Case overview


On 27 April 2018 Judge Ostrager of the Commercial Division of the New York Supreme Court (New York's trial level court) enjoined Fujifilm Holdings Corp's proposed acquisition of a controlling interest in Xerox Corp, which was to be effected in three steps:

  • first through the redemption of Fuji's interest in a joint venture between Fuji and Xerox;
  • then through the issuance of new common shares of Xerox to Fuji; and
  • finally through the payment of a special dividend to the Xerox stockholders.(1)

The court also compelled Xerox to waive provisions of its advance notice bylaw, enabling activist investors to nominate a competing slate of directors after the otherwise applicable deadline. The court's decision has been recognised as precedent-setting New York case law and as a victory for activist shareholders (most notably, Carl Icahn, Xerox's largest shareholder, and Dar­win Deason, Xerox's third largest shareholder).

Case overview

The litigation centred on the conflicted role of Xerox CEO Jeff Jacobson and certain directors in the transac­tion. Icahn and Deason publicly opposed the trans­action, and Deason and certain Xerox stockholders sought to enjoin the deal. Following expedited discovery, the court held a preliminary injunction hearing, after which it enjoined the transaction. The court found that:
  • the plaintiffs had shown a likelihood of success on the merits of their claims; and
  • the transaction should not be eval­uated under the deferential business judgment standard of review because Jacobson and certain other Xerox directors were personally interested in the transaction.

In particu­lar, the court noted that Jacobson (who would otherwise have been fired as Xerox's CEO) would become the CEO of the combined company and that certain Xerox directors would have become directors of the combined company. As a result, the court applied the more rigorous entire fair­ness standard of review, holding that the transaction failed to meet both the fair dealing and fair price prongs of that test because:

  • the director defendants had acted in bad faith in structuring a deal that Xerox's own financial advisor had determined undervalued the company; and
  • Jacob­son had, on learning that he would be replaced, "abandoned the board's request to obtain a value-maximizing all-cash transaction and engineered the framework for a one-sided deal that includes Jacobson retaining his position as CEO post-transaction".

The court also determined that the plaintiffs' aiding and abetting claim against Fuji was likely to succeed on the merits. The court found that plaintiffs had established that Fuji's executives believed the acquisition "disproportionately favored Fuji at the expense of Xerox" and that they were well aware of, and benefited from, Jacobson's conflict.

Interestingly, the court's decision did not analyse two of the three elements under the controlling New York stan­dard for whether a preliminary injunction should be issued – namely:

  • whether the plaintiff has shown irreparable injury; and
  • whether the balance of equities weighs in favour of an injunction.

Here, the court focused solely on the plain­tiffs' probability of success on the merits and preliminarily enjoined the transaction despite the absence of any compet­ing bidder – an outcome that might not have occurred had this action been litigated in the Delaware courts.

Because the transaction was announced after the deadline for nominating directors to the board had already passed, the plaintiffs petitioned the court to compel Xerox to waive its advance notice bylaw and permit them to nom­inate a competing slate of directors. In the court's analy­sis of the issue, it adopted the Delaware test articulated in Hubbard v Hollywood, which is the first instance in which a non-Delaware court has adopted that test. The Hubbard standard provides that "a share­holder is entitled to a waiver of a corporation's advance notice deadline for nominating directors when there is a material change in circumstances of the corporation after the nomination deadline". In concluding that the plaintiffs had satisfied that standard, the New York court held that the board had caused a material change in circumstances to occur after the deadline. The court therefore compelled Xerox to waive its advance notice bylaw.


Following the court's decision, Jacobson and most of the other Xerox directors resigned and were replaced by rep­resentatives of Deason and Icahn. Xerox then ter­minated the merger agreement with Fuji. In response, Fuji has filed suit in New York federal court, seeking payment of the more than $1 billion termination fee provided for in the merger agreement, as well as billions in damages from synergies and other benefits Fuji claims it would have received had the transaction not been improperly terminat­ed.

For further information on this topic please contact Lisa Bebchick, Martin J Crisp or Marc Feldhamer at Ropes & Gray's New York office by telephone (+1 212 596 9000) or email ([email protected], [email protected] or [email protected]). Alternatively, contact Amanda Leese at Ropes & Gray LLP's Boston office by telephone (+1 617 951 7000) or email ([email protected]). The Ropes & Gray website can be accessed at


(1) In Re Xerox Corp Consol Shareholder Litig, 2018 WL 2054280, 2018 NY Slip Op 28137 (Supreme Court 27 April 2018).