Classmates.com 2006 Annual Report Download - page 24

and directors of NetZero and the underwriters of NetZero’s initial public offering, Goldman Sachs Group, Inc., BancBoston Robertson
Stephens, Inc. and Salomon Smith Barney, Inc. The complaint alleges that the prospectus through which NetZero conducted its initial public
offering in September 1999 was materially false and misleading because it failed to disclose, among other things, that (i) the underwriters had
solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those
investors material portions of the restricted number of NetZero shares issued in connection with the offering; and (ii) the underwriters had
entered into agreements with customers whereby the underwriters agreed to allocate NetZero shares to those customers in the offering in
exchange for which the customers agreed to purchase additional NetZero shares in the aftermarket at pre-determined prices. Plaintiffs are
seeking injunctive relief and damages. Additional lawsuits setting forth substantially similar allegations were also served against NetZero on
behalf of additional plaintiffs in April and May 2001. The case against NetZero was consolidated with approximately 300 other suits filed
against more than 300 issuers that conducted their initial public offerings between 1998 and 2000, their underwriters and an unspecified number
of their individual corporate officers and directors. The majority of issuers, including NetZero, and their insurers have approved a settlement
agreement. The district court’s final approval of the settlement has been stayed pending the outcome of the Second Circuit’s decision to vacate
the district court’s decision granting class certification in six of the suits.
On August 21, 2001, Juno commenced an adversary proceeding in U.S. Bankruptcy Court in the Southern District of New York against
Smart World Technologies, LLC, dba “Freewwweb” (the “Debtor”), a provider of free Internet access that had elected to cease operations and
had sought the protection of Chapter 11 of the Bankruptcy Code. The adversary proceeding arose out of a subscriber referral agreement between
Juno and the Debtor. In response to the commencement of the adversary proceeding, the Debtor and its principals filed a pleading with the
bankruptcy court asserting that Juno is obligated to pay compensation in an amount in excess of $80 million as a result of Juno’s conduct in
connection with the subscriber referral agreement. In addition, a dispute arose between Juno and UUNET 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 appealing elapsed 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 $6.50 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
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