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In re Electronic Books Antitrust Litigation

United States District Court, S.D. New York

April 24, 2014

PENGUIN GROUP (USA) INC., et al., Defendants. THE STATE OF TEXAS, et al., Plaintiffs,

Steve W. Berman, George W. Sampson, Seattle, WA, Jeff D. Friedman, Shana Scarlett, Hagens Berman Sobol Shapiro LLP, Berkeley, CA, Kit A. Pierson, Jeffrey Dubner, Cohen Milstein Sellers & Toll PLLC, Washington, D.C., Douglas Richards, Cohen Milstein Sellers & Toll PLLC, New York, NY, for class plaintiffs.

Eric Lipman, Gabriel Gervey, David Ashton, Kayna Stavast-Piper, Office of the Attorney General of Texas, Austin, TX, for plaintiff States, for State of Texas, Liaison Counsel for Plaintiff States.

W. Joseph Nielsen, Gary M. Becker, Office of the Attorney General of Connecticut, Hartford, CT, for State of Connecticut, Liaison Counsel for Plaintiff States.

Robert L. Hubbard, Office of the Attorney General of New York, New York, NY, for State of New York, Liaison Counsel for Plaintiff States.

Theodore J. Boutrous, Jr., Daniel G. Swanson, Gibson, Dunn & Crutcher LLP, Los Angeles, CA, Cynthia Richman, Gibson, Dunn & Crutcher LLP, Washington, D.C., for defendant Apple Inc.


DENISE COTE, District Judge.

After a bench trial in two closely related cases brought by the United States Department of Justice and thirty-three states and U.S. territories, [1] defendant Apple Inc. ("Apple") was found to have colluded with five major publishers (the "Publisher Defendants") to fix e-book prices in violation of Section 1 of the Sherman Antitrust Act ("Sherman Act"), 15 U.S.C. § 1. On March 28, 2014, a class was certified in the related class action (the "Class Action"). In re: Electronic Books Antitrust Litig., 11 MD 2293 (DLC), 2014 WL 1282293 (S.D.N.Y. Mar. 28, 2014) (the "Class Certification Opinion"). A joint damages trial in the States' Action and Class Action is scheduled to begin on July 14, 2014.

On April 4, Apple moved to stay the Class and States' Actions pending Apple's submission and the Court of Appeals's review of a petition for interlocutory appeal of the Class Certification Decision (the "Rule 23(f) Petition"). Although the lion's share of its briefing is devoted to argument in favor of a stay during review of its Rule 23(f) Petition, Apple also suggests, in places, that these actions should be stayed pending Apple's merits appeal of the liability decision.[2] The parties agreed on an expedited schedule for briefing this motion for a stay, and the motion was fully submitted on April 15. By Order of April 23, Apple's stay motion was denied for reasons to be set forth in a later Opinion. This Opinion gives the reasons for that denial.


The relevant procedural history is set out below. Although familiarity with the Class Certification Opinion is assumed, a brief description of the Class Action's expert's damages model is also set forth.

I. The Late Date of Class Certification, and Delay of the Damages Trial

Well before the June - liability trial, at a lengthy conference held on October 26, 2012 addressed to pre-trial scheduling and discovery matters in the DOJ, States' and Class Actions, the Court inquired why Apple wished to delay class certification motion practice until after the liability trial. Apple stated that "the class certification process, we believe, can really be handled in a reasonable time" and "[we] think it makes sense to have it handled after" the liability trial. Apple represented that "not having the class go forward and opt out [at that time], certainly in no way will harm the class." Accordingly, the Court agreed to postpone class certification until after the liability trial.

Class plaintiffs moved for class certification on October 11, 2013. In support of that motion, class plaintiffs submitted the expert report of Dr. Roger Noll ("Noll"), who reported the results of a sophisticated damages model built from a multivariate regression analysis of more than 149 million e-book sales. Noll's initial model explained 90% of the variance in prices among e-book titles. The parties' briefing on the class certification motion was fully submitted on January 21, 2014 following a sur-reply from Apple. Motions to exclude Apple's experts, who offered opinions in opposition to class certification, were fully submitted on February 4. On March 28, class certification was granted. To allow for a 45-day notice period and to accommodate certain pre-trial filings, the Court delayed the damages trial from May 2014 to July 14, 2014.

II. Two Prior Notices

Prior to the June - liability trial in the DOJ Action and States' Action, each of the five Publisher Defendants settled with the DOJ, the States, and class plaintiffs. In connection with those settlements, two notices were sent to affected e-book purchasers - including all class members in the Class Action - advising them of the pendency of these actions and noting the allegations against the Publisher Defendants and Apple.

On September 13, 2012, the Court preliminary approved a $69 million settlement between all states and U.S. territories (sans Minnesota) and three of the Publisher Defendants: Hachette Book Group, Inc. ("Hachette"), HarperCollins Publishers, LLC ("HarperCollins"), and Simon & Schuster, Inc. and Simon & Schuster Digital Sales, Inc. ("Simon & Schuster"). The Court also approved the first plan to notify affected e-book customers. Pursuant to that notice plan, e-retailers ("e-tailers") Amazon, Barnes & Noble, Apple, Kobo, Sony, and Google each identified customers who purchased one or more of the Publisher Defendants' e-books between April 1, 2010 and May 21, 2012 (the "class period"). Each e-tailer then sent by e-mail a one-page notice to affected customers. This first e-mail notice advised that those settlements "resolve an antitrust lawsuit about the price of electronic books, " while "[a] separate lawsuit against two other publishers and Apple, Inc. continues and is set for trial in -."

In addition, the Claims Administrator set up a dedicated website at with further information about the litigation, including a more detailed notice. Kinsella Media, LLC, an advertising and legal notification firm, arranged for supplemental notice to be made through internet banner advertising, with banners that appeared on websites including Facebook's; sponsored links on the most popular U.S. search engines; mobile device advertising; advertising in newspapers in U.S. territories and possessions; press releases distributed via a national newswire and through promoted stories; outreach to more than 300 blogs covering book-related topics; and posts to relevant Twitter accounts. Rust Consulting, Inc. ("Rust") also sent postcard notices to Apple and Sony customers whose e-mail notices were returned as undeliverable.

On July 12, 2013, the Court approved a second plan to notify consumers of $95 million settlements with Publisher Defendants Holtzbrinck Publishers, LLC d/b/a Macmillan ("Macmillan") and Penguin Group (USA) Inc. ("Penguin"), as well as Minnesota's settlement with all five of the Publisher Defendants. Notice of the former settlement went to customers in the States who purchased the Publisher Defendants' e-books during the class period, as well as to putative class members in the Class Action who purchased such e-books; notice of the latter went to Minnesota customers who purchased the Publisher Defendants' e-books during the class period.

The second notice plan largely mirrored the first. Much like the first, the second e-mail notice advised that the settlements resolved claims against these Publisher Defendants "in antitrust lawsuits about the price of electronic books, " while "[t]he antitrust lawsuit against Apple, Inc. continues."

On March 28, 2014, a class was certified in the Class Action. Rule 23 requires individual notice to all class members who can be identified through reasonable effort, advising them, among other things, of their right to opt-out of the litigation. Fed.R.Civ.P. 23(c)(2)(B). Similarly, the Clayton Antitrust Act ("Clayton Act") requires that the States, which have brought this action parens patriae on behalf of their residents, publish notice and permit residents to opt-out. 15 U.S.C. § 15c(b). Having been asked by the Court to prepare notice submissions in the event class certification was granted, plaintiffs moved for approval of a notice plan the same day.

The proposed notice plan is much like the prior plans. A short, half-page notice is to be sent by e-mail to class members and to customers in the States who purchased the Publisher Defendants' e-books during the class period, from their e-tailer, or from Rust on behalf of Apple or Sony (the "E-Mail Notice"). The E-mail Notice advises that the States' and Class Actions "claim that there was a conspiracy involving five U.S. publishers and Apple to fix and raise retail prices of E-books, " that plaintiffs "will have to prove their claims in Court, " and that "Apples denies the claims and the requested damages." Rust is to send the same notice by postcard to class members for whom no correct e-mail address was found in the two prior rounds of notice. An eight-page, detailed notice (the "Detailed Notice") is available on a dedicated case website, and will be mailed to anyone who requests it by calling a toll-free number, writing to an Apple E-Books Antitrust Litigation Post Office Box, or writing or e-mailing class counsel.

Plaintiffs and Apple met and conferred regarding notice, and largely agreed upon the notices to be sent. The parties submitted minor disputes regarding the notices' language to the Court, which were addressed during a telephone conference on March 31. After a second round of discussions, the parties submitted a revised notice on April 1. The Court approved the form of notice by Order of April 1, and approved the notice plan as a whole by Order of April 2. The automated process for disseminating notice may not be halted after April 28.

III. The Instant Motion Practice

As noted above, class certification was granted on March 28 in the Class Action. On April 4, Apple brought the instant motion for a stay of the Class and States' Actions[3] pending Apple's submission and the Court of Appeals's review of Apple's Rule 23(f) Petition, as well as for a stay pending Apple's appeal from the Opinion finding Apple liable. Apple also moved for an administrative stay pending this Court's decision on its stay motion. The parties agreed upon a briefing schedule for the stay motion, which was fully submitted on April 15. On April 11, Apple filed its Rule 23(f) Petition.

By letter of April 22, Apple requested a ruling on its stay motion by close of business the following day, or, in the alternative, a grant of Apple's request for an administrative stay. By letters of April 22 and 23, class plaintiffs and the States, respectively, opposed any such stay. Class plaintiffs opined that any stay, including an administrative stay, of these proceedings will "almost assuredly delay the July 14 trial"; the States concurred that, in the event any stay were granted, "the feasibility of a July 14 trial is significantly decreased." By Order of April 23, the Court denied Apple's stay motion and its request for an administrative stay, with reasons to follow in this Opinion.


The standard for evaluating a stay application is well established:

(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be ...

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