Judge Refuses to Dismiss Fujifilm’s $1 Billion Lawsuit Against Xerox
According to report from Law360, on February 23rd, a Manhattan federal judge rejected Xerox’s request to dismiss Fujifilm’s $1 billion lawsuit against Xerox, stating that one of Xerox’s arguments was “thoroughly unpersuasive” and another “flies in the face” of the terms of the now terminated merger agreement.
Xerox and Fujifilm had agreed to a complicated merger in January 2018 before the Xerox board reversed its decision after legal action by billionaire activist investors Carl Icahn and Darwin Deason, who said the deal undervalued Xerox.
In May 2018, Fujifilm sued Xerox for more than $1 billion for ending the agreement, accusing Xerox of “intentional and egregious conduct.”
Last week, U.S. District Judge John Koeltl, who cleared the way for discovery to proceed, said much of the case depended on disputed facts, such as whether changes to the financial statements of the company’s joint venture (Fuji Xerox) were material enough for Xerox to justify calling the deal off.
According to Law360, the judge “singled out Xerox’s argument that it was more convenient to litigate at the state courthouse next door as ‘thoroughly unpersuasive,’ especially now that a state appellate court dismissed Fuji from that case and threw out the April 2018 decision that froze the merger.
“The judge delivered his decision orally after about an hour and a half of argument that opened with Xerox retreating from its argument that the dispute belonged before Justice Barry Ostrager at the state courthouse,” according to Law360.
Judge Koeltl ruled that Xerox’s forum argument “flies in the face” of a forum selection provision in its Fujifilm transaction documents.
“It’s not so ‘hypertechnical’ to ask the parties to abide by the terms of their agreement,” Judge Koeltl said, using a term from one of Xerox’s briefs. “The argument was plainly wrong. You’re not even prepared to defend it.”
The judge also found fault with Xerox’s argument that it was legally entitled to back out of the Fujifilm deal because Fujifilm didn’t provide a copy of their audited financial statements signed by the auditor by April 15, 2018.
Andrew Stern, a lawyer for Fujifilm, urged Judge Koeltl to let Fujifilm move forward with its lawsuit, stating that Xerox backed out of the deal because it began serving its “new masters,” in a reference to Icahn and Deason, instead of its other investors. Stern told Law360 that Fujfilm was pleased with Judge Koeltl’s ruling: “We were very pleased that Judge Koeltl agreed with our position and rejected Xerox’s arguments and has allowed us to proceed to prove our claims.”
Judge Koeltl said more facts were needed in the case.
Fujifilm CEO Shigetaka Komori has said that he’s still open to a deal with Xerox but that Fujifilm won’t raise its offer for Xerox. He also ultimately discounted the possibility that the deal could still go through.
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