Redbox 2011 Annual Report Download - page 27

price was artificially inflated during the purported class period. Plaintiffs are seeking unspecified compensatory
damages, interest, an award of attorneys’ fees and costs, and injunctive relief. On January 11, 2012, we entered
into a memorandum of understanding with the other parties to settle and resolve the class action. The settlement
provides for a payment to the plaintiff class of $6.0 million which will be paid by our insurers. The parties are
currently working on a stipulation of settlement that will be filed with the Court in February 2012. The class
action settlement is subject to preliminary and, following notice to class members, final approval by the United
States District Court for the Western District of Washington. We have recorded the expected settlement amount
and corresponding insurance recovery within other accrued liabilities and prepaid expenses and other current
assets, respectively, in our Consolidated Balance Sheets.
Related to this putative class action complaint, on March 2 and 10, 2011, shareholder derivative actions were
filed in the Superior Court of the State of Washington (King County) on March, allegedly on behalf of and for
the benefit of Coinstar, against certain of its current and former directors and officers. Coinstar was named as a
nominal defendant. On April 12, 2011, the court consolidated these actions as a single action entitled In re
Coinstar, Inc. Derivative Litigation. A third substantially similar complaint was later filed in the same court. On
April 18, 2011, two purported shareholder derivative actions were filed in the U.S. District Court for the Western
District of Washington. On May 26, 2011, the court consolidated the federal derivative actions and joined them
with the securities class actions, captioned In re Coinstar Securities Litigation, for pre-trial proceedings. The
derivative plaintiffs’ consolidated complaint was filed on July 15, 2011. We moved to dismiss this complaint on
August 12, 2011on the ground that the plaintiffs had not made a pre-litigation demand on our Board of Directors
and had not demonstrated that such a demand would have been futile. On November 14, 2011, the court granted
our motion and issued an order dismissing the complaint with leave to amend the compliant. On November 23,
2011, plaintiffs moved to stay the action or defer filing of an amended complaint in order to allow them time to
inspect Coinstar’s books and records prior to any such amendment. On December 22, 2011, the court entered an
order granting in part and denying in part plaintiffs’ motion. The order grants plaintiffs’ request to defer filing of
an amended complaint until February 23, 2012, but provided that if plaintiffs choose to file an amended
complaint, they must pay attorneys’ fees incurred by defendants on the motion to dismiss the consolidated
complaint. The state and federal derivative complaints arise out of many of the factual allegations at issue in the
class action, and generally allege that the individual defendants breached fiduciary duties owed to Coinstar by
selling Coinstar stock while in possession of material non-public information, and participating in or failing to
prevent misrepresentations regarding Redbox expectations, performance, and internal controls. The complaints
seek unspecified damages and equitable relief, disgorgement of compensation, attorneys’ fees, costs, and
expenses. Because the complaints are derivative in nature, they do not seek monetary damages from Coinstar.
In March 2011, a California resident, Blake Boesky, individually and on behalf of all others similarly situated,
filed a putative class action complaint against our Redbox subsidiary in the U.S. District Court for the Northern
District of Illinois. The plaintiff alleges that Redbox retains personally identifiable information of consumers for
a time period in excess of that allowed under the Video Privacy Protection Act, 18 U.S.C. §§ 2710, et seq. A
substantially similar complaint was filed in the same court in March 2011 by an Illinois resident, Kevin
Sterk. Since the filing of the complaint, Blake Boesky has been replaced by a different named plaintiff, Jiah
Chung, and an amended complaint has been filed alleging disclosures of personally identifiable information, in
addition to plaintiffs’ claims of retention of such information. Plaintiffs are seeking statutory damages, injunctive
relief, attorneys’ fees, costs of suit, and interest. The court has consolidated the cases. The court has denied
Redbox’s motion to dismiss the plaintiffs’ claims involving retention of information, and is still considering
Redbox’s motion to dismiss plaintiffs’ claims involving disclosure of information. We believe that the claims
against us are without merit and intend to defend ourselves vigorously in this matter. Currently, no accrual has
been established as it is not possible to estimate the possible loss or range of loss because this matter had not
advanced to a stage where we could make any such estimate.
In February 2011, a California resident, Michael Mehrens, individually and on behalf of all others similarly
situated, filed a putative class action complaint against our Redbox subsidiary in the Superior Court of the State
of California, County of Los Angeles. The plaintiff alleges that, among other things, Redbox violated
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