Twenty-First Century Fox 2013 Annual Report Download - page 42

On September 29, 2011, the plaintiffs filed a Verified Second Amended Consolidated Shareholder
Derivative and Class Action Complaint (“Second Amended Complaint”). In the Second Amended Complaint, the
plaintiffs removed their claims involving the possible addition of Elisabeth Murdoch to the Company’s Board,
added factual allegations to support their remaining claims and added a claim seeking to enjoin a buyback of
Common B shares to the extent it would result in a change of control. The Second Amended Complaint sought
declaratory relief, an injunction preventing the buyback of Class B shares, damages, pre- and post-judgment
interest, fees and costs.
The defendants filed a motion to dismiss the Second Amended Complaint. The hearing on the defendants’
fully-briefed motion to dismiss was postponed to allow further briefing by plaintiffs after the Cohen Litigation,
which is defined and described below, was consolidated with the Consolidated Action.
On March 2, 2012, another purported stockholder of the Company filed a derivative action captioned
Belle M. Cohen v. Murdoch, et al., in the Delaware Court of Chancery (the “Cohen Litigation”). The complaint
names as defendants the directors of the Company and the Company as a nominal defendant. The complaint’s
claims and allegations pertained to the NoW Matter and were substantially similar to the NoW Matter allegations
raised in the Second Amended Complaint in the Consolidated Action. The complaint asserted causes of action
against the defendants for alleged breach of fiduciary duty, gross mismanagement, contribution and
indemnification, abuse of control, and waste of corporate assets. The action sought damages, fees and costs. On
March 20, 2012, the Cohen Litigation was consolidated with the Consolidated Action.
On June 18, 2012, the plaintiffs in the Consolidated Action filed a Verified Third Amended Consolidated
Shareholder Derivative Complaint (the “Third Amended Complaint”). The Third Amended Complaint alleged
claims against director defendants for breach of fiduciary duty arising from the Shine Transaction; against Rupert
Murdoch for breach of fiduciary duty as the purported controlling shareholder of the Company in connection
with the Shine Transaction; against director defendants for breach of fiduciary duty arising from their purported
failure to investigate illegal conduct in the NoW Matter and allegedly permitting the Company to engage in a
cover up; against certain defendants for breach of fiduciary duty in their capacity as officers arising from a
purported failure to investigate illegal conduct in the NoW Matter and allegedly permitting the Company to
engage in a cover up; and against James Murdoch for breach of fiduciary duty for allegedly engaging in a cover
up related to the NoW Matter. The class action claim asserted in the Second Amended Complaint pertaining to
the buyback of Common B shares and the relief related to that claim was removed. The Third Amended
Complaint sought a declaration that the defendants violated their fiduciary duties, damages, pre- and post-
judgment interest, fees and costs.
On July 18, 2012, the defendants renewed their postponed motion to dismiss in the Consolidated Action,
and in support thereof, they filed supplemental briefing directed towards the allegations of the Third Amended
Complaint. Plaintiffs’ response was filed on August 8, 2012. A hearing on the fully briefed motion was held in
Chancery Court on September 19, 2012. The Court reserved decision.
On April 17, 2013, the parties reached an agreement in principle to settle the Consolidated Action. Pursuant
to the terms of that settlement, the parties agreed that the director defendants in the Consolidated Action would
cause to be paid on their behalf the amount of $139 million to the Company, minus any attorneys’ fees and
expenses awarded by the Court to the plaintiffs’ counsel. Such amount is to be paid from an escrow account
created for the benefit of the director defendants pursuant to an agreement reached between the defendants and
their directors’ and officers’ liability insurers for the payment of insurance proceeds, subject to a claims release.
In addition to the payment to the Company, the settlement contemplates that the Company will build on
corporate governance and compliance enhancements which the Company has implemented in the past year.
These shall remain in effect at least through December 31, 2016, and will be applicable to both the Company and
News Corp. The Memorandum of Understanding related to the settlement was filed with the Court, and on
May 3, 2013, the Stipulation of Settlement was filed with the Court. On May 6, 2013, the Court entered a
Scheduling Order, which, among other things, set the settlement hearing for June 26, 2013 (the “Settlement
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