Twenty-First Century Fox 2011 Annual Report Download - page 71

Notes to the Consolidated Financial Statements (continued)
Contingencies
Intermix
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 board of directors of Intermix Media, Inc. (“Intermix”), including Mr. Rosenblatt,
Intermix’s former Chief Executive Officer, and certain entities affiliated with VantagePoint Venture Partners (“VantagePoint”), a former major
Intermix stockholder. The complaints alleged that, in pursuing the transaction whereby Intermix was to be acquired by Fox Interactive Media, a
subsidiary of the Company (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
Intermix 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 September 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 sought various 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. 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. Greenspan and plaintiffs in the Intermix Media Shareholder Litigation filed notices of appeal. The Court of
Appeal heard arguments on the fully briefed appeal on October 23, 2008. On November 11, 2008, the Court of Appeal issued an unpublished
opinion affirming the lower court’s dismissal on all counts. On December 19, 2008, stockholder appellants filed a Petition for Review with the
California Supreme Court. The California Supreme Court denied review on February 18, 2009 and the judgment is now final.
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. A substantially similar derivative action filed in Los Angeles Superior Court was dismissed based on the
inability of the plaintiffs to plead adequately demand futility. The Amended Complaint added various allegations and purported class claims
arising out of the FIM Transaction that are substantially similar to those asserted in the Intermix Media Shareholder Litigation. The Amended
Complaint also added as defendants the individuals and entities named in the Intermix Media Shareholder Litigation that were not already
defendants in 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 precluded from relitigating demand futility. At the same time, the court asked for further briefing regarding
plaintiffs’ standing to assert derivative claims based on the FIM Transaction, including for alleged violation of Section 14(a) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), the effect of the state judge’s dismissal of the claims in the Greenspan case and the
Intermix Media Shareholder Litigation on the remaining direct class action claims alleging breaches of fiduciary duty and other common law
claims leading up to the FIM Transaction. The parties filed the requested additional briefing in which the defendants requested that the court stay
the direct LeBoyer claims pending the resolution of any appeal in the Greenspan case and the Intermix Media Shareholder Litigation. By order
dated May 22, 2007, the court granted defendants’ motion to dismiss the derivative claims arising out of the FIM Transaction, and denied the
defendants’ request to stay the two remaining direct claims. As explained in more detail in the next paragraph, the court subsequently 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 under the Brown case title. See the discussion of the Brown case below for the subsequent developments in the consolidated case.
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 asserted claims for alleged violations of
Section 14(a) of the Exchange Act and SEC Rule 14a-9, as well as control person liability under Section 20(a) of the Exchange Act. The plaintiff
alleged that certain defendants disseminated false and misleading definitive proxy statements on two occasions: one on December 30, 2003 in
connection with the stockholder vote on January 29, 2004 on the election of directors and ratification of financing transactions with certain
entities of VantagePoint; and another on August 25, 2005 in connection with the stockholder vote on the FIM Transaction. The complaint named
as defendants certain VantagePoint related entities, the former general counsel and the members of the Intermix Board who were incumbent on the
dates of the respective proxy statements. Intermix was not named as a defendant, but has certain indemnity obligations to the former officer and
director defendants in connection with these claims and allegations. On August 25, 2006, plaintiff amended his complaint to add certain
investment banks (the “Investment Banks”) as defendants. Intermix has certain indemnity obligations to the Investment Banks as well. Plaintiff
amended his complaint again on September 27, 2006, which defendants moved to dismiss. On February 9, 2007, the case was transferred to Judge
George H. King, the judge assigned to the LeBoyer action, on the grounds that it raises substantially related questions of law and fact as LeBoyer,
and would entail substantial duplication of labor if heard by different judges. On June 11, 2007, Judge King ordered the Brown case be
consolidated with the LeBoyer action, ordered plaintiffs’ counsel to file a consolidated first amended complaint, and further ordered the parties to
file a joint brief on defendants’ contemplated motion to dismiss the consolidated first amended complaint. On July 11, 2007, plaintiffs filed the
consolidated first amended complaint, which defendants moved to dismiss. By order dated January 17, 2008, Judge King granted defendants’
motion to dismiss the 2003 proxy claims (concerning VantagePoint transactions) and the 2005 proxy claims (concerning the FIM Transaction), as
well as a claim against the VantagePoint entities alleging unjust enrichment. The court found it unnecessary to rule on dismissal of the remaining
claims, which are related to the 2005 FIM Transaction, because the dismissal disposed of those claims. On February 8, 2008, plaintiffs filed a
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