Dissident shareholders from the Detroit Police and Fire Retirement System shareholders filed a class action lawsuit overnight accusing computer storage company Data Domain of violating fiduciary duty by not engaging in a bidding war for the company.

Network Appliance (NTAP) and EMC (EMC) have both offered $1.9 billion, or $30 a share, to buy the company in separate offers. NetApp has offered a mix of cash and stock while EMC offered an all cash deal, which is considered less attractive. An attorney with Bernstein Litowitz Berger & Grossman representing the shareholder group said that the group is not resisting the outright sale of the company, but believes the company could fetch a higher price. 

The suit is attempting to free the board of certain restrictive provisions that prevent Data Domain from shopping the company. According to a legal filing, NetApp placed a "no shop/no talk" provision, as well as matching rights and $57m termination fee, which prevented the company from talking to EMC or others that may be interested in the company.

The filing also states that "the board granted each of these deal protections before any value maximizing process took place, in a blatant effort to ensure that their favored merger partner is Data Domain's ultimate acquirer."

Another point of concern for plaintiffs is that NetApp’s deal terms, which include job offers for some of the officers and directors in the company including CEO and President Frank Slootman, may be influencing directors as well. EMC’s current offer for the company, according to the cited attorney, does not explicitly state job offers for existing management or directors.  Concerns about culture clashes between EMC and Data Domain also said to be a factor favoring NetApp.

Data Domain declined to comment. NetApp and EMC did not immediately respond to requests for comment.

Also overnight, the Federal Trade Commission stated it is conducting a routine review of the proposed sale of Data Domain, which could extend through July. Such a review often prevents competing bids from coming to the table during the review period. 

The attorney representing the Detroit Police and Fire Retirement System stakeholders said that even if the FTC opposed the sale of the company to EMC, the parties will continue to push the lawsuit further. 

“Even if the FTC shuts down the EMC bid, the Data Domain shareholders [we represent] believe they are entitled to a sales process that treat all bidders equally and fairly," said Mark Lebovich, lead partner at Bernstein Litowitz Berger & Grossmann.

However, if the FTC states the sale of the computer storage supplier to EMC does not violate antitrust laws, the group believes Data Domain’s board has no excuse not to engage EMC in discussions and will push the court to free the board from the current provisions preventing EMC and Data Domain from talking.