Overstock.com 2010 Annual Report Download - page 122

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
14. COMMITMENTS AND CONTINGENCIES (Continued)
The parties extended by agreement the time for defendants' answer, including our answer, and thereafter, the Plaintiff and Facebook proposed a stipulated
settlement to the court for approval, which would resolve the case without requirement of financial contribution from us. On March 17, 2010, over objections
lodged by some parties, the court accepted the proposed settlement. Various parties objecting to the settlement have appealed and their appeal is now pending.
The nature of the loss contingencies relating to claims that have been asserted against us are described above. However, no estimate of the loss or range of
loss can be made.
On November 14, 2008, we filed suit in Ohio state court against the Ohio Tax Commissioner, the Ohio Attorney General and the Governor of Ohio,
alleging the Ohio Commercial Activity Tax is unconstitutional. Enacted in 2005, Ohio's Commercial Activity Tax is based on activities in Ohio that
contribute to production or gross income for a company whether or not the company has a physical presence in or nexus within the state. Our complaint asked
for a judgment declaring the tax unconstitutional and for an injunction preventing any enforcement of the tax. The defendants moved to dismiss the case. On
July 28, 2009, the trial court ruled that there was no justiciable controversy in the case, as we had not yet been assessed a tax, and it granted the defendants'
motions to dismiss. In September 2009, we received a letter of determination from the Ohio Department of Taxation noting the Department's determination
that we are required to register for remitting of the Commercial Activity Tax, and owe $612,784 in taxes, interest, and penalties as of June 30, 2009. The Ohio
Department of Taxation issued additional estimated assessments of estimated tax, interest and penalties totaling $24,545 for the period July 1, 2009 through
December 31, 2009 in September, 2010. We have filed protests to challenge the Department's Assessments on constitutional grounds and the matter is
currently pending before the Ohio Department of Taxation's Legal Division for administrative review and determination. The nature of the loss contingencies
relating to claims that have been asserted against us are described above. We believe the determinations to be unlawful, erroneous and are vigorously
contesting the determination.
On March 10, 2009, we were sued in a class action filed in the United States District Court, Eastern District of New York. Cynthia Hines, the nominative
plaintiff on behalf of herself and others similarly situated, seeks damages under claims for breach of contract, common law fraud and New York consumer
fraud laws. The Plaintiff alleges we failed to properly disclose our returns policy to her and that we improperly imposed a "restocking" charge on her return of
a vacuum cleaner. We filed a motion to dismiss based upon assertions that our agreement with our customers requires all such actions to be arbitrated in Salt
Lake City, Utah. Alternatively, we asked that the case be transferred to the United States District Court for the District of Utah, so that arbitration may be
compelled in that district. On September 8, 2009 the motion to dismiss or transfer was denied, the court stating that our browsewrap agreement was
insufficient under New York law to establish an agreement with the customer to arbitrate disputes in Utah. On October 8, 2009, we filed a Notice of Appeal of
the court's ruling. The appeal was denied. On December 31, 2010 Hines filed an amended complaint. The amended complaint eliminated common law fraud
claims and breach of contract claims and added claims for breach of Utah's consumer protection statute and various other state consumer protection statutes.
The amended complaint also asks for an injunction. The nature of the loss contingencies relating to claims that have been asserted against us are described
above. However, no estimate of the loss or range of loss can be made. The suit is in discovery, and we intend to vigorously defend this action.
F-33