Avon 2008 Annual Report Download - page 84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
retirement, had been on paid disability leave for approximately
19 years. The initial complaint alleged that the Employees’
Retirement Plan of Avon Products (the “Retirement Plan”)
violated the Employee Retirement Income Security Act (“ERISA”)
and, as a consequence, unlawfully reduced the amount of plain-
tiff’s pension. Plaintiff sought a reformation of the Retirement
Plan and recalculation of benefits under the terms of the Retire-
ment Plan, as reformed for plaintiff and for the purported class.
In November 2003, plaintiff filed an amended complaint alleging
additional Retirement Plan violations of ERISA and seeking,
among other things, elimination of a social security offset in the
Retirement Plan. The purported class includes “all Plan partic-
ipants, whether active, inactive or retired, and their beneficiaries
and/or Estates, with one hour of service on or after January 1,
1976, whose accrued benefits, pensions or survivor’s benefits
have been or will be calculated and paid based on the Plan’s
unlawful provisions.” In February 2004, we filed a motion to
dismiss the amended complaint. In September 2007, the trial
court granted our motion to dismiss and plaintiff thereafter
appealed that decision to the United States Court of Appeals for
the Second Circuit. While it is not possible to predict the out-
come of litigation, management believes that there are merito-
rious 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
entitled 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 complaint for alleged violations of the federal secu-
rities 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/directors. 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 complaint also asserts that
during the class period certain officers and directors sold shares
of our common stock. In February 2006, we filed a motion to
dismiss the consolidated amended class action complaint, assert-
ing, among other things, that it failed to state a claim upon
which relief may be granted, and the plaintiffs have opposed
that motion.
In August 2005, we reported the filing of a complaint in a share-
holder derivative action purportedly brought on behalf of Avon
entitled Robert L. Garber, derivatively on behalf of Avon Prod-
ucts, Inc. v. Andrea Jung et al. as defendants, and Avon Prod-
ucts, 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. Secu-
rities Litigation naming certain of our officers and directors. 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 February 2006, we filed a motion to
dismiss the amended complaint, asserting, among other things,
that it failed to state a claim upon which relief may be granted,
and the plaintiff opposed that motion. In February 2009, plaintiff
Garber filed an unopposed motion for voluntary dismissal of the
action, which the court granted by order dated
February 13, 2009.
In October 2005, we reported the filing of class action com-
plaints 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 complaint asserts
breaches of fiduciary duties and prohibited transactions in
violation of ERISA arising out of, inter alia, alleged false and
misleading public statements regarding Avon’s business made
during the class period and investments in Avon stock by the
Plan and Plan participants. In February 2006, we filed a motion
to dismiss the consolidated complaint, asserting that it failed to
state a claim upon which relief may be granted, and the plain-
tiffs have opposed that motion.
It is not possible to predict the outcome of litigation and it is
reasonably possible that there could be unfavorable outcomes in
the In re Avon Products, Inc. Securities Litigation,In re Avon
Products, Inc. Securities Litigation (derivative action) and In re
Avon Products, Inc. ERISA Litigation matters. Management is
unable to make a meaningful estimate of the amount or range