ADT 2007 Annual Report Download - page 126

Shareholder Derivative Litigation
As previously reported in our periodic filings, an action was filed on June 7, 2002 in the Supreme
Court of the State of New York, Levin v. Kozlowski, alleging that the individually named defendants
breached their fiduciary duties, committed waste and mismanagement and engaged in self-dealing in
connection with Tyco’s accounting practices, individual board members’ use of funds, and the financial
disclosures of certain mergers and acquisitions. It is further alleged that certain of the individual
defendants converted corporate assets for their own use. Plaintiffs seek money damages. Plaintiffs
agreed to stay that action pending the resolution of the federal derivative action, which was dismissed
by the United States District Court for the District of New Hampshire on October 14, 2004; and the
appeal from that ruling was voluntarily dismissed on May 19, 2005. On June 14, 2005, the plaintiffs
resumed the Levin action. On September 22, 2005, the Company filed a motion to dismiss the
derivative complaint. On November 14, 2006, the Supreme Court of the State of New York dismissed
the complaint with prejudice. On December 11, 2006, plaintiffs filed a notice of appeal of the Court’s
November 14, 2006 order dismissing the complaint. On October 25, 2007, the Supreme Court of the
State of New York, Appellate Division, First Department, heard oral arguments in this action and on
November 15, 2007, the Court denied the plaintiff’s appeal.
ERISA Litigation
As previously reported in our periodic filings, Tyco and certain of our current and former
employees, officers and directors, have been named as defendants in eight class actions brought under
the Employee Retirement Income Security Act (‘‘ERISA’’). Two of the actions were filed in the United
States District Court for the District of New Hampshire and the six remaining actions were transferred
to that Court by the Judicial Panel on Multidistrict Litigation. All eight actions have been consolidated
in the District Court in New Hampshire. The consolidated complaint purports to bring claims on behalf
of our Retirement Savings and Investment Plans and the participants therein and alleges that the
defendants breached their fiduciary duties under ERISA by negligently misrepresenting and negligently
failing to disclose material information concerning, among other things, the following: related-party
transactions and executive compensation; our mergers and acquisitions and the accounting therefor, as
well as allegedly undisclosed acquisitions; and misstatements of our financial results. The complaint also
asserts that the defendants breached their fiduciary duties by allowing the Plans to invest in our shares
when it was not a prudent investment. The complaints seek recovery of alleged plan losses arising from
alleged breaches of fiduciary duties. On January 12, 2005, the United States District Court for the
District of New Hampshire denied, without prejudice, the Company’s motion to dismiss certain
additional individual defendants from the action. On January 20, 2005, Plaintiffs filed a motion for class
certification. On January 27, 2005, the Company answered the plaintiffs’ consolidated complaint. Also,
on January 28, 2005, the Company and certain individual defendants filed a motion for reconsideration
of the Court’s January 12, 2005 order, insofar as it related to our Retirement Committee. On May 25,
2005, the Court denied the motion for reconsideration. On July 11, 2005, the Company and certain
individual defendants opposed plaintiffs’ motion for class certification. On August 15, 2006, the Court
entered an order certifying a class ‘‘consisting of all Participants in the Plans for whose individual
accounts the Plans purchased and/or held shares of Tyco Stock Fund at any time from August 12, 1998
to July 25, 2002.’’ On August 29, 2006, Tyco filed a petition for leave to appeal the class certification
order to the United States Court of Appeals for the First Circuit. On November 13, 2006, the United
States Court of Appeals for the First Circuit denied Tyco’s petition. On November 28, 2006, plaintiffs
filed a motion seeking an order directing them to serve notice of the ERISA class action on potential
class members. Tyco did not object to service of notice on potential class members, and on January 11,
2007, plaintiffs filed a motion, assented to by Tyco that proposed an agreed upon form of notice. On
January 18, 2007, the Court granted that motion. On December 5, 2006, plaintiffs filed a motion
seeking leave to file an amended complaint. Subsequently, on January 10, 2007, plaintiffs filed a motion
to withdraw their motion to amend the complaint without prejudice.
34 2007 Financials