According to the docket for the case Burroughs v. Northrop Grumman Corporation, et al., case number 98-CV-6540, on April 17, 2002, the Court entered the certified copy of the Appellate Court Order as well as the Mandate from the Circuit Court of Appeals, affirming the decision of the District Court.
According to the docket for the case Fanni v. Northrop Grumman Corporation, et al., case number 98-CV-6197, on January 14, 2002, the Court entered the certified copy of the Appellate Court Order as well as the Mandate from the Circuit Court of Appeals, affirming the decision of the District Court.
As previously reported by the Company’s FORM 10-K/A for the fiscal year ended December 31, 2000, five shareholder class action lawsuits, making similar allegations, were filed between July and September, 1998 in the United States District Court for the Central District of California against the company, its directors, and certain of its officers. Three of these lawsuits, respectively encaptioned Fanni v. Northrop Grumman Corp., et al., Schnee v. Northrop Grumman Corp., et al., and Florida State Board of Admin. v. Northrop Grumman Corp., et al. allege that defendants issued misleading proxy materials in connection with the proposed acquisition of the company by Lockheed Martin Corporation, in violation of the federal securities laws. These actions seek unspecified damages on behalf of a class of shareholders related to the accelerated vesting of stock incentive plans upon the shareholder vote to approve the merger. Two of these lawsuits, respectively encaptioned Burroughs v. Northrop Grumman Corp., et al., and Miller, et al. v. Northrop Grumman Corp., et al., allege that defendants disseminated misleading information in connection with the proposed acquisition, in violation of the federal securities laws, thereby artificially inflating the market price of the company's common stock. These actions seek unspecified damages for a class of shareholders who purchased Northrop Grumman stock between July 3, 1997 and March 9, 1998. The District Court consolidated Fanni, Schnee and Florida State Board of Admin. into one action, and Burroughs and Miller into another action. The District Court dismissed the Fanni consolidated actions with prejudice in April 2000, and dismissed the Burroughs consolidated actions with prejudice in October 2000. Plaintiffs filed timely appeals and both matters are pending in the Ninth Circuit Court of Appeals.
The original Complaint charges the Company and certain officers/directors with misuse of their control and directorial positions and Company proxy process to bestow upon top executives unprecedented gifts of corporate assets in connection with the abortive merger of Northrop and Lockheed Martin. Company insiders knew or should have known that there were antitrust problems with the merger. The Company's stock price increased as defendants assured shareholders and others that they had looked at the antitrust issues and that there should be no issues regarding merger approval. Defendants proceeded to obtain shareholder approval because due to an unusual definition of "change in control" in the Company's stock option and stock award plans for its top executives, this vote would release millions in stock awards and payments to the executives, even if the merger itself did not take place. Shortly after the alleged insider selling, defendants revealed that there were significant regulatory problems and that the government was opposed to the merger; stock immediately dropped.