Sun investors querying lawyers about merger lawsuit

By Gina Keating

LOS ANGELES (Reuters) - Two top securities litigators said they have been approached by several large investors of Sun Microsystems Inc (JAVA.O) about suing directors to force them to reconsider their rejection of a takeover bid by International Business Machines Corp (IBM.N).

But UCLA Law School Professor Iman Anabtawi says the Sun board is still on "firm legal ground" with respect to its decision to terminate its exclusivity agreement with IBM, and that lawsuits may be premature.

"If shareholders differ with management over the strategic course that the company should pursue, it would be more appropriate for them to pressure the company ... by contesting the existing directors," Anabtawi said.

Sun spokeswoman Karen Kahn declined comment on potential litigation related to the takeover bid.

The plaintiffs attorneys, Darren Robbins of Coughlin Stoia Geller Rudman & Robbins in San Diego and Marc Molumphy of Cotchett Pitre & McCarthy in Burlingame, California, declined to identify Sun investors who have contacted them, but both represent large pension funds and institutional investors.

Robbins, who would not comment on whether a suit is in the works, said such cases are generally brought as shareholder derivative actions, in which investors sue a company's management on behalf of the company itself.

A case against Sun could be filed in Delaware, where the company was incorporated, and could be brought at any time, despite the lack of a formal statement from either company about the offer, Robbins said.

"There is no requirement to wait if management does not respond (to a buyout offer) in good faith and in compliance with fiduciary duties," Robbins said.