The Wayne County Employee's Retirement System of Michigan, which owns about 13,600 shares of Yahoo, filed the lawsuit Monday in Delaware Chancery Court. The suit asks the court to force Yahoo to consider takeover offers.
The complaint was filed shortly after Yahoo officially rejected the Microsoft offer on Monday morning. Yahoo's board of directors unanimously rejected the bid, saying the offer "substantially undervalues Yahoo."
The Wayne County Employee's Retirement System believes the board failed to meet its obligation to shareholders in evaluating the offer. "We want the board to be responsible and to take this offer seriously, review it appropriately, and respond appropriately," David H. Fink, a lawyer for The Miller Law Firm of Rochester, Mich., which is representing the retirement system, told InformationWeek Tuesday. "Just saying no is not an appropriate response."
Microsoft's bid of $31 a share for Yahoo represents a significant premium over the company's value of $19.18 on Jan. 31, the day before Microsoft made its bid public. The latter figure was the lowest Yahoo stock had traded since 2004.
With Yahoo stock prices low and the company failing to make any headway in catching Google in online advertising, particularly in ads related to search results, many investors are expected to try to put pressure Yahoo co-founder and chief executive Jerry Yang to sell the company. Microsoft has indicated that it may be willing to launch a hostile takeover bid.
Yahoo has been sued before for jilting Microsoft. On Feb. 1 the law firms Byrne & Nixon in Los Angeles and Barrett, Johnston & Parsley in Nashville, Tenn., filed a complaint in Santa Clara Superior Court in California, seeking class-action status to represent shareholders against Yahoo, the San Francisco Chronicle reported. The suit focused on the board's rejection of a Microsoft offer made last year.
The complaint claimed the board should have approved the offer but chose instead to hold on to their lucrative jobs, which paid from $588,424 to $649,788 in 2006, the newspaper said.
This article was edited on Feb. 12 to add in comments from Mr. Fink.