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A California federal judge has approved Apple’s non-monetary settlement in a derivative-shareholder lawsuit over claims that it secretly slowed iPhones. The settlement also awards counsel $6 million in attorney fees and expenses, following revisions to the proposal that were initially rejected for being overly broad.

Judge's Approval and Settlement Details

U.S. District Judge Yvonne Gonzalez Rogers, during a brief hearing in Oakland, confirmed she would grant final approval for the settlement. The plaintiffs will receive $5,000 incentive awards, while Apple and its executives have committed to implementing “policy, corporate governance and oversight reforms” for at least four years to enhance transparency concerning iPhone updates.

Judge Gonzalez Rogers acknowledged that the case, filed in 2019, has been a long-standing one. She reviewed the settlement papers meticulously and found the counsel's work hours and rates reasonable, indicating she would issue an order approving the settlement soon.

Initial Rejection and Revised Settlement

Earlier in April, Judge Gonzalez Rogers had declined to approve the initial settlement due to its overbroad release of claims, which included any claims that “relate” to the case. She criticized this language as too expansive, suggesting it could encompass unrelated issues, and refused to sign off on the agreement.

Following her feedback, the parties amended the settlement to exclude the "relate to" language regarding released claims. This revised proposal was submitted in June, and Judge Gonzalez Rogers indicated on Tuesday that she would approve it.

Apple Slowed iPhone Derivative Deal : Background of the Lawsuit

The lawsuit, initiated in August 2019, accused Apple’s officers and directors of breaching fiduciary duties, wasting corporate assets, and unjust enrichment by concealing the company’s strategy to make older iPhones appear less functional, thereby pressuring users to upgrade prematurely.

After independent investigations revealed the truth, Apple admitted to "planned obsolescence" in December 2017. This acknowledgment sparked significant consumer backlash and a wave of investor litigation, including the current derivative suit, which was consolidated under Judge Gonzalez Rogers in 2020.

Corporate Governance Changes and Future Oversight

As part of the settlement, Apple has agreed to several corporate governance changes. These include requiring its general counsel to report any significant compliance issues to the board's audit and finance committee, adding the chief compliance officer to the board’s "risk oversight" committee, and ensuring that any risks discussed are communicated to the audit and finance committee.

Apple also committed to maintaining web pages with information about lithium-ion batteries and unexpected shutdowns, informing consumers of any substantial changes in phone performance due to iOS updates, and notifying them of battery service options when performance degrades significantly.

Additionally, the settlement requires co-chairs of the board’s disclosure committee to review earnings call transcripts and recommend necessary corrections or clarifications to the public.

Apple Slowed iPhone Derivative Deal : Related Legal Actions

Apple has also settled a related shareholder class action accusing the company of misleading investors about iPhone sales in China, agreeing to a $490 million deal. Judge Gonzalez Rogers preliminarily approved this settlement last month, with a final approval hearing set for September 17 in Oakland.

In a separate case, a different federal judge in California approved Apple’s $500 million settlement to resolve multidistrict litigation filed on behalf of iPhone users affected by the same updates in February 2023.

Representation and Case Information

The investors are represented by Craig W. Smith and Shane P. Sanders of Robbins LLP, and David C. Katz of WeissLaw LLP. Apple and its executives are represented by Alexander K. Talarides of Orrick Herrington & Sutcliffe LLP.

The case is In re: Apple Inc. Stockholder Derivative Litigation, case number 4:19-cv-05153, in the U.S. District Court for the Northern District of California. The related securities case is In re: Apple Inc. Securities Litigation, case number 4:19-cv-02033, in the U.S. District Court for the Northern District of California.