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The State of Texas, et al v. Penquin Group (Usa) Inc.

April 24, 2013


The opinion of the court was delivered by: Denise Cote, District Judge:


Four related cases are before this Court alleging that Apple, Inc. ("Apple") and five publishers conspired to fix prices for certain electronic books, or "e-books," in violation of the antitrust laws of the United States. The publishers are Penguin Group (USA), Inc. ("Penguin"), Hachette Book Group, Inc. ("Hachette"), HarperCollins Publishers LLC ("HarperCollins"),

Holtzbrinck Publishers LLC d/b/a MacMillan ("Macmillan"), and Simon & Schuster, Inc. ("Simon & Schuster"). A bench trial has long been scheduled to begin on June 3, 2013 ("June Bench Trial") in two of these cases:*fn1 United States v. Apple, Inc. et al., 12 Civ. 2826 (DLC), in which the United States (the "Government") brings claims for injunctive relief (the "DOJ Action"), and the instant action State of Texas et al. v. Penguin Group (USA), Inc. et al., 12 Civ. 3394 (DLC), in which thirty-three states and U.S. territories (the "States") bring claims as parens patriae for injunctive relief and damages (the "State Action").

At the time the June Bench Trial was scheduled, it was agreed that it would resolve claims for injunctive relief. Today, only two of the six defendants are scheduled to proceed to trial at the June Bench Trial. Penguin entered into a stipulation of settlement with the Government in the DOJ Action on December 18, 2012, but has not settled with the States and remains a litigating defendant in the State Action. Apple has not settled with either the Government or the States. The four remaining publisher defendants will not be litigating the claims against them at the June Bench Trial, since they have settled with both the Government and the States.

On March 15, 2013, Penguin sought to exclude itself from the June Bench Trial, and moved for a jury trial on the States' claims. Penguin contends that it never waived its right to have the States' monetary claims determined by a jury, and even if it had previously consented to the June Bench Trial as to equitable claims, its ensuing settlement with the Government lead Penguin to assume that "the parties and the nature of the claims being litigated have now changed to the type of legal claims to which [its] jury trial right attaches." The States argue that Penguin voluntarily waived its right to a jury trial on the record and by its conduct, and that a jury trial should not be reinstated at this stage. During a teleconference of April 15, 2013, the Court advised the parties that Penguin's motion was denied and that an Opinion explaining the reasons for that decision would follow. This is that Opinion.


The Class Action, which was consolidated before this Court on December 9, 2011, was the first of the four related e-books cases filed. The Court appointed lead counsel by Order dated December 21, 2011, a consolidated amended class action complaint was filed on January 20, 2012, and motion practice began on several submissions by the parties, including motions to dismiss by Apple and the publisher defendants.

Before these motions were decided, the DOJ Action and State Action were filed on April 11, 2012. These developments affected the Class Action in several ways. The DOJ Action is unique in two respects. First, since the Government exclusively brings claims for injunctive relief, no party disputes that no jury right attaches to the DOJ Action. Second, the Sherman Act grants priority status to the Government's claims. It instructs that in antitrust actions commenced by the Government, "the court shall proceed, as soon as may be, to the hearing and determination of the case." See 15 U.S.C. § 4. No parties have disputed that the DOJ Action takes precedence, and as a result of its statutory priority, the DOJ Action may not be slowed as a result of any related e-books action. In addition, the State Action would affect the claims of any individual class members residing in the plaintiff States because, under Section 4(c) of the Clayton Act, 15 U.S.C. § 15c, claims brought by state Attorneys General as parens patriae are duplicative of claims brought on behalf of class members who are residents of their states.

In light of these developments, the Court included all parties in the related e-books actions at the next conference, held on April 18, in order to discuss with all parties the manner in which these related actions should proceed. At that conference, the Court in relevant part ordered the parties to submit a proposal for coordinated discovery and a proposed confidentiality agreement. The parties filed a Joint Initial Report on June 20, which laid out the parties' respective proposed schedules, including that Apple proposed a trial in March 2013, and the plaintiffs jointly requested a trial in September 2013 ("June 20 Report").

On June 22, the Court held a conference at which all parties in the DOJ, State, and Class Actions participated ("June 22 Conference"). At this conference, the Court and the parties principally discussed the schedule that would govern these coordinated actions, including the extent to which the related cases could be tried together, and whether any coordinated trial would be before the Court or a jury. The Court provided the parties with a proposed schedule based on the parties' June 20 Report, which presented two options for a trial date: (i) a June 3, 2013 trial with no summary judgment practice, or (ii) a later September 16, 2013 trial with preceding summary judgment practice. The Court also noted its view that, "if all the interests can be accommodated, one trial is preferable here," and raised the issue of the potential collateral estoppel effect of any ruling on the Government's claims in any first trial. The Court also explained in detail its bench trial procedures, including that there would be no summary judgment practice for claims being tried by the Court.*fn2

With the Court's bench trial practices in mind, the parties discussed their preferences for the format of any trial moving forward. Apple and the Government both expressed a particular desire for a fast trial in the DOJ Action and advised the Court that that they would waive summary judgment practice in order to have an expeditious June Bench Trial. Penguin in relevant part advised the Court that "a joint trial in June is not going to work for us" because Penguin did not believe it was "practical" and because it would not consent to forfeiting summary judgment practice if there was going to be a jury trial. Penguin also stated that insofar as the parties would "push forward with a hyper schedule" for a June trial, and insofar as summary judgment practice would be waived, it would request a bench trial.

The States first raised the issue of participating in the June Bench Trial towards the end of the June 22 Conference. The States told the Court and the other parties that they "would be willing to entertain moving forward on the June trial schedule on matters related to liability and injunction as a bench trial if the Court feels it is appropriate to move forward in that manner," but that they would need to confer with one another before agreeing to forego a jury trial on those portions of the State Action. The Court expressed that the States' suggestion at the time was "[v]ery creative[, v]ery helpful."

After considering several trial and schedule alternatives presented by the parties, the Court finally ruled that that a non-jury trial would begin on June 3, 2013 as to at least the injunctive relief sought by the Government. The Court also set a schedule for coordinated discovery in the DOJ, State, and Class Actions, which required all fact and expert discovery in all actions -- including discovery on issues of liability that could affect any later damages determination in the State Action -- to be complete by March 22, 2013, in advance of the June Bench Trial.

The Court acknowledged that "[w]ho will be participating in the non-jury trial is yet to be decided, but it will be at least DOJ and non-settling defendants, whoever they might be."

By scheduling order dated June 25, the Court inter alia confirmed the coordinated discovery schedule set at the June 22 Conference, set a schedule for summary judgment motion practice in the State and Class Actions to begin in September 2013, after the June Bench Trial, and set the pretrial order in the DOJ Action to be due on April 26, 2013. The Court also ordered the parties to submit a new joint report on pretrial proceedings in the related actions in light of the Court's recent rulings.

By letter dated June 26, 2012, the States confirmed their desire to resolve all "issues related to liability and injunctive relief in our case" at the June Bench Trial concurrent with the DOJ Action. On July 6, in accordance with the Court's June 25 Order, the parties executed and filed a revised Joint Initial Report governing the related actions ("July 6 Report"). The July 6 Report included a revised schedule of all pretrial deadlines, including that all fact and expert discovery will close before the start of the June Bench Trial, and explicitly noted the States' pending request to have "all issues of liability and injunctive relief in the State Action tried to the Court concurrently with the DOJ Action."

Neither Penguin nor any other party opposed the States' request or otherwise responded.

On August 29, the States filed the Settlement Action as to Hachette, HarperCollins, and Simon & Schuster. On September 6, the Court entered final judgment in the DOJ Action as to these three defendants. Still, no party had directly responded to the States' waiver of their jury right and their proposal to resolve liability and injunctive issues in the State Action at the June Bench Trial. At a September 10 teleconference regarding preliminary approval of the States' settlements with Hachette, HarperCollins, and Simon & Schuster, the Court indicated that the issue of the States' participation in the June Bench Trial should be finally determined.*fn3

The States' role in the June Bench Trial was discussed in detail and resolved at an October 26 teleconference ("October 26 Conference"), at which all parties appeared. At this conference, the Court aimed to "make sure that we understand what is happening at the June trial as opposed to any damages trial that might be held later," and to clarify whether the motion to certify a class had to be resolved, and any opt-out period ...

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