Xerox 2004 Annual Report Download - page 76

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consolidated with the other actions. The purported
class includes all persons who invested or maintained
investments in the Xerox Stock Fund in the Xerox
401(k) Plans (either salaried or union) during the pro-
posed class period, May 12, 1997 through November
15, 2002, and allegedly exceeds 50,000 persons. The
defendants include Xerox Corporation and the follow-
ing individuals or groups of individuals during the
proposed class period: the Plan Administrator, the
Board of Directors, the Fiduciary Investment Review
Committee, the Joint Administrative Board, the
Finance Committee of the Board of Directors, and the
Treasurer. The complaint claims that all the foregoing
defendants were fiduciaries of the Plan under ERISA
and, as such, were obligated to protect the Plan’s
assets and act in the interest of Plan participants.
The complaint alleges that the defendants failed to
do so and thereby breached their fiduciary duties.
Specifically, plaintiffs claim that the defendants failed
to provide accurate and complete material informa-
tion to participants concerning Xerox stock, including
accounting practices which allegedly artificially inflat-
ed the value of the stock, and misled participants
regarding the soundness of the stock and the
prudence of investing their retirement assets in Xerox
stock. Plaintiffs also claim that defendants failed to
invest Plan assets prudently, to monitor the other
fiduciaries and to disregard Plan directives theyknew
or should have known were imprudent, and failed
to avoid conflicts of interest. The complaint does not
specify the amount of damages sought. However, it
asks that the losses to the Plan be restored, which it
describes as “millions of dollars.” It also seeks other
legal and equitable relief, as appropriate, to remedy
the alleged breaches of fiduciary duty, as well as
interest, costs and attorneys’ fees. We filed a motion
to dismiss the complaint. The plaintiffs subsequently
filed a motion for class certification and a motion to
commence discovery. Defendants have opposed both
motions, contending that both are premature before
there is a decision on their motion to dismiss. In the
fall of 2004, the Court requested an updated briefing
on our motion to dismiss and update briefs were filed
in December. We and the other defendants deny any
wrongdoing and are vigorously defending the action.
Based on the stage of the litigation, it is not possible
to estimate the amount of loss or range of possible
loss that might result from an adverse judgment or a
settlement of this matter.
Digwamaje et al. v. IBM et al: Apurported class action
was filed in the United States District Court for the
Southern District of New York on September 27, 2002.
Service of the First Amended Complaint on the
Company was deemed effectiveas of December 6, 2002.
OnMarch 19, 2003, Plaintiffs filed a Second Amended
Complaint that eliminated a number of corporate
defendants but was otherwise identical in all material
respects to the First Amended Complaint. The
defendants include Xerox and a number of other corpo-
rate defendants who are accused of providing material
assistance to the apartheid government in South Africa
from 1948 to 1994, by engaging in commerce in South
Africa and with the South African government and by
employing forced labor, thereby violating both interna-
tional and common law. Specifically, plaintiffs claim
violations of the Alien Tort Claims Act, the Torture
Victims Protection Act and RICO. They also assert
human rights violations and crimes against humanity.
Plaintiffs seek compensatory damages in excess of
$200 billion and punitive damages in excess of $200 bil-
lion. The foregoing damages are being sought from all
defendants, jointly and severally. Xerox filed a motion
to dismiss the Second Amended Complaint. Oral argu-
ment of the motion was heard on November 6, 2003. By
Memorandum Opinion and Order filed November 29,
2004, the court granted the motion to dismiss. A clerk’s
judgment of dismissal was filed on November 30, 2004.
On December 27, 2004, the Company received a notice
of appeal dated December 24, 2004. On February 16,
2005, the parties filed a stipulation withdrawing the
December 24, 2004appeal on the ground that the
November 30, 2004 judgment of dismissal was not
appealable. Following the withdrawal, plaintiffs will
apply to the district court for the entry of a new, appeal-
able judgment. Assuming such judgment is entered,
plaintiffs will havethe right to file a newnotice of
appeal. Xeroxdenies anywrongdoing and is vigorously
defending the action. Based upon the stage of the litiga-
tion, it is not possible to estimate the amount of loss or
range of possible loss that might result from an adverse
judgment or a settlement of this matter.
Arbitration between MPI Technologies, Inc. and Xerox
Canada Ltd. and Xerox Corporation: Adispute between
MPI Technologies, Inc. (“MPI”) and the Company and
Xerox Canada Ltd. (“XCL”) is being arbitrated in
Ontario, Canada. The dispute arose under a license
agreement (“Agreement”) made as of March 15, 1994
between MPI and XCL. Subsequently, the Company
became MPI’s primary interface for the Agreement and
the activities thereunder. MPI has alleged damages of
$93 for royalties owed under the Agreement, $35 for
breach of fiduciary duty or breach of confidence, $35 in
punitive damages and has claimed $4 in damages, dis-
gorgement of profits and injunctive relief with respect
to a claim of copyright infringement. The Company
and XCL have asserted a counterclaim against MPI for
overpayment of royalties and breach of contract. In
November 2004, MPI’s motion to amend its claim to
add its parent, MPI Tech S.A., as a claimant was grant-
ed and the motion of the Companyand XCLto dismiss