Etsy 2015 Annual Report Download - page 105


Etsy, Inc.
Notes to Consolidated Financial Statements

The Company had reserves of $3.5 million and $2.6 million at December 31, 2014 and 2015, respectively, for certain non-income tax obligations,
representing management’s best estimate of its potential liability. The Company could also be subject to examination in various jurisdictions related to
income tax and non-income tax matters. The resolution of these types of matters, if in excess of the recorded reserve, could have an adverse impact on the
Company’s business.

On May 13, 2015, a purported securities class action complaint (, Docket No. 1:15-cv-02785) was filed in the United States District
Court for the Eastern District of New York against the Company and certain officers. The complaint was brought on behalf of a purported class consisting of
all persons or entities who purchased or otherwise acquired shares of the Company's common stock from April 16, 2015 through and including May 10, 2015.
It asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on allegedly false or misleading statements and omissions
with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright infringement
and actions taken by third-party brands against Etsy sellers for trademark or copyright infringement.
On October 22, 2015, the court appointed a lead plaintiff and lead plaintiff’s counsel. On January 21, 2016, lead plaintiff filed an amended class action
complaint alleging false or misleading statements or omissions with respect to substantially the same topics as the original complaint. The amended
complaint adds certain outside directors and underwriters as defendants, expands the purported class period to be April 16, 2015 to August 4, 2015, inclusive,
and asserts violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as Sections 10(b) and 20(a) of the Securities Exchange Act of
1934. The amended complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. The Company and
the named officers and directors intend to defend themselves vigorously against this action. In light of, among other things, the early stage of the litigation,
the Company is unable to predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could
result from an unfavorable outcome.
On July 21, 2015, a purported securities class action complaint (., Case No. CIV 534768) was filed in the Superior Court of State
of California, County of San Mateo against the Company, certain officers, directors and underwriters. The complaint asserts violations of Sections 11 and 15
of the Securities Act of 1933. As in the  litigation, the complaint alleges misrepresentations in the Company’s Registration Statement on Form S-1
and Prospectus with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or
copyright infringement. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys' fees. On
December 7, 2015, the Company and the underwriter defendants moved to stay the Cervantes action on the grounds of 
On November 5, 2015, another purported securities class action complaint (, No. CIV 536123) was filed in the Superior Court of State of
California, County of San Mateo. The Weiss complaint names as defendants the Company and the same officers, directors and underwriters named in the
Cervantes complaint, and also asserts violations of Sections 11 and 15 of the Securities Act of 1933 based on allegedly false or misleading statements or
omissions with respect to, among other things, merchandise for sale on the Company's website that may be counterfeit or constitute trademark or copyright
infringement. On December 24, 2015, the court consolidated the Cervantes and Weiss actions. The Company and the named officers and directors intend to
defend themselves vigorously against these consolidated actions. In light of, among other things, the early stage of the litigation, the Company is unable to
predict the outcome of this matter and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from an unfavorable
outcome. On February 3, 2016, the court granted the Company’s motion to stay the consolidated actions.
In addition, from time to time in the normal course of business, various other claims and litigation have been asserted or commenced against the Company.
Due to uncertainties inherent in litigation and other claims, the Company can give no assurance that it will prevail in any such matters, which could subject
the Company to significant liability for damages. Any claims or litigation, regardless of their success, could have an adverse effect on the Company’s
consolidated results of operations or cash flows in the period the claims or litigation are resolved. As of December 31, 2015, the Company does not believe
that there are any material litigation exposures relating to these other claims.
100