Xerox 2008 Annual Report Download - page 86

Notes to the Consolidated
Financial Statements
(in millions, except per share data and
unless otherwise indicated)
February 9, 2009, three class members filed a notice of appeal of
the Court’s January 15, 2009 order and final judgement and ruling
on motion for award of attorneys fees.
In Re Xerox Corp. ERISA Litigation: On July 1, 2002, a class
action complaint captioned Patti v. Xerox Corp. et al. was filed in
the United States District Court for the District of Connecticut
(Hartford) alleging violations of the ERISA. Four additional class
actions were subsequently filed, and the five actions were
consolidated as In Re Xerox Corporation ERISA Litigation. The
purported class includes all persons who invested or maintained
investments in the Xerox Stock Fund in the Xerox 401(k) Plans
(either salaried or union) during the proposed class period, May 12,
1997 through November 15, 2002, and allegedly exceeds 50,000
persons. The defendants include Xerox Corporation and the
following individuals or groups of individuals during the proposed
class period: the Plan Administrator, the Board of Directors, the
Fiduciary Investment Review Committee, the Joint Administrative
Board, the Finance Committee of the Board of Directors, and the
Treasurer. The complaint alleges that the defendants breached
their fiduciary duties under ERISA to protect the Plan’s assets and
act in the interest of Plan participants. Specifically, plaintiffs allege
that the defendants failed to provide accurate and complete
material information to participants concerning Xerox stock,
including accounting practices which allegedly artificially inflated
the value of the stock, and misled participants regarding the
soundness of the stock and the prudence of investing their
retirement assets in Xerox stock. The plaintiffs filed a Second
Consolidated Amended Complaint, alleging that some or all
defendants breached their ERISA fiduciary duties during 1997-
2002 by (1) maintaining the Xerox Stock Fund as an investment
option under the Plan; (2) failing to monitor the conduct of Plan
fiduciaries; and (3) misleading Plan participants about Xerox stock
as an investment option under the Plans. The complaint does not
specify the amount of damages sought, but demands that the
losses to the Plans be restored, which it describes as “millions of
dollars.” It also seeks other legal and equitable relief, as
appropriate, to remedy the alleged breaches of fiduciary duty, as
well as interest, costs and attorneys’ fees. On January 28, 2009. the
Court granted preliminary approval of an agreement to settle this
case, the terms of which are within the amount previously reserved
by the Company for this matter. The Company and the other
defendants do not admit any wrongdoing as a part of the
settlement, which is subject to final Court approval and other
conditions. A fairness hearing has been scheduled for April 13,
2009.
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 complaint on the
Company was deemed effective as of December 6, 2002. The
purported class includes all persons who lived in South Africa at any
time from 1948 until the present and purportedly suffered
damages as a result of human rights violations and crimes against
humanity through the system of apartheid. The defendants
included the Company and a number of other corporate
defendants who were 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 claimed
violations of the Alien Tort Claims Act, the Torture Victims
Protection Act and RICO. They also asserted human rights
violations and crimes against humanity. Plaintiffs sought
compensatory damages in excess of $200 billion and punitive
damages in excess of $200 billion. On October 27, 2008, plaintiffs
filed an amended complaint that did not name the Company as a
defendant, so the Company is no longer a party to the action.
Arbitration between MPI Technologies, Inc. and MPI Tech S.A.
and Xerox Canada Ltd. and Xerox Corporation: In an
arbitration proceeding the hearing of which commenced in
January 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
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. In September 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. In December 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 2006, Xerox’s application for judicial review of the
award, seeking to have the award set aside in its entirety, was
denied by the Ontario Superior Court in Toronto and Xerox
released all monies and software it had placed in escrow. In
January 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. In
March 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. A panel of three arbitrators
has been appointed to hear the dispute. The panel heard oral
arguments relating to preliminary dispositive motions on
84 Xerox 2008 Annual Report