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Litigation
9 Months Ended
Sep. 30, 2013
Litigation  
Litigation

13.  Litigation

 

On May 2, 2013, a purported securities class action complaint was filed in the U.S. District Court for the Northern District of Texas, entitled Anastacia Shaffer v. Digital Generation, Inc., et al., No. 3:13-cv-1684, alleging civil violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder.  The complaint names as defendants the Company and certain of its current and former officers.  The purported class period is alleged to be June 20, 2011 through February 19, 2013.

 

On May 29, 2013, a purported shareholder derivative suit was filed captioned Boyler v. certain officers and directors of Digital Generation, Inc., Cause No: DC-13-05971-I, in the 162nd Judicial District Court of Dallas County, Texas.  The action alleges breach of fiduciary duty, abuse of control, and gross mismanagement related to DG’s acquisition of several online media companies, its subsequent write-down of these assets, and the inability of a Special Committee of the Board of Directors to find a strategic buyer for the Company.  The suit seeks damages, restitution, disgorgement, attorneys’ fees, and corporate governance reforms.

 

While we cannot predict the outcome of these cases with certainty, it is our present belief these matters are not likely to have a material adverse effect on our annual operating results and we intend to defend them vigorously. We believe the purported claims and our defense costs will qualify for reimbursement under our insurance coverage, which are subject to the applicable deductible and the limits of our policies.

 

Settlement of Meruelo Litigation

 

In October 2013, we entered into an agreement with Alex Meruelo, Meruelo Investment Partners LLC and the Alex Meruelo Living Trust (the “Meruelo Stockholders”) relating to the Meruelo Stockholders intention to propose director nominees to our Board of Directors and to seek certain governance changes.  The Meruelo Stockholders have agreed to dismiss with prejudice their lawsuit challenging certain provisions of our Bylaws with respect to its classified Board.