Xerox 2006 Annual Report Download - page 99

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
briefs were filed in December of that year. On March 31,
2006, the Court granted our motion to postpone
consideration of class certification pending disposition of
our motion to dismiss, and granted plaintiffs motion to
commence formal discovery. 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: A purported 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 effective as of December 6, 2002. On
March 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 corporate
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
international 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 billion. The foregoing damages are being sought
from all defendants, jointly and severally. Xerox filed a
motion to dismiss the Second Amended Complaint. Oral
argument 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, 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. and MPI
Tech S.A. (collectively “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
resulting in an award of $13 for pre- and post-judgment
interest. In June 2006, Xerox’s application for judicial
review of the award, seeking to have the award set aside
in its entirety, was heard by the Ontario Superior Court in
Toronto. The Ontario Superior Court issued a decision on
November 30, 2006 dismissing Xerox’s appeal. In
December 2006, Xerox released all monies and software
it had placed in escrow prior to its application for review
in satisfaction of the arbitration panel’s final award. On
January 30, 2007, Xerox and XCL served an arbitration
claim against MPI seeking a declaratory award
concerning the preclusive effect of the remedy awarded
by the prior arbitration panel. MPI has notified Xerox
that it intends to respond to the arbitration demand with
its own claims and/or counterclaims.
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