Affiliated Computer Services Inc. (ACS) Case

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Company Name(s): 
Affiliated Computer Services
Case Name: 
Affiliated Computer Services Inc. (ACS) Case
Case Status: 
Lawsuit Filed
Affected Securities
NYSE: ACS
Lawsuit Overview
Type of Lawsuit: 
Stockholder Derivative Action
Date Filed: 
03/27/2007
Court of Filing: 
Delaware Court of Chancery
Summary: 

According to a press release of a law firm a shareholder has filed a stockholder class and derivative action lawsuits challenging the proposed acquisition of Affiliated Computer Services, Inc. (ACS) by a buyout group led by its largest stockholder and chairman, Darwin Deason and his selected private equity partner Cerberus Capital Management and his selected financier CitiGroup Global Markets. The Shareholder filed the Complaints in the Delaware Court of Chancery on March 22, 2007 seeking among other things that the ACS board of directors fulfill its fiduciary duties and obligations to the Company’s public shareholders in the face of the “going-private” takeover proposal and participation of Plaintiffs and their counsel to assure a fair process and the best transaction.

On June 10, 2007, ACS spent millions of dollars to partially extract Deason from an exclusivity agreement with Cerberus, which required Deason to deal only with Cerberus in any acquisition of ACS, so that Deason would be able to at least take part in discussions and negotiation with other parties regarding any alternative transaction for ACS. On October 30, 2007, Cerberus Capital Management withdrew from the buyout offer, and as a result, Deason demanded that all of the so-called independent directors of ACS, including those appointed to the Special Committee formed to evaluate the buyout offer, resign immediately. On November 1, 2007, the so-called independent directors filed a complaint in the Delaware Court of Chancery against Deason seeking a declaratory judgment and alleging facts constituting breaches of fiduciary duty on the part of Deason surrounding his buyout offer. Based on these new events, the law firm filed a Consolidated Amended Class and Derivative Action Complaint on November 2, 2007. On November 9, 2007, a motion for intervention in the outside directors’ action was filed in order to protect the rights of the ACS shareholders. The so-called independent directors reached a settlement agreement with Deason and dismissed their complaint and resigned on November 21, 2007.

On April 8, 2008, the law firm filed a Verified Consolidated Second Amended Class and Derivative Action Complaint (Second Amended Complaint). The Second Amended Complaint, among other things, alleges that the Deason-led and negotiated buyout unfairly valued the Company’s shares, imposed an artificial cap on the Company’s stock price, and Deason’s secretive and preemptive activities with respect to the buyout compromised the ACS Board’s ability to achieve a value maximizing result for all shareholders and further caused ACS to incur millions of dollars in costs.