September 11, 2014
Lawsuit pile-on! Shareholders sue Apple
by Sal Robinson
Talk about kicking a multimillion-dollar corporation when they’re down. Last Thursday brought a new lawsuit for Apple, this time not from Amazon the US government, but from its very own: Apple’s shareholders filed a lawsuit against its chief officers and its board of directors, alleging that their efforts to set e-book prices with publishers and the subsequent lawsuit, U.S. v. Apple, represented a mismanagement of the company, “breach of fiduciary duty, waste of corporate assets, unjust enrichment” and other manifold sins, according to the complaint.
In other words, the shareholders are suing the heads of Apple for doing things that got them sued by someone else—in a very real sense, they’re being sued for being sued. Oy. Where will it all end? Apple, whose appeal of Judge Denise Cote‘s decision against them in U.S. v. Apple earlier this year is still pending in the Second Circuit, might be feeling a little weary of this.
And the responsibility isn’t diffused or swept under the corporate rug: the complaint names and shames Tim Cook, Eduardo Cue, and all the members of the board (including Al Gore). It spells out their culpability, describing Cook and Cue’s roles specifically in the negotiations between the Big Six publishers over e-book pricing in 2010, and accusing the board members more generally of failure “to implement adequate internal controls to ensure that Apple complied with antitrust rules and regulations.”
Perhaps most embarrassing of all (but interesting, because we like to know this stuff too), the complaint lists the salaries, stocks, and other compensation of the defendants from 2009 through 2013, arguing that because they failed in their duties to the company, they didn’t deserve those big compensation packages — that’s the “unjust enrichment” part. In some cases, they were very large indeed: in 2011, Tim Cook got $376,180,000 worth of stocks. (That’s approximately 4,200,000 discretely striped black-and-gray business shirts.) And now they ought to be held accountable, not only for their gains but also Apple’s legal bills and the potentially $450 million in damages the company may have to pay out.
While it’s undeniable that Apple’s executives were responsible for the decisions the company made about e-book pricing, the case ignores the fact that they made them with the company’s and the shareholders’ benefit in mind. It was a gamble, an attempt to enter a monopolized market on terms that would pay off for both the publishers and Apple. The way they did it involved substantial legal risks, risks that proved too great, but the aim wasn’t to waste corporate assets, it was to increase them.
Moreover, Jeff John Roberts points out in an article on Gigaom that shareholders’ financial interests actually haven’t been hurt—in a comment below the piece, he writes:
Considering that Apple became the richest company in the world during the very time that Cook and others were allegedly “mismanaging” it gives you an idea about the quality of the lawsuit.
In other words, be aggrieved that Tim Cook has more shirts than you, but don’t tell me he didn’t make you money.
Sal Robinson is a former Melville House editor. She's also the co-founder of the Bridge Series, a reading series focused on translation.