Home Depot 2008 Annual Report Download - page 15

Item 3. Legal Proceedings.
In August 2005, the Company received an informal request from the staff of the SEC for information related to the
Company’s return-to-vendor policies and procedures. Subsequent to August 2005, the SEC staff requested additional
information related to such policies and procedures. The SEC staff last contacted the Company regarding this matter in
January 2007. The Company responded to the requests and will continue to fully cooperate with the SEC staff. The SEC
has informed the Company that the informal inquiry is not an indication that any violations of law have occurred.
Although the Company cannot predict the outcome of this matter, it does not expect that this informal inquiry will have a
material adverse effect on its consolidated financial condition or results of operations.
The SEC informed the Company on December 10, 2008 that it does not intend to take any action on its informal inquiry
into the Company’s stock option granting practices, which inquiry commenced in June 2006. The Office of the
U.S. Attorney for the Southern District of New York also requested information on this subject in 2006. The Company
responded to each request and otherwise cooperated with the SEC and the Office of the U.S. Attorney, including
producing documents to the Office of the U.S. Attorney in late 2006. The SEC matter is therefore now closed, and we
have not received any communication from the Office of the U.S. Attorney since that time.
On October 8, 2008, the U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal of class actions filed
against the Company and certain of its current and former officers and directors in the U.S. District Court for the
Northern District of Georgia in Atlanta, alleging certain misrepresentations in violation of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder in connection with the Company’s return-to-vendor practices.
These actions were filed by certain current and former shareholders of the Company in the second quarter of 2006. Relief
sought in the amended complaint included unspecified damages and costs and attorney’s fees. The disposition of these
matters is now complete.
The Company has agreed to settle derivative and Securities Exchange Act of 1934 Section 14(a) claims filed against it
and certain of its current and former officers and directors relating to the Company’s return-to-vendor, stock option
granting and compensation practices. The claims were filed by certain shareholders of the Company from the second
quarter of fiscal 2006 through the fourth quarter of fiscal 2007. Relief sought included, among others, unspecified
damages, injunctive relief, disgorgement of profits, benefits and compensation obtained by the defendants, cancellation of
a new stock incentive plan and awards granted under such plan, punitive damages, costs and attorneys’ fees. Under the
terms of the settlement, the Company agreed to maintain or adopt certain corporate governance practices and to pay
plaintiff’s counsel attorneys’ fees and reimbursement of expenses in the aggregate amount of $14.5 million. The
settlement was approved by the Superior Court of Fulton County, Georgia, on June 10, 2008. The derivative and
Section 14(a) actions were dismissed in accordance with the settlement, and the disposition of these matters is now
complete.
The following actions have been filed against the Company and, in some cases, against certain of its current and former
officers and directors as described below. Although the Company cannot predict their outcome, it does not expect these
actions, individually or together, will have a material adverse effect on its consolidated financial condition or results of
operations.
In the second and third quarters of fiscal 2006, three purported, but uncertified, class actions were filed against the
Company, The Home Depot FutureBuilder Administrative Committee and certain of the Company’s current and former
directors and employees alleging breach of fiduciary duty in violation of the Employee Retirement Income Security Act of
1974 (“ERISA”) in connection with the Company’s return-to-vendor and stock option practices. These actions are before
the U.S. District Court for the Northern District of Georgia in Atlanta. In the first quarter of fiscal 2007, the plaintiffs
joined together in one case and voluntarily dismissed the other two cases. In March 2007, the three original plaintiffs and
two additional former employees filed a joint amended complaint seeking certification as a class action, unspecified
damages, costs, attorneys’ fees and equitable and injunctive relief. On September 10, 2007, the Court granted the
defendants’ motion to dismiss and entered judgment for the defendants. The plaintiffs appealed the dismissal and, on
July 31, 2008, the U.S. Court of Appeals for the Eleventh Circuit reversed the District Court’s decision on standing,
affirmed its finding that the plaintiffs failed to exhaust the administrative remedies provided under ERISA, and remanded
the matter to the District Court for further adjudication. The District Court has stayed the matter pending plaintiffs’
pursuit of their administrative remedies under ERISA.
10