Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
Aug. 1 — An investor can't pursue a derivative lawsuit alleging that certain Xerox Corp. directors and officers breached their fiduciary duties in connection with the company's $6.4 billion acquisition of Affiliated Computer Services Inc. (ACS), the U.S. District Court for the Southern District of New York ruled July 29 ( Sciabacucchi v. Burns , 2016 BL 245572, S.D.N.Y., No. 15-cv-7506 (PKC), 7/29/16 ).
Plaintiff Matthew Sciabacucchi alleged the defendants failed to discover ACS accounting improprieties that caused Xerox to pay an inflated price for the information technology company in 2010.
As required under New York law, Sciabacucchi in 2013 made a demand on the Xerox board to investigate and initiate legal action against the officers and directors.
In dismissing the lawsuit, Judge P. Kevin Castel concluded that Xerox's board hadn't wrongfully rejected the shareholder's litigation demand. The judge, applying New York law, said the board's investigation of the shareholder's demand “was more than procedurally adequate.”
Two former ACS executives in 2014 agreed to pay a monetary penalty to resolve Securities and Exchange Commission allegations that they caused ACS to falsely report revenue (168 SLD, 8/29/14).
The court found that the board's rejection of the litigation demand was protected under the deferential business judgment rule.
In determining that the Xerox board's probe was adequate, the court observed that the board appointed two qualified independent directors to run a Demand Review Committee to investigate the allegations. The committee retained outside counsel to assist in its investigation and the procedures utilized by the committee and its outside counsel showed that their review was reasonably complete, the court said.
The court also determined that the committee's failure to interview a representative of the SEC didn't render its investigation inadequate.
New York law doesn't require specific witnesses or categories of witnesses to be interviewed during a demand investigation, the court said. It added that the only requirements regarding the scope of an investigation are that the areas and subjects examined are reasonably complete.
“There is no reasonable basis to infer that the [Demand Review Committtee] would have obtained a more complete understanding of the facts and circumstances underlying the shareholder demand if they interviewed any of the SEC employees who worked on the ACS investigation,” Castel wrote.
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The court's opinion is available at http://src.bna.com/hiw.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)