US Judge Dismisses Apple Lawsuit Over CEO Cook's China Sales Comment
US judge rejects Apple's bid to dismiss lawsuit accusing CEO Tim Cook of concealing falling iPhone sales in China. Shareholders can proceed with their claims.
In a recent development, a US judge has rejected Apple's request to dismiss a class-action lawsuit accusing CEO Tim Cook of defrauding shareholders by concealing declining iPhone sales in China. The decision by U.S. District Judge Yvonne Gonzalez Rogers allows shareholders, led by a British pension fund, to proceed with their claims against the tech giant.
The lawsuit stems from Cook's statement during a November 2018 analyst call, where he mentioned that although Apple faced sales pressure in various markets, including Brazil, India, Russia, and Turkey, China did not fall into the same category. Shortly after Cook's comment, Apple informed its suppliers to reduce production. On January 2, 2019, the company unexpectedly lowered its quarterly revenue forecast by up to $9 billion, citing trade tensions between the United States and China as the reason.
The subsequent decline in Apple's stock value, wiping out approximately $74 billion of its market capitalization in a single day, prompted shareholders to initiate legal action. Judge Gonzalez Rogers ruled that the plaintiffs could reasonably interpret Cook's statement as pertaining to Apple's sales outlook in China, rather than the impact of currency fluctuations or historical performance.
The judge further noted that Apple was aware of the slowdown in China's economy and had access to data suggesting a potential decline in demand before Cook made his statement. In her ruling, Gonzalez Rogers wrote that failure to disclose these risks could be deemed as causing harm to the plaintiffs.
Apple and its legal representatives have not yet responded to the court's decision. Likewise, the shareholders' lawyers have not issued any comments regarding the ruling. The lead plaintiff in the case is the Norfolk County Council, acting as the Administering Authority of the Norfolk Pension Fund based in Norwich, England.
Since January 2019, Apple's share price has skyrocketed, reaching a market value of nearly $3 trillion. However, this dismissal does not mark the end of litigation, as the case will now proceed in the US District Court for the Northern District of California.
The case is officially known as In re Apple Inc Securities Litigation and is registered under case number 19-02033.