[JURIST] The Wayne County Employees' Retirement System (WCERS) [official website] on Monday filed a complaint in the Delaware Court of Chancery [official website] challenging the decision of the Yahoo! [corporate website] board of directors to repudiate an unsolicited takeover offer made February 1 by Microsoft [corporate website] for the Internet giant. Microsoft's takeover bid [press release], which offers $31 per share of Yahoo! stock and totals approximately $44.6 billion, was formally rejected by Yahoo's directors on Monday. The board said that the offer, which comes at a 62 percent premium over Yahoo!'s stock trading price, "substantially undervalued" the company [press release]. WCERS, a Micihigan retirement board that owns 13,600 shares of Yahoo! stock, has requested an order from the Court of Chancery forcing the board to consider takeover bids from Microsoft and other suitors. Meanwhile Microsoft has indicated that it will seek a stockholder vote on its bid.

The Yahoo! board can further stymie Microsoft's ability to acquire the company by implementing a defensive mechanism known as a shareholder rights plan or poison pill, although WCERS's stockholder suit combined with the potential for more lawsuits makes it unlikely. Under the plan, Yahoo! stockholders can purchase new shares at a 50 percent discount if one stockholder, such as Microsoft, acquires more than 15 percent of Yahoo!'s stock without the board's approval. The plan also allows the board to issue as many as 10 million preferred shares at any price. If the board intends to utilize the plan, Microsoft could also nominate its own slate of directors to be considered for board membership at the next Yahoo! stockholders' meeting.

The stockholder suit filed by WCERS is not the only lawsuit that Yahoo! faces. On February 1, a Tennessee law firm filed a request for class action status [SFGate report] in Santa Clara Superior Court in connection with a bid made by Microsoft and rejected by the Yahoo! board last year. CBC News has more.