Unsealed GT court documents reveal Apple negotiation tactics

Key court documents related to GT Advanced Technologies’ bankruptcy filing earlier this fall have recently been unsealed, providing some interesting insights into negotiations between Apple and GT. While both companies had previously fought to keep court documents sealed, citing confidentiality agreements, a judge ruled earlier this week that the documents did not contain trade secrets of other confidential information.

The newly disclosed documents also include an unedited affidavit from GT Advanced’s Chief Operating Officer, Daniel Squiller, who places much of the blame for GT’s failure on Apple, in light of agreements that the company had already previously referred to as oppressive and burdensome.

Squiller describes Apple as using a “bait-and-switch” strategy, initially appealing to GT with the promise of a lucrative deal that would have involved Apple purchasing sapphire furnaces and allowing GT to operate them, but later demanding a “fundamentally different deal” that was “onerous and massively one-sided.” The new deal required GT to purchase and operate the furnaces, and shifted all economic risk to GT Advanced Technologies, putting Apple in the role of a lender with no other obligations to purchase any equipment or materials produced by GT.

Squiller goes on to note that the company was forced to agree to Apple’s terms as it had “invested months negotiating a sale contract with Apple while being effectively locked out of pursuing other opportunities with Apple’s competitors.” Negotiations with Apple were described as “extensive and all-consuming” and the lure of the larger company’s offer resulted in GT not speaking with other potential customers or investors. For its part, Apple allegedly told GT that it “does not negotiate with its suppliers,” forcing GT to agree to all of Apple’s terms so as to not risk losing the deal.

As part of the deal, GT was reportedly required to produce specified quantities of sapphire, however Apple was under no obligation to purchase any. Squiller notes that when GT executives contested the terms, Apple’s response was to tell them to “put on your big boy pants and accept the agreement.” In the end, Squiller notes that the relationship ultimately “unsustainable” as Apple exerted a great deal of control over GT’s operations, resulting in cost overruns and other expenses that the larger company refused to take responsibility for, forcing GT to “divert an inordinate amount of its cash and corporate resources” into its Mesa facility.

In court documents requesting that Squiller’s affidavit remain sealed, Apple described his statements as “untrue, irrelevant and defamatory,” and that they go “far beyond” was is required in the bankruptcy filing by including “gratuitous characterizations of Apple’s motives, negotiating tactics and business practices.” Apple and GT have already agreed to end their partnership amicably, nullifying the terms of the original deal, and arranging for GT to repay its loans to Apple by selling off its sapphire furnaces.