Costco 2009 Annual Report Download - page 86

Company, plaintiffs seek to certify four classes of people who purchased Costco organic milk. Aurora
has maintained that it has held and continues to hold valid organic certifications. The consolidated
complaint seeks, among other things, actual, compensatory, statutory, punitive and/or exemplary
damages in unspecified amounts, as well as costs and attorneys’ fees. On June 3, 2009, the court
entered an order dismissing with prejudice, among others, all claims against the Company. Plaintiffs
have appealed the dismissal.
The Company has been named as a defendant in a purported class action relating to sales of farm-
raised salmon. Farm Raised Salmon Coordinated Proceedings, Los Angeles Superior Court Case No.
JCCP No. 4329. The action alleges that the Company violated California law requiring farm-raised
salmon to be labeled as “color added.” The complaint asserts violations of the California Unfair
Competition Law, the California Consumer Legal Remedies Act, and the California False Advertising
Law, and negligent misrepresentation, and seeks restoration of money acquired by means of unfair
competition or false advertising and compensatory damages in unspecified amounts, injunctive relief
remedying the allegedly improper disclosures, and costs and attorneys’ fees. A California Superior
Court ruling dismissing the action on the ground that federal law does not permit claims for mislabeling
of farm-raised salmon to be asserted by private parties was reversed by the California Supreme Court.
The Company has denied the material allegations of the complaint.
The Company has been named as a defendant in a purported nationwide class action relating to sales
of certain waffles, which alleges that labeling (provided by the Company’s supplier) of these items was
deceptive and misleading. Hodes, et al., v. Van’s International Foods, et al., United States District
Court for the Central District of California, Case No. CV 09-01530. The complaint asserts causes of
action for fraud, breach of warranty, false advertising under California Business and Professions Code
sections 17500 et seq., and unfair business practices under California Business and Professions Code
sections 17200 et seq. Relief sought includes compensatory, consequential, and punitive damages,
restitution, prejudgment interest, costs, and attorneys’ fees. By orders dated June 23, and July 23,
2009, the district court dismissed the fraud claim against the Company and denied the plaintiffs’ motion
for class certification. On September 23, 2009, the district court dismissed the action for lack of
jurisdiction. Plaintiff is seeking to appeal the denial of class certification.
In Verzani v. Costco Wholesale Corp., No. 09 CV 2117 (United States District Court for the Southern
District of New York), a purported nationwide class action, the plaintiffs allege claims for breach of
contract and violation of the Washington Consumer Protection Act, based on the failure of the
Company to disclose on the label of its “Shrimp Tray with Cocktail Sauce” the weight of the shrimp in
the item as distinct from the accompanying cocktail sauce, lettuce, and lemon wedges. The complaint
seeks various forms of damages (including compensatory and treble damages and disgorgement and
restitution), injunctive and declaratory relief, attorneys’ fees, costs, and prejudgment interest. On
April 21, 2009, the plaintiff filed a motion for a preliminary injunction, seeking to prevent the Company
from selling the shrimp tray unless the Company separately discloses the weight of the shrimp and
provides shrimp consistent with the disclosed weight. By orders dated July 29 and August 6, 2009, the
court denied the preliminary injunction motion and dismissed the claim for breach of contract. Plaintiffs
are appealing.
Three shareholder derivative lawsuits have been filed, ostensibly on behalf of the Company, against
certain of its current and former officers and directors, relating to the Company’s stock option grants.
One suit, Sandra Donnelly v. James Sinegal, et al., Case No. 08-2-23783-4 SEA (King County
Superior Court), was filed in Washington state court on or about July 17, 2008. Plaintiff alleges, among
other things, that individual defendants breached their fiduciary duties to the Company by “backdating”
grants of stock options issued between 1997 and 2005 to various current and former executives,
allegedly in violation of the Company’s shareholder-approved stock option plans. The complaint
asserts claims for unjust enrichment, breach of fiduciary duties, and waste of corporate assets, and
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