eTrade 2012 Annual Report Download - page 169

within 30 of final approval of that order. Tate and Avakian filed an amended complaint on January 23, 2013,
adding an additional claim under California law. The Company will continue to defend itself vigorously in this
matter.
Based upon the same facts and circumstances alleged in the Freudenberg consolidated actions discussed
above, a verified shareholder derivative complaint was filed in the United States District Court for the Southern
District of New York on October 4, 2007 by Catherine Rubery, against the Company and its then Chief
Executive Officer, President/Chief Operating Officer, Chief Financial Officer and individual members of its
board of directors. The Rubery complaint was consolidated with another shareholder derivative complaint
brought by shareholder Marilyn Clark in the same court and against the same named defendants. On July 26,
2010, plaintiffs served their consolidated amended complaint, in which they also named Dennis Webb, the
Company’s former Capital Markets Division President, as a defendant. Plaintiffs allege, among other things,
causes of action for breach of fiduciary duty, waste of corporate assets, unjust enrichment, and violation of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint seeks, among other
things, unspecified monetary damages in favor of the Company, changes to certain corporate governance
procedures and various forms of injunctive relief. The parties agreed to settle this action and a Stipulation of
Settlement was signed on October 2, 2012, which included an agreement to implement or maintain certain
corporate governance procedures. The parties did not reach an agreement on the issue of plaintiffs’ attorneys’
fees, however. Plaintiffs submitted the Stipulation of Settlement to the Court on November 2, 2012, in
connection with an unopposed motion for preliminary approval of the settlement. The parties are awaiting the
scheduling of a hearing for preliminary approval of the settlement. The Stipulation of Settlement contemplates
that the issue of plaintiffs’ attorneys’ fees will be litigated in parallel with, but have no bearing on, final approval
of the settlement. The Company will continue to defend itself vigorously in this matter.
On February 3, 2010, a class action complaint was filed in the United States District Court for the Northern
District of California against E*TRADE Securities LLC by Joseph Roling on his own behalf and on behalf of all
others similarly situated. The lead plaintiff alleges that E*TRADE Securities LLC unlawfully charged and
collected certain account activity fees from its customers. Claimant, on behalf of himself and the putative class,
asserts breach of contract, unjust enrichment and violation of California Civil Code Section 1671 and seeks
equitable and injunctive relief for alleged illegal, unfair and fraudulent practices under California’s Unfair
Competition Law, California Business and Professional Code Section 17200 et seq. The plaintiff seeks, among
other things, certification of the class action on behalf of alleged similarly situated plaintiffs, unspecified
damages and restitution of amounts allegedly wrongfully collected by E*TRADE Securities LLC, attorneys’ fees
and expenses and injunctive relief. The Company moved to transfer venue on the case to the Southern District of
New York; that motion was denied. The Court granted the Company’s motion to dismiss in part and denied the
motion to dismiss in part. The Court bifurcated discovery to permit initial discovery on individual claims and
class certification. Following preliminary discovery, Plaintiffs moved to amend their verified complaint for a
second time, to assert new allegations and to add a plaintiff. The Company filed its opposition to this motion on
December 27, 2011. On March 27, 2012, the Court granted the Company’s motion for summary judgement and
granted the Company’s motion to dismiss. However, the Court allowed plaintiffs to seek a new class
representative and permitted limited discovery on a narrow issue as to when the fee increase was posted on the
Company’s website in 2005. On September 10, 2012, plaintiffs voluntarily withdrew the action with prejudice.
The Company paid no consideration for this dismissal, which was endorsed by the Court. There have been no
appeals of the Court’s order dismissing the action. This action is now closed.
On May 16, 2011, Droplets Inc., the holder of two patents pertaining to user interface servers, filed a
complaint in the U.S. District Court for the Eastern District of Texas against E*TRADE Financial Corporation,
E*TRADE Securities LLC, E*TRADE Bank and multiple other unaffiliated financial services firms. Plaintiff
contends that the defendants engaged in patent infringement under federal law. Plaintiff seeks unspecified
damages and an injunction against future infringements, plus royalties, costs, interest and attorneys’ fees. On
September 30, 2011, the Company and several co-defendants filed a motion to transfer the case to the Southern
District of New York. Venue discovery occurred throughout December 2011. On January 1, 2012, a new judge
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