Overstock.com 2009 Annual Report Download - page 34

Table of Contents
Our prime broker litigation may have an adverse effect on our business and financial condition.
In February 2007, along with five shareholder plaintiffs, we 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,
we filed an amended complaint articulating in greater detail the allegations against the defendants. The use of management's time and attention in connection
with the litigation and related matters may reduce the time management is able to spend on other aspects of our business, which may have adverse effects on
other aspects of our business. To the extent that any such adverse effects exceed any benefits we may realize from pursuing the litigation, our business,
prospects, financial condition and results of operation may suffer..
We may be liable if third parties misappropriate our customers' personal information.
If third parties are able to penetrate our network security or otherwise misappropriate our customers' personal information or credit card information, or if
we give third parties improper access to our customers' personal information or credit card information, we could be subject to liability. This liability could
include claims for unauthorized purchases with credit card information, impersonation or other similar fraud claims or damages for alleged violations of state
or federal laws governing security protocols for the safekeeping of customers' personal or credit card information. This liability could also include claims for
other misuses of personal information, including unauthorized marketing purposes. These claims could result in litigation. Liability for misappropriation of
this information could adversely affect our business. In addition, the Federal Trade Commission and state agencies have been investigating various Internet
companies regarding their use of personal information. We could incur additional expenses if new regulations regarding the use of personal information are
introduced or if government agencies investigate our privacy practices.
We rely on encryption and authentication technology licensed from third parties as well internally developed technology to provide the security and
authentication necessary to effect secure transmission of confidential information such as customer credit card numbers. We cannot provide assurance that
advances in computer capabilities internet technology, new discoveries in the field of cryptography or other events or developments will not result in a
compromise or breach of the algorithms that we use to protect customer transaction data. If any such compromise of our security were to occur, it could harm
our reputation, business, prospects, financial condition and results of operations. A party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to
protect against such security breaches or to alleviate problems caused by such breaches. We cannot assure you that our security measures will prevent security
breaches or that failure to prevent such security breaches will not harm our business, prospects, financial condition and results of operations.
We may be subject to product liability claims that could be costly and time consuming.
We sell products manufactured for us by third parties, some of which may be defective. If any product that we sell were to cause physical injury or injury
to property, the injured party or parties could bring claims against us as the manufacturer and/or retailer of the product. Our insurance coverage may not be
adequate to cover every claim that could be asserted. If a successful claim were brought against us in excess of our insurance coverage, it could adversely
affect our business. Even unsuccessful claims could result in the expenditure of funds and management time and could have a negative impact on our
business.
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