Vonage 2009 Annual Report Download - page 26

ITEM 1B. Unresolved Staff Comments
Not applicable.
ITEM 2. Properties
The following is a summary of our offices and locations:
Location Business Use
Square
Footage
Lease
Expiration
Date
Holmdel, New Jersey Corporate Headquarters, Network Operations, Customer Service, Sales and Marketing,
and Administration 350,000 2017
London, United Kingdom Sales and Marketing, Administration 3,472 2010
Altanta, Georgia Product Development 2,588 2011
We believe that the facilities that we occupy are adequate for our current needs and do not anticipate leasing any additional space.
ITEM 3. Legal Proceedings
From time to time, we may become party to litigation and
subject to claims, normally those incidents to the ordinary
course of our business.
Litigation
State Attorney General Proceedings. In 2008, we learned
that an initial group of 28 states’ attorneys general had begun an
investigation into certain of our business practices. We received
document requests from 22 of the participating states. The
requests sought information that Vonage previously produced to
the Wisconsin Attorney General as part of an investigation
commenced in November 2007, which consisted of, among
other things, sales and retention marketing scripting, advertising
disclosures, and information related to our money back guaran-
tee. The requests also sought, among other things, information
related to marketing and billing practices, as well as early termi-
nation fees. On November 16, 2009, we reached a definitive
agreement to settle the investigation. The settlement was filed
for Court approval where such approval was required. There
was no finding of any violation or wrongdoing by us, and the 32
states participating in the settlement have released us and our
affiliates from the matters investigated. In connection with the
settlement, we agreed to pay an aggregate of $3.0 million to the
participating states, including to cover legal and investigation
fees incurred. To improve the customer experience and promote
continued customer satisfaction, we also agreed to implement
certain enhancements to our business practices, many of which
we implemented prior to completion of the settlement. We also
agreed to provide refunds for certain affected consumers. We
previously made a reserve in the second quarter of 2009 for the
amount of the payment to the states and the customer refunds,
and in September 2009, placed into escrow the payment to the
states. We do not believe that any future amounts recorded in
connection with this matter will be material to our financial posi-
tion, results of operations or cash flows.
IPO Litigation. During June and July 2006, Vonage, several
of our officers and directors, and the firms who served as the
underwriters in our IPO were named as defendants in several
purported class action lawsuits arising out of our IPO. On Jan-
uary 9, 2007, the Judicial Panel on Multidistrict Litigation trans-
ferred all complaints to the District of New Jersey. On
September 7, 2007, the Court appointed Zyssman Group as the
lead plaintiff, and the law firm of Zwerling, Schachter and Zwerl-
ing, LLP as lead counsel. On November 19, 2007, the plaintiffs
filed the Amended Complaint, which generally alleges:
(i) defendants made misstatements regarding subscriber line
growth and average monthly churn rate; (ii) defendants failed to
disclose problems with facsimile transmissions and a pending
fax litigation case; (iii) defendants failed to disclose all patent
infringement claims and issues; and (iv) that the Directed Share
Program suffered from various infirmities. On January 18, 2008,
defendants filed their motions to dismiss the Amended Com-
plaint. On April 6, 2009, the Court hearing the matter dismissed
three claims with leave to amend two of them, and declined at
such time to dismiss two of the other claims. On April 20, 2009,
the plaintiffs filed a motion asking the Court to reconsider the
partial dismissal of their claims. On June 3, 2009, the Court
granted-in-part and denied-in-part plaintiffs’ motion for
reconsideration. On June 16, 2009, Vonage and the plaintiffs
reached an agreement in principle to settle the litigation, which
includes a release and dismissal of all stockholder claims
against Vonage and its individual directors and officers who
were named as defendants. On December 4, 2009, we received
final Court approval for the settlement. The settlement was
funded by our liability insurance under our directors and officers’
liability insurance policy.
18 VONAGE ANNUAL REPORT 2009