April 4, 2024
Aspiring lawyers (solicitors or barristers) interested in corporate law may be interested in following this true David vs Goliath story on Apple defrauding its shareholders.

What is the story with Apple and Norfolk County Council?

In November 2018, Tim Cook (Apple CEO) made an announcement to investors, reassuring them that there was no issue with iPhone sales in China. Filled with confidence, a number of investors bought Apple stock via Norfolk County Council’s pension fund – the Norfolk Pension Fund.

However, just two months later, Apple suddenly slashed its revenue forecasts by around £7 billion and cited falling iPhone demand in the Chinese market as one of the main reasons – share prices plummeted as a result (falling 10% within a day – equivalent to $74 billion given Apple’s huge market cap). 

It has since emerged that while making the reassuring comments about Apple’s strength in China, Cook had also privately been speaking to its manufacturers and warning them that they would be downgrading in light of difficulties in China. This suggested that Apple were aware of the issue all along and essentially lied to investors in the November statement. 

The claimants in this class action lawsuit (one brought on behalf of multiple people) were the investors who bought Apple stock through the Norfolk Pension Fund. They argued that Cook’s comments essentially misled and defrauded them as a result – ‘false and misleading statements and omissions’ were supposedly made.

Norfolk County Council have not been the only claimants involved, however – the case was first brought in the US by a city which had similarly invested heavily in the company, but in 2020 Norfolk decided to take over as the ‘lead plaintiff’. Of course, there could well be further claimants arising in the near future given both the size of Apple’s investor pool and the success in this case.

It is worth re-iterating that this case has not gone to court – instead, Apple have settled before a trial (due in a few months’ time) could take place. The settlement has been filed in California, where a judge will need to sign off on it to bring proceedings to an end. The official court documents contain the following statement from Apple’s perspective:

“Defendants (Apple) have expressly denied and continue to deny that they have violated the federal securities laws or any other laws, or have otherwise misled investors as alleged in this action…but in recognition that further litigation will be protracted, overly burdensome, expensive and distracting have determined that it is desirable and beneficial for them to resolve the action”.

The case has been led mostly by Robbins Geller Rudman & Dowd LLP, an American law firm specialising in shareholder rights cases. They have previously acted on similar cases including representing Tesla shareholders in a high-profile class action lawsuits against company directors and Musk following questionable public statements and the misrepresentation of their financial position on numerous occasions.

On this case, partner Shawn Williams stated that the outcome was an ‘outstanding result’ for Norfolk investors. It has been suggested that this law firm might take up to 25% of the profits from the win.


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What can aspiring lawyers learn from this story?

This story contains a range of interesting discussion points for aspiring lawyers to use within the context of their applications (be that on application forms initially, or at interviews). For solicitors, this could mean applications for open days, vacation schemes, or training contracts.

For barristers, this could mean applications for mini pupillages or full pupillages. Either way, there are many different angles from which this story could be analysed – and this is often best done through considering ‘practice areas’ (which practicing lawyers will often specialise within in practice). 

Corporate Law

Naturally, this story has obvious ties to areas of corporate law. This is an area of law which primarily deals with how large companies are run, and is a particularly profitable practice area for many of the big City law firms (think Magic Circle or elite US). 

The way in which senior figures in companies communicate with their shareholders is often closely regulated, and lawyers in this practice area would need to examine both statute and case law to work out where Cook’s comments fall on the spectrum of liability.

In the UK, for example, directors have numerous duties under the Companies Act 2006, which are often vaguely worded, and so whether these statements were misleading or not would likely require close comparisons to previous cases. 

International Law

There is another element to consider in this story – the fact that it is inherently cross-jurisdictional. Many large City firms make the majority of their profit from complex cross-border deals, requiring effective collaboration skills from lawyers across offices in different countries.

Here, lawyers would need to consider the interplay between the relevant law in the US and the relevant law in England and Wales. One starting point for conversation could be the fact that the UK is generally seen as more involved in regulating corporate activity than their American counterparts. 

Where can I read more about the case?

While the settlement means this is highly unlikely to go to court, interested members of the public are still able to read the initial filings here (In re Apple Inc. Securities Litigation). An extract from the text summarises the claims made as this:

Specifically, plaintiff raises two causes of action: (1) violation of Section 10(b) of the Securities Exchange Act (“Exchange Act”) and Rule 10b-5 promulgated thereunder by all defendants, and (2) violation of Section 20(a) of the Exchange Act by the individual defendants.

Looking into these relevant statutes further can be a great starting point for getting to grips with the details of this case.


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