Derivative Action Slams Apple Over ‘Batterygate’ Scandal Stock Drop

(CN) – Tech giant Apple Inc. faces a shareholder derivative complaint after the company’s share value dropped significantly due to dwindling sales of iPhones after a phone software “fix” slowed down older models to push consumers into purchasing newer models.

The complaint was filed by lead plaintiff Terrence Zehrer in the Northern District Court of California and alleges that older iPhone models began to shut down unexpectedly in 2016.

The issue was caused by aging batteries which could have been simply replaced, but the company engaged in a scheme to offer a “fix” which, in reality, only slowed the older models’ performance in an attempt to drive new sales, according to the complaint. When Apple’s plan was exposed to the public it became known as the “Batterygate” scandal.

Independent investigations of Apple in 2017 revealed the company deliberately caused slowdowns in older iPhone models through iOS updates. In late 2017, Apple eventually admitted to intentionally slowing the performance after facing severe consumer outrage.

Since the nature of the phones’ issues were the battery, after Apple’s alleged scheme was exposed, the company offered a discount on replacement batteries to resolve the issue and offered customers a battery replacement program.

Following a lengthy series of class action litigation, Apple announced in a public release that sales of newer model iPhones were down due to the battery replacement program.

After Apple exposed the drop in iPhone sales, Apple’s stock followed with shares dropping 10 percent or $15.73 per share which wiped out nearly $74 billion in market capitalization in one day. The share value plummet prompted at least two other federal securities class action lawsuits.

The complaint claims that Apple’s scheme damaged the company and exposed Apple to significant liability and alleges the company engaged in breaches of fiduciary duties, waste of corporate assets and unjust enrichment.

Zehrer is represented by Brian J. Robbins, Craig W. Smith, Ashley R. Rifkin and Steven R. Wedeking of Robbins Arroyo LLP out of San Diego, CA.

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