Xerox 2007 Annual Report Download - page 126

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
developments cause a change in our determination as to
an unfavorable outcome, or result in a final adverse
judgment or be settled for significant amounts, there
could be a material adverse effect on our results of
operations, cash flows and financial position in the period
in which such change in determination, judgment or
settlement occurs. Based on the present stage of the
proceeding, it is not possible to estimate the amount of
any material loss or range of material loss that might
result from any of the claims advanced in such
counterclaim.
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 with the Appellate Division
a notice of appeal of the May 5, 2006 order and
subsequently filed a withdrawal of such notice of appeal,
without prejudice, dated May 11, 2007. 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,
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