DIRECTV 2003 Annual Report Download - page 28

THE DIRECTV GROUP, INC.
Robert LaMarche v. General Motors Corporation, et al.) and in the California Superior Court, Los Angeles,
(Matcovsky, et al. v. Hughes Electronics Corporation, et al.; Brody v. Hughes Electronics Corporation, et al.) on
behalf of the owners of GM Class H shares, challenging the series of transactions by which GM split-off its
interest in the Company to the holders of shares of GM Class H common stock and News Corporation acquired
34% of our outstanding capital stock. The lawsuits allege that the transactions provided benefits to GM not
available to all GM Class H common stockholders, in violation of fiduciary duties.
The Delaware actions were consolidated and plaintiffs filed a Consolidated Class Action Complaint on
August 29, 2003, which dropped the Company, our directors and News Corporation from the case.
The California actions were consolidated and plaintiffs filed a Consolidated Class Action Complaint on July
18, 2003 against GM, the Company and each member of the respective Board of Directors of the two companies.
On August 21, 2003, defendants filed a motion to dismiss or stay, and certain named defendants filed a motion to
quash service, contesting personal jurisdiction in this matter. On November 12, 2003, the California Superior
Court granted the motion to quash service, denied the motion to dismiss and granted the motion to stay.
The challenged transactions were consummated on December 22, 2003. As of that date, pursuant to the
Separation Agreement between GM and the Company, GM has assumed the defense and indemnification of the
Company and our directors in this matter. Based on the dismissal of the Delaware proceedings and the
indemnification by GM as to the California case, we believe this matter is no longer material to us.
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A purported class action, P. Shoenfeld Asset Management LLC, et al. v. Shaw et al., was filed in Delaware
Chancery Court on December 18, 2002, against the Company and PanAmSat’s Board of Directors. The suit
alleged that the settlement between EchoStar Communications Corporation and the Company of all claims
related to the termination of the proposed merger between EchoStar and the Company favored the Company in
violation of alleged fiduciary duties. On July 10, 2003, the Delaware Chancery Court granted defendants’
motions to dismiss all claims with prejudice and denied plaintiffs’ motion for leave to amend the complaint. The
plaintiffs appealed, and on December 17, 2003, the dismissal was affirmed by the Delaware Supreme Court, so
this purported transaction is no longer pending.
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In September 2002, DIRECTV, Inc., DIRECTV Enterprises, LLC, and DIRECTV Operations, LLC, which
we refer to in this paragraph as the DIRECTV Parties, filed a lawsuit in U.S. District Court in Los Angeles
against NDS (and related entities), the provider of DIRECTV’s conditional access system, alleging, among other
things, breach of contract and misappropriation of trade secrets. On October 21, 2002, NDS filed counterclaims
against the DIRECTV Parties and a chip manufacturer. NDS sought injunctive relief as well as an unspecified
amount in punitive damages. On August 5, 2003, the DIRECTV Parties, NDS, the chip manufacturer, the
Company and News Corporation, NDS’ parent company, entered into an agreement to stay the litigation pending
the closing of the proposed transactions with News Corporation. Upon closing of the News Corporation
transactions, the litigation and all claims and counterclaims were dismissed with prejudice.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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