Judge to plaintiffs in Yahoo lawsuit: Don't rush me

IDG News Service - A judge denied a shareholders' request to accelerate the start of a trial over a lawsuit they filed alleging that Yahoo Inc. failed to protect their interests by sabotaging Microsoft Corp.'s acquisition attempt.

The shareholders failed to prove that the court should expedite the setting of a trial date, Judge William Chandler of Delaware's Chancery Court ruled yesterday.

"Aside from the maelstrom of media coverage, very little has changed about plaintiffs' core contentions since I denied plaintiff's previous request for expedition," Chandler wrote, pointing out that the plaintiffs had previously filed a similarly unsuccessful motion to expedite the case.

Last week, the shareholders in the class-action lawsuit argued in their motion that it was imperative for the trial to be held in July, before Yahoo holds its annual shareholders meeting Aug. 1.

In particular, the plaintiffs wanted the judge to rule on the legality of a controversial employee severance plan that they allege Yahoo leaders adopted to derail Microsoft's attempt to buy the company.

The employee severance plan is so vague and costly that it amounts to a poison pill "entrenchment device" that is illegal under Delaware law, the plaintiffs argue.

The plan, which was approved shortly after Microsoft made its offer, would be triggered by a change in who controls the company, including the election of a new slate of directors, as billionaire investor Carl Icahn is seeking to do.

Thus, the plaintiffs argue, as long as the severance plan is in place, shareholders will be coerced to vote to re-elect the current board, just to prevent the plan from getting activated and triggering a mass employee exodus.

The plaintiffs also argued in another filing last week that Yahoo's agreement to outsource part of its search advertising business to Google serves to coerce shareholders to vote against re-electing a new board because it gives Google the option to cancel the deal if Icahn succeeds in getting his candidates elected.

But Chandler wasn't convinced that the plaintiffs' case is at risk of irreparable damage unless a trial is rushed and scheduled for next month. He reminded the plaintiffs that in order to expedite the setting of a trial date, the court must accelerate certain proceedings and conduct, among other things, "a truncated determination of the merits of the underlying claims."

"To successfully earn expedition, the movant must show good cause why it is necessary to impose upon the counterparty and the Court these substantially increased burdens of time, effort, and expense," Chandler wrote.

Instead, the plaintiffs and Yahoo should quickly set up a briefing schedule regarding Yahoo's motion to dismiss the lawsuit, Chandler wrote, adding that the court is "willing to and capable of deciding that motion before the Yahoo annual shareholders' meeting."