Last Week Key Apple Executives, Board Members were sued in Shareholder Complaint for Breach of Fiduciary Duty
In January 2019 Patently Apple posted a report titled "Apple Issues a Gloomy Preannouncement that they'll miss their Financial Guidance for Q1 2019," which set off a series of lawsuits against Apple's CEO, CFO and Apple board members (01, 02 & 03).
Last week Apple was sued for a fourth time by John Votto who filed the lawsuit in San Jose for: "Verified Stockholder Derivative Complaint for Breach of Fiduciary Duty and Violation of the Federal Securites laws."
Nature of the Action
This is a shareholder derivative action brought in the right, and for the benefit, of Apple against certain of its officers and directors seeking to remedy Defendants’ violations of state and federal law that have occurred from August 1, 2017 through January 2, 2019 (the “Relevant Period”) and have caused, and continue to cause, substantial harm to Apple, including monetary losses and damages to Apple’s reputation and goodwill.
Apple is a multinational technology company that designs, develops, and sells consumer electronics and software in the U.S. and abroad. Apple’s flagship product is its iPhone, accounting for nearly two-thirds of the Company’s revenues since 2007. Apple sells the iPhone throughout the world, including in Greater China, its third-largest market segment behind the Americas and Europe.
During the Relevant Period, the Defendants misrepresented and/or failed to disclose multiple material factors that negatively impacted Apple’s iPhone sales and revenues, including that, inter alia: (a) consumer demand for new iPhone models was negatively impacted by Apple’s sales of heavily discounted battery replacement program for older iPhone models, as customers chose not to upgrade or to delay same; (b) macroeconomic factors, including an escalating trade war with the United States, increased competition from cheaper smartphones, and sluggish economy, were likely to negatively affect, and were doing so, Apple’s iPhone sales in China; and (c) that as a result of the foregoing, the Defendants lacked a reasonable basis when issuing positive iPhone sales and revenue guidance for the first quarter of 2019, and when publicly denying the existence and negative impact of the foregoing.
Apple’s wrongful conduct came to light on January 2, 2019, when the Company disclosed declining iPhone sales and was forced to reveal to investors that it would not meet the first quarter 2019 revenue guidance it had issued only two months earlier, the first instance of Apple having to reduce its revenue expectations in the past 16 years. Apple’s Chief Executive Officer ("CEO"), Tim Cook, conceded that the declining sales were the result of users’ decisions not to upgrade after receiving discount battery replacements, as well as economic issues in China, both issues of which Apple and the Defendants herein repeatedly denied to analysts and investors existed and/or would have a negative impact on sales.
On this news, the Company’s share price fell approximately 9%, from $157.92 on January 2, 2019 to $142.19 on January 3, 2019, the first trading day after the disclosure, on exceedingly high trading volume of over 91 million shares.6.In addition, based on the wrongful conduct discussed herein, numerous lawsuits were filed against Apple and certain of the Defendants and regulatory and governmental investigations were started in the United States and abroad.
For more details, read John Votto's full complaint filed with the court in the full SCRIBD document below, courteous of Patently Apple.