Apple's bid to throw out a class action lawsuit has been rejected by a US judge. Chief Executive Officer Tim Cook was accused of defrauding shareholders by concealing falling demand for iPhones in China.
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CUPERTINO, CALIFORNIA - JUNE 05: Apple CEO Tim Cook speaks before the start of the Apple Worldwide Developers Conference on June 05, 2023 in Cupertino, California.
Rejecting Apple's Bid
United States District Judge Yvonne Gonzales Rogers decided to reject Apple's bid to end the lawsuit against Chief Executive Officer Tim Cook's China sales comment. According to a report from Reuters, this lawsuit stemmed from a comment from the executive during an analyst call on November 1, 2018, where they faced sales pressure in different markets.
As per Judge Rogers, jurors could reasonably infer that the CEO was discussing Apple's sales outlook in China, rather than the past performance of the impact of currency changers. Prior to Cook's comment, Apple already knew China's economy had also been slowing and had data suggesting where demand could fall.
How Did It Start?
Economic Times reported that this lawsuit referenced an analyst call in 2018, where Cook discussed countries like Brazil, India, Russia, and Turkey where currencies had weakened. Cook stated during that time, "I would not put China in that category."
Following this, Apple instructed its suppliers a few days later to curb production, and by January 2, 2019, the company slashed its quarterly revenue forecast by up to $9 billion.
Apple blamed the trade tensions between US and China. The revenue forecast was Apple's first lowered prediction since the iPhone's launch in 2007. Aside from this, Apple also experienced a decrease in its company shares, falling 10% the next day.
Rogers added that by knowing China's economy had slowed, failure to disclose the data would have put investors at risk unnecessarily. In 2020, the shareholders were advised that Cook's comment could bring a class action against the company.
The lawsuit officially gained class-action status only last year in February 2022. Among the shareholders is the Norfolk County Council, believing that the revised guidance was already too late and Apple should have foreseen this issue. Especially since they had taken action to deal with it in China just days after the CEO's remarks.
Norfolk County Council is the lead plaintiff of the case as the Administering Authority of the Norfolk Pension Fund in Norwich, England. Shareholders' Lawyer Shawn Williams stated, "We are pleased with the ruling and look forward to presenting the facts to a jury."
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As per the original lawsuit, Apple Insider reported that the fund lost close to $1 million over the comments. But the change to a class action suit will do more than enable more shareholders to join in against the company, knowing that it reduces the standard of proof required by claimants.
Apple defended Cook's comments and said that it was a statement of opinion, which is therefore protected. Apple attorneys stated that the claim fails to plead any actionably false or misleading statement.
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