Xerox 2005 Annual Report Download - page 91

Xerox Corporation
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the parties filed a stipulation withdrawing the December 24, 2004
appeal on the ground that the November 30, 2004 judgment
of dismissal was not appealable. On March 28, 2005, Plaintiffs
submitted a letter requesting permission to file a motion for leave
to file an amended and consolidated complaint. By Summary
Order filed April 6, 2005, the Court denied the request. In a
second Summary Order filed the same day, the Court amended
its November 29, 2004, Opinion and Order, which dismissed
the action, so as to render the Opinion and Order appealable and
plaintiffs filed a new appeal on May 3, 2005. On August 19, 2005,
plaintiffs-appellants filed their brief in the Second Circuit Court of
Appeals. On October 4, 2005, defendants-appellees filed their
brief in the Second Circuit Court of Appeals. Oral argument in the
Second Circuit Court of Appeals was held on January 24, 2006.
Xerox denies any wrongdoing and is vigorously defending the
action. Based upon 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.
Arbitration between MPI Technologies, Inc. and Xerox Canada Ltd.
and Xerox Corporation: In an arbitration proceeding the hearing of
which commenced on January 18, 2005, MPI Technologies, Inc.
(“MPI”) sought damages from Xerox Corporation and Xerox Canada
Ltd. (“XCL”) for royalties owed under a license agreement made
as of March 15, 1994 between MPI and XCL (the “Agreement”)
and breach of fiduciary duty,breach of confidence, equitable
royalties and punitive damages and disgorgement of profits and
injunctive relief with respect to a claim of copyright infringement.
On September 9, 2005, the arbitration panel rendered its decision,
holding in part that the Agreement had been assigned to Xerox
and that no punitive damages should be granted, and awarded
MPI approximately $89, plus interest thereon. On December 12,
2005, the arbitration panel rendered its decision on the applicable
rate of pre-judgment interest. We have accrued the amount of the
$89 award, as well as $13 for pre- and post-judgment interest
thereon. On December 7, 2005, Xerox filed an application for
judicial review of the award with the Ontario Superior Court
seeking that the award be set aside in its entirety. The hearing is
scheduled for late June 2006. On December 29, 2005, MPI filed
an application for judicial recognition and enforcement of the
award. On agreement of the parties, that application has been
adjourned to be heardafter the Xerox application to set aside the
award on a date to be set by the Ontario Superior Court. Pending
the determination of the application to set aside the award, Xerox
has deposited into escrow funds ordered owing in the awardas
of the date the deposit was made.
National Union Fire Insurance Company v. Xerox Corporation, et al.:
On October 24, 2003, a declaratory judgment action was filed in
the Supreme Court of the State of New York, County of New York
against the Company and several current and former officers
and/or members of the Board of Directors. Plaintiff claims that
it issued an Excess Directors & Officers Liability and Corporate
Reimbursement Policy to the Company in reliance on information
from the Company that allegedly misrepresented the Company’s
financial condition and outlook. The policy at issue provides for
$25 of coverage as a component of the Company reimbursement
portion of an insurance program that provides for up to $135
coverage (after deductibles and coinsurance and subject to other
policy limitations and requirements) over a three-year period.
However, $10 of the entire amount may be unavailable due to the
liquidation of one of the other insurers. Plaintiff seeks judgment
(i) that it is entitled to rescind the policy as void from the outset;
(ii) in the alternative, limiting coverage under the policy and
awarding plaintiff damages in an unspecified amount representing
that portion of any required payment under the policy that is
attributable to the Company’s and the individual defendants’
own misconduct; and (iii) for the costs and disbursement of the
action and such other relief as the court deems just and proper.
On December 19, 2003, the Company and individual defendants
moved to dismiss the complaint. On November 10, 2004, the
Courtissued an opinion partially granting and partially denying
the motions. Among other things, the Courtgranted the motions
to dismiss all of the claims for rescission and denied plaintiff’s
request to replead. The Courtdenied the Company’sand some
of the individual defendants’ motions to dismiss certain claims
that seek to limit coverage based on particular provisions in the
policy and that at least in part related to settlement with the SEC.
Plaintifffiled notices of appeal on January 10, 2005 and February
11, 2005. By order entered on January 3, 2006, the Appellate
Division affirmed the portions of the Court’s November 10, 2004
decision which dismissed several of plaintiff’s claims and denied
leave to replead. On February 2, 2006, plaintiff moved for
reargument or for leave to appeal to the Court of Appeals. That
motion has not been fully briefed. The Appellate Division has not
issued a ruling. Separately, on February 22, 2005, the defendants
filed a motion seeking dismissal of any remaining claims in light
of Xerox’s representation that it will not seek coverage from
plaintiff for settlement payments to the SEC. By order dated July
12, 2005, the Court denied the motion. On August 23, 2005,
defendants moved for leave to reargue the February 22 motion
and separately moved for leave to renew the December 19, 2003
motions. Those motions have been fully briefed. The court has
not issued a ruling. The Company and the individual defendants
deny any wrongdoing and are vigorously defending the action.
Xerox Annual Report 2005