Overstock.com 2009 Annual Report Download - page 132

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
16. COMMITMENTS AND CONTINGENCIES (Continued)
in the bankruptcy proceedings. Dislocations in the financial markets and economy could result in additional bankruptcies or consolidations that may impact
the litigation or the ability to collect a judgment. On January 12, 2009, Goldman Sachs Group, Inc., Goldman Sachs &Co., Goldman Sachs Execution &
Clearing L.P., Citigroup, Inc, Citigroup Global markets, Inc., Credit Suisse (USA) Inc., and Credit Suisse Securities (USA) LLC filed a motion to strike
portions of the Second Amended Complaint regarding certain allegations of conspiracy among defendants and the request for punitive damages. Also, on
January 12, 2009, Goldman Sachs Group, Inc., Goldman Sachs &Co., Goldman Sachs Execution & Clearing L.P., Citigroup, Inc, Citigroup Global
markets, Inc., Credit Suisse (USA) Inc., and Credit Suisse Securities (USA) LLC filed a demurrer to the first and second causes of action for conversion and
trespass to chattels and a motion to strike various other allegations of the Second Amended Complaint. On March 19, 2009, the Court sustained the demurrer
to first and second causes of action but granted leave to amend the complaint. The motion to strike was denied. On April 20, 2009, the Company amended its
complaint against all the defendants, re-pleading conversion and trespass to chattels causes of action. Defendants again filed demurrer to the amended
complaint and, on July 23, 2009, the court sustained the demurrer. Discovery in this case continues. A trial date has been set for September 12, 2011. The
Company intends to continue to vigorously prosecute this action.
On April 15, 2008, the Company received a letter from the Office of the District Attorney of Marin County, California, stating that the District Attorneys
of Marin and four other counties in Northern California have begun an investigation into the way the Company advertises products for sale, together with an
administrative subpoena seeking related information and documents. The subpoena requests a range of documents, including documents relating to pricing
methodologies, definitions of core and partner product, as well as other site-defined terms, and the methods of internal and external pricing of products, as
well as documents related to the pricing of a list of product items identified in the subpoena. The Company has responded to the subpoena and has engaged in
resolution discussions with these authorities. The Company received correspondence from the Office of the District Attorney of the County of Monterey in
which the respective offices of the various district attorneys have made a collective proposal to resolve the dispute by the Company's payment of $7,500,000
in penalties and reimbursement. The Company disagrees with the proposal and continues to discuss this matter with the authorities involved. The Company
believes that it follows industry advertising practices and intends to continue to cooperate with the investigation.
On May 30, 2008 the Company filed a complaint in New York state court against the New York State Department of Taxation and Finance, its
Commissioner, the State of New York and its governor, alleging that a recently enacted New York state tax law is unconstitutional. The effect of the New
York law is to require Internet sellers to collect and remit New York sales taxes on their New York sales even if the seller has no New York tax "nexus" other
than with New York based independent contractors who are Internet advertising affiliates. The complaint asks for the court to declare the law unconstitutional
and enjoin its application to the Company. New York filed a motion to dismiss. The Company responded to the motion and filed a motion for summary
judgment, and both motions were heard simultaneously. On January 12, 2009, the court granted New York's motion to dismiss and denied the Company's
motion for summary judgment. On February 12, 2009, the Company filed notice of appeal, and argued the appeal on October 29, 2009. The appeal is still
pending before the New York Supreme Court, Appellate Division.
F-37