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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`IN RE APPLE INC. SECURITIES LITIGATION,
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`Case No. 4:19-cv-2033-YGR
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`ORDER GRANTING IN PART AND DENYING IN
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`PART MOTION FOR CLASS CERTIFICATION
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`Re: Dkt. Nos. 165, 206
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`Lead Plaintiff Norfolk County Council as Administering Authority of the Norfolk Pension
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`Fund (“Norfolk”) brings this putative securities fraud class action against defendants Apple, Inc.,
`Timothy Cook, and Luca Maestri for alleged violations of Sections 10(b) and 20(a) of the Securities
`Exchange Act and Rule 10b-5 promulgated thereunder. The Court initially appointed Employees’
`Retirement System of the State of Rhode Island as lead plaintiff, Labaton Sucharow LLP as lead
`counsel, and Wagstaffe, Von Loewenfeldt, Busch & Radwick LLP as liaison counsel. (Dkt. No. 72.)
`Subsequently, the Court approved the transition of Norfolk as lead plaintiff and Robbins Geller
`Rudman & Dowd LLP as lead counsel. (Dkt. No. 113.)
`Currently pending before the Court is plaintiff’s motion for (1) certification of a class
`defined, with exclusions, as: “[a]ll persons and entities who purchased or otherwise acquired the
`publicly traded securities of Apple Inc. during the period from November 2, 2018 through January 2,
`2019, inclusive (the ‘Class Period’), and who suffered damages by [d]efendants’ alleged violations
`of [Sections] 10(b) and 20(a) of the Exchange Act”; (2) appointment of Norfolk as class
`representative; and (3) appointment of Robbins Geller as class counsel. (Dkt. No. 165.) Having
`carefully considered the briefing and the arguments submitted at the January 18, 2022 hearing, and
`for the reasons set forth more fully below, the Court GRANTS IN PART the motion except as to the
`inclusion of option holders in the class. In that regard, the motion is DENIED WITHOUT PREJUDICE.
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`I. BACKGROUND
`Plaintiff alleges that in late 2018, defendants misrepresented the state of Apple’s business in
`Greater China, the company’s most important growth market at the time. (Revised Consolidated
`Class Action Complaint (“Compl.”), Dkt. No. 114, ¶¶ 8–10, 18.)1 Specifically, on November 1,
`2018, following a press release announcing the financial results for its fourth quarter of 2018 and
`setting revenue expectations for the next quarter, Apple held a conference call for analysts and
`investors to discuss the same. (Id. ¶¶ 17–18.)2 After analysts expressed concerns about
`“deceleration” in emerging markets, Cook, Apple’s chief executive officer, responded that “[t]he
`emerging markets that we’re seeing pressure in are markets like Turkey, India, Brazil, Russia, these
`are markets where currencies have weakened over the recent period.” (Id. ¶ 56; Shareholder/Analyst
`Call Transcript (“Call Tr.”), Dkt. No. 119-1 at 11.) However, he “d[id]n’t see it as some sort of
`issue that is common” among all emerging markets, as “each one of the emerging markets has a bit
`of a different story”:
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`In relation to China specifically, I would not put China in that category. Our
`business in China was very strong last quarter. We grew 16%, which we’re very
`happy with. iPhone, in particular, was very strong double-digit growth there. Our
`other products category was also stronger, in fact, a bit stronger than even the . . .
`overall company number.
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`(Call Tr. at 11.)
`Notwithstanding making these statements, defendants allegedly knew facts indicating
`otherwise, particularly, the facts that “the U.S.-China trade tensions and economic conditions in
`China were negatively impacting sales and demand for Apple products, particularly iPhones”; Apple
`“had already begun to see declining traffic in [its] retail stores and those of its channel partner stores
`in Greater China, and reports of an overall contraction of the smartphone industry”; and Apple “had
`already, or was preparing to, cut iPhone production at multiple manufacturers and reduce orders
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`1 Apple identifies Greater China as including Hong Kong, Taiwan, and mainland China.
`(Compl. ¶ 8 n.5.)
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` Apple’s fiscal fourth quarter covers July, August, September. (See Compl. ¶ 1 n.1.)
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`from its largest suppliers of iPhone components for the current quarter and holiday season.”
`(Compl. ¶ 24.)
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`Days after the alleged misrepresentations, on November 5, reports emerged that Apple had
`instructed its top smartphone assemblers to “halt plans for additional production lines” for the
`recently released iPhone XR. (Id. ¶¶ 27–28.) Then, on November 12, Wells Fargo issued a report
`estimating that Apple had reduced iPhone production by “as much as . . . 30%” based on a negative
`earnings preannouncement by a key supplier of iPhone components disclosing that one of its largest
`customers (presumed to be Apple) directed it to “materially reduce shipments . . . .” (Id. ¶ 29.)
`Further, on December 4, Bloomberg reported that in October 2018, Apple shifted marketing staff
`and increased trade-in discounts to boost sales of its most recently released iPhones in what was
`described as a “fire drill” response to poor iPhone sales. (Id. ¶ 31.) After each of the foregoing
`reports, Apple’s stock price declined but “continued to trade at artificially inflated prices.” (Id. ¶¶
`28, 30, 32.)
`Finally, on January 2, 2019, the full truth was allegedly revealed when Apple preannounced
`its first earnings shortfall in more than 15 years. (Id. ¶ 33.) In a letter to investors, Cook stated that
`revenue for the first quarter of 2019 was expected to be $84 billion, contrary to Apple’s guidance
`range of $89 to $93 billion announced on November 1. (Id. ¶ 34.) The letter cited challenges to
`emerging markets:
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`While we anticipated some challenges to key emerging markets, we did not
`foresee the magnitude of the economic deceleration, particularly in Greater China.
`In fact, most of our revenue shortfall to our guidance, and over 100 percent of our
`year-over-year worldwide revenue decline, occurred in Greater China across
`iPhone, Mac and iPad.
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`China’s economy began to slow in the second half of 2018. The government-
`reported GDP growth during the September quarter was the second lowest in the
`last 25 years. We believe the economic environment in China has been further
`impacted by rising trade tensions with the United States.
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`(Id. ¶ 35.) With respect to the iPhone business in particular, the letter explained: “Lower than
`anticipated iPhone revenue, primarily in Greater China, accounts for all of our revenue shortfall to
`our guidance and for much more than our entire year-over-year revenue decline.” (Id. ¶ 36.)
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`Later that day, Cook appeared on CNBC for an interview, further shedding light on the
`company’s situation in China:
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`[A]s we look at what’s going on in China – it’s clear that the economy begins to
`slow there for the second half. And what I believe to be the case is the trade
`tensions between the United States and China put additional pressure on their
`economy.
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`And so we saw, as the quarter went out, things like traffic in our retail stores,
`traffic in our channel partner stores, the reports of the smartphone industry
`contracting, particularly bad in November – I haven’t seen the December number
`yet, but I would guess that would not be good either. And so that’s what we’ve
`seen.
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`(Id. ¶ 36.) Apple’s stock price thereafter declined from a close of $157.92 per share on January 2 to
`a close of $142.19 per share on January 3 on unusually heavy trading volume.3
`Plaintiff now seeks certification of the following class: “All persons and entities who
`purchased or otherwise acquired the publicly traded securities of Apple Inc. during the period from
`November 2, 2018 through January 2, 2019, inclusive (the ‘Class Period’), and who suffered
`damages by [d]efendants’ alleged violations of [Sections] 10(b) and 20(a) of the Exchange Act.”
`(Motion for Class Certification (“Mtn.”), Dkt. No. 165, at 1–2.)4 Plaintiff also requests appointment
`as class representative and appointment of Robbins Geller, its selected counsel, as class counsel.
`Defendants oppose certification on four grounds: (1) plaintiff is not an adequate class representative;
`(2) evidence rebuts the presumption of classwide reliance; (3) even if a class were to be certified, it
`should not include Apple option holders; and (4) the proposed damages model includes damages that
`did not result from the alleged wrongdoing.
`//
`//
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`3 In its order dated June 23, 2020, the Court granted in part and denied in part defendants’
`motion to dismiss the revised consolidated class action complaint, dismissing the claims predicated
`on Cook’s statement that the then-recently released iPhone XS and XS Max “got off to a really great
`start . . . .” (Dkt. No. 123 at 10–11.)
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` Excluded from the class are (i) Apple and the individual defendants; (ii) members of the
`families of each individual defendant; (iii) officers and directors of Apple; and (iv) the legal
`representatives, heirs, successors or assigns of any such excluded party.
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`II. LEGAL FRAMEWORK
`Rule 23, which governs class certification, contains two sets of distinct requirements
`plaintiffs must meet before the Court may certify the proposed class. First, “Rule 23(a) ensures that
`the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate.
`The Rule’s four requirements—numerosity, commonality, typicality, and adequate representation—
`effectively limit the class claims to those fairly encompassed by the named plaintiff’s claims.” Wal-
`Mart Stores, Inc. v. Dukes, 564 U.S. 338, 349 (2011) (internal quotation marks and citations
`omitted). “Class certification is proper only if the trial court has concluded, after a ‘rigorous
`analysis,’ that Rule 23(a) has been satisfied.” Wang v. Chinese Daily News, Inc., 737 F.3d 538,
`542–43 (9th Cir. 2013) (quoting Dukes, 564 U.S. at 351). Second, “[w]here a putative class satisfies
`all four requirements of 23(a), it still must meet at least one of the three additional requirements
`outlined in 23(b).” United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv.
`Workers Int’l Union AFL-CIO, CLC v. ConocoPhillips Co., 597 F.3d 802, 806 (9th Cir. 2010).
`The party seeking class certification bears the burden of demonstrating by a preponderance
`of the evidence that all four requirements of Rule 23(a) and at least one of the three bases for
`certification under Rule 23(b) are established. See Dukes, 564 U.S. at 350. On a motion for class
`certification, the Court is required to “examine the merits of the underlying claim . . . only inasmuch
`as it must determine whether common questions exist; not to determine whether class members
`could actually prevail on the merits of their claims.” Ellis v. Costco Wholesale Corp., 657 F.3d 970,
`981 n.8 (9th Cir. 2011) (citations omitted). A trial court has broad discretion in deciding whether to
`grant or deny a class certification motion. See Bateman v. Am. Multi-Cenima, Inc., 623 F.3d 708,
`712 (9th Cir. 2010).
`III. ANALYSIS
`A. RULE 23(A)
`Plaintiff submits that it has satisfied each of the Rule 23(a) requirements. In particular,
`plaintiff asserts that (1) the class consists of thousands of members; (2) virtually all of the questions
`of law or fact at issue are common to all class members; (3) its claims are typical of the proposed
`class; and (4) for purposes of adequacy, it has no conflicts of interest, it has a substantial financial
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`stake in the case, it has demonstrated its willingness and ability to take an active role in this litigation
`to protect the interests of the class, and it has retained attorneys with considerable experience in
`securities class actions.
`Defendants only contest plaintiff’s showing under the adequacy requirement. Rule 23(a)(4)
`requires that a class representative be able to “fairly and adequately protect the interests of the
`class.” Fed. R. Civ. P. 23(a)(4). “In making this determination, courts must consider two questions:
`‘(1) do the named plaintiffs and their counsel have any conflicts of interest with other class members
`and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the
`class?’” Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1031 (9th Cir. 2012) (quoting
`Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998), overruled on other grounds
`by Dukes, 564 U.S. at 338).
`Here, despite those parameters, defendants challenge plaintiff’s adequacy as a class
`representative on the ground that plaintiff made errors in its certification to the Court filed in support
`of its earlier motion for appointment as lead plaintiff. Specifically, defendants highlight plaintiff’s
`notice of errata, which corrected the share price used in calculating its sale of stock on February 11,
`2019 (from $158.39 to $169.45), the date of its one its purchases (from November 13, 2018 to
`November 12, 2018), and the share price used in calculating that purchase (from $193.23 to
`$204.42). (Dkt. No. 194.) Defendants emphasize that plaintiff waited two years to correct this
`revised trading history and did so without explanation. Moreover, defendants contend that the
`revised trade history contains two additional errors, namely, that plaintiff actually sold 36,934 shares
`on February 11, 2019, not 32,147 shares, and that Apple’s shares never traded above $200 on
`November 12, 2018. Further, defendants argue that plaintiff’s November 12, 2018 acquisition of
`Apple shares was not a purchase but rather a transfer between plaintiff’s accounts.
`Plaintiff responds that “the amended loss chart correct[s] the date and price of one transaction
`based upon updated information and substitute[s] the realized sale price for the average price which
`had been mistakenly entered by counsel.” (Reply at 12.) However, plaintiff disputes the other
`alleged errors, arguing that, under the first-in-first-out accounting method, its pre-class period
`holding of 4,787 shares were matched against the first of the 36,934 shares sold on February 12,
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`yielding the 32,147 shares listed in the chart. In addition, plaintiff submits that its records show that
`it acquired Apple shares on November 12 at $204.42 per share. Finally, plaintiff explains that it
`acquired the 14,012 Apple shares on November 12 in exchange for its investment in a pooled fund
`by way of an in specie redemption.5
`The Court declines to find that the discrepancies corrected in plaintiff’s notice of errata,
`without more, preclude a finding of adequacy here. An error in claimed losses may render a movant
`inadequate if there is “evidence of bad faith or intent to deceive the court or the parties.” See In re
`SLM Corp. Sec. Litig., No.08-cv-1029 (WHP), 2012 WL 209095, at *8 (S.D.N.Y. Jan. 24, 2012),
`However, defendants do not make such a showing.6 Plaintiff already corrected its inadvertent errors
`on the certification (albeit two years after the fact).
`Nevertheless, defendants contend that even such inadvertent misstatements show a lack of
`diligence inconsistent with adequate representation of the class. Although plaintiff’s errors in its
`trade certification may demonstrate carelessness, they are not the types of errors that would normally
`preclude a finding of adequacy to represent the class. See, e.g., In re Solar City Corp. Sec. Litig.,
`No. 16-cv-4686 (LHK), 2017 WL 363274, at *6 (N.D. Cal. Jan. 25, 2017) (“Multiple district courts
`have held that minor or inadvertent mistakes made in a sworn certification do not strike at the heart
`of Rule 23’s adequacy requirement.”) (quotation marks omitted) (collecting cases). The errors do
`not demonstrate a conflict with the class, nor do they make plaintiff's claims atypical of the class.
`Nor is a computational error the type of credibility issue that would “divert the fact finders’ attention
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`5 In its proposed surreply, defendants further quibble that plaintiff’s November 12 acquisition
`of shares was not a purchase and that its February 11 disposition of shares was a non-cash
`transaction. (Dkt. No. 206.) While the Court GRANTS defendants’ motion for leave to file a surreply,
`for the reasons stated below, the Court finds that the purported problems with plaintiff’s claimed loss,
`which plaintiff essentially argues are disputes over accounting, are insufficient to render plaintiff
`inadequate as a class representative.
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` Furthermore, defendants claim that these errors result in plaintiff inflating its losses by more
`than $350,000 nominally. (Opp. at 13.) However, by the Court’s math, plaintiff’s total loss was
`revised from $1,166,648.47 to $982,082.52, a difference of $184,565.95. (Compare Dkt. No. 37-9
`with Dkt. 194.) While not insignificant, it hardly amounts to plaintiff overstating its losses by more
`than 40%, as defendants contend. (Opp. at 12.)
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`from the merits and thus infect the claims of the class as a whole.” Dubin v. Miller, 132 F.R.D. 269,
`272 (D. Colo. 1990).
`Defendants’ other complaints are equally peripheral to the suit, irrelevant to the factual
`predicate of the class’s claims, and may themselves be in error. If anything, defendants’ arguments
`concern the amount of damages suffered by plaintiff, rather than being meaningfully indicative of
`inadequacy. Thus, none of the issues defendants raise persuade the Court that plaintiff would be
`unable to adequately serve as class representative.
`Notwithstanding defendants’ objections, the record supports a finding that plaintiff is an
`adequate class representative. Defendants have not shown that plaintiff and its selected counsel,
`Robbins Geller, have conflicts or that plaintiff will not prosecute the action vigorously. Plaintiff is
`knowledgeable of the litigation, has provided its assistance, and assures the Court it will represent
`the class diligently. Moreover, Robbins Geller has significant experience with securities fraud class
`actions and demonstrates a thorough understanding of the applicable law. The Court therefore finds
`plaintiff to be an adequate class representative under Rule 23(a)(4) and Robbins Geller to be
`adequate class counsel under Rule 23(g).
`In sum, because plaintiff is an adequate class representative and defendants do not dispute
`the other requirements, the Court concludes that plaintiff has satisfied Rule 23(a).
`B. RULE 23(B)
`Plaintiff seeks certification under Rule 23(b)(3), which requires that “questions of law or fact
`common to class members predominate over any questions affecting only individual members, and
`that a class action is superior to other available methods for fairly and efficiently adjudicating the
`controversy.” Fed. R. Civ. P. 23(b)(3). Defendants do not dispute, and the Court agrees, that the
`superiority requirement is met. However, defendants challenge plaintiff’s showing of predominance.
`Under Rule 23(b)(3), courts must consider whether questions capable of resolution with
`“generalized, class-wide proof” predominate over individualized ones. See Tyson Foods, Inc. v.
`Bouaphakeo, 577 U.S. 442, 453 (2016); see also Torres v. Mercer Canyons, Inc., 835 F.3d 1125,
`1134 (9th Cir. 2016) (“The Rule 23(b)(3) predominance inquiry asks the court to make a global
`determination of whether common questions prevail over individualized ones.”); Wang, 737 F.3d at
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`545 (“The predominance analysis under Rule 23(b)(3) focuses on ‘the relationship between the
`common and individual issues’ in the case and ‘tests whether proposed classes are sufficiently
`cohesive to warrant adjudication by representation.’”) (quoting Hanlon, 150 F.3d at 1022).
`“Predominance is not, however, a matter of nose-counting. Rather, more important questions apt to
`drive the resolution of the litigation are given more weight in the predominance analysis over
`individualized questions which are of considerably less significance to the claims of the class.” In re
`Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539, 557 (9th Cir. 2019) (quoting Torres, 835 F.3d at
`1134). “Class certification under Rule 23(b)(3) is proper when common questions represent a
`significant portion of the case and can be resolved for all members of the class in a single
`adjudication.” In re Diamond Foods, Inc. Sec. Litig., 295 F.R.D. 240, 246 (N.D. Cal. 2013) (citing
`Hanlon, 150 F.3d at 1022).
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`The Court’s predominance inquiry begins with the elements of a Section 10(b) securities
`fraud claim, which are: “(1) a material misrepresentation or omission by the defendant; (2) scienter;
`(3) a connection between the misrepresentation or omission and the purchase or sale of a security;
`(4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” In
`re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 1140 (9th Cir. 2017). “Most of these elements are
`clearly susceptible to classwide proof, particularly the alleged misrepresentations made by the
`defendants, scienter, and loss. Furthermore, a plaintiff is not required to prove materiality or loss
`causation at the class certification.” Milbeck v. TrueCar, Inc., No. 18-cv-2612 (SVW), 2019 WL
`2353010, at *4 (C.D. Cal. May 24, 2019) (internal quotation marks, citations, and alterations
`omitted). However, defendants contend that plaintiff cannot satisfy Rule 23(b)’s predominance
`requirement with respect to questions of reliance and damages. The Court considers each set of
`challenges in turn.
`1. PREDOMINANCE OF COMMON QUESTIONS OF RELIANCE
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`The Supreme Court has held that plaintiffs can invoke a rebuttable presumption of reliance
`based on the “‘fraud-on-the-market’ theory, which holds that ‘the market price of shares traded on
`well-developed markets reflects all publicly available information, and, hence, any material
`misrepresentations.’” Halliburton Co. v. Erica P. John Fund, Inc. (“Halliburton II”), 573 U.S. 258,
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`268 (2014) (citing Basic Inc. v. Levinson, 485 U.S. 224, 246 (1988)). The presumption allows a
`plaintiff to substitute reliance on a company’s stock price for actual reliance on a company’s false
`statement so long as a company’s stock traded in an efficient manner. Basic, 485 U.S. at 246–47.
`Application of the Basic presumption dispenses with the requirement that each class member prove
`individual reliance on defendants’ alleged misstatements or omissions.
`To invoke the presumption of reliance, a plaintiff must show: (1) the alleged
`misrepresentations were publicly known; (2) they were material; (3) the stock traded in an efficient
`market; and (4) the plaintiff traded stock between the time the misrepresentations were made and
`when the truth was revealed. Halliburton II, 573 U.S. at 268 (citing Basic, 485 U.S. at 248 n. 27).
`Here, defendants acknowledge two categories of investors in the putative class: (1) holders of Apple
`stock and (2) holders of options on Apple stock. With respect to the former, defendants do not
`dispute that the publicity and market timing prerequisites have been satisfied or that materiality need
`not be proven at the class certification stage. See Amgen v. Conn. Ret. Plans and Trust Funds, 568
`U.S. 455, 459 (2013). Nor do defendants challenge the findings of plaintiff’s expert, Professor
`Steven P. Feinstein, Ph.D., CFA, demonstrating that Apple stock, specifically, traded in an efficient
`market over the course of the class period. (Report of Professor Steven P. Feinstein, Ph.D., CFA
`(“Feinstein Report”), Dkt. No. 165-3, ¶¶ 56–142.) Therefore, the Court finds that plaintiff makes a
`prima facie showing sufficient to invoke the Basic presumption as to holders of Apple stock.7
` With respect to the latter, defendants argue that Dr. Feinstein fails to show that options on
`Apple stock traded in an efficient market, and therefore, that option holders should be excluded from
`the class if certification is granted. For the reasons stated in Section III.B.2, infra, the Court finds
`
`7 Plaintiff also relies on the presumption of reliance recognized in Affiliated Ute Citizens v.
`United States, 406 U.S. 128, 153–54 (1972). Because the Court ultimately finds that defendants fail
`to rebut the Basic presumption with respect to Apple stockholders, the Court need not address
`whether plaintiff is entitled to a presumption of reliance under Affiliated Ute, which “allows the
`element of reliance to be presumed in cases involving primarily omissions, rather than affirmative
`misstatements.” Waggoner v. Barclays PLC, 875 F.3d 79, 93 (2d Cir. 2017). Nevertheless, it
`appears that the Affiliate Ute presumption would actually not apply in this case, as that doctrine is
`inapplicable where “the [p]laintiff[’s] complaint alleges numerous affirmative misstatements by the
`[d]efendants.” Id. at 96. Here, the thrust of plaintiff’s allegations is that defendants affirmatively
`misrepresented the state of Apple’s business in China, and thus it is “not in a situation in which it is
`impossible for [it] to point to affirmative misstatements.” Id.
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`that plaintiff fails to show that common questions of damages predominate with respect to option
`holders. Because Apple option holders are therefore excluded on that basis, the Court need not
`decide whether plaintiff adequately proved that Apple stock options trade in an efficient market.
`Although defendants do not challenge the proof of the elements giving rise to the Basic
`presumption with respect to Apple stockholders, they do seek to rebut it. A “defendant may rebut
`the [Basic] presumption through ‘[a]ny showing that severs the link between the alleged
`misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at a
`fair market price.’” Goldman Sachs Grp., Inc. v. Arkansas Teacher Ret. Sys., 141 S. Ct. 1951, 1958
`(2021) (quoting Basic, 485 U.S. at 248). Here, defendants argue that the alleged misrepresentations
`had no price impact. If true, “then Basic’s fundamental premise ‘completely collapses, rendering
`class certification inappropriate.’” Id. at 1959 (quoting Halliburton II, 573 U.S. at 283); see
`Halliburton II, 573 U.S. at 279 (“[Basic] affords defendants an opportunity to rebut the presumption
`by showing, among other things, that the particular misrepresentation at issue did not affect the
`stock’s market price.”).
`The defendant bears the burden of proving a lack of price impact by a preponderance of the
`evidence. Goldman, 141 S. Ct. at 1963.8 “The district court’s task is simply to assess all the
`evidence of price impact—direct and indirect—and determine whether it is more likely than not that
`the alleged misrepresentations had a price impact.” Id. The analysis is “qualitative as well as
`quantitative—aided by a good dose of common sense.” Id. at 1960.
`“[P]rice impact can be observed on the ‘front-end’ (i.e., misstatements causing or
`maintaining inflation) or on the ‘back-end’ (i.e., a decline in price caused by the corrective
`disclosures) . . . .” Plymouth Cnty. Ret. Sys. v. Patterson Cos., Inc., No. 18-cv-871 (MJD), 2020 WL
`5757695, at *11 (D. Minn. Sept. 28, 2020). As the Supreme Court explained:
`
`Plaintiffs typically try to prove the amount of inflation indirectly. They point to a
`negative disclosure about a company and an associated drop in its stock price;
`allege that the disclosure corrected an earlier misrepresentation; and then claim
`that the price drop is equal to the amount of inflation maintained by the earlier
`misrepresentation.
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`8 Thus, defendants misstate the law when they assert that “the Court [ ] determin[es] whether
`[p]laintiff has met its burden to show price impact.” (Opp. at 15.)
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`But that final inference—that the back-end price drop equals front-end inflation—
`starts to break down when there is a mismatch between the contents of the
`misrepresentation and the corrective disclosure. That may occur when the earlier
`misrepresentation is general (e.g., “we have faith in our business model”) and the
`later corrective disclosure is specific (e.g., “our fourth quarter earnings did not
`meet expectations”). Under those circumstances, it is less likely that the specific
`disclosure actually corrected the general misrepresentation, which means that
`there is less reason to infer front-end price inflation—that is, price impact—from
`the back-end price drop.
`Goldman, 141 S. Ct. at 1961 (citations omitted); see also Glickenhaus & Co. v. Household Int’l, Inc.,
`787 F.3d 408, 415 (7th Cir. 2015) (“The best way to determine the impact of a false statement is to
`observe what happens when the truth is finally disclosed and use that to work backward, on the
`assumption that the lie’s positive impact on the share price is equal to the additive inverse of the
`truth’s negative effect. (Put more simply: what goes up, must come down.)”).
`Defendants’ arguments focus on back-end price impact.9 Dr. Feinstein conducted a robust
`event study, the findings of which show a statistically significant share price decline following the
`January 2, 2019 disclosure date. (Feinstein Report ¶¶ 137–39.) Defendants do not rebut this back-
`end evidence with their own event study or other means. Instead, defendants cite various
`mismatches between the alleged misrepresentation and the corrective disclosures as well as other
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`9 Despite criticizing plaintiff for failing to “adduce any front-end evidence” that the alleged
`misrepresentation inflated Apple’s stock price, defendants acknowledge that plaintiff is proceeding
`on a price inflation-maintenance theory. (Opp. at 16.) Under this theory, a misrepresentation
`“cause[s] the stock price to remain higher than it would have been had the statements been truthful.”
`Glickenhaus, 787 F.3d at 419; see also Goldman, 141 S. Ct. at 1961. Thus, “[t]he stock price may
`even decline after a false statement, but be inflated nonetheless ‘because the price might have fallen
`even more’ if the full extent of the bad news were known.” In re Allstate Corp. Sec. Litig., 966 F.3d
`595, 612 (7th Cir. 2020) (quoting Glickenhaus, 787 F.3d at 415); see also In re Vivendi, S.A. Sec.
`Litig., 838 F.3d 223, 260 (2d Cir. 2016) (rejecting notion that price impact requirement means a
`“misstatement must be associated with an increase in inflation to have any effect on a company’s
`stock price”); Hatamian v. Advanced Micro Devices, Inc., No. 14-cv-226 (YGR), 2016 WL 104502,
`at *7 (N.D. Cal. Mar. 16, 2016) (“Price impact in securities fraud cases is not measured solely by
`price increase on the date of a misstatement; it can be quantified by decline in price when the truth is
`revealed.”) (citing Halliburton II, 573 U.S. at 279–80). Therefore, the absence of front-end price
`impa