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Sherman Anti Trust Law and Apple

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What is the Sherman Anti Trust Law?

US history books tell that Senator John Sherman, an Ohio Republican, was the main author of the Sherman Anti Trust Act of 1890. Originally, Robber Barons of oil, steel, banking and railroads created “trusts.” These trusts were similar to today’s “cartels” where wealthy principals use hostile buyouts of companies to form “trusts.”

The Sherman Anti Trust Act’s chief aim was to destroy monopolies by outlawing every business contract or combination, or conspiracy in “restraint of trade.” The Sherman Anti Trust Act was supposed to expose the evils of big business and to control big business in the public interest. In 1914, The Federal Trade Commission Act created a five-man Federal Trade Commission whose primary duties were to prevent unfair methods of competition in trade and business that included:

  • Miss branding and adulterating goods
  • False and misleading advertising
  • Spying and bribery to secure trade secrets
  • Closely imitating competitors’ products

Court Decides Apple is in Violation of Sherman Anti Trust Law

The circumstances surrounding court decision that Apple is in violation of Sherman Anti Trust Law are based on the Supreme Court case, the United States of America v. Apple Inc., et al., 12 Civ. 2862 (DLC). The court upheld the violation that Apple and five book publishing companies had conspired to increase the prices on e-books. The lawsuit was filed April 2012. The five co-conspirator publishers with Apple were: Harper Collins Publishers, Penguin Group, Inc. Simon & Schuster, Inc. Hachette Book Group, Inc. and Macmillan Publishers.

According to US Court records, these publishers sold these books from $9.99 to $14.99 as recommended in a meeting with the five publishers and Eddy Cue, Sr. VP of Apple’s Internet Software and Services for which Apple would receive a 30% commission. When Amazon.com discovered this Apple agreement with these publishers, it tried to discourage authors from selling their books directly to online buyers. Amazon later sent another letter to the US Federal Trade Commission regarding the agreements between Apple and the five publishers.

As the case proceeded, the court determined that the Sherman Anti Trust Act had been violated as a result of Apple creating an agreement that created unfair competition due to publishers withholding books from Amazon and fixing the prices to appear equal to that of the prices Amazon was selling their e-books.

The entire premise of the Apple and five publishers’ agreement was based on a mutual adoption of an agency “model.” Amazon hadn’t adopted the agency modeling allowing the publishers to withhold e-books from sale on Amazon. This is where the crux of the violation of the Sherman Anti Trust Act lies. By disallowing Amazon to sell the publishers’ e-books, this created unfair methods of competition in trade and business for related e-book sellers.

The Verdict by the Court

The court uncovered considerable evidence that clearly showed that Apple and five publishers had, as a result of their meeting with Eddy Cue, joined together in “a horizontal price-fixing conspiracy.”

Evidence also showed that “Apple violated Section 1 of the Sherman Act by conspiring with the Publishers to eliminate retail price competition and raise the price of e-books.” The court concluded through evidence that “Apple was a knowing and active member of the conspiracy, proving by the Plaintiff, “a per se violation of the Sherman Act.”

Dispute Resolution: Trial

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If you attempted to settle your dispute through litigation and it failed to happen, trial may be your best option. Virtually all litigation is settled. Often, the primary reason settlement through litigation does not occur is due to substantial disagreements over the monetary amount of settlement. You think you can get substantially more or pay substantially less in a trial. Your opponent believes that he or she can get more or pay less, as well. There is a parallel path here. Each side has to weigh their chances of winning at trial. Frequently someone grossly overestimates their chances at trial. Trial may wind up costing half as much as litigation did after everything is said and done.

Regardless, here you are trying your lawsuit, to settle your dispute. Each side’s case has strengths and weaknesses. Plus, there is the element of chance and human nature at play. If you lose big, you have more chances to settle. File for an appeal. The case may settle under circumstances similar to those at trial.

Going to Trial Offers Ample Opportunities to Settle

Was the Last Offer Better than Trial?

Settlement may happen before trial, once every party makes their entire case, looks at it as a whole, and decides that the last offer in mediation wasn’t so bad. I have settled a case at docket call, the proverbial settlement at the courthouse steps.

Can the Jury Influence Settlement?

If you are trying a case before a jury, it is possible that a settlement will occur after the jury is picked. Did you get a bad jury? Your chances of success may decrease, and a settlement number changes. I have also heard of cases that settled once the plaintiff has presented their case and before the defendant has presented their case. It is also not uncommon for a case to settle after the trial, but before the jury returns a verdict.

Dispute Resolution: Litigation

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In my previous blog posts, I discussed settlement through informal dispute resolution and settlement through demand letters. Today, I will discuss settlement through litigation.

The Ultimate Goal is to Reach a Settlement, Not to Enter into Trial

Many associate litigation with going to trial. Yet, less than 10 percent of litigation cases actually result in a trial. The other 90 percent are either settled or dropped before trial occurs. As such, most litigants file suit with the goal of settling the dispute – not to enter into a trial. If you cannot settle a dispute through informal resolutions or through a demand letter, a lawsuit may be your best option.

Can You Afford a Trial?

Before you make the leap into litigation, you should understand the expense of trial. If a lawsuit inevitably ends up in trial, you must be financially prepared for it. A good lawyer will walk you through the expenses and discuss your options. If you cannot afford a trial, settlement through demand letter negotiation is a preferable avenue. Personally, I have yet to encounter anyone who wanted to spend the money on a trial unless they have exhausted all other options for settlement.

Bringing Suit Proves a Powerful Point

Ideally, you file a suit to prove a point. You are telling the other party that litigation will ensue if a settlement is not reached. I have seen lawsuits thrown immediately into settlement negotiation, even through mediation, without any discovery being conducted. However, this is not the rule. Typically, some discovery does take place. In such circumstances, you must hope that the amount you will gain in settlement exceeds the expense of discovery. Always keep this mind, as discovery is expensive.

The Settlement Process

If settlement is not discussed early on in the litigation process, it typically leads into a mediation forum. During mediation both parties are forced to exchange settlement offers repeatedly. Many mediation forums result in a settlement agreement on the spot. However, some attorneys and/or parties want to gather all of the evidence before coming to a settlement decision. This means mediation may take place both after the discovery process is over and just before the preparation for trial. Obviously, this is a course of action for a lawsuit in which larger amounts are at stake.

Next Time…

In my next post, I will discuss trial as the final form of dispute resolution.

Contract Boilerplate

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What is a Boilerplate?

You might have heard of a “boilerplate” before. Boilerplate refers to the miscellaneous provisions in a contract which are in every contract. However, boilerplate provisions do vary from contract to contract, and the terms of a boilerplate provision may vary. So, the issue in boilerplate provisions is the content that you want for each provision. The content of some provisions is negotiated between the attorneys. I am going to focus on one boilerplate provision that will provide an example of how important the terms of a provision can be.

Boilerplate Provisions:

Usually there will be a litigation provision. This boilerplate provision can have huge implications. It states where a suit will be filed, if one becomes necessary, and which state’s laws will be used.

Location of a Suit

If you have two parties that do not do business in the same county, the location of a suit will result in some additional expense of the litigation for one party. More importantly, it determines the inclinations that the judges may use during the litigation. For instance, some counties are known to be very conservative, and as such, the judges in that county are more likely to be conservative. There are exceptions, but generally this can be true. There are many considerations that have to be used to determine the likely nature of the judges, but location of the suit is a very important factor. The same can be true with respect to juries. For instance, if a county is very conservative, the jurors may be conservative in deciding who wins, and how much the other party has to pay.

The location of a suit can even be more important, when the parties to a contract live in different states or countries. The travel expense can be large. The expense of learning the tendencies of judges and juries can be large, if this can be done at all. When the location is picked by one party, that party will likely know the local factors that may affect who generally wins, and who generally loses. You will not.

Choice of Law (Which State’s / County’s Law Will be Used?)

The second term in a litigation provision is the choice of law. Which state’s or country’s law will be used in determining the outcome of a litigation? The law does vary from state to state, or country to country. Choosing between Texas law and New York law can be a very important decision. You know Texas law, but you do not know New York law.If the choice of law is not made by the most powerful person in the negotiation of the contract, it pays to know something about the other state’s laws, before a decision is made.

Pay Attention to the Terms of a Litigation Provision

And the terms of a litigation provision are very important. I frequently see clients who never thought a contract would be broken, encounter a serious breach of the contract. The question is whether to litigate. If the party who breached has its own location and the use of its own laws, a big question arises as to the cost of the litigation, and, more importantly, who is likely to win. When you are likely to win, a good settlement is easy to reach.

Evaluation of a Case

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What are the Motives of the Case?

When there is a dispute, every client wonders whether they should file suit. You have to decide why you want to sue: to gratify emotions, for the principle of the matter, or to gain money. You must consider your motives very carefully.

To Gratify Emotions?

Suing to gratify your emotions is a temporary relief. When you file suit, your emotions may be gratified, however, this has happened at a great cost. You are now in a lawsuit and the cost of that suit can be very high. How much money would you pay to gratify an emotion? Tens of thousands? A hundred thousand? Do you think such a trial will gratify your emotions? In the end, you will have to decide if the emotion was worth the financial cost. I will not file a lawsuit for you based upon your emotions alone. It never turns out well. In hindsight, you regret having spent the money.

For the Principle of the Matter?

The same is true, if you want to sue “on principle”. I will not file a lawsuit for you on principle alone. In practice, I usually find that you want to sue upon both—emotion and principle. The two are intimately tied together. When one undertakes a great cost based upon these emotions, one usually regrets having spent the money. I will not file a suit for you based upon emotion and principle alone.

Financial Goals

You must have a financial goal to justify a suit. Or at least one that I will file. You must think—not believe—that you will get more money than you will spend. To reach this conclusion, you must have some idea of your chances of winning, how much you can collect, and what the cost is.

Evaluating your chances of winning is a challenging task. One cannot say 60-40 or 70-30, with a degree of accuracy. I will tell you if you have a strong case, and are more likely to win, than not. In contrast, I may say the outcome is 50-50. If I say that you have a weak case, it is probably best to not sue.

You measure your chances of winning against how much you can collect, if you win. Notice that I did not say that the measurement is against how much a judgment will be, if you win. Many judgments are worthless-because nothing can be collected. You do not sue an insolvent defendant. You had better sue someone who has more assets than you can reasonably expect a judgment to be. I can also help with this assessment.

Lawsuits cost a lot of money. You may think that you can file one, and then drop it, if a settlement does not occur quickly. What if the defendant countersues you? Then you cannot just drop it, on your own. To get the defendant to drop the suit with you, you will most probably need a settlement, even if it is not on the terms you would like. Let’s say that you file, and negotiate a settlement. Including the draft of the settlement documents, you may have spent ten thousand dollars. Many people think that mediation is a low-cost means to reach a settlement. It is true that mediation usually results in a settlement. However, it will probably take five thousand dollars or more to participate in a mediation. So, let’s say the total cost is fifteen thousand. But wait, the defendant must also want to mediate right away—which is usually not the case. Some discovery will have to be done, before both parties are prepared to mediate. Some discovery will cost at least ten thousand dollars. Maybe thirty. You get the idea. If you try the case, depending upon its complexity, you may altogether spend from seventy-five thousand to two hundred thousand. I will also help you through this phase of your evaluation.

Once you have judged whether proceeding is a good financial decision, you must acknowledge the personal cost to you of filing suit. Lawsuits may take as little as three months, if the defendant is willing to mediate. Perhaps fourteen months, if you have to try the case. Along the way, you must devote time to the suit. And, the suit always causes some stress. You do not know what the outcome will be. This is just not stressful; it is also a distraction.

Whether to sue is a joint decision—of you and your lawyer.

Defending Yourself

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Occasionally I run into someone who wants to get enough free information and advice from me, to where they can do the legal work themselves. On other occasion, I talk with someone who has researched their area of law on the internet and thinks that they know all that is necessary to do the work themselves.

Abe Lincoln once said that people who represent themselves have a fool for a client. His point is that you can never give yourself good advice, because you are biased. The same is true with regard to your judgment in a legal matter. And too much that is personal finds its way into a legal matter.

And there is the people factor. You are dealing with this matter for the first time, and your lawyer, if that person has a lot of experience, has probably dealt with some of the people involved, or people who occupy the same place as in other matters like yours. And certainly this experienced lawyer has handled a few matters similar to what you want to address.

There is a certain type of skill in your interactions with others on a legal matter. Experienced lawyers have learned the way to interact with others that is especially tailored to getting a “yes” in a matter. Usually the other person has a considerable amount of discretion in a matter. And circumstances like handling a situation to where a transaction closes, defending yourself before a revenue officer and getting a good resolution, or finishing a small lawsuit in a cost-effective manner that gets you results are good examples of when an experienced lawyer adds value, reduces risk, and gets a smile on your face.

Judge to Rule Against Las Brisas Air Permit

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The Las Brisas Power Plant proposed location in Corpus Christi projects creating almost 4,000 jobs over the 4-5 year construction period in Refinery Row. In addition to creating jobs Las Brisas would generate $900 million in local spending and $400 million in local tax revenue. Residents in the Refinery Row district in Corpus Christi are mostly low-income, minority populations; however, the plant is facing opposition from Refinery Row residents, city officials, and business leaders. Despite being supported by the Central Bend Labor Council, the South Texas Chapter of the Associated General Contractors of America and the Port of Corpus Christi. Business leaders in the area state that Corpus Christi is taking striding steps in becoming a more sustainable community and creating further associations with coal and petroleum coke industries would be a detrimental to the development process.

Texas District Court Judge Stephen Yelenosky cited Monday that he plans to rule against the air permit for Las Brisas power plant. The ruling is based on a lawsuit proposed by environmental groups wanting to reverse the permit. Judge Yelenosky concerns are directed three major aspects of the permit. Texas Commission on Environmental Quality did not require sufficient technology to tolerate Las Brisas fuel source. They did not make compliance with National Ambient Air Quality Standards. Further, the permit did not prove accountability for storage and transportation of petroleum coke at the Las Brisas plant. It has not been determined if the ruling will require a reversal of the permit or a reversal and remand of permit for the plant.

Southwest Airlines to pay $28,000 for burns from hot chocolate

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Southwest Airlines will pay a child more than $28,000 for burns he suffered from hot chocolate he spilled during a flight.

Port Arthur resident Indria Rice, acting as next of friend of Jaylon Jackson, filed suit against Southwest on Oct. 11, 2011, in Jefferson County District Court, stating it is the company’s fault her son spilled hot chocolate on himself during a flight.

Court records show that a final judgment was entered in the case, stating that the parties had reached a settlement with Southwest agreeing to pay $28,601.26 into the court’s registry as part of the minor’s settlement proceeds. An additional $1,500 was paid for a guardian ad litem fee.

The lawsuit alleged that on Aug. 20, 2010, Jackson was traveling to Houston on Southwest Airlines Flight 322 when he spilled a cup of hot chocolate on himself, allegedly resulting in a second-degree burn to his chest. A second-degree burn is one that raises a blister.

The lawsuit did not list a single act of the negligence and only asserted that Southwest owed Jackson a “duty, which was breached, causing minor plaintiff Jaylon Jackson injury.”

Beaumont attorney Kent Johns of Johns & Johns represents the plaintiffs. Dallas attorney Katherine Staton of Jackson Walker represents the airline. Judge Donald Floyd, 172nd District Court, presided over the case. The case is No. E191-165.