14 DAY TRIAL // The shareholder backdating lawsuit against Steve Jobs and other Apple executives was dismissed, but the Californian judge is allowing investors to refile an amended complaint as part of a derivative suit.
Last year, Apple's internal investigation in the company's backdating revealed 6,428 misdated stock-option grants issued between 1997 and 2002. While Jobs and other company executives were cleared of any wrongdoing, in August a suit was filed against Apple by its shareholders. The New York City Employees' Retirement System acted as the lead plaintiff, alleging that the company's issuance of 200 million improperly accounted for shares unjustly diluted the company's stock price.
In his ruling, U.S. District Judge Jeremy Fogel of San Jose noted that the retirement board clearly acknowledged that Apple's stock was not negatively affected as a result of the backdating, a condition for most shareholder claims against corporations in situations such as this. "Defendants note, such dilution is not necessarily accompanied by economic loss in the form of a fall in the stock price. For example, a company's stock might soar if it were to announce that it had secured the services of a leading executive by granting the executive a large number of options. While the subsequent disclosure that the options were backdated might require a restatement, without a discernible drop in the stock price there is no basis upon which to establish an injury to shareholders."
While the retirement board's case against Apple was dismissed, Judge Fogel did so with leave to amend and the board has the option to refile in an attempt to establish that its claims are derivative but only if the organization can actually prove that it has suffered an injury that is not dependent on an injury to Apple as a company. "However, any derivative claims on behalf of Apple arising from the facts alleged in the Complaint likely would be subject to consolidation with the pending derivative action, In re Apple Computer Inc. Derivative Litig., Case No. C 06-4128 JF." Should such an amended complaint prove futile, the Court can order dismissal with prejudice.