Court Of Baltimore Rules Against Costa Brava Hedge Fund

The Circuit Court for Baltimore City has, for the third time in just over a year, denied legal motions filed against Telos Corporation by Costa Brava Partnership III, L.P., a Boston-based hedge fund. Costa Brava previously had two motions for receivership dismissed or denied, and a motion for preliminary injunction regarding the sale of assets dismissed.

John B. Wood, CEO of Telos said, “As we said in our memorandum to the court, Costa Brava clearly refuses to take no for an answer. Not satisfied that their stock value has increased by nearly 200% in less than two years, Costa Brava wants to litigate even higher returns, an act that could have detrimental effects on our other shareholders and our employees.”

The activist hedge fund was demanding that Telos be prohibited from pursuing or closing any sale of assets until after May 31, 2007. That is the date that Costa Brava hopes to elect two new Class D directors of their choosing to the Telos Board of Directors.

Costa Brava and Telos are scheduled to meet on May 31 to discuss the election of two Class D directors. Costa Brava was previously given an opportunity to elect Class D directors, but failed to pursue that opportunity. The Court recognized Costa Brava’s “earlier reluctance” to fill the directorships and found that the Telos was “not in violation of any statutory, charter or by-law requirements with respect to the pending election of those directors.”

The same Court has in the past has addressed several claims by the activist hedge fund, including a recent opinion regarding Costa Brava’s demand that Telos be placed into receivership.

Wood said that Telos, whose stock over the past five years has outperformed the NASDAQ composite by 100%, “is committed to treating all shareholders equitably and continuing to focus on our role as a trusted provider of security solutions to U.S. government agencies and the Department of Defense.”