Xerox 2007 Annual Report Download - page 125

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
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. On October 12, 2007, the United States
Court of Appeals affirmed the dismissal of the claims
asserted under the Torture Victim Protection Act, vacated
the dismissal of the claims asserted under the Alien Tort
Claims Act and remanded those claims to the district
court for further proceedings. On January 10, 2008,
defendants-appellees filed a petition for a writ of
certiorari in the Supreme Court of the United States,
seeking review of the Second Circuit’s October 12, 2007
opinion. Xerox denies any wrongdoing and is vigorously
defending the action. Based upon the present stage of the
litigation, it is not possible to estimate the amount of loss
or range of possible loss that might result from 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 the
Company 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. On March 27, 2007, MPI delivered to
Xerox a statement of defense and counterclaim in
response to Xerox’s arbitration claim. MPI claims
entitlement to an unspecified amount of damages for
royalties. In addition, MPI claims damages of $50 for
alleged “misuse” of its licensed software by Xerox after
December 2006. MPI also claims entitlement to
unspecified amounts of pre and post-judgment interest
and its costs of the arbitration. Xerox delivered a reply and
answer to MPI’s defense and counterclaim on May 29,
2007 and MPI delivered a reply to that pleading on July 5,
2007. A panel of three arbitrators has been appointed to
hear the dispute. The panel has established a schedule for
hearing preliminary dispositive motions with oral
argument to be held in May, 2008. In the course of
litigation, we periodically engage in discussions with MPI’s
counsel for possible resolution of the matter. Should
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