Computer Associates 2006 Annual Report Download - page 150

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Note 7 — Commitments and Contingencies (Continued)
Company moved to dismiss the Texas litigation. On July 21, 2005, the plaintiffs filed a motion for summary
judgment. On July 22, 2005, the Texas Federal Court dismissed the latter two motions without prejudice to refiling
the motions later in the action. On September 1, 2005, the Texas Federal Court granted the Company’s motion to
transfer the action to the Federal Court.
Other Civil Actions
In June 2004, a lawsuit captioned Scienton Technologies, Inc. et al. v. Computer Associates International, Inc., was
filed in the Federal Court. The complaint seeks monetary damages in various amounts, some of which are
unspecified, but which are alleged to exceed $868 million, based upon claims for, among other things, breaches of
contract, misappropriation of trade secrets, and unfair competition. This matter is in the early stages of discovery.
Although the ultimate outcome cannot be determined, the Company believes that the claims are unfounded and that
the Company has meritorious defenses. In the opinion of management, the resolution of this lawsuit is not likely to
result in the payment of any amount approximating the alleged damages and in any event, is not expected to have a
material adverse effect on the financial position of the Company.
In September 2004, two complaints to compel production of the Company’s books and records, including files that
have been produced by the Company to the USAO and SEC in the course of their joint investigation of the
Company’s accounting practices (see “— The Government Investigation”) were filed by two purported
stockholders of the Company in Delaware Chancery Court pursuant to Section 220 of the Delaware General
Corporation Law. The first complaint was filed on September 15, 2004, after the Company denied the purported
stockholder access to some of the files requested in her initial demand, in particular files that had been produced by
the Company to the USAO and SEC during the course of their joint investigation. This complaint concerns the
inspection of certain Company documents to determine whether the Company has been involved in obstructing the
joint investigation by the USAO and SEC and whether certain Company employees have breached their fiduciary
duties to the Company and wasted corporate assets; these individuals include Messrs. Kumar, Wang, Zar,
Silverstein, Woghin, Richards, Artzt, Cron, D’Amato, La Blanc, Ranieri, Lorsch, Schuetze, Vieux, Fernandes,
de Vogel, Grasso and Goldstein and Ms. Kenny. The Company filed its answer to this complaint on October 15,
2004. On October 11, 2005, the Special Litigation Committee (see “— Derivative Actions Filed in 2004”) moved to
stay this action. On December 13, 2005, the Delaware state court denied that motion. The second complaint, filed on
September 21, 2004, concerns the inspection of documents related to Mr. Kumar’s compensation, the independence
of the Board of Directors and ability of the Board of Directors to sue for return of that compensation. The Company
filed its answer to this complaint on October 15, 2004.
The Company, various subsidiaries, and certain current and former officers have been named as defendants in
various other lawsuits and claims arising in the normal course of business. The Company believes that it has
meritorious defenses in connection with such lawsuits and claims, and intends to vigorously contest each of them. In
the opinion of the Company’s management, the results of these other lawsuits and claims, either individually or in
the aggregate, are not expected to have a material effect on the Company’s financial position, results of operations,
or cash flow.
Note 8 — Income Taxes
The amounts of income (loss) from continuing operations before taxes attributable to domestic and foreign
operations are as follows:
2006 2005 2004
Year Ended March 31,
(restated) (restated)
(in millions)
Domestic ............................................... $(84) $(208) $(228)
Foreign ................................................ 205 241 113
$121 $ 33 $(115)
130