GT Advanced Technologies was forced into a one-sided, money-draining deal after Apple allegedly made a "bait and switch" move.
GT Advanced COO Daniel Squiller said in documents submitted to a U.S. Bankruptcy Court that Apple gave an offer to the company for what should have been the company's biggest contract ever.
Apple then modified the agreement after it was too late for GT Advanced to rescind the agreement and pursue other deals.
GT Advanced, a manufacturer of sapphire furnaces and a supplier of new iPhone screens, filed for bankruptcy early last month. Back then, GT Advanced did not explain the reason for the sudden turn of events after the massive contract signed with Apple. It merely stated that it was not allowed to do so due to confidentiality terms in the contracts.
The two firms eventually reached an agreement to cancel the partnership to allow GT Advanced to move forward with its bankruptcy.
However, Judge Henry Boroff did not approve requests made by both companies to conceal from the public certain documents.
The original deal that was agreed upon last year would have had GT Advanced outfit an Apple-owned plant in Arizona with specialized furnaces, which would be used to produce sapphire that would be scratch-resistant.
Apple initially offered to purchase 2,600 sapphire furnaces from the company, which GT Advanced would be operating for Apple.
However, after months of negotiations passed, Apple made another offer that moved economic risk away from the company. Apple changed the framework of the agreement so that it would only be lending funds to GT Advanced for the production of the furnaces, with the sapphire to be sold only to Apple but at prices lower than the prevailing market price.
GT Advanced, unable to pursue any other deals with rival smartphone makers, was effectively forced to agree to the proposal.
"With a classic bait-and-switch strategy, Apple presented GTAT with an onerous and massively one-sided deal in the fall of 2013," wrote Squiller in the documents. "In hindsight, it is unclear whether Apple even intended to purchase any sapphire furnaces from GTAT."
When managers of GT Advanced expressed their concerns regarding provisions in the contract, Apple responded by saying that all of its suppliers agree to the terms and that they could not be negotiated.
"Put on your big boy pants and accept the agreement," Squiller quoted Apple as saying.
Apple, in a separate document that was unsealed, said that the accusations of GT Advanced were "scandalous and defamatory."
"These statements are intended to vilify Apple and portray Apple as a coercive bully," said Apple, adding that it "bent over backwards" to be able to work with the company, such as making payments despite GT Advaced's failure to meet performance requirements.
