In a new legal twist, a New York judge has refused to approve a proposed settlement in a Xerox shareholder class action suit following the terminated $6 billion merger agreement between Xerox and Fujifilm.
“In the judge’s view, plaintiffs’ lawyers had essentially allowed [Darwin] Deason and [Carl] Icahn, who owned just 15 percent of Xerox shares, to seize control of the company with no consideration for shareholders – but with a $7.5 million fee deal for themselves,” according to a report by Reuters. “Justice Ostrager said that if he had approved the settlement, Xerox directors would be released from liability for their role in approving the tainted Fuji deal and then walking away from it. But shareholders, according to Justice Ostrager, would have gotten nothing in exchange for releasing claims against Xerox directors.”
The proposed settlement, announced in May, was seen as a win for Deason and Icahn, who had agreed to drop their lawsuit over the proposed deal in exchange for the resignation of Xerox’s CEO and five other board members. The deal gave the two billionaire activist investors control of the Xerox board. [Fujifilm has filed its own lawsuit, seeking $1 billion in compensation over the abandoned deal].
“There were not exigent circumstances requiring purported class counsel to enter into the [settlement] other than the desire of Deason and Icahn to achieve control of the Xerox board, which purported class counsel facilitated,” Justice Ostrager said in a 15-page opinion published dated Sept. 10, The New York Law Journal reported.
“The net result of the actions of the purported class representatives and purported class counsel was to transfer control of a public corporation to Messrs. Deason and Icahn via a private agreement that offered no tangible benefits to the interests of the class.”
Lawyer Eduard Korsinsky, who represented an objecting shareholder, said his legal team would continue to pursue claims on behalf of Xerox shareholders. “We’re gratified that Justice Ostrager saw our point of view, and we look forward to litigating the case on behalf of shareholders of Xerox, who have been damaged considerably,” he said.
In May 2019, Xerox shareholders voted in favour of a proposal to restructure the company under a new holding company. Holding companies can make it easier to sell divisions and contain litigation.
Meanwhile, it’s reported that 83-year-old Icahn, said to be worth $17.7 billion, is planning to move his home and business from New York to Florida to avoid New York’s higher taxes.
Xerox shares (XRX on the NYSE) closed at USD$30.63 yesterday, down 1.06% of previous day's trading and still below the original Fujifilm overall offer price.