NetZero 2011 Annual Report Download - page 41

Table of Contents
ITEM 3. LEGAL PROCEEDINGS
In April 2001 and in May 2001, lawsuits were filed in the United States District Court for the Southern District of New York against
NetZero, Inc. ("NetZero"), certain officers and directors of NetZero and the underwriters of NetZero's initial public offering, Goldman Sachs
Group, Inc., BancBoston Robertson Stephens, Inc. and Salomon Smith Barney, Inc. A consolidated amended complaint was filed in April 2002.
The complaint alleged that the prospectus through which NetZero conducted its initial public offering in September 1999 was materially false
and misleading because it failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed
commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the restricted number
of NetZero shares issued in connection with the offering; and (ii) the underwriters had entered into agreements with customers whereby the
underwriters agreed to allocate NetZero shares to those customers in the offering in exchange for which the customers agreed to purchase
additional NetZero shares in the aftermarket at pre-determined prices. Plaintiffs sought injunctive relief and damages. The case against NetZero
was coordinated with approximately 300 other suits filed against more than 300 issuers that conducted their initial public offerings between 1998
and 2000, their underwriters and an unspecified number of their individual corporate officers and directors. The parties in the approximately 300
coordinated class actions, including NetZero, the underwriter defendants in the NetZero class action, and the plaintiff class in the NetZero action,
reached an agreement in principle under which the insurers for the issuer defendants in the coordinated cases will make a settlement payment on
behalf of the issuers, including NetZero. In October 2009, the district court granted final approval of the settlement. The order approving the
settlement was appealed to the United States Court of Appeals for the Second Circuit. One appeal was dismissed, and a second appeal was
remanded to the district court. The district court then determined that the appellant lacked standing to appeal, and the appellant appealed the
district court's decision to the Second Circuit. The appellant subsequently entered into an agreement with counsel for the plaintiff class that
resulted in the dismissal with prejudice of his appeal in January 2012. As a result, the settlement among the parties is final.
In October 2008, Anthony Michaels filed a purported class action complaint against Classmates Online, Inc., now known as Memory
Lane, Inc., Classmates Media Corporation and United Online, Inc. in Superior Court of the State of California, County of Los Angeles, alleging
causes of action for intentional misrepresentation, negligent misrepresentation, negligence, fraudulent concealment, and for violations of
California Business and Professions Code sections 17200 and 17500 et seq. In December 2008, Xavier Vasquez filed a purported class action
complaint against Classmates Online, Inc., Classmates Media Corporation and United Online, Inc. in Superior Court of Washington, Kings
County, alleging causes of action for violation of the Washington Consumer Protection Act, violation of California's Unfair Competition Law,
violation of California's Consumer Legal Remedies Act, unjust enrichment and violation of California Civil Code section 1694, dealing with
dating services contracts. In both actions, the plaintiffs are seeking injunctive relief and damages. In April 2009, the United States District Court
of the Western District of Washington consolidated the Michaels and the Vasquez actions and designated the Michaels action as the lead case. In
March 2010, the parties entered into a comprehensive class action settlement agreement. In February 2011, the court denied final approval of
such settlement agreement. In March 2011, the parties entered into a revised settlement agreement and, in July 2011, the court issued an order
granting preliminary approval of the revised settlement agreement. The parties subsequently modified the settlement agreement in August 2011.
A hearing on plaintiffs' motion for final approval of the revised settlement agreement was held in December 2011. The parties are currently
awaiting the court's ruling on that motion.
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