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Apple Picks Its Spots In E-Books Litigation

Apple (AAPL) just simplified its approach to the ongoing litigation around its alleged price fixing of e-books. A damages settlement struck on Monday with several state attorneys general and a class of plaintiffs clears the way for Apple to focus on appealing a July 2013 ruling that it fixed prices in violation of antitrust laws. The company agreed to a deal with U.S. states and consumers seeking damages of up to $840 million. A jury trial on those damages was scheduled to start next month.

Federal judge Denise Cote in Manhattan on Monday asked all sides to submit a filing by July 16, seeking approval of the proposed deal. As Bloomberg News reported, details of the agreement weren’t disclosed. Apple spokeswoman Kristin Huguet, Apple’s attorney, Theodore Boutrous, and plaintiffs’ attorney Steve Berman declined to comment.

The July trial would have been one of four lawsuits to emerge from a Justice Department investigation into e-book pricing by several companies, including Hachette Book Group (MMB:FP), HarperCollins (FOXA), and Simon & Schuster (CBS). All the defendants except Apple settled the various federal and state cases.

Monday’s settlement doesn’t end the main dispute between the Justice Department and Apple, which was tried last June and which Apple lost. A July ruling by Judge Cote found that the company had violated antitrust laws and colluded with book publishers to inflate the price of e-books. In February, Apple asked the Second Circuit Court of Appeals to overturn Cote’s ruling, arguing that it is “a radical departure from modern antitrust law and policy,” according to the appellate brief. “If allowed to stand, the ruling will stifle innovation, chill competition, and harm consumers. This Court should overturn it.”

Apple, through its lawyers at the law firm Gibson, Dunn & Crutcher, has denied the price-fixing charges and called the government’s case and the arguments it was built on “absurd,” “fundamentally flawed,” and favoring “monopoly, rather than competition.” The appellate brief says Judge Cote’s ruling contradicts other Supreme Court and Second Circuit decisions in price-fixing cases. Apple’s case could itself make its way to the high court.

A little over two weeks ago, the Justice Department and the states responded to Apple’s appeal, writing in their brief that the “price-fixing conspiracy is per se unlawful under Section 1 of the Sherman Act, and Apple is liable for it.” They argue that rather than address the district court’s findings, Apple instead claimed it struck several separate agreements with publishers “whose only purpose was to facilitate Apple’s precompetitive entry into the ebook market. That characterization … cannot be reconciled with the evidence presented at trial, which demonstrated that Apple had conspired with the publishers to achieve their shared goal of eliminating ebook retail price competition and raising ebook prices.”

The brief charges Apple with putting forth unsound legal arguments, and asks that Cote’s judgement and injunction be affirmed by the appellate court. Apple’s response to the government’s brief is due by June 24.

So the settlement now focuses attention on the pending appeal, which is likely to determine the fate of the class actions and state damages cases.

Kessenides is an associate editor for Bloomberg Businessweek.

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