In a split decision, the U.S. Court of Appeals for the Tenth Circuit decided that while Gemstar-TV Guide International Inc. can collect fees spent in its defense of the Oklahom securities fraud complaint filed against the company and two ex-officers by a former executive, it cannot collect legal fees it incurred from its counterclaim against the plaintiff. The court said that while a separation agreement executed by the two parties does not allow the former executive to sue the company it also does not allow for fees to be awarded for counterclaims.
Ex-Gemstar-TV Guide executive Pamela McKissick had sued the company, its former chief financial officer Elsie M. Leung, and its former chief executive Henry C. Yuen in 2004. McKissick claimed that the defendants issued false and misleading statements that overstated company revenues and that this resulted in an artificially inflated stock price. McKissick says that because of this misconduct and other acts, her stock options became worthless. However, prior to exiting Gemstar in 2003, McKissick had consented to a Separation Agreement and Release that included a “no actions” provision that had her releasing all claims against the company unless a claim involved the enforcement of the SAR.
Gemstar submitted a motion for summary judgment claiming that the SAR prevented McKissick from filing the securities fraud lawsuit. Gemstar then counterclaimed saying that it should receive legal fees because her lawsuit violated the terms of the SAR.
The judgment was upheld on appeal in 2008, which was the same year that criminal charges were filed against Yuen for alleged securities fraud. Yuen had also been ordered by the US Securities and Exchange Commission to pay $22.3M in penalties, disgorgement, and interest to settle allegations that he played a role in Gemstar significantly overstating its revenues.
Summary judgment was awarded by the district court to Gemstar for both McKissick’s securities fraud case and the company’s counterclaim. McKissick appealed. Yuen and Leung filed a motion for legal fees. After the district court granted their fee request, McKissick added the issue to her appeal.
Related Web Resources:
McKissick v. Yuen, United States Court of Appeals, 10th Circuit
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