While that offer moots the bulk of Apple’s current objection, we expect that, consistent
with Section VI.G, Apple will assist Mr. Bromwich in the performance of his duties by timely
responding to all of his scheduling requests and requests for information and documents.
3. Financial Issues
Mr. Bromwich is permitted to hire any persons reasonably necessary to fulfill his
responsibilities. FJ § VI.I. Those individuals and Mr. Bromwich serve “at the cost and expense
of Apple, on such terms and conditions as the United States, after consultation with the
Representative Plaintiff States, approves.” Id. Those compensation terms are required to be
reasonable and customary and commensurate with the individuals’ experience and
responsibilities. Id. Nowhere does the Final Judgment provide that Apple shall have any role in
setting the compensation terms of Mr. Bromwich and his team, or in approving his expenses.
Nonetheless, we understand that Apple has objected to the financial terms of
Mr. Bromwich’s engagement, and has proposed significantly reduced terms based on “a detailed
analysis of billing rates for law firms doing work for Apple and the nature of the tasks to be
performed by Mr. Bromwich and his team.”3 Respectfully, we do not believe that the rates
Apple is able to negotiate with outside counsel it chooses to hire is the appropriate metric to use
here. As noted above, Mr. Bromwich does not work for Apple—he is serving as a Courtappointed monitor to ensure that Apple’s compliance policies and training are sufficient to
prevent Apple from orchestrating another massive and costly price-fixing scheme. Mr.
Bromwich is one of the most highly regarded and experienced monitors in the country, and the
terms of the Final Judgment require that his compensation reflect both his experience and the
critical responsibility he has been entrusted with.
We firmly believe that a compromise acceptable to both Apple and Mr. Bromwich can be
reached on the fee issue. Mr. Bromwich has informed Apple that he is willing to engage in those
discussions, and we reached out to Apple’s counsel last week to inquire whether Apple similarly
was inclined. Once we receive Apple’s response, we will proceed accordingly.
Regardless of the outcome of the fee dispute, we do not believe it is productive or logical
to set a cap on total fees for the External Monitor’s 2014 and 2015 work. As you know, a
sizeable portion of the fees billed so far have been incurred because Mr. Bromwich has had to
devote significant time to engaging in dialogues unreasonably extended by Apple over basic
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At no point prior to its letter did Apple assert that Mr. Bromwich needed to wait 90 days before commencing any
work. Indeed, during the meet-and-confer-process Apple specifically stated that it believed Mr. Bromwich should
be performing various monitor functions in his first 90 days.
3

We have not been provided any analysis by Apple of the rates its counsel charge, or any of the data underlying that
analysis.

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scheduling issues and responding to baseless objections by the company. Neither Mr. Bromwich
nor Plaintiffs expected that Apple would seek to impede his ability to perform his tasks, and
certainly no one could properly budget for such obstructions. Apple can minimize the bills of
the External Compliance Monitor by working with Mr. Bromwich, rather than continuing in the
adversarial posture it has operated under so far.4
*

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While we recognize that Apple would prefer that there be no External Compliance
Monitor, the reality is that Mr. Bromwich has been appointed to perform that function, and that
his appointment provides Apple with a genuine opportunity to “change its culture to one that
includes a commitment to understand and abide by the requirements of the law.” Aug. 27, 2013
Tr. at 20:1-4. We hope that, moving forward, Apple will conduct itself as a model for antitrust
compliance, and are confident that Mr. Bromwich and his team can assist in those efforts. We
remain dedicated to assisting in resolving any and all disagreements Apple may have with the
process as it is carried out, and gladly accept your request to meet in Washington, D.C., the week
of January 14 to discuss these matters in person. In the interim, we hope you and your
colleagues have happy holidays.
Sincerely,
/s/ Lawrence E. Buterman
Lawrence E. Buterman

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For the same reasons, we believe that requiring Mr. Bromwich to submit workplans and budgets is of limited
utility. As noted above, however, we do believe that increased communication between Mr. Bromwich and Apple is
important, and welcome those types of discussions when possible. We also believe that there is benefit in the
External Compliance Monitor providing Apple with billing that contains some reasonable level of detail, and are
hopeful that Apple and Mr. Bromwich can come to an agreement on that matter.

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