Apple’s removal failure could mean open season for compliance monitors

Courts have shown to be skeptical to punish or remove court-appointed monitors

Apple garnered headlines for its push  to remove compliance monitor Michael Bromwich from his post — an attempt that U.S. District Judge Denise Cote rejected on Jan. 16. But the case did more than bring Apple’s name into the limelight, as it also brought the future of compliance monitors to the forefront.

Many companies view compliance monitors as an evil that unnecessarily saps corporate dollars. Apple argued that the lack of competition — since compliance monitors are court-appointed — means that the monitor has very little oversight and can exploit the company.

“Mr. Bromwich appears to be simply taking advantage of the fact that there is no competition here or, in his view, any ability on the part of Apple, the subject of his authority, to push back on his demands,” Apple said in its initial December lawsuit filing.

Apple also argued that compliance officers often act outside of the law. “The external compliance monitor appointed by the court…is conducting a nonjudicial, inquisitorial, roaming investigation that is interfering with Apple's business operations,” Apple lawyer Theodore Boutrous said during the court hearing.

However, based on Cote’s ruling, it seems that compliance officers may receive lots of leeway moving forward. Cote ruled that that Apple “failed to show” it is in the “the public interest” to remove Bromwich and also that governmental regulations posed no “irreparable harm” to the company.

“If anything,” Cote wrote in her opinion, “Apple's reaction to the existence of a monitorship underscores the wisdom of its imposition.”

Because of rulings such as these, companies continue to be skeptical of court-appointed monitors. According to The Wall Street Journal, a 2009 Government Accountability Office study on monitors said that half the companies it spoke with “raised concerns about the monitor's cost, scope, and amount of work completed.”

And more often than not, the issue at hand is the fees. In one key case from 2010, U.S. District Judge Ellen Segal Huvelle raised concerns over a monitor appointed for specialty-chemical manufacturer Innospec Inc., which settled allegations of bribery of Cuban officials.

“It's an outrage that people get $50 million to be a monitor,” Judge Huvelle said, according to the WSJ. “I'm not comfortable, frankly, signing off on something that becomes a vehicle for someone to make lots of money.” However, the court ultimately approved the monitor. But the Justice Department did say that if a monitor’s recommendations are impractical, companies can present alternatives.

Now, the business world will watch for the success Apple’s appeal. After the 2nd Circuit granted Apple an “administrative stay” of the court order assigning Bromwich on Jan. 21, meaning the company receives a temporary reprieve from his monitoring, maybe big business’s interests are looking up.

 

For more on the ongoing Apple/monitor case, check out these InsideCounsel articles:

Judge rejects Apple request to remove court-appointed monitor

Apple feud tenses up with court-appointed monitor

Apple claims court-appointed e-book monitor is overcharging

Judge appoints attorney to oversee Apple e-book sales practices

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