Overstock.com 2009 Annual Report Download - page 131

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
16. COMMITMENTS AND CONTINGENCIES (Continued)
and certain of its current and former directors. The Copper River cross-complaint alleged cross-defendants engaged in violations of California's state securities
laws, violations of California's unfair business practices act, tortuous interference with contract and prospective business advantage, and deceit. In January
2008, each of the cross-defendants filed various motions in opposition to this cross-complaint. On April 23, 2008, the court dismissed Copper River's cross
claims against various former directors of the Company, and dismissed various claims against the Company in the cross-complaint. The court declined to
dismiss Copper River's securities fraud claims and its request for an injunction for unfair business practices against the Company and Patrick Byrne and the
claims for tortuous interference with contract and prospective business advantage against the Company, Patrick Byrne and John Fisher, though later all claims
against John Fisher were dismissed. On October 10, 2008, the Company and Patrick Byrne reached a confidential settlement agreement with Gradient
Analytics and its current and former principals. Shortly thereafter, those claims against those Gradient defendants were dismissed. Subsequently, on
December 8, 2009, the Company entered a settlement with the remaining defendants. Under the settlement Copper River Partners, L.P. and Copper River
Funds jointly paid the Company $5 million and Copper River Parners L.P. dismissed its claims. Once the Company received payment, the Company
dismissed its claims. Following settlement, the court dismissed the case.
On February 2, 2007, along with five shareholder plaintiffs, the Company filed a lawsuit in the Superior Court of California, County of San Francisco
against Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York,
Citigroup Inc., Credit Suisse (USA) Inc., Deutsche Bank Securities, Inc., Merrill Lynch, Pierce, Fenner & Smith, Inc., and UBS Financial Services, Inc. In
September 2007, the Company filed an amended complaint adding two plaintiff shareholders, naming Lehman Brothers Holdings Inc. as a defendant,
eliminating the previous claim of intentional interference with prospective economic advantage and clarifying various points of other claims in the original
complaint. The suit alleged that the defendants, who control over 80% of the prime brokerage market, participated in an illegal stock market manipulation
scheme and that the defendants had no intention of covering short sell orders with borrowed stock, as they are required to do, causing what are referred to as
"fails to deliver" and that the defendants' actions caused and continue to cause dramatic distortions within the nature and amount of trading in the Company's
stock as well as dramatic declines in the share price of the Company's stock. The suit asserts that a persistent large number of "fails to deliver" creates
significant downward pressure on the price of a company's stock and that the amount of "fails to deliver" has exceeded the Company's entire supply of
outstanding shares. The suit accuses the defendants of violations of California securities laws and common law, specifically, conversion, trespass to chattels,
intentional interference with prospective economic advantage, and violations of California's Unfair Business Practices Act. In April 2007, defendants filed a
demurrer and motion to strike the Company's complaint. The Company opposed the demurrer and motion to strike. In July 2007 the court substantially denied
defendants' demurrer and motion to strike. In November 2007, the defendants filed additional motions to strike. In February 2008, the court denied defendants'
motion to strike the Company's claims under California's Securities Anti-Fraud statute and defendants' motion to strike the Company's common law punitive
damages claims, but granted in part the defendants' motion to strike Overstock's claims under California's Unfair Business Practices Act, while allowing the
Company's claims for injunctive relief under California's Unfair Business Practices Act. Lehman Brothers Holdings filed for bankruptcy on September 15,
2008 and Barclays Bank has purchased its investment banking and trading business. The Company elected not to pursue its claims against Lehman Brothers
Holdings
F-36