The Delaware judge overseeing the legal wrangling there between PeopleSoft and hostile suitor Oracle rejected on Wednesday a settlement that PeopleSoft had arranged with a group of dissident shareholders.
PeopleSoft negotiated the deal in May to resolve claims bought by a number of shareholders unhappy with the methods PeopleSoft used to fend off Oracle's unsolicited takeover bid. Under the settlement's terms, PeopleSoft agreed to change some provisions in its controversial customer guarantees, and to leave decisions about Oracle's bid in the hands of the board's independent directors. PeopleSoft and the plaintiffs submitted their settlement agreement to the court in July, and were awaiting approval.
But last week, spurred by Oracle's decision to raise its bid from US$21 to $24 cash per share, PeopleSoft shareholders filed a fresh lawsuit. That lawsuit concerned only PeopleSoft's actions after June 17, the day on which the shareholders signed the settlement agreement.
The case's presiding judge, Leo Strine of Delaware's Chancery Court, decided to eliminate the confusion of one settled suit and one current one by rejecting the settlement.
"The judge said, in light of the way events have evolved, that he didn't view the benefits under the settlement as sufficient to justify releasing claims that rose prior to June 17," said the lead counsel for the shareholders, Bruce Jameson, of Prickett, Jones & Elliott PA.
A PeopleSoft spokesman did not immediately return a call for comment.
Judge Strine also scheduled further hearings on Oracle's case against PeopleSoft for Dec. 13 and 14, virtually assuring that the case will continue into next year. Oracle has asked the Delaware court to invalidate several antitakeover provisions PeopleSoft is using to prevent Oracle from acquiring the company.
Legal experts say, based on past precedent, that it's unlikely Judge Strine will void PeopleSoft's defenses -- although last week's tendering of 61 percent of PeopleSoft's shares into Oracle's $8.8 billion bid complicates the case. With a majority of shareholders willing to sell at the price Oracle has offered, PeopleSoft's board is under pressure to back down from its contention the company is worth more.
Oracle's best shot at buying PeopleSoft is through a proxy fight to gain majority representation on PeopleSoft's board. It faces a Thursday deadline for filing a slate of nominees to replace the four PeopleSoft directors who will be up for election in 2005. An Oracle spokeswoman declined to comment.
PeopleSoft has not yet scheduled its 2005 annual meeting, but the gathering is expected to take place between March and May.