Judge rejects Apple's bid to throw out China sales comment class-action lawsuit
Apple has not succeeded in overturning a lawsuit that alleges CEO Tim Cook defrauded shareholders by withholding knowledge of falling demand in China.
The lawsuit references Apple's November 2018 analyst call, in which Cook said that Apple was seeing what he described as sales pressure in some markets. However, he then stated, "I would not put China in that category."
U.S. District Judge Yvonne Gonzalez Rogers said jurors could reasonably infer that Cook was discussing Apple's sales outlook in China, not past performance or the impact of currency changes. according to Reuters.
Rogers also noted that Apple knew China's economy had slowed, and data suggested that demand could fall. Failure to disclose the data would have unnecessarily put investors at risk.
In late 2020, the shareholders were told they could bring a class-action suit against Apple over Cook's comments.
The lawsuit officially gained class action status in February of 2022. Shareholders, including Norfolk County Council, believe the revised guidance was too late, and that Apple should've foreseen the issue, given that it took action to deal with it in China just days after Cook's remarks.
After being informed in November 2020 that the shareholders could bring a proposed class-action suit over accusations the company concealed falling sales demand, the group's proposal was granted.
At the time, Judge Yvonne Gonzalez-Rogers advised Apple had failed to dismiss the council's efforts to turn the lawsuit into a class-action suit, referring to Apple's arguments on the matter as "distortions."
Norfolk County Council is involved as it runs the Norfolk Pension Fund, valued at multiple billions of pounds. In the original lawsuit, it was claimed the fund lost close to $1 million over the comments.
The change to a class action suit does more than enable more shareholders to join in against Apple, as it also reduces the standard of proof required by claimants. Under a "presumption of reliance," the council wouldn't need to demonstrate that it made trading decisions after hearing Cook's analyst call comments.
According to Apple, Cook's comments were a statement of opinion, and therefore protected. The claim "fails to plead any actionably false or misleading statement," according to Apple's attorneys.
It's not yet clear when the trial will take place.
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Comments
I also agree with you that, on the surface, this lawsuit seems to be silly. There are of course a lot of facts we just don't know, so it's no more than an uneducated opinion that the lawsuit is without merit.
If Apple can find some better lawyers to represent itself, I predict this case won’t go too far. That said, Judge Gonzalez Rogers has a history with Apple, and she doesn’t seem entirely unbiased towards them, if my memory serves.
It doesn't seem reasonable to me, but what is reasonable and what the courts rule to be legal are two separate things.
First, the stock dropped 30% during the period in question. Whether Apple stock went up 3 years later is irrelevant to those who sold at a loss.
Second, to the extent that someone was able to mitigate that loss by "making money" over the long term, that would a question of damages, not whether any misleading statements were made.
Third, even if the shareholders at issue were "making money," the question is whether they would have made more money.
Framing something as an "opinion" doesn't transforom if from false to truthful. The question is whether person who stated the "opinion" knew that it was false or was negligent in forming that opinion. Moreover, according to the ruling, Apple knew that it was facing economic headwinds in China in November 2018, and not only failed to disclose it until early 2019, but told investors that he would not put China in the "category" of other regions where there was sales pressure. This was not merely an "opinion," it was a statement of fact made to investors.
Yesterday Apple made an offer of roughly half a $Billion to settle it, and now waiting on the judge's approval,