Xerox 2006 Annual Report Download - page 100

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
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 Court
issued an opinion partially granting and partially denying
the motions. Among other things, the Court granted the
motions to dismiss all of the claims for rescission and
denied plaintiff’s request to replead. The Court denied
the Company’s and 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.
Plaintiff filed 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. On May 30,
2006, the Appellate Division denied plaintiff’s motion.
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. On
April 10, 2006, the court issued an order granting those
motions, dismissing one cause of action and partially
dismissing the two other causes of action that were the
subject of those motions. Subsequently, at a status
conference on May 4, 2006, the parties appeared before
the Court and discussed inconsistencies between the
Court’s April 10, 2006 order and its November 10, 2004
decision. As a result, on May 5, 2006 the court executed
an order, which was later rendered on July 27, 2006,
withdrawing the April 10, 2006 order and substituting a
new order which clarified and confirmed the dismissal of
all claims asserted in the original complaint. On
August 31, 2006, plaintiff filed a notice of appeal (to the
Appellate Division) of the May 5, 2006 order. In
addition, on September 5, 2006, plaintiff served a motion
to the Court of Appeals seeking leave to appeal directly
to that court from the May 5, 2006 order, and seeking
review of the Appellate Division’s January 3, 2006 order.
On November 20, 2006, the Court of Appeals denied
plaintiff’s motion. Plaintiff had earlier filed an amended
complaint on February 27, 2006, naming all defendants
named in the original complaint and adding four causes
of action against Xerox only, as well as a demand for
unspecified monetary relief. On May 11, 2006, Xerox
served its motion to dismiss the amended complaint and
for sanctions. On August 2, 2006, the Court granted
Xerox’s motion to dismiss and for sanctions. All claims
asserted by National Union now have been dismissed. In
accordance with the Court’s instructions during the
August 2, 2006 oral argument, Xerox submitted an
affidavit, sworn to on August 16, 2006, specifying the
precise amount of fees and sanctions requested by Xerox.
On September 11, 2006, National Union submitted an
opposition to Xerox’s specific request for fees and
sanctions and requested a hearing before the Court. The
Court has not scheduled a hearing on the fees issues, nor
has it issued a decision.
Warren, et al. v. Xerox Corporation: On March 11,
2004, the United States District Court for the Eastern
District of New York entered an order certifying a
nationwide class of all black salespersons employed by
Xerox from February 1, 1997 to the present under Title
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