Legal Roundup, Part 2…

In Part 1 of yesterday afternoon’s legal roundup, we wrote about some companies’ new disclosures about legal matters. Today we—ll look at a few more interesting examples that we—ve uncovered in the past few days.

Full Steam Ahead: First is Microchip Technology, Inc.’s (MCHP) annual report, filed June 2. The company discloses that on March 16, shareholders of Silicon Storage Technology (SSTI) amended the class action petition they filed to protest the then-pending merger between SST and Microchip. The plaintiffs allege that SST’s directors breached the fiduciary duties they owed to SST’s stockholders when they approved the proposed merger without ensuring that the shareholders got what their shares were really worth. They also sued Microchip, alleging (and this quote is from the filing, not the complaint itself) —that Microchip aided and abetted in the purported breaches of fiduciary duties by the SST director defendants. The plaintiffs sought to enjoin the merger if it hadn—t occurred yet, or to rescind the deal or get compensatory damages if it had.

In this case, since the merger has already occurred, the plaintiffs are now seeking either money or to rescind the deal. Microchip notes

—Given that the merger closed on April 8, 2010, plaintiffs— request to enjoin the transaction has been rendered moot. Microchip believes the Amended Complaint lacks merit and intends to defend against the claims vigorously.

Headed to Court: In the annual report that Eagle Materials, Inc. (EXP) filed recently, it gave an update about an ongoing dispute (over denied depreciation deductions) with the IRS.

First, a bit of background: In November, 2007, the company paid about $45.8 million for taxes, interest, and penalties that it owed for years ending March 31, 2001, 2002, and 2003. It paid another $29.3 million in taxes, interest, and penalties in March 2010 for the years that ended March 31, 2004, 2005, and 2006. The filing then explains:

—These deposits were made to avoid imposition of the large corporate tax underpayment interest rates. Efforts at Appeals, most recently IRS Post Appeals Mediation on March 3, 2010, have been unsuccessful in resolving the case. We expect to receive a statutory notice of deficiency (a 90 day letter) from the IRS for all of the fiscal years ended March 31, 2001 through 2006 in the near future. We intend to resort to the courts for a final determination.

Lost This Round: Finally, in the quarterly report that The Children’s Place Retail Stores, Inc. (PLCE) filed today, the company discloses that it just lost a round in court. A shareholder filed a lawsuit in June, 2009 against the company and its current and former directors and senior executives. The complaint alleged that they

——breached their fiduciary duties to the Company and its stockholders by causing the Company to issue false and misleading public statements and by abdicating their responsibilities to the Company and its stockholders, in violation of state law. The complaint also alleges that the defendants committed corporate waste in connection with a severance payment to the Company’s former Chief Executive Officer.

The plaintiff seeks to recover money, litigation costs, expert fees, and equitable relief.

As defendants usually do, The Children’s Place filed a motion to dismiss the lawsuit. In this case, the company argued that the case was barred by the settlement of a prior case and that the plaintiff had failed to make proper demand before he or she filed suit.

Yesterday a judge denied the company’s motion to dismiss, which means that the lawsuit will proceed. The company’s filing then states:

—The outcome of this litigation is uncertain and no estimate can be made at this time of any potential loss or range of losses. While we believe there are valid defenses to the claims and we will defend ourselves vigorously, no assurance can be given as to the outcome of this litigation. The litigation could distract our management and directors from the Company’s affairs, the costs and expenses of the litigation could have a material adverse effect on the Company’s financial position, results of operations and cash flows and an unfavorable outcome could adversely affect the reputation of the Company.

We—ll continue to watch the SEC filings and give you updates on these and other cases as they’re disclosed.

Image source: Wikimedia Commons

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