Legal News

Jury Orders Apollo Group to Pay $280 Million

By Ashby Jones

Eh, you win some, you lose some. Pretty much everyone not named Tom Brady has to say that at some point, and today it’s Gibson Dunn’s turn.

No sooner that we’d posted about Ted Olson’s latest Supreme Court victory, we got word of a pretty stunning jury verdict outta Phoenix: After a two-month trial on a suit filed by Apollo Group shareholders, a jury today ordered Apollo to pay shareholders about $280 million or $5.55 a share. Apollo Group, the for-profit company that owns the University of Phoenix, had tapped Gibson Dunn, among others, to handle the case.

Shareholders claimed Apollo misled investors four years ago when it kept secret a Department of Education report that criticized the University of Phoenix’s recruitment policies. The report concluded that the University of Phoenix paid enrollment counselors “solely based on [the] recruiters” success in securing enrollments,” which violated federal regulations.

“This is a truly a great victory for shareholder rights in America and is a great victory for the preservation for the integrity of our financial markets and I want to compliment the lead plaintiff, the Policeman’s Annuity & Benefit Fund of Chicago, for prosecuting this matter and seeing it through to a successful conclusion on behalf of all investors,” said Stephen Basser of Barrack Rodos & Bacine, the lead trial lawyer for the plaintiffs.

Apollo argued that the report was largely false and based on anecdotal evidence. Therefore, the company said, its failure to disclose its existence to investors was not misleading. (Click here for Apollo’s unusually detailed Web site on the litigation.)

As we wrote in regard to the recent JDS Uniphase case, trials in class-action securities-fraud cases are as rare as a pygmy marmoset. But two class-action securities cases in as many months? We’re talking long-whiskered owlet (pictured) rare. According to Adam Savett of Risk Metrics, of the six cases that have gone to verdict since Congress passed substantial securities-fraud litigation in 1995, three have gone for the plaintiffs, and three for the defendants (though one of the defense verdicts was tossed on appeal and currently awaits retrial).

“The jury’s verdict is contrary to the evidence and the law,” said Wayne Smith of Gibson Dunn and the Law Blog Moustache Society. “Not only is it horribly disappointing, it’s also flat wrong.” Apollo Group said it disagreed with the verdict and is “evaluating options for appeal.”

Full post as published by Law Blog - WSJ.com on January 16, 2008 (boomark / email).