Classmates.com 2006 Annual Report Download - page 103

Technologies, Inc., an affiliate of MCI WorldCom Network Services, Inc., regarding the value of services provided by UUNET, with UUNET
claiming in excess of $1.0 million and Juno claiming less than $0.3 million. On August 4, 2006, Juno entered into a settlement agreement with
the Committee of Unsecured Creditors providing for the settlement of all claims against Juno pursuant to a proposed plan of liquidation of the
Debtor. The settlement and plan of liquidation were approved by the bankruptcy court in December 2006 and the deadline for appeal elapse in
January 2007. We had previously reserved $6.25 million for the Freewwweb settlement, which was increased by $0.25 million in the
December 2006 quarter. Pursuant to the settlement agreement, Juno paid a total of $6.5 million.
On April 27, 2004, plaintiff MyMail Ltd. filed a lawsuit in the United States District Court for the Eastern District of Texas against
NetZero, Juno, NetBrands, America Online, Inc., AT&T, EarthLink, Inc., SBC Communications, Inc., and Verizon Communications, Inc.
alleging infringement of plaintiff’s patent which purported to cover user access to a computer network. Plaintiff sought injunctive and
declaratory relief and damages. On October 28, 2005, the court issued an order granting defendants’ motions for summary judgment of non-
infringement of the patent. MyMail appealed the trial court’s ruling, and on February 20, 2007, the Federal Circuit affirmed the trial court’s
ruling.
On March 6, 2006, plaintiff Anthony Piercy filed a purported consumer class action lawsuit in the Superior Court of the State of California,
County of Los Angeles, against NetZero claiming that NetZero continues to charge consumers fees after they cancel their Internet access
account. Plaintiff is seeking injunctive and declaratory relief and damages. NetZero has filed a response to the lawsuit denying the material
allegations of the complaint.
On July 27, 2006, plaintiff Donald E. Ewart filed a purported consumer class action lawsuit in the Superior Court of the State of California,
County of Los Angeles, against NetZero claiming that NetZero continues to charge consumers fees after they cancel their Internet access
account. Plaintiff is seeking injunctive and declaratory relief and damages. NetZero has filed a response to the lawsuit denying the material
allegations of the complaint. On January 29, 2007, counsel for Mr. Ewart advised the trial court that Mr. Ewart would be withdrawing from the
action as a class representative and that counsel would seek permission from the court to add one or more new class representatives. On that
same date, the court ordered counsel for Mr. Ewart to file their motion to substitute a new class representative by March 2, 2007. As of
February 27, 2007, Mr. Ewart has not withdrawn from the action and his counsel has not filed a motion to substitute a new class representative.
The pending lawsuits involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of
other resources to defend. Although the Company does not believe the outcome of the above outstanding legal proceedings, claims and litigation
will have a material adverse effect on its business, financial position, results of operations or cash flows, the results of litigation are inherently
uncertain and the Company can provide no assurance that it will not be materially and adversely impacted by the results of such proceedings. At
December 31, 2006, other than an immaterial reserve for the then unpaid portion of the Freewwweb settlement payment, the Company had not
established reserves for any of the matters described above.
The Company is subject to various other legal proceedings and claims that arise in the ordinary course of business. Management believes
the amount and ultimate liability, if any, with respect to these actions will not materially affect the Company’s business, financial position,
results of operations or cash flows. There can be no assurance, however, that such actions will not be material or adversely affect the Company’s
business, financial position, results of operations or cash flows.
F- 41