After reading the lawsuit filings that were posted, I add my opinion to those who believe that Liberty will prevail here.
The central issue in this case is whether or not Liberty’s issuance of 76.4 million shares to compensate unpaid directors (on 4-23-2010) triggered a clause in the warrant agreements that Liberty had with the plaintiffs allowing the plaintiffs to claim that: 1) They are entitled to more shares than they originally contracted for (ten times the number) and 2) They are entitled to get shares at a reduced exercise price ($.002 not the $.02 rate that they initially had)
As a general rule, courts do believe in enforcing contracts and making parties live up to what they bargained for. But deciding exactly what they bargained for oftentimes requires some judicial interpretation of contract language and intent of the parties. And before enforcing a contract, a court must also determine that the contract’s provisions do not violate any laws or otherwise go against public policy.
Now in order for the Judge to find against Liberty, he would have to find that the so-called warrant clauses that triggered a windfall to the plaintiffs were, in fact, properly triggered; that such a trigger could not be withdrawn by Liberty’s rescission of its stock issuance; and, most importantly, that these clauses are valid and enforceable.
Such a finding for the plaintiff is rather unlikely in my opinion because most judges who deal in matters of equity really want to do what is fair and a finding for the plaintiff in this case would require some bizarre determinations.
Specifically, the judge would have to ignore some rather strong defense arguments. To wit: The judge would have to make the determination that the NY usury law is not applicable in this case; that standard contract law disallowing penalties is not applicable in this case; and that Liberty has no right to cancel out and totally rescind the 76.4 million shares that it issued in April.
In addition to those three unlikely determinations, the judge would have to also overlook the fact that the plaintiffs – who are savvy business creditors and not likely to get much sympathy from the court – were, in fact, paid in full (all principal and interest).
Thus, to me, it is highly doubtful that any judge deciding this matter would reject all the defenses raised, ignore basic tenets of fairness that underscore Liberty’s position, and give the plaintiffs an undeserved windfall. Just my two cents.
AI
