Expedia 2008 Annual Report Download - page 28

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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 IAC’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 sought an order voiding the election of IAC’s then 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. The court
issued an opinion and order (i) granting the defendants’ motion to dismiss the complaint in the securities class
action, with leave to replead, and (ii) granting the defendants’ motion to dismiss the complaint in the
shareholder derivative suits, with prejudice.
On April 23, 2007, the plaintiffs in the shareholder derivative suits filed a notice of appeal to the
United States Court of Appeals for the Second Circuit from the District Court’s order of dismissal. On June 14,
2007, on consent of the parties, the appeal was withdrawn from active consideration by the Court of Appeals,
subject to reinstatement by no later than March 31, 2008.
On May 15, 2007, the plaintiffs in the securities class action filed a second amended complaint. The new
pleading continues to allege that the defendants failed to disclose material information concerning problems at
the Company’s then-travel businesses and to assert the same legal claims as its predecessor. On August 15,
2007, the defendants filed a motion to dismiss the second amended complaint. On October 19, 2007, the
plaintiffs opposed the motion. On November 9, 2007, the defendants filed their reply brief in support of the
motion. A hearing on the motion has not been scheduled.
Expedia believes that the claims in the class action and derivative suits lack merit and will continue to
vigorously defend against them.
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
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