Bucks County Employees’ Retirement System et al. v. Timothy Cook et al.

Apple’s motion to dismiss is fully briefed and awaiting decision. Discovery in the Securities Class Action is stayed under the Private Securities Litigation Reform Act (PSLRA).

After the instant motion to stay was filed, the United States Court of Appeals for the Ninth Circuit, on December 11, 2025, affirmed the district court’s contempt finding, affirmed in part and reversed in part the contempt remedies, and remanded. (Epic Games, Inc. v. Apple Inc. (9th Cir. 2025) 161 F.4th 1162.) Rehearing was denied and the mandate issued; Apple has filed a petition for a writ of certiorari that remains pending. 1

II. Legal Standard “Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.” (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489 (Freiberg).) “[W]hen a federal action has been filed covering the same subject matter as involved in the California action, the California court has the discretion but not the obligation to stay the state court action.” (Caiafa Pro. Law Corp. v. State Farm Fire & Cas. Co. (1993) 15 Cal.

App. 4th 800, 804 (Caifa); see also Thomson v. Contl. Ins. Co. (1967) 66 Cal.2d 738, 746.) In exercising its discretion, the Court considers whether a stay will avoid the possibility of conflicting rulings, the importance of avoiding unseemly conflicts with other courts, the relative convenience of the forums, and whether the federal action is pending in California and not some other state. (Caiafa, supra, 15 Cal.App.4th at 804; Farmland Irrigation Co. v. Dopplmaier (1957) 48 Cal. 2d 208, 215.)

A recurring application of these principles is a stay of a shareholder derivative action pending a parallel securities class action. Because a derivative plaintiff acts in a “fiduciary character” for the corporation (Cohen v. Beneficial Indus. Loan Corp. (1949) 337 U.S. 541, 549), and a derivative suit exists “to protect the interests of the corporation” (Kamen v. Kemper Fin. Servs., Inc. (1991) 500 U.S. 90, 95), numerous courts have stayed derivative actions where simultaneous prosecution would force the company to take inconsistent positions or risk inconsistent rulings. (See, e.g., In re STEC, Inc.

Deriv. Litig. (C.D. Cal. 2012) 2012 WL 8978155, 2012 U.S. Dist. LEXIS 189167 (STEC); Cucci v. Edwards (C.D. Cal. 2007) 2007

1 Several related actions are pending: Anguka and City of Hialeah (Super. Ct. Santa Clara 2025) No. 25CV472876; Western Fund (Super. Ct. Santa Clara 2026) No. 26CV491926; City of Hollywood (N.D. Cal. 2026) No. 5:26-cv-01724; and In re Apple Inc. AI Deriv. Litig. (N.D. Cal. 2025) No. 5:25-cv-05364.)

WL 3396234, 2007 U.D. Dist. LEXIS 868832; In re Rh S’holder Deriv. Litig. (N.D. Cal. 2019) 2019 WL 580668, 2019 U.S. Dist. LEXIS 11128.) Other courts have declined to stay where the overlap was insufficient or the asserted conflict speculative. (See, e.g., In re Galena Biopharma, Inc. Deriv. Litig. (D. Or. 2015) 83 F. Supp. 3d 1033; Smith ex rel. Apollo Grp., Inc. v. Sperling (D. Ariz. 2012) 2012 WL 79237, 2012 U.S. Dist. LEXIS 3672; In re FirstEnergy S’holder Deriv. Litig. (N.D. Ohio 2004) 219 F.R.D. 584.)

III.

Discussion

Defendants contend all the relevant factors weigh in favor of the requested stay. (Memorandum, p. 14:11–22.) They contend that a stay is required to prevent harm to Apple. (Id. at pp. 14:23–17:15.) Defendants further argue that, due to the factual overlap between the actions, considerations of efficiency and judicial economy support the issuance of a stay. (Id. at pp. 17:16–18:18.) Plaintiffs emphasize that the two actions involve different legal theories. (Opposition, pp. 9:8–11:5.) Plaintiffs further contend that denying the motion will not result in prejudice, and granting the stay will prejudice both Plaintiffs and Apple. (Id. at pp. 12:11– 17:1.)

A. Overlapping Subject Matter The threshold issue is whether the actions involve the same subject matter, not whether they assert identical claims or parties. They do. Both this action and the Securities Class Action turn on whether Apple violated the Epic Injunction and whether particular individuals knew of that violation. The derivative complaint alleges that the Individual Defendants caused or allowed Apple to willfully violate the Epic Injunction; the Securities Class Action alleges that Apple and certain officers misrepresented Apple’s compliance while knowing it was violating the same injunction.

Plaintiffs argue this action should not be stayed because the cases concern distinct claims and distinct legal theories. (Opposition, pp. 9:8–11:5.) According to Plaintiffs, their breach of fiduciary duty claims in this action are altogether different from the Section 10(b) claims asserted in the Securities Class Action. While Plaintiffs are correct that California

fiduciary duty law and federal Section 10(b) are distinct legal theories, this is not controlling. The relevant inquiry is whether the same factual allegations are at issue. (STEC, supra, 2012 U.S. Dist. LEXIS 189167, at *19 [“the law does not require that the parties and the claims be identical”].)

B. Risk of Inconsistent Findings Defendants persuasively argue that allowing this action to proceed in parallel with the Securities Class Action would place Apple in the position of prosecuting (through Plaintiffs) the contention that Apple knowingly violated the Epic Injunction, while Apple simultaneously opposes that same contention in defendant the Securities Class Action. This is the same conflict that has led courts to stay derivative actions in favor of parallel securities actions because it carries with it a genuine risk of inconsistent factual findings on the overlapping questions of violation and knowledge.

The underlying violation of the Epic Injunction is not meaningfully in dispute because the Ninth Circuit has affirmed the contempt findings. Nevertheless, the question of whether and when the Individual Defendants knowingly cause or permitted non-compliance is an overlapping question that remains in both actions. This question is central both to Plaintiffs’ fiduciary-duty theory and the scienter allegations in the Securities Class Action. This question also remains subject to Apple’s pending certiorari petition.

The risk of inconsistent findings regarding that question is sufficient to support the stay of these proceedings.

C. Plaintiffs’ Assertions of Prejudice Plaintiffs raise several points that the Court has considered. (Opposition, pp. 16:9– 17:1.) That this action was filed before the Securities Class Action generally weighs against a stay, but it does not eliminate the present conflict of issues discussed above. That Plaintiffs’ claims arise under California corporate-governance law is significant, but a stay defers rather than displaces this Court’s adjudication of those claims. The Securities Class Action’s presence in a California federal court is a factor favoring a stay under Caiafa. Plaintiffs’ argument that an open-ended stay risks complicating their demand-futility allegations as Apple’s Board

changes carries some weight because Apple has announced a transition in the office of Chief Executive Officer. The Court finds this concern legitimate and non-speculative, and it is the primary reason why the Court declines to impose the indefinite stay that Defendants request.

D. Efficiency Favors a Limited Stay A ruling on the motion to dismiss in the Securities Class Action will likely address whether the Epic-related misrepresentation and scienter allegations are adequately pleaded. Such a ruling would likely result in efficiency gains by narrowing the issues in this action and reducing duplicative litigation of the same conduct. Nevertheless, these efficiency gains can be realized through a defined stay as opposed than the open-ended “final resolution” stay sought by Defendants.

A stay limited to the ruling on the pending motion to dismiss in the Securities Class Action balances California’s delay-reduction policies against the risk of inconsistent rulings. Such a ruling is within the Court’s inherent discretion to enter a stay where substantial justice warrants it. (Freiberg, supra, 33 Cal.App.4th at p. 1489 [“[t]rial courts generally have the inherent power to stay proceedings in the interest of justice and to promote judicial efficiency”].)

E. Plaintiffs’ Alternative Requests In addition to requesting a limited stay, Plaintiffs make several other requests related to the issuance of a stay in this action. (Opposition, pp. 17:2–18:10; Reply, pp. 14:13–15:25.) The Court declines Plaintiffs’ request that it first decide a demand-futility demurrer before ruling on the stay because requiring that briefing now would reproduce the same conflict the stay is intended to avoid. The standing question can be addressed promptly once the stay is lifted, without prejudice to any party.

The Court also denies Plaintiffs’ request to conduct or coordinate discovery during the stay because permitting discovery would defeat the purpose of the stay. A derivative plaintiff who has not yet established standing is not entitled to merits discovery. (Jones v. Martinez (2014) 230 Cal.App.4th 1248, 1254 [“[t]he proper purpose of discovery in a shareholder derivative action is to find out additional facts about a well-pleaded

claim, not to find out whether such a claim exists”]; see also Bezirdjian v. O’Reilly (2010) 183 Cal.App.4th 316, 328.) Discovery in the Securities Class Action is, in any event, stayed under the PSLRA. Plaintiffs’ stated intention to seek consolidation with the related Western Fund action2 is not before the Court, and any consolidated action will be subject to this stay.

IV.

Conclusion

For the reasons stated, the Court GRANTS IN PART Defendants’ motion to stay. This action is STAYED in its entirety. The stay shall remain in effect until the federal district court rules on the pending motion to dismiss the Securities Class Action, at which time the stay shall expire unless it otherwise extended by further order of Court following a noticed motion. Discovery in this action remains stayed during the pendency of the stay as ordered above. Plaintiff’s request to conduct discovery or obtain discovery produced in the Securities Class Action is DENIED without prejudice.

The Court does not reach the sufficiency of Plaintiffs’ demand-futility allegations, which may be addressed by motion practice after the stay is lifted. If this action is later consolidated with any related derivative action, the consolidated action shall be stayed subject to the stay on the same terms. The Court will prepare the order.

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2 See Opposition, pp. 6:28 – 7:13.

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