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Week in Review

By Martha Nimmer

A Bad Apple

Following a June trial, Southern District Judge Denise Cote ruled on Wednesday that Apple violated antitrust laws when the company fixed e-book prices with five major publishers. Judge Cote wrote, "the evidence is overwhelming that Apple knew of the unlawful aims of the conspiracy and joined the conspiracy with the specific intent to help it succeed." Assistant attorney general William Baer hailed the decision as "a victory for millions of consumers who choose to read books electronically." The major publishers involved in the suit -- Simon & Schuster, Inc., HarperCollins Publishers, Inc., Penguin, Hachette Book Group and Macmillan -- previously settled with the federal government.

The Department of Justice commenced the suit in April 2012, claiming that Apple had "acted as the 'hub' in a hub-and-spoke conspiracy to move the book industry from a 'wholesale' model dominated by Amazon.com to an 'agency' model where Apple and other e-retailers would take commissions." To effect that change, Apple first met with publishers in December 2009, and discussed moving to the agency model that included "use of most favored nation clauses--an arrangement that enabled the publishers to force Amazon, then dominating the market for e-books with its Kindle reader, to switch from its wholesale model to the agency model." Eventually, the publishers and Apple agreed on a plan wherein Apple would sell e-books and take a 30 percent commission, thereby, according to Judge Cote, "ensur[ing] that Apple would make a profit from every e-book sale in its iBookstore without having to compete on price." The publishers also convinced Google to move to that same model in late January 2010, just as Apple was introducing the iPad and the iBookstore.

Disputing the government's claims, Apple tried to argue that evidence of "rapid-fire negotiations with publishers were contentious," thereby extinguishing any notion that there was a meeting of the minds necessary to form a conspiracy. Judge Cote rejected that argument, however, writing that tense negotiations do not "preclude a finding of liability." In its closing argument, Apple tried to convince the judge that "Apple should be applauded and not condemned for its beneficial impact on the e-book market." Unmoved, Judge Cote concluded that "in any event, the Plaintiffs have shown that the Agreements did not promote competition, but destroyed it."

The case will now move to a new phase, where a judge will decide Apple's penalties for participating in an antitrust conspiracy. Adding to Apple's legal troubles is the fact that the tech powerhouse is currently being pursued by various states attorney generals who are seeking damages on behalf of customers who paid inflated e-book prices.

Executives and attorneys in the tech industry are likely to study this ruling closely, particularly because books, movies and music are now increasingly sold online. That said, industry members will be looking for guidance on how to work with other companies and establish business relationships, without violating antitrust regulations.



Read the opinion here: http://www.nysd.uscourts.gov/cases/show.php?db=special&id=306

Think Before You Post

The next time you say that a beauty pageant is rigged, don't. That is the lesson being learned by Sheena Monnin, the former Miss Pennsylvania USA 2012, who claimed on Facebook and the Today Show that the 2012 Miss USA pageant followed a "script" directing the final 16 contestants and the top five finishers. Now, Monnin must pay a $5 million damages award for defamation.

After winning the title of Miss Pennsylvania USA in 2012, Monnin "signed three contracts with Randy Sanders of Sanders & Associates, which owns the franchise for the Miss Pennsylvania USA pageant." One of the contracts contained an arbitration clause that required any dispute arising between the beauty queen and the Miss Universe organization to be resolved in arbitration. Despite this requirement, Monnin's attorney, Richard Klineburger, inexplicably refused to participate in arbitration before retired Magistrate Judge Theodore Katz in 2012.

During the opening scenes of the televised beauty pageant, 51 contestants assembled on the stage. That number, however, rapidly fell to 16, based on preliminary scoring. Monnin was one of the dismissed contestants, but she did not go quietly. While waiting to return to her dressing room, Monnin alleged that Miss Florida USA, Karina Brez, told Monnin that she (Brez) "had seen a paper in a notebook with a list of the top five finishers already written out." Incensed, Monnin texted the owner of the Miss Pennsylvania USA franchise, writing "[t]his is f-ing rigged Randy. I'm done. This is ridiculous," and "[i[t's so obviously rigged so the girl they want can shine; they kept several beautiful girls out for that reason." Monnin eventually resigned from the pageant, but her outrage did not abate: "a media frenzy was triggered that same day when Monnin went public with her allegations in a Facebook post and then posted them again on June 5."

Following her comments on Facebook, Monnin received a hand-delivered letter from Miss Universe, stating its intent to "assert claims for her false and defamatory statements." Monnin, however, did not keep quiet, eventually appearing on the Today Show for an interview with Ann Curry, during which Monnin repeated her allegations about what Miss Florida USA had told her backstage. Fed up, Miss Universe took Monnin to arbitration, seeking $10 million in damages. The defendant, however, did not attend the arbitration because her legal counsel claimed that she was not obligated to arbitrate because she had resigned from her contract in June 2012. The arbitrator issued his award in December of last year, writing that Monnin's comments about "rigging" caused "the Miss Universe organization to lose a $5 million site fee from BP to sponsor the 2013 Pageant on the Gulf Coast." The arbitrator added that Monnin's comments on Facebook and the Today Show were "obviously harmful to MUO's business" and made with "actual malice."

Monnin, who finally got herself new legal counsel, appeared before presiding Judge J. Paul Oetken last month. The defendant claimed that her previous attorney told her that "she was not bound by any agreement to arbitrate and that [Monnin] need not respond to any communications" from the arbitration service. Monnin added that her previous attorney also failed to keep her apprised of the situation, and she therefore lacked notice of the arbitration. Unfortunately for the former Miss Pennsylvania USA, the judge rejected the notice argument: "[w]hile it is unfortunate and perhaps unfair that Klineburger, likely in violation of the Model Rules of Professional Conduct, failed to communicate with his client for several months, despite receiving repeated entreaties and status updates regarding the Arbitration, it is well established that notice to an attorney constitutes notice to the represented client."

So with that, remember: think before you post, think again before you go on the Today Show, and definitely think harder before you choose not to participate in arbitration.


Heads Up on the NFL Concussion Case

U.S. District Court Judge Anita B. Brody has ordered the National Football League (NFL) and the former players suing the NFL over concussion-related injuries to mediate. Layn Phillips, a retired federal judge, will serve as the mediator in the case. Judge Brody originally planned to rule on the NFL's motion to dismiss on July 22. Her decision to send the case to mediation "signals a belief that a settlement is possible with continued negotiations," writes NFL.com. The judge has indicated that she would not rule on the motion to dismiss until September 3, so as to give the mediator sufficient time to hear the case and work with the parties. She also issued a gag order for both sides.

As mediator, Phillips will meet jointly with the lead counsel for both parties to the dispute, with each side giving a presentation highlighting the merits of its case and the drawbacks and weaknesses of the other side's position. At that point, Phillips will meet individually with each side and attempt to "create a situation where a deal can be struck."

Readers will recall that the former professional football players have alleged that the NFL "concealed for years and even decades" what it knew about the long-term effects of repeated impacts to the head. Unsurprisingly, the NFL has rejected that claim, adding that it issued warnings in line with medical knowledge available at the time. The NFL also points to a collective bargaining agreement negotiated between it and the players, which governs player safety.

It remains unclear how this case will evolve. At the end of the summer when the mediator reports back to Judge Brody, he will hopefully have a proposal worked out between the parties. On the flip side, the mediator may request more time to work out an agreement between the NFL and the former players, or may come up empty handed, thereby sending the case back to court. If the case does, in fact, return to court, the judge may decide to rule on the NFL's motion to dismiss, urge the parties to settle, or commence discovery. Undoubtedly, the NFL, the thousands of former players affected by the suit, and the countless observers and fans across the nation will be monitoring the case closely.



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This page contains a single entry from the blog posted on July 12, 2013 12:40 PM.

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