PeopleSoft has announced the settlement of shareholder lawsuits that arose over its controversial customer-refund program, launched last year to counter rival Oracle's hostile takeover bid.
The Customer Assurance Program, started about a year ago, bound PeopleSoft -- or any potential suitor who bought it out -- to repay as much as five times the software costs to new customers if products ceased to be developed after a takeover. The move was greeted with derision from Oracle, whose president, Chuck Phillips, claimed, "It helps the customer but makes any potential acquirer have a huge liability. It's making the company worthless and taking control from the shareholders, who can't control the company without triggering liabilities."
PeopleSoft insisted that what was good for customers was good for the company and its shareholders. Not all stockholders saw it that way, however, and they launched a lawsuit against PeopleSoft. After creating something on the order of US$1.5 billion in potential liability, PeopleSoft quietly allowed the program to lapse in April.
In a statement Wednesday, PeopleSoft said it had crafted a memorandum of understanding for settlement of all class actions. The settlement states that if the program is extended past June 30, all new contracts "will be limited to actions by Oracle." PeopleSoft cautioned that this settlement is still subject to approval by the Delaware Court of Chancery.
The memorandum also states that over the next two years, the redemption decisions will be made by an independent board of directors.
"This settlement puts the stockholder litigation behind us," the company said in its statement. "We are pleased that the stockholder plaintiffs recognize the legitimacy of the Customer Assurance Program. We believe the program assures customers of the soundness of their investment in PeopleSoft products and stockholders that the value of their investment is protected."