Antitrust Law Daily Wrap Up, ANTITRUST—SDNY: Penguin Group Waived Right to Jury Trial on States’ E-Book Price Fixing Claims, (Apr 25, 2013)

By Tobias J. Gillett, J.D., LL.M.

Penguin Group (USA) Inc. waived its right to a jury trial on the claims of thirty-three U.S. states and territories that it violated the antitrust laws by engaging in a conspiracy with technology company Apple, Inc. and four other major publishers to fix the price of e-books, the federal district court in New York City has ruled (The State of Texas, et al. v. Penguin Group (USA) Inc., et al., April 24, 2013, Cote, D.).

The United States Department of Justice and thirty-three U.S. states and territories brought claims against Apple, Inc. and five major publishing companies alleging that they conspired to fix the prices for e-books, in violation of the antitrust laws. A bench trial has been scheduled to begin on June 3, 2013, with only two defendants currently scheduled to proceed to trial on that date—Penguin and Apple.

On December 18, 2012, Penguin settled with the United States, but remained a defendant in the action brought by the states. Apple did not settle with either the United States or the states. The remaining four publishers settled with both the United States and the states. On March 15, 2013, Penguin moved for a jury trial on the states’ claims, and sought to exclude itself from the bench trial, contending that it never waived its right to have the states’ claims determined by a jury.

The court explained that the Seventh Amendment guarantees a right to trial by jury in "suits in which legal rights are to be ascertained and determined, in contradistinction to those where equitable rights alone are recognized, and equitable remedies are administered." Once a party demands a jury trial, "all other parties affected by the demand may rely on it." The court noted that the parties did not dispute that the states’ claims implicated the parties’ right to a jury trial, and that the states had made a timely demand for jury trial in their complaint.

The court observed that the states could not unilaterally waive the jury trial right once it had been conferred. A waiver could only be made by the parties "by written stipulation filed with the court," "by an oral stipulation made in open court and entered in the record," or "by conduct of the parties." The waiver "must be clear and unequivocal," and the burden of proving a waiver lies on the party seeking to enforce it.

The court concluded "that Penguin, along with all other litigating parties, knowingly and intentionally waived a jury determination of liability on the States’ claims." At a June 22, 2012 conference, the states had proposed "moving forward on the June trial schedule on matters related to liability and injunction as a bench trial," and Penguin had signed a report "memorializ[ing ] the states’ request." Therefore, Penguin could not dispute that it was aware of the states’ intention to waive its right to a jury trial from at least June 2012.

At an October 26, 2012 conference the parties conferred and agreed that the states would participate in the bench trial and class action plaintiffs in a separate action would not. The court affirmed this agreement by stating, "Okay, so what we have then is DOJ and the states against Apple, Macmillan, and Penguin." Apple and Macmillan agreed the bench trial would proceed, and Macmillan clarified that the bench trial would "get through the injunctive relief trial of the DOJ and the liability portion with respect to the states." When asked, Penguin affirmed by stating, "No, that’s fine. No, your Honor." This statement "constituted an intentional and explicit waiver," according to the court.

In addition, Penguin confirmed its waiver by agreeing to push back the class certification period in the class action until after the June bench trial, the court observed. Finally, Penguin and all other parties assented on the record following the October 26 conference, after a discussion of the states’ participation in the bench trial and the trial’s effect on any future class action trial, by stating in response to a request for objections, "No, your Honor, and thank you."

Therefore, Penguin had consented to the states’ proposed jury trial waiver under the language of Federal Rule of Civil Procedure 39(a), according to the court. The court rejected Penguin’s argument that the circumstances following Penguin’s settlement with the United States meant that the court was improperly blending "a demand for equitable relief in aid of the legal action" with "a claim, properly cognizable at law." Rather, the parties had "dispensed with" the waiver by their assent.

The court also rejected Penguin’s argument that was not aware that the states’ claims would be tried with the claims of the United States at the bench trial because the court had never issued a formal order to that effect. The court observed that, under its local rules, "an oral decision that does not finally determine all claims for relief" would "constitute the court’s order." The facts that the court had stated in the October 26 conference "that it intended to decide issues related to the logistics of the June bench trial," and that it had "so ordered the November 6 stipulation," only clarified the court’s statement that "what we have then is DOJ and the states against Apple, Macmillan, and Penguin."

Moreover, Penguin had not merely failed to object by "silence" or "ambiguity." It had participated in "a lengthy discussion regarding the parties participating in and the issues to be tried" at the bench trial, and had agreed that the other defendants’ comments concerning the trial were "fine." The discussion was not merely raised "in passing," but rather "was a central focus of the" October 26 conference, Penguin had been aware since at least June 2012 that the states would seek to have the liability and injunctive portions of their action tried at the bench trial, and Penguin had "affirmatively agreed on the record" with statements by other defendants regarding the trial.

Furthermore, Penguin’s conduct also "demonstrated its waiver of a jury trial," according to the court. The court observed, contrary to Penguin’s contention, that participation in a bench trial or objecting on the day a bench trial begins were not necessary requirements for conduct to constitute a "clear and unequivocal" waiver of a jury trial, and that other conduct could also represent such a waiver.

The court cited a number of examples of such conduct, including signing two separate stipulations "which confirmed that the states’ liability claims would be heard in June." The parties had completed an aggressive discovery stage and "sacrificed summary judgment practice in support of an expedited schedule in preparation for the June Bench trial." Moreover, Penguin had failed to request or even mention a summary judgment schedule, or to communicate to the court until February 2013 its alleged understanding that it had a right to trial by jury on the states’ claims and was no longer participating in the bench trial.

The court rejected Penguin’s request for the court to exercise its discretion to "order a jury to decide issues of liability on the states’ claims either at the June trial or at a separate, second trial linked to any damages determination." The court determined that granting the request "at this late stage would be both impractical and prejudicial." The court noted that Penguin had not made its waiver of a jury trial conditional on a failure to reach a settlement with the United States, or otherwise indicated that a settlement would change its views regarding the bench trial.

Ordering a jury trial would "severely impact" all parties, since they had all made "enormous efforts" to prepare for the bench trial, including completing discovery, exchanging initial witness lists, and waiving summary judgment practice. Further, Penguin’s motion was fully submitted only weeks before the parties’ pretrial order and motions in limine were due.

In addition, proceeding with a jury trial concurrently with the bench trial would be "simply impractical," in the court’s view. Jury and non-jury trials "follow drastically different procedures," the court observed, including taking testimony by affidavit in a bench trial and live in a jury trial, and the court preparing a draft opinion with findings of fact at the start of a bench trial. Moreover, Penguin’s settlement with the United States did not affect "the nature of the states’ claims to be adjudicated by the court at the June bench trial."

The case is No. 12 Civ. 2294 (DLC).

Attorneys: Allison Sheedy (Akin Gump Strauss Hauer & Feld, LLP) for Penguin Group (USA) Inc. David M. Ashton of the Texas Attorney General's Office for the State of Texas.

Companies: Penguin Group (USA) Inc.

Cases: Antitrust NewYorkNews