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Norfolk County Council takes on mighty Apple over profit warning

Apple store Iphone
Apple store Iphone

An English council suing Apple for concealing weak iPhone demand has won a legal breakthrough after a judge approved its attempt to have the case turned into a class action.

A California judge certified Norfolk County Council’s case against the tech giant as a class action after a lengthy battle over the merits of the case.

Its status potentially strengthens the council’s case, and could lead to Apple having to make a larger payout if found liable.

The council is suing Apple, chief executive Tim Cook and chief financial officer Luca Maestri, claiming the company’s chief executive misled shareholders over weak iPhone demand in China in 2018.

Mr Cook told shareholders in November 2018 that while the company was “seeing pressure” in some emerging markets, “I would not put China in that category”.

The news was met with relief by shareholders, since China is a major market for the company.

However, in January 2019 - two months later - Apple unveiled a major profit warning that blamed weakness in China. It was the first time Apple had cut sales forecasts since 2002 and sent shares down by 8pc.

The council, which runs the multi-billion pound Norfolk Pension Fund, claims that Mr Cook’s earlier comments misled shareholders, and that the company was aware at the time that sales in China were starting to slow down.

It sued the company in 2020, and claims that his comments cost the fund close to $1m.

A class action will allow other shareholders to join the case.

It will also hold the claimants to a lower standard of proof, possibly boosting their chances of a payout. A class action allows them to invoke a “presumption of reliance”, meaning the council would not have to show it chose to trade based on Mr Cook’s comments.

Judge Yvonne Gonzalez-Rogers said that Apple had failed to dismiss the council’s efforts to turn the case into a class action, and labelled the company’s arguments as “distortions”.

Any trial would be likely to see Mr Cook take the stand. The company says that Mr Cook’s comments were statements of opinion, and thus protected. It says that claim “fails to plead any actionably false or misleading statement”.

Apple denies wrongdoing.