Costco 2011 Annual Report Download - page 79

In Verzani, et ano., 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, and on July 21, 2010, the court of appeals summarily affirmed these rulings. On
September 28, 2010, the district court denied the motion of one plaintiff to file an amended complaint.
On September 20, 2011, the court of appeals affirmed the rulings of the district court.
In Kilano, et. ano, v. Costco Wholesale Corp., No. 2:10-cv-11456-VAR-DAS (United States District
Court for the Eastern District of Michigan), filed on April 12, 2010, a purported class action was filed on
behalf of certain Michigan Executive level-members who received 2% rewards. Plaintiffs allege that the
Company “guarantees” that the member will receive rewards of no less than the fifty dollar difference
between Executive and Gold Star membership and that the Company is required to but has failed to
automatically reimburse members whose rewards are less than this difference. Plaintiffs allege
violations of the Michigan Consumer Protection Act, breach of contract, and unjust enrichment. They
seek compensatory and statutory damages, injunctive relief, costs, and attorneys’ fees. The Company
filed an answer denying the material allegations of the complaint. On April 5, 2011, the court denied
plaintiff’s motion for class certification. On July 22, 2011, plaintiffs sought leave to file an amended
complaint.
On March 15, 2011, Robles, et al., v. Costco Wholesale Corporation was filed as a purported class
action in the United States District Court for the Northern District of Illinois, Case No. 11-CV-1785.
Plaintiffs seek to represent a class composed of all disabled persons with ambulatory impairments who
depend upon the use of a wheelchair and are allegedly unable to obtain optometry services at the
Company. Plaintiffs allege that the Company has failed to remove architectural barriers that prevent full
and equal enjoyment of and access to its eye examination services. They allege violations of Title III of
the Americans with Disabilities Act and the Rehabilitation Act of 1973. They seek injunctive relief and
compensatory damages, costs, and attorneys’ fees. The Company has filed an answer denying the
material allegations of the complaint.
Three shareholder derivative lawsuits were 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 alleged, 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. On April 3, 2009, on the
Company’s motion the court dismissed the action, following the plaintiff’s disclosure that she had
ceased to own Costco common stock, a requirement for her to pursue a derivative action. The second
action, Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust v. James Sinegal, et al., Case
No. 2:08-cv-01450-TSZ (United States District Court for the Western District of Washington), was filed
on or about September 29, 2008, and named as defendants all but one of the Company’s directors and
certain of its senior executives. Plaintiff alleged that defendants approved the issuance of backdated
stock options, concealed the backdating of stock options, and refused to vindicate the Company’s
rights by pursuing those who obtained improper incentive compensation. The third action, Daniel
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