eTrade 2009 Annual Report Download - page 162

Certain leases contain provisions for renewal options and rent escalations based on increases in certain costs
incurred by the lessor. Rent expense from continuing operations, net of sublease income, was $24.5 million,
$25.6 million and $25.0 million for the years ended December 31, 2009, 2008 and 2007, respectively. Rent
expense excludes costs related to leases involved in facility restructurings, which are recorded in the facility
restructuring and other exit activities line item in the consolidated statement of loss.
NOTE 22—COMMITMENTS, CONTINGENCIES AND OTHER REGULATORY MATTERS
Legal Matters
Litigation Matters
On October 27, 2000, Ajaxo, Inc. (“Ajaxo”) filed a complaint in the Superior Court for the State of
California, County of Santa Clara. Ajaxo sought damages and certain non-monetary relief for the Company’s
alleged breach of a non-disclosure agreement with Ajaxo pertaining to certain wireless technology that Ajaxo
offered the Company as well as damages and other relief against the Company for their alleged misappropriation
of Ajaxo’s trade secrets. Following a jury trial, a judgment was entered in 2003 in favor of Ajaxo against the
Company for $1.3 million dollars for breach of the Ajaxo non-disclosure agreement. Although the jury also
found in favor of Ajaxo on its claim against the Company for misappropriation of trade secrets, the trial court
subsequently denied Ajaxo’s requests for additional damages and relief. On December 21, 2005, the California
Court of Appeal affirmed the above-described award against the Company for breach of the nondisclosure
agreement but remanded the case to the trial court for the limited purpose of determining what, if any, additional
damages Ajaxo may be entitled to as a result of the jury’s previous finding in favor of Ajaxo on its claim against
the Company for misappropriation of trade secrets. Although the Company paid Ajaxo the full amount due on the
above-described judgment, the case, consistent with the rulings issued by the Court of Appeal, was remanded
back to the trial court, and on May 30, 2008, a jury returned a verdict in favor of the Company denying all claims
raised and demands for damages against the Company. Following the trial court’s filing of entry of judgment in
favor of the Company on September 5, 2008, Ajaxo filed post-trial motions for vacating this entry of judgment
and requesting a new trial. On November 4, 2008, the trial court denied these motions. On December 2, 2008,
Ajaxo filed a notice of appeal with the Court of Appeal of the State of California for the Sixth District, and the
parties completed the briefing of Ajaxo’s appeal on December 14, 2009. The Company will continue to
vigorously defend itself and oppose Ajaxo’s appeal.
On October 11, 2006, a state class action was filed by Nikki Greenberg on her own behalf and on behalf of
all those similarly situated plaintiffs, in the Superior Court for the State of California, County of Los Angeles on
behalf of all customers or consumers who allegedly made or received telephone calls from the Company that
were recorded without their knowledge or consent. On February 7, 2008, class certification was granted and the
class defined to consist of (1) all persons in California who received telephone calls from the Company and
whose calls were recorded without their consent within three years of October 11, 2006, and (2) all persons who
made calls from California to the Beverly Hills branch of the Company on August 8, 2006. Plaintiffs sought to
recover unspecified monetary damages plus injunctive relief, including punitive and exemplary damages,
interest, attorneys’ fees and costs. On October 16, 2009, the court granted final approval of the parties’ proposed
settlement agreement. Objectors to the court’s order granting final approval of the parties’ settlement agreement
filed notices of appeal which were subsequently dismissed on January 26, 2010.
On October 2, 2007, a class action complaint alleging violations of the federal securities laws was filed in
the United States District Court for the Southern District of New York against the Company and its then Chief
Executive Officer and Chief Financial Officer, Mitchell H. Caplan and Robert J. Simmons, by Larry Freudenberg
on his own behalf and on behalf of other similarly situated (the “Freudenberg Action”). On July 17, 2008, the
trial court consolidated this action with four other purported class actions, all of which were filed in the United
States District Court for the Southern District of New York and which were based on the same facts and
circumstances. On January 16, 2009, plaintiffs served their consolidated amended class action complaint in
which they also named Dennis Webb, the Company’s former Capital Markets Division President as defendant.
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