LensCrafters 2007 Annual Report Download - page 169

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and Pearle Vision Care, Inc. The claims alleged various statutory violations related to the operation
of Pearle Vision Centers in California, including violations of California laws governing relationships
among opticians, optical retailers, manufacturers of frames and lenses and optometrists, false
advertising and other unlawful or unfair business practices. The action seeks unspecified damages,
disgorgement, restitution of allegedly unjustly obtained sums, civil penalties and injunctive relief,
including an injunction that would have prohibited defendants from providing eye examinations or
other optometric services at Pearle Vision Centers in California.
On July 18, 2007, the trial court entered a final judgment and permanent injunction, pursuant to a
stipulation of the parties, dismissing the case. The judgment required modification to Pearle Vision’s
advertising, and the payment by the Company of $2.5 million for attorneys’ fees and costs of investigation.
The payment was made in August 2007. The judgment does not bar Pearle Vision from advertising the
availability of eye exams and other optometric services provided by Pearle VisionCare at Pearle Vision
optical stores. Costs associated with the People v. Cole litigation incurred for the years ended December
31, 2007 and 2006, were approximately Euro 0.1 million and Euro 0.5 million, respectively.
Cole Consumer Class Action Lawsuit
In June 2006, in Seiken v. Pearle Vision, Inc. et al, Cole and its subsidiaries were sued by a consumer
in a purported class action which alleges various statutory violations related to the operation of Pearle
Vision and its affiliated HMO, Pearle VisionCare in California. The claims and remedies sought are
similar to those asserted in the LensCrafters and EYEXAM case. In December 2006, the court
granted defendants’ motion to dismiss the complaint but allowed plaintiff an opportunity to replead.
Defendants moved to dismiss the amended complaint in February 2007, and a hearing on the motion
was held in March 2007. Such motion to dismiss was denied. Plaintiff has moved for class
certification and the oral arguments relating to that petition, originally scheduled for April 4, 2008,
have been postponed. Recently, the parties reached an agreement in principle to settle this case,
subject to documentation and Court approval. The proposed settlement provides a store voucher at
Pearle or Lenscrafters to each class member and the payment of attorneys’ fees and costs. A hearing
to address approval of the settlement has not yet been scheduled. Although we believe that our
operational practices in California comply with California law, if the settlement does not receive final
approval and an adverse decision results, Pearle Vision or Pearle VisionCare may have to modify or
cease their activities in California. In addition, the Cole subsidiaries might be required to pay
damages and/or restitution, the amount of which might have a material adverse effect on the
Company’s consolidated financial statements. Costs associated with this Cole class action litigation
incurred for the years ended December 31, 2007 and 2006 were approximately Euro 0.7 million and
Euro 0.1 million, respectively. Management believes, based in part on advice from counsel, that no
estimate of the range of possible losses, if any, can be made at this time.
Oakley Shareholder Lawsuit
On June 26, 2007, Pipefitters Local No. 636 Defined Benefit Plan filed a purported class action
complaint in the Superior Court of California, County of Orange, on behalf of itself and all other
shareholders of Oakley Inc. against Oakley Inc. and each of its directors. The complaint alleged,
among other things, that the defendants violated their fiduciary duties to shareholders by approving
Oakley’s merger with Luxottica and claimed that the price per share fixed by the merger agreement
is inadequate and unfair. The defendants filed demurrers to the complaint, which the Court granted
without prejudice. On September 14, 2007, the plaintiff filed an amended complaint containing the
same allegations as the initial complaint and adding purported claims for breach of the duty of
candor. Because it believed the allegations were without merit, on October 9, 2007 the Company
demurred to the amended complaint. Rather than respond to that demurrer, the plaintiff admitted that
its claims were moot and on January 4, 2008 filed a motion for attorneys' fees and expenses. The
hearing for this motion, originally scheduled for March 27, 2008, took place on April 17, 2008. The