Corporate & Securities Law

Kerkorian?s $39 million Daimler opt-out cost

By Werner R. Kranenburg

The direct action by Kirk Kerkorian’s Tracinda Corp. against DaimlerChrysler AG (Deutsche Börse, NYSE: DCX), the next week to be renamed Daimler AG, is no more. The Third Circuit Court of Appeals upheld the earlier decision and rejected Tracinda’s claim for damages. See this previous post for some background on the case and the International Herald Tribune for more on the latest decision.

Terry N. Christensen, of Christensen Glaser Fink Jacobs Weil & Shapiro LLP which represented Tracinda, is quoted in the IHT article as saying: “We feel that we did our duty to try to protect Chrysler shareholders.” (WV&Z’s emphasis) By opting out?

The shareholders that in 2004 settled the securities class action Tracinda opted out of shared $300 million among them. (notice) Tracinda held approximately 13% of DaimlerChrysler’s shares at the time and so would have been able to claim about $39 million of that settlement amount. (Other sources put the figure at $30 million and $35 million.)

Opting out however, to retain the right to pursue a direct action for and on behalf of itself, it lost the right to claim and thus, at least in hindsight, it thereby lost another $39 million. (To put that into perspective, it had sought as much as $3 billion in damages in the direct action.) Tracinda’s unclaimed amount was to be distributed among those claimants that stayed in instead, an instant 15% gain. One may doubt however whether this is what Christensen referred to in his statement. He couldn’t be reached for comment at the time of posting.

Jonathan J. Lerner, of Skadden Arps Slate Meagher & Flom LLP and the lead trial counsel defending DaimlerChrysler, responded to WV&Z’s request for comment saying that “Daimler is delighted at the unamamous affirmance of the dismissal of Tracinda’s claim. The case had no merit and the basic theory of the case was legally and factually flawed.” Lerner’s defence of the action in District Court was named one of the 10 best defence wins in 2005 by the National Law Journal.

Full post as published by With Vigour and Zeal on September 26, 2007 (boomark / email).