Apple Gets Relief on Costly Discovery Fine in Qualcomm Case

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By Eleanor Tyler

Apple Inc. is off the hook on potentially hundreds of thousands of dollars worth of discovery sanctions in the Federal Trade Commission’s antitrust case against Qualcomm Inc.

Apple isn’t a party to that dispute, which is pending before Judge Lucy H. Koh in the U.S. District Court for the District of Northern California. Qualcomm demanded that Apple produce documents in the lawsuit as a third party. The FTC claims in the suit that Qualcomm’s licensing practices are anticompetitive, and Apple is a major customer. The situation is particularly complicated because Apple and Qualcomm are also suing each other in a separate antitrust lawsuit over patent licensing in Southern California.

The magistrate judge overseeing discovery disputes in the FTC case, Nathanael M. Cousins, sanctioned Apple $25,000 a day for failing to meet a court-ordered deadline to turn over 1.3 million documents Qualcomm demanded in the FTC case. Apple asked for relief.

It’s unusual for a court to sanction a party for dragging its feet on discovery. It is practically unheard of for a court to sanction a third party, which is subject to different rules than an active party, for failing to turn over documents on time.

Koh held in a Feb. 7 order that Apple won’t have to pay those sanctions because Cousins’ authority to sanction Apple as a nonparty to this lawsuit is unclear.

Potential Abuses

Qualcomm’s discovery demand and the harsh penalty caused the advocacy group Lawyers for Civil Justice (LCJ) to file a brief on Apple’s behalf. LCJ said Cousins didn’t adhere to procedural protections for nonparties forced to produce documents in lawsuits. The order sets a “dangerous precedent” that would permit litigants to threaten egregious sanctions on nonparties that are late with onerous discovery demands. That could increase the frequency and stakes of ugly discovery disputes and ultimately increase costs to everyone, the brief said.

LCJ’s brief, which Koh noted in setting aside Cousins’ order, said those outcomes are “not an imagined threat.” An “emboldened” Qualcomm asked for similar daily monetary sanctions against five other nonparties for failing to meet discovery deadlines, LCJ said. Qualcomm also asked Cousins to fine Apple $1 million per day rather than the $25,000 he actually imposed.

Koh didn’t rule “on the propriety of a sanction or the amount of any sanction.” But she set aside Cousins’ order and remanded the issue for his reconsideration.

The case is FTC v. Qualcomm Inc. , N.D. Cal., No. 17-cv-00220, 2/7/18 .

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

For More Information

The court's order is at http://src.bna.com/wgM.

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