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CUSTOMER RELATIONSHIP MANAGEMENT NEWS. UPDATED 9 MINUTES AGO.
You are here: Home / Digital Life / Sapphire Maker Slams Apple Deal
Sapphire Maker Says Deal with Apple 'Oppressive'
Sapphire Maker Says Deal with Apple 'Oppressive'
By Dan Heilman / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
OCTOBER
13
2014
A week after sapphire maker GT Advanced Technologies filed for Chapter 11 bankruptcy protection, court documents revealed that the company said its supplier agreement with Apple was “oppressive and burdensome."

GT filed for bankruptcy shortly after the iPhone and iPhone 6 were released without GT’s sapphire screen. The company had previously signed a $578 million deal to supply Apple with scratch-resistant sapphire goods.

The Financial Times reported that among other terms, the agreement between the two companies included a clause stating that "each breach of the confidentiality obligations will require GTAT Corp. to pay liquidated damages to Apple in an amount of $50 (million) per occurrence."

GT also blamed Apple for withholding a $139 million payment the GT described as a significant factor in its filing for bankruptcy.

Disproportionate Control

Documents had previously been filed in bankruptcy court by GT, but in redacted form. Last week GT asked the court to let it file unredacted versions of several documents related to its confidentiality agreement with Apple "in the interest of their creditors, equity holders and other stakeholders, as well as to ensure an open, transparent and fair process in these Chapter 11 cases." GT contended that the confidentiality Apple demanded would put other creditors at a disadvantage and give Apple "disproportionate control over the case."

While acknowledging that Apple wanted to keep its entire business operations confidential, GT said that created logistical problems in the Chapter 11 context.

"While parties may have a legitimate interest in protecting their trade secrets because disclosure of the 'secret sauce' reduces the value of a business, many times the information for which protection is sought does not require the level of protection requested," the company said.

In a separate filing, GT claimed its agreements with Apple "imposed oppressive and burdensome terms and obligations on GTAT" and that it should not be bound by those agreements because they were eating into the company’s cash reserves.

GT also said in the filings that it "also believes that Congress’ express desire for public access in bankruptcy cases . . . outweighs contractual demands for secrecy. However, absent express direction from the court, GTAT will not risk exposing itself to potentially hundreds of millions of dollars in additional liabilities."

Shareholders Sue

In the meantime, GT faces a class-action lawsuit from shareholders who allege it "misrepresented and/or concealed" its financial health, manufacturing capabilities and progress. GT stock lost had 90 percent of its $1.5 billion value almost immediately after it declared bankruptcy proceedings had begun.

Apple had agreed to lend GT $578 million to develop a 1.3-million-square-foot facility in Mesa, Ariz., to create sapphire products using about 700 employees. GT is required to repay that money over five years, starting in 2015.

Apple released a statement saying in part, "We are focused on preserving jobs in Arizona following GT’s surprising decision and we will continue to work with state and local officials as we consider our next steps."

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