Expedia 2005 Annual Report Download - page 29

consolidated action pending in the Delaware Chancery Court, which had consolidated a number of
putative class actions filed against Hotels.com, IAC and members of the board of directors of Hotels.com
as a result of IAC's announcement in June 2002 of its intention to enter into a Hotels.com acquisition
transaction, filed a consolidated and amended class-action complaint. See In re Hotels.com Shareholders
Litigation, No. 16662-NC (New Castle County). Pursuant to an agreement among the parties, the
defendants' time to respond to this complaint and to the complaint in the Garvey case has been adjourned
indefinitely. The complaints in these three actions allege, in essence, that the defendants breached their
fiduciary duties to Hotels.com's public shareholders by entering into and/or approving the merger
agreement, which allegedly did not reflect the true value of Hotels.com. Expedia believes that the
allegations in these lawsuits are without merit and will continue to defend vigorously against them.
Litigation Relating to Hotels.com's Guidance for the Fourth Quarter of 2002
Securities Class Action. On January 10, 2003, a putative class action, Daniel Taubenfeld et al., on
Behalf of Themselves and All Others Similarly Situated v. Hotels.com et al., No. 3:03-CV-0069-N, was
filed in the United States District Court for the Northern District of Texas, arising out of Hotels.com's
downward revision of its guidance for the fourth quarter of 2002. Three other substantially similar
securities class actions were filed in the same court shortly thereafter and were later consolidated with the
Taubenfeld action. The lead plaintiffs in this action filed a consolidated class-action complaint on
August 18, 2003 alleging violations of federal securities laws against Hotels.com and three of its former
executives. On September 27, 2004, the district court dismissed all of the plaintiffs' claims with prejudice,
with the exception of two claims involving statements by analysts. On August 10, 2005 the United States
Court of Appeals for the Fifth Circuit entered an order dismissing the plaintiffs' appeal of the district
court's ruling with prejudice.
Shareholder Derivative Suit. The action In re Hotels.com Derivative Litigation, No. 3:03-CV-501-K,
pending in United States District Court for the Northern District of Texas arises out of the same events as
the Taubenfeld action and consolidated two shareholder derivative actions, Anita Pomilo Wilson,
Derivatively on Behalf of Nominal Defendant Hotels.com v. Elan J. Blutinger et al., No. 3:03-CV-0501-K,
and Alex Solodovnikov, Derivatively on Behalf of Hotels.com v. Robert Diener et al., No. 3:03-CV-0812-K
originally filed in Texas state court on January 14, 2003 and March 14, 2003, respectively. On April 26,
2004, the lead plaintiff filed a consolidated amended complaint against Hotels.com (as a nominal
defendant only) and sixteen current or former directors of Hotels.com. The amended complaint alleges
breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust
enrichment. The lawsuit seeks damages, restitution and disgorgement of profits in an unspecified amount
and imposition of a constructive trust in favor of Hotels.com on the profits obtained by the selling
defendants on their sales of Hotels.com stock during a specified period. On March 7, 2005, the district
court issued orders staying the case until further notice and directing that the case be administratively
closed pending a decision in the appeal of the Taubenfeld action. On August 17, 2005, after the
Taubenfeld appeal was dismissed, the defendants filed a motion for a pretrial conference with the Court
giving notice of the Taubenfeld dismissal. The lead plaintiffs responded to the motion on September 7,
2005 and the defendants filed their reply on September 15, 2005. The Court has not ruled on this motion
and the case remains administratively closed.
Litigation Relating to Hotel Occupancy Taxes
Hotels.com. On June 20, 2003, a purported class action was filed in Texas state court against certain
Hotels.com-affiliated entities (""Hotels.com''). See Nora J. Olvera, Individually and on Behalf of All
Others Similarly Situated v. Hotels.com, Inc., No. DC-03-259 (District Court, 229th Judicial District,
Duval County). The complaint and subsequent amended complaints filed August 12, 2003 and May 6,
2004, allege that Hotels.com collects ""excess'' hotel occupancy taxes from consumers (i.e., allegedly
charges consumers more for occupancy taxes than it pays to the hotels for the hotels' use in satisfying
their obligations to the taxing authorities). The complaint sought certification of a nationwide class of all
persons who have purchased hotel accommodations from Hotels.com since June 20, 1999, as well as
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