Overstock.com 2010 Annual Report Download - page 120

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
14. COMMITMENTS AND CONTINGENCIES (Continued)
business and the sale of products on our Website. In connection with such litigation, we may be subject to significant damages. We may also be subject to
equitable remedies and penalties. Such litigation could be costly and time consuming and could divert or distract our management and key personnel from our
business operations. Due to the uncertainty of litigation and depending on the amount and the timing, an unfavorable resolution of some or all of these matters
could materially affect our business, results of operations, financial position, or cash flows.
On February 2, 2007, along with five shareholder plaintiffs, we filed a lawsuit in the Superior Court of California, County of San Francisco against
Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York,
Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., and UBS Financial Services, Inc. In
September 2007, we filed an amended complaint adding two plaintiff shareholders, naming Lehman Brothers Holdings Inc. as a defendant, eliminating the
previous claim of intentional interference with prospective economic advantage and clarifying various points of other claims in the original complaint. The
suit alleged that the defendants, who control over 80% of the prime brokerage market, participated in an illegal stock market manipulation scheme and that the
defendants had no intention of covering short sell orders with borrowed stock, as they are required to do, causing what are referred to as "fails to deliver" and
that the defendants' actions caused and continue to cause dramatic distortions within the nature and amount of trading in our stock as well as dramatic declines
in the share price of our stock. The suit asserts that a persistent large number of "fails to deliver" creates significant downward pressure on the price of a
company's stock and that the amount of "fails to deliver" has exceeded our entire supply of outstanding shares. The suit accused the defendants of violations
of California securities laws and common law, specifically, conversion, trespass to chattels, intentional interference with prospective economic advantage, and
violations of California's Unfair Business Practices Act. In April 2007, defendants filed a demurrer and motion to strike our complaint. We opposed the
demurrer and motion to strike. In July 2007 the court substantially denied defendants' demurrer and motion to strike. In November 2007, the defendants filed
additional motions to strike. In February 2008, the court denied defendants' motion to strike our claims under California's Securities Anti-Fraud statute and
defendants' motion to strike our common law punitive damages claims, but granted in part the defendants' motion to strike our claims under California's
Unfair Business Practices Act, while allowing our claims for injunctive relief under California's Unfair Business Practices Act. Lehman Brothers Holdings
filed for bankruptcy on September 15, 2008 and Barclays Bank has purchased its investment banking and trading business. We elected not to pursue our
claims against Lehman Brothers Holdings in the bankruptcy proceedings. Dislocations in the financial markets and economy could result in additional
bankruptcies or consolidations that may impact the litigation or the ability to collect a judgment. On January 12, 2009, Goldman Sachs Group, Inc., Goldman
Sachs & Co., Goldman Sachs Execution & Clearing L.P., Citigroup, Inc, Citigroup Global markets, Inc., Credit Suisse (USA) Inc., and Credit Suisse
Securities (USA) LLC filed a motion to strike portions of the Second Amended Complaint regarding certain allegations of conspiracy among defendants and
the request for punitive damages. Also, on January 12, 2009, Goldman Sachs Group, Inc., Goldman Sachs & Co., Goldman Sachs Execution & Clearing L.P.,
Citigroup, Inc, Citigroup Global markets, Inc., Credit Suisse (USA) Inc., and Credit Suisse Securities (USA) LLC filed a demurrer to the first and second
causes of action for conversion and trespass to chattels and a motion to strike various other allegations of the Second Amended Complaint. On March 19,
2009, the Court sustained the demurrer to first and second causes of action but granted leave to amend the complaint. The motion to strike was denied. On
April 20, 2009, we amended our
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