Expedia 2006 Annual Report Download - page 25

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Securities Class Action Litigation against IAC.
Beginning on September 20, 2004, twelve purported shareholder class actions were commenced in the
United States District Court for the Southern District of New York against IAC and certain of its officers and
directors, alleging violations of the federal securities laws. These cases arose out of IAC’s August 4, 2004
announcement of its earnings for the second quarter of 2004 and generally alleged that the value of the
Company’s stock was artificially inflated by pre-announcement statements about its financial results and
forecasts that were false and misleading due to the defendants’ alleged failure to disclose various problems
faced by IAC’s travel businesses. On December 20, 2004, the district court consolidated the twelve lawsuits,
appointed co-lead plaintiffs, and designated co-lead plaintiffs’ counsel. See In re IAC/InterActiveCorp
Securities Litigation, No. 04-CV-7447 (S.D.N.Y.). Expedia is not a party to this litigation, however, under the
terms of its Separation Agreement with IAC, Expedia has generally agreed to bear a portion of the costs and
liabilities, if any, associated with any securities law litigation relating to conduct prior to the Spin-Off of the
businesses or entities that comprise Expedia following the Spin-Off.
On October 18, 2004, a related shareholder derivative action, Stuart Garber, Derivatively on Behalf of
IAC/InterActiveCorp v. Barry Diller et al., No. 04-603416, was commenced in the Supreme Court of the State
of New York (New York County) against certain of IAC’s officers and directors. On November 15, 2004,
another related shareholder derivative action, Lisa Butler, Derivatively on Behalf of IAC/InterActiveCorp v.
Barry Diller et al., No. 04-CV-9067, was filed in the United States District Court for the Southern District of
New York against certain of IAC’s current and former directors. On January 24, 2005, the federal district court
consolidated the Butler case with the securities class action for pre-trial purposes only. On April 11, 2005, the
district court issued a similar consolidation order in respect of the Garber case.
On July 5, 2005, the plaintiffs in the related shareholder suits filed a consolidated shareholder derivative
complaint against IAC (as a nominal defendant) and sixteen current or former officers or directors of IAC or
its former travel business. The complaint, which is based upon factual allegations similar to those in the
securities class action, purports to assert claims for breach of fiduciary duty, abuse of control, gross
mismanagement, waste of corporate assets, unjust enrichment, violation of Section 14(a) of the Exchange Act,
and contribution and indemnification. The complaint seeks an order voiding the election of the IAC’s current
Board of Directors, as well as damages in an unspecified amount, various forms of equitable relief, restitution,
and disgorgement of remuneration received by the individual defendants from IAC.
On September 15, 2005, IAC and the other defendants filed motions to dismiss both the securities class
action and the shareholder derivative suits. On November 30, 2005, the plaintiffs filed their opposition to the
motions. On January 6, 2006, the defendants filed reply papers in further support of the motions. Both motions
to dismiss remain pending. On October 12, 2006, the Court heard oral argument on the motions to dismiss,
but has not yet issued a ruling on those motions.
Expedia believes that the claims in the class action and derivative suits lack merit and that the claims will
be vigorously defended.
Litigation Relating to the IAC/Hotels.com Merger Agreement
A putative class action on behalf of Hotels.com stockholders was filed in the Delaware Chancery Court
against Hotels.com, IAC, and members of the Board of Directors of Hotels.com on April 10, 2003, the day of
the announcement of the IAC/Hotels.com merger agreement. See Michael Garvey, on Behalf of Himself and
All Others Similarly Situated v. Jonathan F. Miller et al., No. 20248-NC (New Castle County). Also on
April 10, 2003, the plaintiff in a purported shareholder derivative action on behalf of Hotels.com filed an
amended complaint to include class allegations regarding the merger transaction. See Alex Solodovnikov,
Derivatively on Behalf of Hotels.com v. Robert Diener et al., No. 03-02663 (District Court, 160th Judicial
District, Dallas County). In addition, on April 17, 2003, the plaintiffs in a 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
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