A U.S. judge has rejected Apple’s bid to throw out a class-action lawsuit that accused Chief Executive Tim Cook of defrauding shareholders by concealing falling demand for iPhones in China.
U.S. District Judge Yvonne Gonzalez Rogers’ decision late Monday night clears the way for shareholders led by a British pension fund to sue over a one-day plunge that wiped out $74 billion (roughly Rs. 6,06,700 crore) of Apple’s market value.
The lawsuit stemmed from Cook’s comment on a November 1, 2018, analyst call that while Apple faced sales pressure in markets such as Brazil, India, Russia and Turkey, where currencies had weakened, “I would not put China in that category.”
Apple told suppliers a few days later to curb production, and on January 2, 2019, unexpectedly slashed its quarterly revenue forecast by up to $9 billion (roughly Rs. 73,800 crore), blaming U.S.-China trade tensions.
The lowered revenue forecast was Apple’s first since the iPhone’s launch in 2007, and the Cupertino, California-based company’s shares fell 10 percent the next day.
Judge Rogers, based in Oakland, California, said jurors could reasonably infer that Cook was discussing Apple’s sales outlook in China, not past performance or the impact of currency changes.
The judge also said that prior to Cook’s comment, Apple knew China’s economy had been slowing and had data suggesting that demand could fall.
“A reasonable jury could find that failure to disclose these risks caused plaintiff’s harm,” Rogers wrote.
Apple and its lawyers did not respond on Tuesday to requests for comment.
Shawn Williams, a lawyer for the shareholders, said: “We are pleased with the ruling and look forward to presenting the facts to a jury.”
The lead plaintiff is the Norfolk County Council as Administering Authority of the Norfolk Pension Fund, located in Norwich, England.
Apple’s share price has approximately quintupled since January 2019, giving the company a market value near $3 trillion (roughly Rs. 2,45,97,900 crore).
The case is In re Apple Inc Securities Litigation, U.S. District Court, Northern District of California, No. 19-02033.
© Thomson Reuters 2023
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