America Online 2009 Annual Report Download - page 99

Table of Contents
The Company also has certain contractual arrangements that would require it to make payments or provide funding if certain circumstances occur
("contingent commitments"). At December 31, 2009, these arrangements related primarily to letters of credit and totaled $10.9 million. The Company does
not expect that these contingent commitments will result in any material amounts being paid by the Company in the foreseeable future.
Included in the commitment amounts discussed above are certain commitments to Time Warner, see "Note 13: Related Party Transactions" for
additional information.
Contingencies
Shareholder Derivative Lawsuits
During the summer and fall of 2002, numerous shareholder derivative lawsuits were filed in state and federal courts naming as defendants certain
current and former directors and officers of Time Warner, as well as Time Warner as a nominal defendant. The complaints alleged that defendants breached
their fiduciary duties by, among other things, causing Time Warner to issue corporate statements that did not accurately represent that AOL had declining
advertising revenues. Certain of these lawsuits were later dismissed, and others were eventually consolidated in their respective jurisdictions. In 2006, the
parties entered into a settlement agreement to resolve all of the remaining derivative matters, and the Court granted final approval of the settlement on
September 6, 2006. The court has yet to rule on plaintiffs' petition for attorneys' fees and expenses. During 2009 and 2008, AOL incurred $27.9 million and
$20.8 million, respectively, of legal fees related to securities litigation and government investigations. During 2007, Time Warner reached agreements to settle
substantially all of the remaining securities litigation claims, and AOL incurred expenses of $171.4 million related to these agreements and legal fees. While
these amounts were historically incurred by Time Warner and reflected in Time Warner's financial results, through the date of spin-off they also have been
reflected as an expense and a corresponding capital contribution in AOL's financial statements because they relate to AOL matters. Following the spin-off,
these costs will continue to be incurred by Time Warner to the extent that proceeds from a settlement with insurers are available to pay those costs, and
thereafter AOL has an obligation to indemnify Time Warner for such costs to the extent they are associated with present or former officers and employees of
AOL. As of December 31, 2009, the Company did not have any liability recorded related to these shareholder derivative lawsuits. AOL does not view the
remaining potential obligations related to this matter to be material. As a result, the Company does not intend to include disclosure regarding this matter in
future notes to financial statements.
Other Matters
On May 24, 1999, two former AOL Community Leader volunteers brought a putative class action, Hallissey et al. v. America Online, Inc., in the U.S.
District Court for the Southern District of New York alleging violations of the Fair Labor Standards Act ("FLSA") and New York State law. The plaintiffs
allege that, in serving as AOL Community Leader volunteers, they were acting as employees rather than volunteers for purposes of the FLSA and New York
State law and are entitled to minimum wages. In 2001, four of the named plaintiffs in the Hallissey case filed a related lawsuit alleging retaliation as a result
of filing the FLSA suit in Williams, et al. v. America Online, Inc., et al. A related case was filed by several of the Hallissey plaintiffs in the U.S. District Court
for the Southern District of New York alleging violations of the retaliation provisions of the FLSA. Also in 2001, two related class actions were filed in state
courts in New Jersey (Superior Court of New Jersey, Bergen County Law Division) and Ohio (Court of Common Pleas, Montgomery County, Ohio), alleging
violations of the FLSA and/or the respective state laws. These cases were removed to federal court and subsequently transferred to the U.S. District Court for
the Southern District of New York for consolidated pretrial proceedings with Hallissey.
On January 17, 2002, AOL Community Leader volunteers filed a class action lawsuit in the U.S. District Court for the Southern District of New York,
Hallissey et al. v. AOL Time Warner, Inc., et al., against AOL LLC alleging ERISA violations and an entitlement to pension, welfare and/or other employee
benefits subject to ERISA. In March 2003, plaintiffs filed and served a second amended complaint, adding as defendants the AOL Time Warner
Administrative Committee and the AOL Administrative Committee.
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