City of Coral Springs Police Officers Pension Plan v. Apple, Inc., et al.

Background

This securities putative class action alleges losses related to Apple’s representations about its artificial-intelligence technology. The opinion states that the case was the second of two related actions in the Northern District of California. In the earlier round of this case, a plaintiff filed claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. That earlier action was voluntarily dismissed after the plaintiff stated that its class claims were encompassed by the claims in this case.

Three investors sought appointment as lead plaintiff and lead counsel: National Pension Service, on behalf of the National Pension Fund; Union Investment Luxembourg S.A.; and KBC Asset Management NV. The court vacated the scheduled hearing because it concluded that oral argument was unnecessary.

Legal standard

The Private Securities Litigation Reform Act requires the court to appoint the class member most capable of adequately representing the proposed class. The court applied a three-step process: notice of the action must be published; the court identifies the applicant with the largest financial interest who also satisfies the requirements of Federal Rule of Civil Procedure 23; and competing applicants may try to rebut that applicant’s presumed suitability based on typicality and adequacy.

The court evaluated financial interest using four factors commonly called the Lax factors: shares purchased, net shares purchased, net funds expended, and approximate losses. The opinion states that approximate losses carry the greatest weight and that courts in the Ninth Circuit commonly use the “last in, first out” method to calculate them.

Analysis

Using that method, the court found that National Pension Service incurred an estimated loss of $87 million, the largest amount among the applicants. It also found that National Pension Service made an initial showing that its claims were typical of the proposed class because it sought recovery for losses on Apple securities allegedly caused by the defendants’ misrepresentations and omissions. The court further found that National Pension Service was an adequate representative because its interests were aligned with those of similarly harmed class members.

KBC challenged National Pension Service’s selection on two grounds. First, KBC urged the court to use the “first in, first out” method and argued that National Pension Service had not provided information needed for that calculation. The court rejected that argument, concluding that the “last in, first out” method was rational and consistently applied.

Second, KBC argued that National Pension Service was not the real party in interest and therefore lacked standing. The court rejected that argument, stating that courts have routinely found asset managers to have standing in similar circumstances. The court found that National Pension Service met the applicable exception because it had a close relationship to the injured party and a barrier existed to the injured party’s ability to assert its own interests.

Lead counsel

The court explained that the lead plaintiff generally selects counsel, subject to court approval. National Pension Service selected Kessler Topaz Meltzer & Check, LLP. The court found that the firm had extensive experience litigating securities class actions, and noted that KBC did not dispute the firm’s qualifications. The court therefore approved the selection and appointed Kessler Topaz as lead counsel.

Disposition

The court granted National Pension Service’s motion for appointment as lead plaintiff and appointed National Pension Service lead plaintiff. It appointed Kessler Topaz Meltzer & Check, LLP as lead counsel. The court denied Union Investment Luxembourg S.A.’s and KBC Asset Management NV’s motions.