The judge in the lawsuit between PeopleSoft and hostile bidder Oracle yesterday voided a PeopleSoft settlement with a group of dissident shareholders.
PeopleSoft negotiated the deal in May to resolve claims bought by a number of shareholders unhappy with the methods the company was using to fend off Oracle's unwelcome takeover bid.
The deal committed PeopleSoft to change some provisions in its controversial customer guarantees, and to leave decisions about Oracle's bid in the hands of the board's independent directors. The agreement was submitted to the court in July, and was awaiting ratification.
But last week, spurred by Oracle's decision to raise its bid, PeopleSoft shareholders filed a fresh lawsuit about PeopleSoft's actions after June 17, the day on which the shareholders signed the settlement deal.
The judge in the case decided to eliminate the confusion of one settled suit and one current one by rejecting the settlement.
"The judge said that in light of the way events have evolved he didn't view the benefits under the settlement as sufficient to justify releasing claims that rose prior to June 17," said the shareholders' lawyer Bruce Jameson.
The judge also scheduled further hearings on Oracle's case against PeopleSoft for next month, virtually guaranteeing that it would continue into next year. Oracle has asked the court to invalidate several anti-takeover provisions PeopleSoft is using to prevent Oracle from acquiring the company.
Legal experts said the judge was unlikely to strike down PeopleSoft's defences - although last week's tendering of 61% of PeopleSoft's shares into Oracle's $8.8bn (£4.7bn) bid complicates matters. With the holders of most shares willing to sell at the price Oracle has offered, the argument of the PeopleSoft board that the company is worth more has come under real pressure.
Oracle's best chance of buying PeopleSoft is through a proxy fight to gain majority representation on PeopleSoft's board. It faces a Thursday deadline for filing a slate of nominees to replace the four PeopleSoft directors up for election in 2005.
Stacy Cowley writes for IDG News Service