US - The New York City Employees' Retirement System (NYCERS) will sue Apple's Steve Jobs and other key managers for the second time after an appeal court granted the pension fund the right to do so.
NYCERS filed the initial lawsuit over losses allegedly related to the company's stock option plan. But a district court dismissed the claim on the ground the company's stock option plan did not cause NYCERS economic losses through share dilution.
The 9th Circuit Court of Appeal confirmed the district court's ruling. But the appeal court said it "abused its discretion" by denying the pension fund the possibility to amend its lawsuit to include a different claim asserted in a previous version of the suit. (Global Pensions; January 29, 2009)
It concluded NYCERS could now "amend its consolidated complaint to re-allege the omitted claim".
Grant & Eisenhofer attorney Michael Barry, who is representing NYCERS, told GP: "Once the mandate comes out of the 9th Circuit Court of Appeal, we will immediately file the amended case."
He added: "The new lawsuit will allege that the company, by concealing the backdating of the stock, improperly allowed the stock to be traded at an inflated level. On disclosure the stock went down significantly and investors suffered as a result of that."
Backdating involves granting a stock option that is dated earlier than it is actually issued, usually at a date when the stock price was lower.
The decision the 9th Circuit Court of Appeal stated: "Shortly before the complaint was filed, Apple initiated an investigation into past option practices. The results disclosed that 6,428 backdated options had been granted on 42 days between 1997 and 2002. As a consequence, Apple restated its financial statements to reflect a pre-tax expense of US$105m."
Apple did not return emails seeking comment.
The dismissed complaint alleged: "From 1996 to 2005, shareholders ‘unwittingly' authorized issuance of a total of 205 million shares, or 20% of Apple's stock. Apple shareholders suffered injury through impairment of their right to a fully informed vote and substantial dilution of their shares."
The complaint sought the rescission of the votes, compensatory damages for share dilution, an order for an accounting, a declaration of defendants' liability and attorney fees and costs.
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