Apple shareholders are suing CEO Tim Cook along with some of the company’s other executives and directors, claiming that their role in a price-fixing conspiracy with publishers damaged the company.
According to a complaint filed on Thursday in California state court, Cook and other senior [company]Apple[/company] figures bear “responsibility for ensnaring Apple in a multi-year anticompetitive scheme” that resulted in a highly-publicized trial and a proposed $450 million payout by the company to settle related complaints that it illegally raised the price of ebooks.
The new lawsuit, a so-called “derivative suit,” is a type of corporate litigation that is available to shareholders who believe that a company’s own directors won’t take action to protect it from mismanagement. Such suits, however, have also been described as a form of shakedown in which law firms extract easy payouts from big corporations.
In the case of Apple, the shareholders claim that Cook and others, including directors Al Gore and Bill Campbell, breached their fiduciary duty to the company and engaged in “waste of corporate assets.” They want the court to order Apple’s board to implement better governance measures, and for Cook and the other defendants to pay restitution to shareholders and to pay the shareholders’ legal bills.
Apple, as its custom, did not provide a comment on the litigation.
According to the shareholders, the complaint is based in part on non-public documents that it obtained by suing Apple to comply with a shareholder inspection demand. And while parts of the filing are blacked out, most of the allegations it contains — including tales of Apple pressuring publishers — amount to a rehashing of familiar details from the recent anti-litigation.
The complaint also publishes the annual salaries of Cook and the other defendants, dating from 2009, in order to support the shareholders’ claim that Apple’s leadership has no incentive to stop the mismanagement.
While Apple’s overall performance does not appear to have been damaged by the ebook debacle, the company’s directors are likely to find a way to settle the case all the same.
As a recent report by James Stewart in the New York Times explains, a flaw in the incentive structure of U.S. securities law means that it is in companies’ interests to simply pay the lawyers to go away, rather than get bogged down in years of time-consuming and expensive litigation.