NetZero 2011 Annual Report Download - page 42

Table of Contents
We have been cooperating with certain governmental authorities in connection with their respective investigations of our former post-
transaction sales practices and certain other current or former business practices:
•
In 2010, FTD.com Inc. and Classmates Online, Inc. received subpoenas from the Attorney General for the State of Kansas and the
Attorney General for the State of Maryland, respectively. These subpoenas were issued on behalf of a Multistate Work Group that
consists of the Attorneys General for the following states: Alabama, Alaska, Delaware, Florida, Idaho, Illinois, Kansas, Maine,
Maryland, Michigan, New Mexico, New Jersey, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Vermont, and
Washington. Based on the subpoenas, the Company believes that the primary focus of the inquiry concerns certain post-
transaction sales practices in which these subsidiaries previously engaged with certain third-party vendors.
•
In 2010, Classmates Online, Inc. received a subpoena from the Attorney General for the District of Columbia regarding the
subsidiary's marketing, billing, and renewal practices, including, without limitation, its former post-transaction sales practices.
•
In July 2011, United Online, Inc. received a civil investigative demand from the Federal Trade Commission regarding certain
post-transaction sales practices in which we previously engaged with a certain third-party vendor.
• In July 2011, Classmates Online, Inc. received a civil investigative demand from the Attorney General for the State of
Washington regarding its marketing, refund, cancelation, and renewal practices. In 2009, Classmates Online, Inc. had received a
civil investigative demand from the Attorney General for the State of Washington regarding certain post-transaction sales
practices in which it had previously engaged with certain third-party vendors.
We cannot predict the outcome of these or any other governmental investigations or other legal actions or their potential implications for
our business. There are no assurances that additional governmental investigations or other legal actions will not be instituted in connection with
our former post-transaction sales practices or other current or former business practices.
We record a liability when we believe that it is both probable that a loss will be incurred, and the amount of loss can be reasonably
estimated. We evaluate, at least quarterly, developments in our legal matters that could affect the amount of liability that has been previously
accrued, and make adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount. We may
be unable to estimate a possible loss or range of possible loss due to various reasons, including, among others: (i) if the damages sought are
indeterminate; (ii) if the proceedings are in early stages, (iii) if there is uncertainty as to the outcome of pending appeals, motions or settlements,
(iv) if there are significant factual issues to be determined or resolved, and (v) if there are novel or unsettled legal theories presented. In such
instances, there is considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. At
December 31, 2011, we had reserves of $4.8 million for pending legal settlements. With respect to the other legal matters described above, we
have determined, based on our current knowledge, that the amount of possible loss or range of loss, including any reasonably possible losses in
excess of amounts already accrued, is not reasonably estimable. However, legal matters are inherently unpredictable and subject to significant
uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters will not
materially and adversely affect our business, financial condition, results of operations, or cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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