In the case, former shareholders of MFS Telecom had sold the company to the defendant, Level 3 Communications. But MFS shareholders later sued Level 3, claiming that it had wrongfully acquired their shares through fraudulent representations and omissions. Had they known the truth, the shareholders argued, they could have commanded a higher price for their shares.
Level 3 settled the lawsuit for $12 million, seeking coverage for the settlement payment under a D&O policy issued by Federal Insurance Co. Federal denied coverage, and Level 3 then sued.
Read the exciting ruling on the case from the United States Court of Appeals for the Seventh Circuit.
July 1, 2007
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