GT Advanced Technologies has to settle legal disputes with Apple because “protracted litigation against one of the largest corporations in the world with over $100 billion of cash would be challenging and expensive,” according to a court filing submitted late Monday night. Lawyers for the bankrupt sapphire supplier say that Apple is threatening to hit it with “numerous liquidated damages provisions in the Apple Agreements pursuant to which Apple would likely assert millions, if not billions, of dollars in secured and unsecured claims against certain of the Debtors.”
The lawyers suggest that GT could win contract disputes with Apple, and that it has “various
causes of action” against the company, “including actions rooted in the Bankruptcy Code and breach of contract claims.” GT could potentially try proving that Apple “engaged in the requisite inequitable conduct and the misconduct resulted in an injury to creditors or conferred an unfair advantage,” something that might help reduce the priority of the latter’s claim for $439 million.
GT may also try to undo the financing, confidentiality, and supply agreements it signed on the basis that they were deals with an insolvent firm. Much of the situation remains in the air however, as lawyers for the official committee of unsecured creditors haven’t answered whether they’re going to support a settlement, and aren’t telling the media whether they’re conducting a probe of their chances in a lawsuit against Apple. For its part, GT’s filing states that going with a settlement was also linked to being “compelled to investigate and eventually assert causes of action against Apple relating to the Apple Agreements and the business relationship with Apple” in any future legal action.
If the judge overseeing the bankruptcy approves the settlement, a contract rejection motion will be “moot,” GT says. The supplier adds that it expects to “ultimately succeed” in an attempt to remove the shackles of its contract, including ones that prevented it from selling sapphire furnaces to Apple competitors. It notes though that “it is almost certain that Apple would vigorously challenge” lifting restrictions, and that a battle with Apple “could significantly delay GTAT’s emergence from chapter 11.” Apple has agreed to avoid interfering with GT efforts to finance a recovery, which allegedly include a bankruptcy loan coming “in several weeks.”
The settlement depends on securing a court order for the destruction of all copies of bankruptcy papers GT filed that explain the difficulties with Apple that led to the former’s collapse. Wall Street Journal owners Dow Jones are contesting that motion. In the meantime, a Thursday hearing will decide whether a granted sealing order can continue until November 25th.
