Apple 2006 Annual Report Download - page 36

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shareholders at the annual meeting held on April 21, 2005. Plaintiff, who ostensibly brings suit on the Company’s behalf, has made no demand
on the Board of Directors and alleges that such demand is excused. Plaintiff seeks injunctive and other relief for purported injury to the
Company. On July 27, 2005, Plaintiff filed an amended complaint alleging that, in addition to the purported derivative claims, adoption of the
bonus plan and distribution of the proxy statement describing that plan also inflicted injury on her directly as an individual shareholder. On
January 10, 2006, the Court sustained defendants’ demurrer to the amended complaint, with leave to amend. Plaintiff filed a second amended
complaint on February 7, 2006, and the Company filed a demurrer. After a hearing on June 13, 2006, the Court sustained the demurrer without
leave to amend as to the non-director officers and with leave to amend as to the directors. On July 24, 2006, plaintiff filed a third amended
complaint, which purports to bring claims derivatively as well as directly on behalf of a class of common stock holders who have been or will
be harmed by virtue of the allegedly misleading proxy statement. In addition to reasserting prior causes of action, the third amended complaint
includes a claim that the Company violated the terms of the plan, and a claim for waste related to restricted stock unit grants to certain officers
in 2003 and 2004 and an option grant to the Company’s CEO in January 2000. A demurrer that the Company filed to the third amended
complaint as well as a motion to disqualify the Company’s lawyers will be heard on January 30, 2007.
Baghdasarian, et al. v. Apple Computer, Inc.
Plaintiffs filed this action in Los Angeles County Superior Court on October 31, 2005, on behalf of a purported nationwide class of all
purchasers of all Apple wireless products (router, modem, or adaptor) sold at any time. The complaint alleges that the Company misrepresented
the transmission rates of these products. The complaint alleges causes of action for breach of express warranty and for violations of the
Consumer Legal Remedies Act, California Business & Professions Code §17200 (unfair competition) and California Business & Professions
Code §17500 (false advertising). The complaint seeks damages and equitable remedies. On December 15, 2005, the Company filed an answer
denying all allegations and asserting numerous affirmative defenses. The parties have reached a tentative settlement, which is not expected to
have a material effect on the Company’s financial position or results of operations.
Barry et al. v. Apple Computer, Inc.
Two Plaintiffs filed this purported class action on May 16, 2006 in the United States District Court for the Northern District of California, San
Jose Division, on behalf of a nationwide class of iPod purchasers between May 2002 and the present. The complaint alleged various problems
with the iPod hard drive, including skipping and limited lifespan. Plaintiffs alleged violations of California Business & Professions Code
§17200 (unfair competition), the Consumer Legal Remedies Act, the Song-Beverly Consumer Warranty Act and breach of warranties. The
complaint sought damages and equitable relief. The plaintiffs voluntarily dismissed this case, without prejudice, on September 18, 2006.
Birdsong v. Apple Computer, Inc.; Patterson v. Apple Computer, Inc.
These federal court complaints allege that the Company’s iPod music players, and the ear bud headphones sold with them, are inherently
defective in design and are sold without adequate warnings concerning the risk of noise-induced hearing loss by iPod users. The Birdsong
action was initially filed on January 30, 2006 in the United States District Court for the Western District of Louisiana on behalf of a purported
Louisiana class of iPod purchasers and alleges violations of the Louisiana Products Liability Act, breaches of implied warranties, unjust
enrichment, and negligent misrepresentation. The Patterson action was filed on January 31, 2006 in the United States District Court for the
Northern District of California on behalf of a purported class of all iPod purchasers within the four
-year period before January 31, 2006. That
action alleged breaches of implied and express warranties, violations of California Business & Professions Code §17200 (unfair competition),
California Business & Professions Code §17500 (false advertising), the Consumer Legal Remedies Act, breaches of express and implied
warranties, negligent misrepresentation and unjust enrichment. The Birdsong action was transferred to the Northern District of California, and
the
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