March 21, 2013

Penguin opts for a jury of its peers


First, Penguin told the Justice Department to “Bring it on” — it was going to stand firm against the government’s bizarre price-fixing lawsuit even when most of the others charged in the case decided to settle. Then, er, Penguin changed its mind after being bought by Random House and said it would like to settle the case after all, coming to terms with the DOJ. Except then, as if the case wasn’t already weird enough, the judge in the case said the settlement wasn’t enough and declared the trial would go on (as Judith Rosen reported in this Publishers Weekly story), with Penguin as the lone remaining publisher in the case alongside Apple.

Now, Penguin seems to have decided if it’s in the game after all, it’s in it to win, and in an interesting move that seems to represent a new level of having its head in the game, the world’s second biggest publisher earlier this week asked the judge for a trial by jury.

As Andrew Albanese reports in another PW story, “with money damages now at stake in the state and consumer class actions, and not merely injunctive relief, Penguin has asserted its right to a jury trial, while also admitting that the motion constituted, at the very least, an inconvenience for the court.”

As a report by Melissa Lipman in Law360 notes,

“The Seventh Amendment to the U.S. Constitution guarantees Penguin … a jury trial on all of the states’ claims seeking legal (monetary) remedies,” the company said in a memorandum. “This constitutional right, which is one of the few procedural protections related to civil trials enshrined in the Constitution, is fundamental.”

… “The Constitution, the federal rules, and controlling precedent all point in the same direction: The common-law right to a jury trial at law is too important to relinquish through anything less than a clear and unequivocal waiver,” Penguin said. “Silence, ambiguity or (at worst) the simple misunderstanding the states assert here simply will not do.”

So what’s the strategy behind this? Per PW:

Why ask for a jury trial? If granted, the jury trial would effectively sever Penguin from being tried at the same table with Apple, on June 3, before a judge who, in approving the settlements, has already called the underlying claims in the DoJ matter “a straightforward price-fixing case.” Notably, when Penguin was still a defendant in the DoJ action, an action that was by law entitled to be heard at a bench trial, there was no reason to demand a separate, additional jury trial, since the underlying claims to be proven in all three cases were identical. “Yet the minute Penguin settled with DOJ on December 18, 2012,” Penguin attorneys noted, “all of those considerations materially changed.”

What’s more, Albanese points out, Penguin settled with the DOJ to help get its merger with Random House approved; now its free to fight, especially the additional claims being brought against it by consumer groups and 30 states. Still, he observes, the risk is high:

The question remains: is winning at trial worth the risk of losing? In its decision to settle, Macmillan, (the other publisher that had vowed to fight the charges) CEO John Sargent noted that the damages Macmillan could have been on the hook for had it lost was “was much more than the entire equity of our company.” Clearly, the newly formed Penguin Random House has more resources at its disposal, but with a new company to put together, will its legal team really want this fight?

But of course, with the trial forced upon Penguin despite its efforts to settle, what choice does it have except to fight — and, as it seems to have recognized, to fight with all its got?



Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.