Jan. 23, 2014 7:00 p.m. ET
It's getting harder to distinguish among the executive branch, the judiciary and the private sector in the antitrust campaign against Apple AAPL +0.85% Apple Inc. U.S.: Nasdaq $556.18 +4.67 +0.85% Jan. 23, 2014 4:00 pm Volume (Delayed 15m) : 14.27M AFTER HOURS $555.94 -0.24 -0.04% Jan. 23, 2014 7:59 pm Volume (Delayed 15m): 155,045 P/E Ratio 13.94 Market Cap $492.25 Billion Dividend Yield 2.19% Rev. per Employee $2,127,850 01/23/14 As the Mac Turns 30, Apple Pon... 01/23/14 The Apple Inquisition 01/23/14 Carl Icahn's Letter to Apple's... More quote details and news » —and a federal appeals court seems to agree. This week the Second Circuit rebuked the Justice Department, the federal judge and the white-shoe attorney ganging up to plunder the tech maker.
The Second Circuit temporarily suspended the outside monitor who Manhattan district court Judge Denise Cote handpicked after she ruled last summer that Apple conspired to drive up digital book prices. Michael Bromwich has since been acting as a prosecutor, demanding privileged documents and interviews with Apple executives and board members who have no relevance to the antitrust compliance that is supposed to be his mandate.
Mr. Bromwich says he must oversee Apple's "corporate structure, process, culture and tone" and the "tone at the top of the company," as he put it in a recent declaration. While he's at it, maybe he can invent something as revolutionary as the iPad tablet, whose introduction Judge Cote and the Justice Department think was an act of price fixing.
The improper relationship between Judge Cote and Mr. Bromwich extends beyond their friendship, political ties and ex parte communications, as we reported in December in "Apple's Star Chamber." Special masters are usually imposed on companies in negotiated legal settlements and the litigants consent to the terms of their appointment. Yet Apple is appealing Judge Cote's injunction and the terms of Mr. Bromwich's installation.
The core problem is that under Article III of the Constitution judges aren't allowed to conduct open-ended investigations, as Mr. Bromwich is doing. To the extent his position is legitimate, he is serving as an agent of the court. Judges can appoint surrogates to help carry out their judicial duties, but in that case they must be as objective and impartial as judges.
So when Apple asked Judge Cote to remove Mr. Bromwich earlier this month, standard court practice would have been for him as a judicial officer to ask permission to make a report of his version of events after she heard from Apple and the Justice Department. Instead, he approached DOJ on his own and coordinated as an advocate for one side. Apple learned of Mr. Bromwich's sworn declaration when it was DOJ's only evidence in support of its argument to reject Apple's motion.
Mr. Bromwich's declaration is filled with what he regards as personal slights, such as the fact that Apple scheduled interviews at a remote location instead of its Cupertino headquarters. But his main accusation is that Apple is "using its outside counsel as a shield to prevent interaction between senior management and my monitoring team."
So try to sort this one out. An agent acting on behalf of the judiciary volunteers to become literally the star witness for the plaintiffs. This arm of the court then claims that the defendant's right to counsel is preventing him from conducting his adversarial investigation.
Judge Cote then issued a 64-page ruling that relied heavily on Mr. Bromwich's testimony to reject Apple's petition, even though Apple challenged multiple factual assertions as inaccurate. "The monitor works for me. The monitor is to assist me," Judge Cote said at a contentious Jan. 13 hearing. It is as if she herself had become a witness against Apple.
Judge Cote then voiced "a hope, not a requirement, but it is my hope that Apple would come to see that it is in its interest to comply, its self-interest, not just its obligation to comply under the law, but its very deep self-interest." A corporation could be forgiven for mistaking this "hope" for a threat to let Mr. Bromwich do whatever he likes or else.
Judge Cote said even before the antitrust trial that she was predisposed to rule against Apple, and she is now presiding over a separate class-action damages trial that starts in May. Yet in her Jan. 13 tirade she said consumers "suffered hundreds of millions of dollars in harm." Has she made up her mind in advance in that case too?
Apple could have followed the path of least corporate resistance and settled with DOJ as most companies do. But Apple believes (as do we) that competition from the iPad lowered e-book prices and so it refuses to be railroaded by the Justice-Cote-Bromwich threesome.
The case has grown into an unusual challenge to the legal and constitutional authority of court-appointed monitors, which were rare as recently as a decade ago. They've since become multimillion-dollar operations that can loot companies and are a fabulous gig for white-shoe lawyers with the right judicial contacts. Mr. Bromwich has an unlimited budget and wants to bill at $1,100 an hour to lecture Tim Cook and Al Gore about the appropriate "tone" to take about bogus antitrust charges.
When the Second Circuit hears arguments the first week in February, the judges ought to begin by disqualifying Mr. Bromwich as biased. They might also remove Judge Cote, though Apple isn't asking. To vindicate the rule of law and the separation of powers, they might also consider knocking down the monitor racket, which as the Apple inquisition shows is an invitation for abuse.
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