Twenty-First Century Fox 2007 Annual Report Download - page 101

NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
with contract and prospective business advantage. The complaint sought injunctive relief, unspecified compensatory and exemplary
damages and restitution. On December 22, 2003, all of the claims were dismissed by the court. Sogecable filed a second amended
complaint. NDS filed a motion to dismiss the second amended complaint on March 31, 2004. On August 4, 2004, the court issued
an order dismissing the second amended complaint in its entirety. Sogecable had until October 4, 2004 to file a third amended
complaint. On October 1, 2004, Sogecable notified the court that it would not be filing a third amended complaint, but would
appeal the court’s entry of final judgment dismissing the suit to the United States Ninth Circuit Court of Appeals. On December 14,
2006, the appellate court issued a memorandum decision reversing the district court’s dismissal. On January 26, 2007, NDS filed its
petition for rehearing by an en banc panel of the United States Ninth Circuit Court of Appeals. On February 21, 2007, the petition
was denied. On June 11, 2007, NDS filed a petition for a Writ of Certiorari in the United States Supreme Court seeking reversal of
the Ninth Circuit Court of Appeals’ decision. The Company believes that Sogecable’s claims are without merit and will continue to
vigorously defend itself in this matter.
Intermix
FIM Transaction
On August 26, 2005 and August 30, 2005, two purported class action lawsuits captioned, respectively, Ron Sheppard v. Richard
Rosenblatt et. al., and John Friedmann v. Intermix Media, Inc. et al., were filed in the California Superior Court, County of Los Angeles.
Both lawsuits named as defendants all of the then incumbent members of the Intermix Board, including Mr. Rosenblatt, Intermix’s
former Chief Executive Officer, and certain entities affiliated with VantagePoint Venture Partners, a former major Intermix stock-
holder. The complaints alleged that, in pursuing the transaction whereby Intermix was to be acquired by FIM (the “FIM
Transaction”) and approving the related merger agreement, the director defendants breached their fiduciary duties to Intermix
stockholders by, among other things, engaging in self-dealing and failing to obtain the highest price reasonably available for Inter-
mix and its stockholders. The complaints further alleged that the merger agreement resulted from a flawed process and that the
defendants tailored the terms of the merger to advance their own interests. The FIM Transaction was consummated on Sep-
tember 30, 2005. The Friedmann and Sheppard lawsuits were subsequently consolidated and, on January 17, 2006, a consolidated
amended complaint was filed (the “Intermix Media Shareholder Litigation”). The plaintiffs in the consolidated action are seeking vari-
ous forms of declaratory relief, damages, disgorgement and fees and costs. On March 20, 2006, the court ordered that substantially
identical claims asserted in a separate state action filed by Brad Greenspan, captioned Greenspan v. Intermix Media, Inc., et al.,be
severed and related to the Intermix Media Shareholder Litigation. The defendants filed demurrers seeking dismissal of all claims in the
Intermix Media Shareholder Litigation and the severed Greenspan claims, which were heard by the Court on July 6, 2006. On
October 6, 2006, the court sustained the demurrers without leave to amend. On December 13, 2006, the court dismissed the
complaints and entered judgment for the defendants. On February 6, 2007, the Intermix Media Shareholder Litigation plaintiffs filed a
notice of appeal.
Although their opening brief is currently due on August 24, 2007, plaintiffs have requested that the Court of Appeal grant them
an extension of this due date to October 23, 2007. The Court of Appeal has not yet ruled on this request. The matter will likely not
be fully briefed and ready for oral argument until the first half of 2008.
In November 2005, plaintiff in a derivative action captioned LeBoyer v. Greenspan et al. pending against various former Intermix
directors and officers in the United States District Court for the Central District of California, filed a First Amended Class and
Derivative Complaint (the “Amended Complaint”). The original derivative action was filed in May 2003 and arose out of Intermix’s
restatement of quarterly financial results for its fiscal year ended March 31, 2003. Until the filing of the Amended Complaint, the
action had been stayed by mutual agreement of the parties since its inception. A substantially similar derivative action filed in Los
Angeles Superior Court was dismissed based on inability of the plaintiffs to adequately plead demand futility. Plaintiff LeBoyer’s
November 2005 Amended Complaint added various allegations and purported class claims arising out of the FIM Transaction which
are substantially similar to those asserted in the Intermix Media Shareholder Litigation. The Amended Complaint also adds as defend-
ants the individuals and entities named in the Intermix Media Shareholder Litigation that were not already defendants in the matter.
On July 14, 2006, the parties filed their briefing on defendants’ motion to dismiss and stay the matter. On October 16, 2006, the
court dismissed the fourth through seventh claims for relief, which related to the 2003 restatement, finding that the plaintiff is pre-
cluded from relitigating demand futility. At the same time, the court asked for further briefing regarding the standing issues and the
effect of the judge’s dismissal of the claims in the Greenspan case and the Intermix Media Shareholder Litigation on the remaining
claims, which include two direct class action claims related to alleged breaches of fiduciary duty leading up to the FIM Transaction
and a third claim under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) asserted as a
derivative claim and alleging material misstatements and omissions in the FIM Transaction proxy statement. The parties filed the
requested additional briefing in which the defendants requested that the court stay the federal court proceedings pending the reso-
lution of any appeal in the Greenspan case and the Intermix Media Shareholder Litigation. The court vacated the scheduled
November 27, 2006 hearing with respect to this briefing and took the matter under submission. The court denied the stay in an
order dated May 22, 2007, and as explained in more detail in the next paragraph, consolidated this case with the Brown v. Brewer
action also pending before the court. On July 11, 2007, plaintiffs filed the consolidated first amended complaint. Pursuant to the
stipulated briefing schedule ordered by the court, the parties’ joint brief is due to be filed on October 11, 2007.
On June 14, 2006, a purported class action lawsuit, captioned Jim Brown v. Brett C. Brewer, et al., was filed against certain former
Intermix directors and officers in the United States District Court for the Central District of California. The plaintiff asserts claims for
alleged violations of Section 14a of the Exchange Act and SEC Rule 14a-9, as well as control person liability under Section 20a. The
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