Apple will surrender less than a day of earnings to satisfy class action suit

Posted:
in General Discussion

The class action lawsuit accusing Tim Cook of misleading investors over falling sales in China has been settled for half a billion dollars.

Apple CEO Tim Cook
Tim Cook's comment cost Apple $61 million per word



It's now almost six years since Tim Cook confirmed in a late 2018 earnings call that there were countries where iPhone sales were down, but "I would not put China in that category." However, within days of the call, Apple allegedly then told suppliers to reduce production.

Then in early 2019, Apple took the unusual step of revising its revenue guidance down because of lower iPhone sales in China.

As leader of the class action suit, the UK's Norfolk County Council, alleges that Cook and Apple should have foreseen the economic downturn that so affected its sales of the iPhone in the region. Consequently, the suit argued that Cook deliberately withheld pertinent information, leading to investors losing billions of dollars as the stock dropped by $74 billion.

According to Reuters, Apple has settled. Apple has agreed to pay $490 million to investors who bought shares between Cook's comments and Apple's subsequent revision of its guidance.

Apple's position throughout was that Cook's comments were solely a statement of opinion. Apple's lawyers have previously argued that the lawsuit "fails to plead any actionably false or misleading statement."

Nonetheless, in 2020, US District Judge Yvonne Gonzalez Rogers agreed a lawsuit could be filed. She said that Apple's argument Tim Cook was unaware of an impact on China sales "strains credulity." In 2022, the lawsuit then officially gained class action status.

Apple next attempted to get the lawsuit overturned in 2023, but Judge Gonzalez summarized the company's arguments as "distortions."

The $490 million payout



A preliminary settlement of $490 has been filed with the court, and must be approved by Judge Gonzales. According to Reuters, lawyers representing the shareholders may seek fees of up to $122 million.

In total, Cook's eight-word comment has cost Apple around $61 million per word. It's also 7.8 times Tim Cook's official annual salary of $63.2 million for fiscal year 2023. Then based on the EverySecond site, the $490 million fine is equal to about 16 hours of Apple sales.

Consequently, given that Cook led Apple into becoming the first company to reach a $2 trillion market cap, he's unlikely to be facing a frosty HR interview.

However, the point is that he won't be facing a judge any more, either. Apple continues to deny any liability, and says that the settlement is to avoid the cost and distraction of a trial.

As to whether Cook lied or not, Apple of course continues to say that he didn't. Shareholders have maintained that he did, and so now their representative -- Shawn Williams of Robbins Geller Rudman & Dowd -- has described the settlement as an "outstanding result".

The fact that Apple cut supply orders within days of the earnings call in question does raise questions about how promptly the company did -- or could have -- reacted to falling sales.

Yet Apple's earnings calls are always retrospective, with as little forward-looking statements as the company can get away with. So it seems unlikely that Cook intentionally misled the investors.



Read on AppleInsider

Comments

  • Reply 1 of 13
    omasouomasou Posts: 601member
    This somehow has to stop.

    Countries with their fines and individuals w/their class action suits are using Apple as their personal trust account to withdraws funds.
    MacProzeus423williamlondonwatto_cobrajony0
  • Reply 2 of 13
    SO, I am one of the people cheated. You didn’t mention how much I get per share after the bloodsuckers get their pound of gold.
    MacProwilliamlondon
  • Reply 3 of 13
    looplessloopless Posts: 338member
    "Cook and Apple should have foreseen the economic downturn "
    Yeah, and they should have foreseen COVID as well. And the invasion of Ukraine, and that I was going to stub my toe this morning.

    Tim is a scrupulously honest guy, and it would  "strain credulity" that he would make a deliberately false statement to mislead investors. To what end?  He, personally, 
    did not benefit in any way. 

    Its not a false equivalence to ask why Elon Musk has not been thrown in jail for his blatantly false statements regarding Tesla which has affected their stock price or why Tesla have not been fined billions.

    Apple is everyones favorite punching bag these days.
    MacProwilliamlondonwatto_cobra
  • Reply 4 of 13
    chadbagchadbag Posts: 2,006member
    While class action suits have their place, lawyers fees should be capped at 5% of the settlement amount.   (Or their abouts).   Most of these class action suits you read about are lawyer driven.  My FB feed is full of sponsored ads trying to drum up enough aggrieved people for whatever to file a suit.   “Did you play Sonic the Hedgehog? You may be owed $2500”.   That sort of nonsense.  (Yes that is approximately a real one on FB now — from memory so the $-amount may be off). 
    MacProwilliamlondonwatto_cobra
  • Reply 5 of 13
    bala1234bala1234 Posts: 147member
    Tim Cook shouldn't have said it. But considering the kind of stuff Elon Musk and some others get away with stock price altering nonsense quotes it seems like overkill.
    OferwilliamlondonStrangeDayswatto_cobrajony0
  • Reply 6 of 13
    omasou said:
    This somehow has to stop.

    Countries with their fines and individuals w/their class action suits are using Apple as their personal trust account to withdraws funds.]

    This lawsuit was due to Cook purposely lying about the sale slowdown in China to investors, you can't do that.
    VictorMortimerwilliamlondon
  • Reply 7 of 13
    MacProMacPro Posts: 19,776member
    Blizzard said:
    omasou said:
    This somehow has to stop.

    Countries with their fines and individuals w/their class action suits are using Apple as their personal trust account to withdraws funds.]

    This lawsuit was due to Cook purposely lying about the sale slowdown in China to investors, you can't do that.
    BS
    omasouwilliamlondonStrangeDayswatto_cobrajony0
  • Reply 8 of 13
    omasouomasou Posts: 601member
    Blizzard said:
    omasou said:
    This somehow has to stop.

    Countries with their fines and individuals w/their class action suits are using Apple as their personal trust account to withdraws funds.]

    This lawsuit was due to Cook purposely lying about the sale slowdown in China to investors, you can't do that.
    BS+1
    williamlondonwatto_cobrajony0
  • Reply 9 of 13
    bulk001bulk001 Posts: 769member
    I haven’t kept up with the coverage of this. Given that it is being presented here as so inconsequential to Apple, why have they been fighting it for so long? Would it not have made sense to just settle right away and move on? 
    VictorMortimerwatto_cobra
  • Reply 10 of 13
    Sad.  Should have been MUCH bigger.

    At least the EU knows how to fine a company properly.
    williamlondon
  • Reply 11 of 13
    robin huberrobin huber Posts: 3,978member
    Fine line between justice and protection money: “Sure would be a shame if something bad happened to your nice European market.” Apple, the cash cow for the EU. Wonder what percentage fines from Apple are of their GDP?
    watto_cobra
  • Reply 12 of 13
    macguimacgui Posts: 2,383member
    This lawsuit was due to Cook allegedly lying about the sale slowdown in China to investors.

    There is no proof he lied, only supposition that detractors chose to see as fact, when it wasn't proven.

    That it wasn't proven doesn't mean he didn't lie.
    That it wasn't proven doesn't mean he did lie.
    That Apple settled doesn't 
    mean he did lie.

    We'll never know if he did or didn't so we can pick a side and call it victory or cash grab, and move on.
    watto_cobrajony0
  • Reply 13 of 13
    MacPro said:
    BS
    What is BS about it?  It is in the article.  They were sued because Tim Cook knowingly lied to investors, he said in 2018 that there were sale slowdowns in countries, but that China wasn't one of them. and then just a very short few days later told suppliers to reduce production due to reduce demand in China.
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