Classmates.com 2010 Annual Report Download - page 148

Table of Contents
UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. COMMITMENTS AND CONTINGENCIES (Continued)
Legal Contingencies
In April 2001 and in May 2001, lawsuits were filed in the United States District Court for the Southern District of New York against
NetZero, Inc. ("NetZero"), certain officers 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. A consolidated amended complaint was filed in April 2002.
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. The case against
NetZero was coordinated 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 parties in the
approximately 300 coordinated class actions, including NetZero, the underwriter defendants in the NetZero class action, and the plaintiff class in
the NetZero action, have reached an agreement in principle under which the insurers for the issuer defendants in the coordinated cases will make
a settlement payment on behalf of the issuers, including NetZero. On October 5, 2009, the district court issued an order granting final approval of
the settlement and certifying the settlement class. Two individuals have appealed the October 5, 2009 order and plaintiffs have filed a motion to
dismiss the appeals. The appellate court has not ruled on either the appeals or the motions to dismiss.
On October 30, 2008, Anthony Michaels filed a purported class action complaint against Classmates Online, Inc., now known as Memory
Lane, Inc., Classmates Media Corporation and United Online in Superior Court of the State of California, County of Los Angeles, alleging
causes of action for intentional misrepresentation, negligent misrepresentation, negligence, fraudulent concealment, and for violations of
California Business and Professions Code sections 17200 and 17500 et seq. On December 19, 2008, Xavier Vasquez filed a purported class
action complaint against Classmates Online, Inc., Classmates Media Corporation and United Online in Superior Court of Washington, Kings
County, alleging causes of action for violation of the Washington Consumer Protection Act, violation of California's Unfair Competition Law,
violation of California's Consumer Legal Remedies Act, unjust enrichment and violation of California Civil Code section 1694, dealing with
dating services contracts. In both actions, the plaintiffs are seeking injunctive relief and damages. On April 30, 2009, the United States District
Court of the Western District of Washington consolidated the Michaels and the Vasquez actions and designated the Michaels action as the lead
case. On March 12, 2010, the parties entered into a comprehensive class action settlement agreement. On December 16, 2010, the court
conducted a final approval hearing on the settlement. On February 22, 2011, the court issued an Order formally denying final approval of the
settlement. Discovery has not recommenced and no trial date has been set.
In 2009, Classmates Online, Inc., now known as Memory Lane, Inc. received a civil investigative demand from the Attorney General for
the State of Washington. In 2010, FTD.com Inc. and Classmates Online, Inc. received subpoenas from the Attorney General for the State of
Kansas and the Attorney General for the State of Maryland, respectively. These subpoenas were issued on behalf of a
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