OAKLAND, Calif. (CN) — A $490 million proposed settlement agreement between Apple and investors who claim the tech giant misrepresented its value between 2018 and 2019 needs more work, a federal judge in California said Tuesday.
Apple told U.S. District Judge Yvonne Gonzalez Rogers in Oakland that the company doesn't oppose the settlement, which a class of investors who brought securities fraud claims against the company proposed on March 15.
But the judge said she is unlikely to approve the draft agreement to settle claims that Apple misrepresented its value to investors during the U.S. trade war with China, calling parts of it “wholly inadequate.”
“In general, I think the material terms are satisfactory,” Rogers said. “But there are a number of issues, and I'm not going to approve it today because you still have work to do.”
The proposed agreement requires that Apple pay the class $490 million, along with up to 25% of that sum in attorneys’ fees and no more than $3 million in expenses. Individuals authorized to collect from the settlement fund could get at least $10 each.
The judge said the agreement’s proposed notice of settlement is convoluted, and its schedule within which class members can respond or object is confusing. The court also requires information on the relationship with the selected settlement administrator, which is missing from the agreement.
Rogers also said she was not clear on why she should approve attorneys’ fees containing interest. “I don’t recall that I’ve ever done that," the Barack Obama appointee said.
Apple attorney Dan Kramer agreed to adjust the language in the draft agreement. The plaintiffs’ attorney Shawn Williams said that his team reviewed prior class action settlement the judge approved in the past, and said that the class picked an "efficient" settlement administrator attorneys had worked with before.
Rogers said the parties can resubmit the revised agreement within two weeks, and must return to court May 31.
The plaintiffs filed the class action in 2019, accusing Apple of securities fraud on behalf of all purchasers of Apple stock between Nov. 2, 2018 and Jan. 2, 2019. They said in their complaint the company made fraudulent statements in November 2018, which hid the fact that “Apple’s business metrics and financial prospects were not as strong as defendants had led the market to believe.” They demanded a jury trial on the company's statements during a period of slowed economic growth in China and geopolitical pressures from U.S.-China sales tariffs.
The litigation began after Apple boasted about the demand of its flagship products, like the iPhone, during late 2018 when the Trump administration implemented the first $34 billion of import tariffs on Chinese products. Plaintiffs say the tech giant avoided telling investors that the demand for iPhones dipped in China, and that the rate at which customers were replacing batteries in older iPhones was negatively impacting sales growth.
The plaintiffs said the company also did not report that it slashed prices and production orders from suppliers for new iPhone models; that unit sales for iPhone and other hardware were relevant to investors and the company’s financial performance; and that it intended to mask declining unit sales by withholding the real totals.
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