Apple 2006 Annual Report Download - page 43

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economic relationship, negligent misrepresentation, trade libel, unfair competition and false advertising. Plaintiffs requested unspecified
damages and other relief. The Company answered the Computer International complaint on November 12, 2003, denying all allegations and
asserting numerous affirmative defenses. The Company filed an answer in the Macadam case on December 3, 2004 denying all allegations and
asserting numerous defenses. Three of the other Plaintiffs filed amended complaints on February 7, 2005, and on March 16, 2005 the Company
filed answers to these claims denying all allegations and asserting numerous affirmative defenses. A sixth Plaintiff, MacAccessory Center, filed
a complaint on February 23, 2005. The Company filed an answer to this complaint on April 20, 2005 denying all allegations and asserting
numerous affirmative defenses. On February 28, 2006, MacGuys and Creative Online filed complaints against the Company. All of these cases
with the exception of Macadam were coordinated for discovery (along with the Branning class action) in Santa Clara Superior Court. The Elite,
Neighborhood Computer Store, MacTech and MacAccessory cases were set for trial on November 27, 2006. The Company has reached
settlements with Computer International, MacTech Systems, Elite Computers and Software, Inc., MacAccessory Center, Inc., The
Neighborhood Computer Store, Creative Online Computer Services, Inc., and MacGuys, Inc. and these matters are concluded. These
settlements did not have a material effect on the Company’s financial position or results of operations.
On October 1, 2003, one of the reseller Plaintiffs, Macadam, was deauthorized as an Apple reseller. Macadam filed a motion for a temporary
order to reinstate it as a reseller, which the Court denied. The Court denied Macadam’s motion for a preliminary injunction on December 19,
2003. On December 6, 2004, Macadam filed for Chapter 11 Bankruptcy in the Northern District of California, which placed a stay on the
litigation as to Macadam only. The Company filed a claim in the bankruptcy proceedings on February 16, 2005. The Macadam bankruptcy case
was converted to Chapter 7 (liquidation) on April 29, 2005. The Company has reached a settlement of the Macadam case with the Chapter 7
Bankruptcy Trustee. The Bankruptcy Court approved the settlement on July 17, 2006 over the objection of Tom Santos, MacAdam’s principal.
Santos has appealed the ruling approving the settlement.
On December 19, 2005, Tom Santos, who was an original plaintiff in the Macadam case, filed a Fifth Amended Complaint on his own behalf
(not on behalf of Macadam) alleging fraud, violations of California Business & Professions Code §17200 (unfair competition), California
Business & Professions Code §17500 (false advertising) and the Consumer Legal Remedies Act. The Company filed a demurrer to Santos’
amended complaint and a special motion to strike the defamation cause of action on January 20, 2006. Those motions were heard on
February 17, 2006, and the Court sustained the demurrer without leave to amend as to one cause of action, overruled the demurrer as to one
cause of action and sustained the demurrer with leave to amend as to two causes of action. The Court also denied the special motion to strike.
Santos filed a further amended complaint on July 14, 2006. The Company filed a demurrer, which was granted on September 9, 2006. Santos
filed an amended complaint. The Company filed a motion to strike, which was granted in part and denied in part on December 15, 2006. The
Company also filed a cross complaint against Santos on January 20, 2006 alleging violations of California Business & Professions Code
§17200 and California Penal Code §502, fraud and deceit, and breach of contract.
Macsolutions, Inc. v. Apple Computer, Inc.
Plaintiff Macsolutions, Inc., a former Apple authorized reseller, filed this lawsuit against the Company on January 20, 2006 alleging breach of
contract, fraud, misappropriation of trade secrets, intentional interference with economic advantage, violation of the Cartwright Act, violation
of California Business & Professions Code §17200 (unfair competition) and fraudulent concealment. The factual allegations in this complaint
are similar to those in the eight other reseller cases and the Branning class action. Principally, Plaintiffs allege that the Company treated
Macsolutions unfairly compared to other resellers, that the Company has competed unfairly in opening the Apple retail stores, and has
allegedly sold used goods as new. Macsolutions filed an amended complaint on June 5, 2006, adding Tech Data Corporation as a
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