Court Rejects Apple's Bid to Shake Off Corporate Monitor -- Update

By Joe Palazzolo 

A federal appeals court rejected Apple Inc.'s efforts to rid itself of a corporate monitor appointed after a judge found the company liable for conspiring to raise the price of e-books.

Michael Bromwich, a former Justice Department inspector general, began assessing Apple's antitrust compliance policies six days after he was appointed in October 2013 by U.S. District Judge Denise Cote, who held the company liable for a price-fixing conspiracy in a July 2013 decision.

Since then, the technology company has been trying to shake him off, arguing that he began work prematurely and exceeded the scope of his mandate, and that his $1,000-an-hour fees were exorbitant.

Mr. Bromwich, in turn, has accused the company of stonewalling him. In a 2013 declaration filed in federal district court in Manhattan, Mr. Bromwich said that he received "far less access" than in his previous stints as a corporate monitor.

The declaration was attached to a Justice Department legal brief, which Apple said was evidence of his partiality to the government. Monitors are extensions of the courts and have a duty to remain independent.

On Thursday, the Second U.S. Circuit Court of Appeals ruled 3-0 that Mr. Bromwich's role was "appropriately constrained" and said Apple could continue to raise objections in the lower court, if it believes overstepped his bounds.

Mr. Bromwich kept his job but received some criticism in Thursday's ruling. The Second Circuit panel said submitting the 2013 declaration as part of the government's brief was "the opposite of best practice for a court-appointed monitor." But it wasn't so serious as to warrant his disqualification, the panel said.

A spokeswoman for Mr. Bromwich declined to comment. Lawyers for Apple didn't have an immediate comment.

In a February 2014 ruling, the Second Circuit clarified Mr. Bromwich's role, saying that he was authorized to request interviews and documents from the company only to ensure that Apple has policies in place to prevent future antitrust violations and that senior executives and board members understand them.

Mr. Bromwich also drew complaints from Apple for writing to the company's officers, rather than through their lawyers, and proposing they communicate with him directly.

Mr. Bromwich later explained in the declaration that he wrote the letters because he believed the company was using its outside counsel "as a shield."

On Thursday, Judge Jesse M. Furman, a member of the Second Circuit panel, said Apple failed to follow a process established by Judge Cote to mediate disputes between the company and the monitor. "Instead, the company largely sat on its hands, allowing issues with the monitor to fester and the relationship to deteriorate, mostly without the district court's knowledge," Judge Furman wrote in a concurring opinion.

The Justice Department's case against Apple laid bare the company's efforts in 2009 and 2010 to gain a foothold in a market that Amazon.com Inc. commanded with between 80% and 90% of all e-book sales. At the time, publishers were dissatisfied with Amazon's aggressive discounts, over which they had no control.

Apple ceded to publishers the power to set their own prices, in agreements that the Justice Department said led almost immediately to an increase in the price of new and best-selling e-books.

Apple is appealing Judge Cote's decision finding it liable for price-fixing. A ruling could come any day.

Write to Joe Palazzolo at [e-mail]

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