Expedia 2005 Annual Report Download - page 28

whether any of these matters may be material to our financial position or operations based upon the
standard set forth in the SEC's rules.
Securities Class Action Litigation against IAC.
Beginning on September 20, 2004, twelve purported shareholder class actions were commenced in the
United States District Court for the Southern District of New York against IAC and certain of its officers
and directors, alleging violations of the federal securities laws. These cases arose out of IAC's August 4,
2004 announcement of its earnings for the second quarter of 2004 and generally alleged that the value of
the Company's stock was artificially inflated by pre-announcement statements about its financial results
and forecasts that were false and misleading due to the defendants' alleged failure to disclose various
problems faced by IAC's travel businesses. On December 20, 2004, the district court consolidated the
twelve lawsuits, appointed co-lead plaintiffs, and designated co-lead plaintiffs' counsel. See In re IAC/
InterActiveCorp Securities Litigation, No. 04-CV-7447 (S.D.N.Y.). Expedia is not a party to this
litigation, however, under the terms of its Separation Agreement with IAC, Expedia has generally agreed
to bear a portion of the costs and liabilities, if any, associated with any securities law litigation relating to
conduct prior to the Spin-Off of the businesses or entities that comprise Expedia following the Spin-Off.
On October 18, 2004, a related shareholder derivative action, Stuart Garber, Derivatively on Behalf of
IAC/InterActiveCorp v. Barry Diller et al., No. 04-603416, was commenced in the Supreme Court of the
State of New York (New York County) against certain of IAC's officers and directors. On November 15,
2004, another related shareholder derivative action, Lisa Butler, Derivatively on Behalf of IAC/
InterActiveCorp v. Barry Diller et al., No. 04-CV-9067, was filed in the United States District Court for
the Southern District of New York against certain of IAC's current and former directors. On January 24,
2005, the federal district court consolidated the Butler case with the securities class action for pre-trial
purposes only. On April 11, 2005, the district court issued a similar consolidation order in respect of the
Garber case.
On July 5, 2005, the plaintiffs in the related shareholder suits filed a consolidated shareholder
derivative complaint against IAC (as a nominal defendant) and sixteen current or former officers or
directors of IAC or its former travel business. The complaint, which is based upon factual allegations
similar to those in the securities class action, purports to assert claims for breach of fiduciary duty, abuse
of control, gross mismanagement, waste of corporate assets, unjust enrichment, violation of Section 14(a)
of the Exchange Act, and contribution and indemnification. The complaint seeks an order voiding the
election of the IAC's current Board of Directors, as well as damages in an unspecified amount, various
forms of equitable relief, restitution, and disgorgement of remuneration received by the individual
defendants from IAC.
On September 15, 2005, IAC and the other defendants filed motions to dismiss both the securities
class action and the shareholder derivative suits. On November 30, 2005, the plaintiffs filed their
opposition to the motions. On January 6, 2006, the defendants filed reply papers in further support of the
motions. Both motions to dismiss remain pending.
Expedia believes that the claims in the class action and derivative suits lack merit and that the claims
will be vigorously defended.
Litigation Relating to the IAC/Hotels.com Merger Agreement
A putative class action on behalf of Hotels.com stockholders was filed in the Delaware Chancery
Court against Hotels.com, IAC, and members of the board of directors of Hotels.com on April 10, 2003,
the day of the announcement of the IAC/Hotels.com merger agreement. See Michael Garvey, on Behalf
of Himself and All Others Similarly Situated v. Jonathan F. Miller et al., No. 20248-NC (New Castle
County). Also on April 10, 2003, the plaintiff in a purported shareholder derivative action on behalf of
Hotels.com filed an amended complaint to include class allegations regarding the merger transaction. See
Alex Solodovnikov, Derivatively on Behalf of Hotels.com v. Robert Diener et al., No. 03-02663 (District
Court, 160th Judicial District, Dallas County). In addition, on April 17, 2003, the plaintiffs in a
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