eBay 2005 Annual Report Download - page 112

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eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
the settlement, certain PayPal account holders are eligible to receive payment from a settlement fund of
$9.25 million, less administrative costs and the amount awarded to plaintiffs' counsel by the court. That sum is
being distributed to class members who have submitted timely claims in accordance with the settlement's plan
of allocation. The plan of allocation for a portion of the settlement fund that remains undistributed must still
be approved by the court. That plan was recently approved by the Special Master, who has recommended that
the District Court issue its approval. Substantially all of the cost associated with the settlement was reserved in
2003.
In July 2004, a purported class action lawsuit was filed by two eBay users in Superior Court of the State
of California, County of Santa Clara (No. 104CV022708) alleging that eBay engaged in improper billing
practices as the result of problems with the rollout of a new billing software system in the second and third
quarters of 2004. The lawsuit sought damages and injunctive relief. An amended complaint was filed in
January 2005, dropping one plaintiff, changing the capacity of the other plaintiff to that of representative
plaintiff, and adding seven additional eBay users as plaintiffs. The amended complaint expanded its claim to
include numerous alleged improper billing practices from September 2003 until the present. In February 2005,
eBay filed a motion to strike and a demurrer seeking to dismiss the complaint. In April 2005, the court
sustained portions of the demurrer, but granted the plaintiffs leave to amend their complaint. The plaintiffs
filed a second amended complaint, dropping the last original plaintiff and again adding new plaintiffs. We filed
a motion to strike and a demurrer regarding the plaintiffs' second amended complaint. In July 2005, the court
again sustained a portion of the demurrer and again granted the plaintiffs leave to amend their complaint, and
the plaintiffs filed a third amended complaint. In December 2005, the plaintiffs filed a fourth amended
complaint, dropping several plaintiffs. In January 2006, the parties reached tentative agreement on the terms
of a settlement, though the settlement has not been finalized.
In February 2005, eBay was sued in Superior Court of the State of California, County of Santa Clara
(No. 105CV035930) in a purported class action alleging that certain bidding features of our site constitute
""shill bidding'' for the purpose of artificially inflating bids placed by buyers on the site. The complaint alleges
violations of California's Auction Act, California's Consumer Remedies Act, and unfair competition. The
complaint seeks injunctive relief, damages, and a constructive trust. In April 2005, we filed a demurrer seeking
to dismiss the complaint, and a hearing on the demurrer was held in February 2006. We believe that we have
meritorious defenses and intend to defend ourselves vigorously.
In March 2005, eBay, PayPal, and an eBay seller were sued in Supreme Court of the State of New York,
County of Kings (No. 6125/05) in a purported class action alleging that certain disclosures regarding PayPal's
Buyer Protection Policy, users' chargeback rights, and the effects of users' choice of funding mechanism are
deceptive and/or misleading. The complaint alleged misrepresentation on the part of eBay and PayPal, breach
of contract and deceptive trade practices by PayPal, and that PayPal and eBay have jointly violated the civil
RICO statute (18 U.S.C. Section 1961(4)). In April 2005, eBay and PayPal removed the case to the
U.S. District Court for the Eastern District of New York and the plaintiffs filed an amended complaint in the
U.S. District Court (No. 05-CV-01720) repeating the allegations of the initial complaint but dropping the
civil RICO allegations. The complaint seeks injunctive relief, compensatory damages, and punitive damages.
Following several mediation sessions, the parties reached a tentative settlement in December 2005. The parties
are still engaged in the process of documenting this settlement. In order for the settlement to become final, the
court must preliminarily approve its terms, and the settlement must then receive final approval from the court
after a public hearing. The full amount of the proposed settlement was accrued in our consolidated income
statement for the year ended December 31, 2005.
In January 2005, 51 former shareholders of Epinions, Inc. common stock including founders and former
employees of that company filed a lawsuit in Superior Court of the State of California County of
San Francisco (No. CGC 05-437906) related to the April 2003 merger of Epinions and DealTime, Ltd. The
lawsuit was filed against certain of Epinions' former officers and directors and preferred shareholders and the
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