Opinion

Alison Frankel

Apple contests constitutionality of court-appointed monitors

By Alison Frankel
December 2, 2013

Ever heard the old adage that when your only tool is a hammer, every problem looks like a nail? The law firm Gibson, Dunn & Crutcher has no shortage of tools, but among its most powerful is a premier appellate practice that in the last few years has won landmark rulings from the U.S. Supreme Court in Hollingsworth v. Perry, the California same-sex marriage case; Wal-Mart v. Dukes, which raised due process defenses against class certification; and Citizens United v. Federal Election Commission, the infamous corporate free speech case. When your litigators are expert at winning constitutionality arguments, an awful lot of problems seem to have constitutional dimensions.

That has certainly been true in Gibson Dunn’s representation of Apple in the e-books antitrust litigation. On Nov. 17, you may recall, Gibson filed a brief asserting that state attorneys general don’t have constitutional standing to bring claims for antitrust damages via parens patriae suits – an argument with potentially devastating consequences for state AG actions. A mere 10 days later Apple and Gibson Dunn once again hoisted the sledgehammer of constitutionality in the e-books litigation. In a brief filed late Wednesday, Apple objects to the mandate of the independent monitor appointed to police its antitrust compliance, arguing that court-appointed monitors violate the Due Process Clause and the doctrine of separation of powers.

Apple has some sharp differences with its new monitor, Michael Bromwich of The Bromwich Group and Goodwin Procter, and with the federal judge who appointed him, Denise Cote of Manhattan. (Cote, as you’ll recall, oversaw the trial of the Justice Department’s claims that Apple conspired with book publishers to raise e-book prices.) But why just complain about Bromwich’s $1,100-per-hour fees and insistence on purportedly intrusive interviews with Apple’s top officials and board members when you can mount a sweeping challenge the constitutional legitimacy of outside monitors? Apple’s argument is two-pronged: Its due process rights are violated because Bromwich has a financial interest in prolonging his investigation of the company; and Judge Cote’s definition of Bromwich’s mandate, which includes ex parte interviews with Apple witnesses and private reports to the judge, violates the separation of powers doctrine because it makes the monitor a special prosecutor, not a special master conducting court activities.

Monitors are standard operating procedure for the Justice Department, which routinely insists that corporate defendants submit to the scrutiny of an independent watchdog empowered to make sure the corporation is keeping its promises to the government. Almost all monitors are appointed with the consent of the corporation, through a civil settlement or deferred prosecution agreement. Only rarely do judges impose a monitor on an objecting corporation like Apple, which opposed the Justice Department’s request for an independent monitor as part of its relief against the company and has appealed the final judgment in which Cote appointed a watchdog.

There is scant precedent on the constitutionality of outside monitors, since the overwhelming majority of defendants succumb to Justice demands for independent oversight. But Apple did cite a 2003 ruling by the District of Columbia Court of Appeals in Cobell v. Norton, in which the appeals court revoked the appointment of a monitor in a case involving the federal government’s oversight of Indian trust accounts. The government, as a defendant, had agreed to a one-year monitorship but opposed any extension of the monitor’s term. The appeals court agreed that the trial judge should not have granted a wide mandate to the monitor, who had become more like an adversary than a watchdog. “The monitor was charged with an investigative, quasi-inquisitorial, quasi-prosecutorial role that is unknown to our adversarial legal system,” the ruling said. “When the parties consent to such an arrangement, we have no occasion to inject ourselves into their affairs. When a party has for a nonfrivolous reason denied its consent, however, the district court must confine itself (and its agents) to its accustomed judicial role.”

According to Apple, Judge Cote intruded on powers reserved for the executive branch when she proposed amendments to her final judgment that expanded the monitor’s mandate. Judges are within their rights to appoint special masters to oversee issues that are inherently “judicial,” Apple said, but may not impose quasi-prosecutors – with expansive investigative powers and a profit motive – on unwilling defendants. “Because the additional authority conferred by the proposed amendments is not ‘judicial’ in nature, the amendments would exceed this Court’s authority under Federal Rule of Civil Procedure 53 and the constitutional separation of powers,” Apple argued. “To make matters worse, Mr. Bromwich has already exceeded in multiple ways the mandate this court originally afforded him – pressing for immediate interviews with the very top executives at the company, such as CEO Tim Cook, and including others who have nothing whatsoever to do with the day-to-day operation of the business unit at issue.”

Apple and Gibson Dunn argue that Bromwich – a very experienced independent monitor – has insisted upon interviewing Apple officials without Apple lawyers being present and has emailed board members directly rather than proceeding through counsel. (Bromwich actually e-mailed Apple board members to complain about the obstacles he believes the company has already put in his way.) Cote’s amended order would require Bromwich to make regular ex parte reports to her, and would permit her to make his finding public. Apple asserts that it’s a violation of its due process rights to shut its lawyers out of Bromwich’s interviews and then out of his reports to the judge – who is also overseeing the private AG and class e-books litigation. Bromwich and Apple have also clashed over Bromwich’s fees, which Apple must pay. Apple contends that the monitor has not charged as much in previous assignments as he is charging Apple; Bromwich replied that he is actually discounting his usual fees on this assignment.(In an email, Bromwich declined to comment but pointed me to exhibits I’ve linked to.)

This sort of tit-for-tat correspondence is always entertaining, but Gibson Dunn’s argument about the constitutionality of outside monitors is the main event here. If Apple and its lawyers are right about limits on judges’ power to appoint these watchdogs, corporate defendants may be less willing to submit to monitors. Some monitor-shy defendants might take Apple’s route and go to trial, if Apple wins a ruling that courts can’t impose outside investigators on unwilling defendants.

As I mentioned, Apple has appealed Cote’s judgment to the 2nd Circuit Court of Appeals. Its brief to the 2nd Circuit is due in February, and I’m expecting that brief to include more of Apple’s constitutional arguments against monitors.

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