11-Year-Old Merger Returns to Court

The first hearing of a damages lawsuit filed by the National Pension Service (NPS) against Samsung Electronics Chairman Lee Jae-yong and others was held on May 19 at the Seoul Central District Court. The NPS claims it suffered losses from the 2015 merger between Samsung C&T and Cheil Industries, alleging the merger diminished the value of its shareholdings. The lawsuit seeks approximately ₩510 million, with the possibility of an increased claim if damages are recalculated through expert assessment.

The court indicated that the legality of the merger itself and the alleged improper government intervention need to be examined separately, scheduling the next hearing for June 4. The lawsuit was filed in September 2024, ten months before the statute of limitations expires in July 2025.

NPS: "Unfavorable Merger for Management Succession"

The NPS argues that the merger was orchestrated by Samsung Group's Future Strategy Office to strengthen Chairman Lee Jae-yong's control. At the time, the NPS held an 11.21% stake in Samsung C&T and voted in favor of the merger proposal that assigned 0.35 shares of Samsung C&T for each share of Cheil Industries. The NPS's core argument is that this ratio was intentionally disadvantageous to Samsung C&T shareholders.

The NPS's legal representative stated, "Samsung increased the ownership stake of the controlling family through the merger ratio, and internal personnel at the fund facilitated this." They added, "Despite the duty to protect shareholder interests, the validity of the merger and the appropriateness of the price were not sufficiently reviewed." The representative emphasized, "The legality cannot be determined solely based on criminal trial outcomes; various evidence must be comprehensively examined."

Samsung: "Years of Trials Concluded with Acquittal"

The defendants maintain that there was no illegality in the merger process and no damages occurred. Chairman Lee's legal representative argued, "Related criminal trials did not recognize illegality in the purpose and process of the merger," adding that "all charges of Capital Markets Act violations raised by prosecutors were also rejected."

Indeed, Chairman Lee was acquitted by the Supreme Court in July 2024 on charges of accounting fraud and unfair trading related to the merger process. However, he was sentenced to two years and six months in prison for providing bribes to former President Park Geun-hye in exchange for support for management succession.

Former Minister of Health and Welfare Moon Hyung-pyo and former NPS Chief Investment Officer Hong Wan-seon were each sentenced to two years and six months for pressuring the fund to vote in favor of the merger. However, they maintain that civil liability for the merger process itself is a separate matter.

Court: "Separate Review of Merger and Government Intervention Needed"

Presiding Judge Jung Yong-shin stated, "This is a case where positions overlap, as the fund is both a victim and the entity exercising voting rights." He added, "There is a need to separately present and prove arguments regarding the merger and government intervention." He specifically noted that "the plaintiff's complaint focuses on merger-related aspects, while the government intervention portion is not sufficiently revealed," requesting supplementation.

The court requested additional materials on liability for damages, causation, and damage calculation methods, scheduling the next hearing for June 4 at 3 PM. Key issues moving forward will be how the civil court judges a matter where criminal acquittal was confirmed, and how it distinguishes between government intervention and merger illegality in assigning responsibility.