Overstock.com 2013 Annual Report Download - page 88

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application to us. New York filed a motion to dismiss. We 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 our motion for summary judgment. We appealed the
decision, and the New York Appellate Division upheld part of the lower court’s ruling rejecting our claims that the law is unconstitutional on its face, but
remanded to the trial court our claims that the law is unconstitutional as applied. We filed with the New York State Court of Appeals a motion for leave to
appeal the portions of the decision upholding the lower court’s ruling. On March 15, 2011, the Appellate Division of the New York State Court of Appeals
denied our motion. We then determined not to pursue in the trial our claims that the law is unconstitutional as applied and proceeded with an appeal to the New
York State Court of Appeals of the Appellate Division’s ruling on our claim that the statute is unconstitutional on its face. On March 28, 2013, New York
State Court of Appeals denied the appeal. We petitioned the Supreme Court of the United States for a writ of certiorari which was denied on December 2, 2013,
concluding the appeal and the case.
On August 12, 2008, we along with seven other defendants, were sued in the United States District Court for the Northern District of California, by
Sean Lane, and seventeen other individuals, on their own behalf and for others similarly in a class action suit, alleging violations of the Electronic
Communications Privacy Act, Computer Fraud and Abuse Act, Video Privacy Protection Act, and California’s Consumer Legal Remedies Act and Computer
Crime Law. The complaint relates to our use of a product known as Facebook Beacon. The Plaintiff and Facebook proposed a stipulated settlement to the
Court for approval, which would resolve the case without requirement of financial contribution from us. On March 17, 2010, over objections lodged by some
parties, the Court entered an order accepting settlement. Various parties appealed and the Federal Appeals Court for the 9th Circuit upheld the settlement.
Appealing parties petitioned for a rehearing which the Court denied. The appealing parties petitioned the Supreme Court of the United States for a writ of
certiorari, which was denied November 4, 2013, concluding the case.
On November 14, 2008, we filed suit in Ohio state court against the Ohio Tax Commissioner, the Ohio Attorney General and the Governor of Ohio,
alleging the Ohio Commercial Activity Tax is unconstitutional. Enacted in 2005, Ohio’s Commercial Activity Tax is based on activities in Ohio that contribute
to production or gross income for a company whether or not the company has a physical presence, or “nexus,” within the state. Our complaint asked for a
judgment declaring the tax unconstitutional and for an injunction preventing enforcement of the tax. The defendants moved to dismiss. On July 28, 2009, the
trial court granted the defendants’ motions to dismiss. In September 2009, we received a letter of determination from the Ohio Department of Taxation noting
the Department’s determination that we were required to register for remitting of the Commercial Activity Tax, and owed $612,784 in taxes, interest, and
penalties as of June 30, 2009. The Ohio Department of Taxation issued additional estimated assessments of estimated tax, interest and penalties totaling
$170,322 as of September 30, 2013. We filed protests to challenge the Department’s Assessments on constitutional grounds. A hearing on these matters was
held November 18, 2011. Before a ruling issued, we reached an agreement in principle with the Ohio Department which required our payment of a diminished
amount of the estimated assessments, a reduction in interest and waiver of penalties, and the case is now concluded.
On September 23, 2009, SpeedTrack, Inc. sued us along with 27 other defendants in the United States District Court in the Northern District of
California. We are alleged to have infringed a patent covering search and categorization software. We believe that certain third party vendors of products and
services sold to us are contractually obligated to indemnify us in this action. On November 11, 2009, the parties stipulated to stay all proceedings in the case
until resolution of a reexamination of the patent in question, and also until a previously filed infringement action against Wal-Mart Stores, Inc. and other
retailers resulted either in judgment or dismissal. Subsequently, the parties agreed to extend the time for defendants’ complaint answer until 21 days following
a court order to lift the stay to which the parties stipulated. The United States Patent and Trademark Office resolved the reexamination of the patent in question
in favor of SpeedTrack, Inc. The case remains stayed, pending the outcome and appeal of the infringement action against Wal-Mart Stores, Inc. and other
retailers. On February 22, 2012, the court in the Wal-Mart Stores case granted Wal-Mart Stores’ motion for summary judgment of non-infringement. The
court also granted Speedtrack’s motion for summary judgment on patent validity. Speedtrack is appealing the ruling. It is not known whether the summary
judgments granted in the Wal-Mart Stores case will have an effect on the Speedtrack case in which we are named as one of the defendants. The nature of the
loss contingencies relating to claims that have been asserted against us are described above. However no estimate of the loss or range of loss can be made. We
intend to vigorously defend this action and pursue our indemnification rights with our vendors.
On September 29, 2010, a trustee in bankruptcy filed against us an adversary proceeding in the matter of In re: Petters Company, Inc., a case filed
in United States Bankruptcy Court, in the District of Minnesota. The complaint alleges principal causes of action against us under various Bankruptcy Code
sections and the Minnesota Fraudulent Transfer Act, to recover damages for alleged transfers of property from the Petters Company occurring prior to the
filing of the case initially as a civil receivership in October 2008. The trustee’s complaint alleges such transfers occurred in at least one note transaction
whereby
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