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Novell's board must face investor suit over Attachmate sale

WILMINGTON, Delaware (Reuters) - Novell Inc directors who approved the information technology company's 2010 sale for $2.2 billion must defend a lawsuit that alleges they unfairly favored Attachmate Corp over other bidders.

The shareholders brought a reasonably conceivable claim that the directors acted in bad faith based on their "unexplained, extremely favorable treatment of Attachmate," Delaware Court of Chancery Judge John Noble wrote in a 50-page opinion. His ruling on Wednesday will allow the case to proceed.

Novell's board agreed in November 2010 to sell the company to Seattle-based software firm Attachmate for $6.10 per share. As part of the deal, Novell also agreed to sell a collection of patents to a group led by Microsoft Corp for $450 million.

Novell shareholders, led by pension funds for Oklahoma firefighters and Louisiana police, sued and alleged that the board did not allow another potential buyer, which initially had the higher bid, to partner with others as Attachmate did. Attachmate was also told of the simultaneous patent sale, while the other bidder was not.

Bret Fitzgerald, a spokesman for Novell, which is based in Waltham, Massachusetts, did not immediately respond to a request for comment.

Judge Noble refused the directors' request for an early dismissal, and the case will now proceed to trial where the defendants can present evidence and testimony to counter the plaintiffs' claims. Many investor lawsuits settle after surviving a motion to dismiss.

However, Noble did dismiss claims against Attachmate and Elliott Associates. The hedge fund had been accused of gaming the sale of Novell to get what plaintiffs said was nearly $10 per share for its 7 percent stake in the company. Elliott's unsolicited bid for Novell jump-started the sale process and the hedge fund helped finance the deal with Attachmate.

(Reporting By Tom Hals in Wilmington, Delaware; Editing by Nick Zieminski)

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