Avon 2005 Annual Report Download - page 47

2005฀ANNUAL฀REPORT฀฀67
to make a reasonable estimate of the amount or range of expense
that could result from an unfavorable outcome in respect of these
or any additional assessments that may be issued for subsequent
periods. The structure adopted in 1995 is comparable to that used
by many companies in Brazil, and we believe that it is appropri-
ate, both operationally and legally, and that the assessments are
unfounded. This matter is being vigorously contested and in the
opinion of our outside counsel the likelihood that the assessments
ultimately will be upheld is remote. Management believes that the
likelihood that the assessments will have a material impact on our
consolidated financial position, results of operations or cash flows
is correspondingly remote.
Scheufler v. Estee Lauder, Inc., et al., a purported class action, was
commenced in February 2005 in the Superior Court of California
for the County of San Diego. The action initially named Avon and
other defendants and sought injunctive relief and restitution for
alleged violations of the California Unfair Competition Law and the
California False Advertising Law, and for negligent and intentional
misrepresentation. The purported class included individuals “who
have purchased skin care products from defendants that have been
falsely advertised to have an ‘anti-aging’ or youth inducing benefit
or effect”. We filed a demurer to the complaint asserting that the
complaint did not state a viable cause of action. In October 2005
the court sustained our demurrer but granted plaintiff leave to
amend her complaint to, among other things, assert Avon-specific
allegations. An amended complaint was filed, but we were not
named in the complaint.
Roqueta v. Avon Products, Inc., et al. is a purported class action
commenced in April 2005 in the Circuit Court of the Eleventh
Judicial Circuit in and for Miami-Dade County, Florida. The action
seeks general damages, special damages and punitive damages for
alleged violations of the Florida Deceptive and Unfair Trade Practices
Act and Florida statutes regarding misleading advertisements, and
for negligent and fraudulent misrepresentation. The purported class
includes “all persons who have purchased skin care products from
the Defendant that have been falsely advertised to have an ‘anti-
cellulite’ or cellulite reducing effect.” We removed the action to the
United States District Court for the Southern District of Florida and
moved to dismiss the complaint for failure to state a claim upon
which relief can be granted. In August 2005 the court dismissed
plaintiff’s claims for negligent and fraudulent misrepresentation,
with prejudice. The court also dismissed plaintiff’s remaining claims
but granted plaintiff leave to amend her complaint, which she has
done. While it is not possible to predict the outcome of litigation,
management believes that there are meritorious defenses to the
claims asserted and that this action should not have a material
adverse effect on our consolidated financial position, results of
operations or cash flows. This action is being vigorously contested.
In August 2005, we reported the filing of class action complaints
for alleged violations of the federal securities laws in actions enti-
tled Nilesh Patel v. Avon Products, Inc. et al. and Michael Cascio v.
Avon Products, Inc. et al., respectively, which subsequently have
been consolidated. A consolidated amended class action com-
plaint for alleged violations of the federal securities laws was filed
in the consolidated action in December 2005 in the United States
District Court for the Southern District of New York (Master File
Number 05-CV-06803) under the caption In re Avon Products, Inc.
Securities Litigation naming Avon, an officer and two officer/direc-
tors. The consolidated action, brought on behalf of purchasers of
our common stock between February 3, 2004 and September 20,
2005, seeks damages for alleged false and misleading statements
“concerning Avon’s operations and performance in China, the
United States . . . and Mexico.” The consolidated amended com-
plaint also asserts that during the class period certain officers and
directors sold shares of our common stock.
In August 2005, we reported the filing of a complaint in a
shareholder derivative action purportedly brought on behalf of
Avon entitled Robert L. Garber, derivatively on behalf of Avon
Products, Inc. v. Andrea Jung et al. as defendants, and Avon
Products, Inc. as nominal defendant. An amended complaint
was filed in this action in December 2005 in the United States
District Court for the Southern District of New York (Master File
Number 05-CV-06803) under the caption In re Avon Products,
Inc. Securities Litigation naming certain of our officers and direc-
tors. The amended complaint alleges that defendants’ violations
of state law, including breaches of fiduciary duties, abuse of
control, gross mismanagement, waste of corporate assets and
unjust enrichment, between February 2004 and the present,
have caused losses to Avon.
In October 2005, we reported the filing of class action complaints
for alleged violations of the Employee Retirement Income Security
Act (“ERISA”) in actions entitled John Rogati v. Andrea Jung, et
al. and Carolyn Jane Perry v. Andrea Jung, et al., respectively,
which subsequently have been consolidated. A consolidated
class action complaint for alleged violations of ERISA was filed in
the consolidated action in December 2005 in the United States
District Court for the Southern District of New York (Master File
Number 05-CV-06803) under the caption In re Avon Products, Inc.
ERISA Litigation naming Avon, certain officers, Avon’s Retirement
Board and others. The consolidated action purports to be brought
on behalf of the Avon Products, Inc. Personal Savings Account
Plan and the Avon Products, Inc. Personal Retirement Account
Plan (collectively the “Plan”) and on behalf of participants and
beneficiaries of the Plan “for whose individual accounts the Plan
purchased or held an interest in Avon Products, Inc. . . . common
stock from February 20, 2004 to the present.” The consolidated