High court to hear shareholders' bid to nullify MCA settlement


WASHINGTON -- The Supreme Court agreed yesterday to decide whether to keep alive the multibillion-dollar damage claims by stockholders who are challenging terms of the 1990 takeover of MCA Inc.

Those claims, made under federal securities laws, have been threatened by a $2 million settlement in a separate case under state law in Delaware.

A federal appeals court in San Francisco has refused to honor the state court settlement. It has insisted that federal securities claims go to trial in federal court, for the possible benefit of 7,000 former MCA stockholders.

At issue when the Supreme Court decides the case late this year or next year is whether federal claims were erased under the state court deal.

In a $6.6 billion transaction in 1990, Matsushita Electric Industrial Co. Ltd., the Japanese consumer electronics company, bought out the stock of MCA, a Los Angeles-based conglomerate with interests in movies and recordings.

MCA shareholders were offered $66 a share, to be paid in cash -- a price nearly 100 percent above the market price at the time. But MCA's founder, Lew Wasserman, was allowed to swap his holdings in MCA for stock in a newly created Matsushita subsidiary -- and the tax-free arrangement saved him $113 million in federal taxes.

His tax basis in the stock was only 3 cents a share. Had he taken the $66 cash offer, he would have gained $327 million -- resulting in a combined federal and state tax of $113 million.

A group of stockholders challenged the Wasserman arrangement in Delaware state court, claiming that it violated company officers' duties under state law. A separate group challenged it in federal court in California, claiming that the deal for Mr. Wasserman was illegal under federal securities laws.

The state case was settled in a $2 million deal, upheld by Delaware courts. Under that settlement, MCA stockholders would receive only 2 cents to 3 cents a share. Matsushita argued unsuccessfully to the federal appeals court in San Francisco that the Delaware settlement nullified the federal case, too.

In other opinions and orders:

* The court refused, without comment, to review the federal appeals court ruling that had kept Sears, Roebuck and Co. out of the Visa card business. The appeals court ruled in September that Visa USA did not violate federal antitrust law when it adopted a by-law -- directly aimed at Sears -- barring membership to any company that issues a competing credit card.

* The court ruled 7-1 that U.S. maritime law allows shipping contracts to specify that disputes be sent to arbitration in a foreign nation. The dispute involved $1 million in damages to a shipment of oranges, under a contract requiring any dispute to be arbitrated in Japan.

* The court agreed to decide, in its next term, whether train crews who have finished their maximum hours of work are to be considered on duty while they wait for transportation to their home base. Lower courts are divided over how that nonwork time is to be counted under the federal law controlling train crews' work schedules.

* In a unanimous decision, the court ruled that state courts have no power, under federal civil rights law, to interfere with state tax laws -- provided the taxpayer has a chance under state law to overturn the tax and perhaps to get a refund. The dispute arose in a case over trucking taxes in Oklahoma.

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