Twenty-First Century Fox 2011 Annual Report Download - page 73

Notes to the Consolidated Financial Statements (continued)
On July 18, 2011, a purported shareholder of the Company filed a derivative action captioned Shields v. Murdoch, et al., in the United States
District Court for the Southern District of New York. The plaintiff alleged violations of Section 14(a) of the Securities Exchange Act, as well as
state law claims for breach of fiduciary duty, gross mismanagement, waste, abuse of control and contribution/ indemnification arising from, and in
connection with, the NoW Matter. The complaint names the directors of the Company as defendants and named the Company as a nominal
defendant, and seeks damages and costs.
On July 19, 2011, a purported class action lawsuit captioned Wilder v. News Corp., et al., was filed on behalf of all purchasers of the
Company’s common stock between March 3, 2011 and July 11, 2011, in the United States District Court for the Southern District of New York.
The plaintiff brought claims under Section 10(b) and Section 20(a) of the Securities Exchange Act, alleging that false and misleading statements
were issued regarding the NoW Matter. The suit names as defendants the Company, Rupert Murdoch, James Murdoch and Rebekah Brooks, and
seeks compensatory damages, rescission for damages sustained, and costs.
On July 22, 2011, a purported shareholder of the Company filed a derivative action captioned Stricklin v. Murdoch, et al., in the United States
District Court for the Southern District of New York. The plaintiff brought claims for breach of fiduciary duty, gross mismanagement, and waste of
corporate assets in connection with, among other things, (i) the NoW Matter; (ii) News America’s purported payments to settle allegations of anti-
competitive behavior; and (iii) the Shine Transaction. The action names as defendants the Company, Les Hinton, Rebekah Brooks, Paul Carlucci and
the directors of the Company. The plaintiff seeks various forms of relief including compensatory damages, injunctive relief, disgorgement, the award
of voting rights to Class A shareholders, fees and costs.
The Company and its board of directors believe these shareholder claims are entirely without merit, and intend to vigorously defend these
actions.
News of the World Investigations and Litigation
U.K. and U.S. regulators and governmental authorities are conducting investigations after allegations of phone hacking and inappropriate payments
to police at our former publication, News of the World,andotherrelatedmatters,includinginvestigationsintowhethersimilarconductmayhave
occurred at the Company’s subsidiaries outside of the U.K. The Company is cooperating fully with these investigations. It is possible that these
proceedings could damage our reputation and might impair our ability to conduct our business.
The Company is not able to predict the ultimate outcome or cost associated with these investigations. Violations of law may result in civil,
administrative or criminal fines or penalties. The Company has admitted liability in a number of civil cases related to the phone hacking
allegations and has settled a number of cases. At June 30, 2011, the Company has provided for its best estimate of the liability for the claims that
have been filed. The Company has announced a process under which parties can pursue claims against the Company, and management believes
that it is probable that additional claims will be filed. It is not possible to estimate the liability for such additional claims given the early stage of
this matter and the information that is currently available to the Company. If more claims are filed and additional information becomes available,
the Company will update the provision for such matters. Any fees, expenses, fines, penalties, judgments or settlements which might be incurred by
the Company in connection with the various proceedings could affect the Company’s results of operations and financial condition.
News America Marketing
Valassis Communication, Inc.
On January 18, 2006, Valassis Communication, Inc. (“Valassis”) sued News America Incorporated, News America Marketing FSI, LLC and
News America Marketing Services, In-Store, LLC, each of which are subsidiaries of the Company (collectively “News America”), in the United
States District Court for the Eastern District of Michigan (the “Valassis Federal Action”). Valassis’ operative complaint alleged that News America
possesses monopoly power in a claimed in-store advertising and promotions market (the “in-store market”) and has used that power to gain an
unfair advantage over Valassis in a purported market for coupons distributed by free-standing inserts (“FSIs”). Valassis alleged that News America
is attempting to monopolize the purported FSI market by leveraging its alleged monopoly power in the purported in-store market, thereby
allegedly violating Section 2 of the Sherman Antitrust Act of 1890, as amended (the “Sherman Act”). Valassis further alleged that News America
has unlawfully bundled the sale of in-store marketing products with the sale of FSIs and that such bundling constitutes unlawful tying in violation
of Sections 1 and 3 of the Sherman Act. Additionally, Valassis alleged that News America is predatorily pricing its FSI products in violation of
Section 2 of the Sherman Act. Valassis also asserted that News America violated various state antitrust statutes and has tortuously interfered with
Valassis’ actual or expected business relationships. Valassis’ complaint sought injunctive relief, damages, fees and costs.
On March 9, 2007, Valassis filed a two-count complaint in Michigan state court against News America (the “Valassis Michigan Action”).
That lawsuit, which was based on the same factual allegations as the Valassis Federal Action, alleged that News America tortuously interfered with
Valassis’ business relationships and that News America unfairly competed with Valassis. The complaint sought injunctive relief, damages, fees and
costs.
On March 12, 2007, Valassis filed a three-count complaint in California state court against News America (the “Valassis California Action”).
That lawsuit, which is based on the same factual allegations as the Valassis Federal and Michigan Actions, alleged that News America violated the
Cartwright Act (California’s state antitrust law) by unlawfully tying its FSI products to its in-store products, violated California’s Unfair Practices
Act by predatorily pricing its FSI products, and unfairly competed with Valassis. The Valassis California Action sought injunctive relief, damages,
fees and costs. On May 4, 2007, News America filed a motion to dismiss or, in the alternative stay, that complaint. On June 28, 2007, the court
issued a tentative ruling denying the motion and reassigned the case to the Complex Litigation Program. On July 19, 2007, the court denied the
motion. The Valassis California Action was stayed until March 2010.
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