Northern District of California Dismisses Shareholder Complaint against Hewlett-Packard
On September 25, 2012, the U.S. District Court for the Northern District of California dismissed a shareholder derivative complaint against certain current and former directors of Hewlett-Packard (HP). The plaintiffs alleged that HP's board of directors violated Delaware law by awarding former Chairman and CEO Mark Hurd a separation package following his August 2010 termination in the wake of an accusation of sexual harassment by an independent contractor. The plaintiffs also asserted that HP's 2010 proxy statement violated federal securities laws because it allegedly misstated the status of Hurd's employment contract.
The court rejected the plaintiffs' argument that the separation agreement with Hurd constituted corporate waste, under which HP supposedly received nothing in exchange for large amounts awarded to Hurd. In concluding that the plaintiffs had failed to raise a reasonable doubt that the HP board's decision was anything but the product of a valid exercise of business judgment, the court recognized that even if the HP board could have elected to pay Hurd nothing, such a decision could have exposed HP to a lawsuit by Hurd and the accompanying expense of litigation and negative publicity. The court also rejected the plaintiffs' federal securities claim, finding any alleged misstatement in the proxy immaterial and that no such misrepresentation caused the plaintiffs harm in any event.
Partner Steven Schatz led the Wilson Sonsini Goodrich & Rosati team representing Hewlett-Packard in the matter, which also included Boris Feldman, Katherine Henderson, Cheryl Foung, Bryan Ketroser, and Brian Danitz.
For more information, please refer to the court's decision.