Ninth Circuit Court of Appeals Reverses Lower Court Ruling in Apollo Group, Inc. Securities Lawsuit
June 23 2010 - 5:18PM
Business Wire
Apollo Group, Inc. (Nasdaq: APOL) today announced that the
United States Court of Appeals for the Ninth Circuit has reversed a
lower court’s ruling in favor of the Company and ordered the lower
court to enter judgment against the Company in accordance with the
jury verdict in securities litigation arising out of a 2003 program
review by the U.S. Department of Education, Apollo Group Inc.
Securities Litigation.
“The Company is disappointed in the Ninth Circuit’s decision,
and believes that the lower court’s well-reasoned decision in its
favor was correct,” said P. Robert Moya, senior vice president,
general counsel and secretary for Apollo Group, Inc. “We will
explore all available options for seeking further review of the
Ninth Circuit’s decision.”
Appellate Argument Overview
Under securities law, to prevail at trial, the plaintiff had to
prove that a “corrective disclosure” – a disclosure that reveals to
the market the falsity of prior statements or omissions – caused
the price of Apollo’s stock to decline and, consequently, caused
the losses of the plaintiff class.
When the contents of the initial government report at issue were
reported by major business publications including The Wall Street
Journal, Apollo’s stock price did not decline by a statistically
significant amount. Consequently, the plaintiff pointed to a
downgrade by a single market analyst one week later – a downgrade
that made no mention of the report’s contents and contained no new
facts – and argued that it caused a decline in the price of Apollo
stock for which the plaintiff class of shareholders should be
compensated.
Although the jury returned a verdict for the plaintiff, Apollo
argued, and the district court agreed, that the analyst report
contained nothing new about the initial government report or its
effects. The information that the plaintiff argued was newly
disclosed by the analyst report was either clearly disclosed in
previous news reports, or was not accurate. The district court
recognized that neither false information nor previously disclosed
information can correct anything. Accordingly, the district court
ruled that the jury’s apparent finding that the downgrade was a
corrective disclosure was not supported by any evidence, and
therefore failed as a matter of law.
Litigation Background
This case, Apollo Group Inc. Securities Litigation, was a
consolidated securities class action brought by the Policemen’s
Annuity and Benefit Fund of Chicago. It stemmed from allegations
about the non-disclosure of an initial government report involving
the manner in which Apollo subsidiary University of Phoenix
compensated its enrollment counselors. The report’s allegations,
which were first raised in a False Claims Act lawsuit filed in 2003
by two private plaintiffs and then repeated with striking
similarity in the initial government report at issue, have been
largely discredited in recent years. The False Claims Act case was
recently resolved, importantly with no admission of liability,
wrongdoing, noncompliance or violation.
Apollo Group Inc. Securities Litigation was tried in Federal
District Court in Arizona beginning November 14, 2007. The jury
found in favor of the plaintiff on January 16, 2008, and the
plaintiff class was awarded damages of up to $5.55 per share. On
February 13, 2008, Apollo filed post-trial motions in which it
asked the trial court to: (1) reverse the erroneous verdict; (2)
order a new trial; or (3) condition denial of Apollo’s motions on
the plaintiff’s acceptance of a reduced amount of damages not to
exceed $3.49 per share. On August 4, 2008, the trial court
overturned the erroneous jury verdict and resolved the case in
favor of Apollo, finding that an analyst report on which the
plaintiff’s case heavily relied was not a corrective
disclosure.
More information on the case may be found in Apollo’s Legal
Information Center at: www.apollolegal.com.
About Apollo Group,
Inc.
Apollo Group, Inc. is one of the world's largest private
education providers and has been in the education business for more
than 35 years. The Company offers innovative and distinctive
educational programs and services both online and on-campus at the
high school, undergraduate, masters and doctoral levels through its
subsidiaries: University of Phoenix, Apollo Global, Institute for
Professional Development, College for Financial Planning and
Meritus University. The Company's programs and services are
provided in 40 states and the District of Columbia; Puerto Rico;
Canada; Latin America; and Europe, as well as online throughout the
world (data as of May 31, 2010).
For more information about Apollo Group, Inc. and its
subsidiaries, call (800) 990-APOL or visit the Company’s website at
www.apollogrp.edu.
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