9th Circuit Panel Reinstates $280 Million Verdict In Apollo Group Investor Class Action

SAN FRANCISCO - (Mealey's) Ruling that a federal district court erred in granting Apollo Group Inc. judgment as a matter of law, a Ninth Circuit U.S. Court of Appeals panel on June 23 reversed the district court's ruling and remanded with instructions to enter judgment "in accordance with the jury's verdict" (In re Apollo Group, Inc. Securities Litigation, No. 08-16971, 9th Cir.).

In its three-page opinion, the panel held that Apollo is not entitled to a new trial because the U.S. District Court for the District of Arizona did not abuse its discretion by excluding "potentially confusing deposition testimony" by an analyst whose reports allegedly disclosed the fraud and whom Apollo chose not to cross-examine.

The panel also found that the District Court properly instructed the jury because it "made clear that damages could be awarded only for fraud-related losses, and it was not required to instruct the jury on a theory of liability the plaintiffs hadn't presented."

"Finally, there is no basis for remittitur," the panel said, adding that "[t]he jury could have reasonably credited the expert who testified that the fraud revealed by multiple corrective disclosures accounted for $5.55 of the drop in stock price."

"Damages are limited by the extent of Apollo's fraud, not by the subset of fraud the [analyst] reports alone revealed," the panel explained.

Shareholders filed a class action complaint on Oct. 12, 2004, on behalf of all purchasers of Apollo common stock from Feb. 27, 2004, to Sept. 14, 2004.  They alleged that Apollo and certain of its executive officers violated Section 10(b) of the Securities Exchange Act of 1934 by misrepresenting the status of the DOE program review of Apollo's subsidiary, the University of Phoenix.  The report found that the school paid enrollment counselors "solely based on (the) recruiters' success in securing enrollments," which violated federal regulations.  It also found that the university systematically kept its incentive-based recruitment practices hidden from the DOE.

After a two-month trial and three days of deliberations, the jury ruled in favor of the shareholders, ordering the defendants to pay the shareholders nearly $280 million, or $5.55 per share.

The defendants moved for judgment as a matter of law, and on Aug. 4, 2008, Judge James A. Teilborg ruled that the jury's finding in favor of the Apollo shareholders was not supported by the evidence because the analyst reports are nothing more than "a market analyst's opinion, [which] is not, and never can be, a 'corrective disclosure.'"

Judge Teilborg also agreed with Apollo's contention that "even accepting the premise that analysis of existing facts may sometimes be necessary to reveal a fraud to the market, the [analyst] reports were not necessary to reveal the fraud in this case because they did not provide any new, fraud-revealing analysis."

[Editor's Note:  Full coverage will be in the July issue of Mealey's Emerging Securities Litigation.  In the meantime, the opinion is available at or by calling the Customer Support Department at 1-800-833-9844.  Document #57-100713-040Z.  For all of your legal news needs, please visit]

Download the document now: - Document #57-100713-040Z

For more information, call editor Timothy J. Raub at 610-205-1127, or e-mail him at