Yahoo 2003 Annual Report Download - page 30

declaratory and injunctive relief and damages for the plaintiffs in the case and Overture’s insurance carriers. A
alleged infringement. Yahoo! and LAUNCH do not proposal has been made for the settlement and release of
believe that LAUNCH has infringed any rights of plain- claims against the issuer defendants, including Overture.
tiffs and intend to vigorously contest the lawsuit. The The settlement is subject to a number of conditions,
lawsuit is still in the preliminary, discovery phase and we including approval of the proposed settling parties and the
do not believe it is feasible to predict or determine the court. If the settlement does not occur, and litigation
outcome or resolution of the LAUNCH litigation. The against Overture continues, the Company and Overture
range of possible resolutions of the LAUNCH litigation believe that Overture has meritorious defenses to liability
could include judgments against us or settlements that and damages and intend to defend the case vigorously.
could require substantial payments by us, which could
On or about February 4, 2004, a shareholder derivative
have a material adverse impact on our financial position,
action was filed in the Court of Chancery of the State of
results of operations or cash flows. An estimate of the
Delaware in and for New Castle County, against us (as
potential loss, if any, or range of loss that could arise from
nominal defendant) and certain of our current and former
the LAUNCH litigation cannot be made at this time. In
officers and directors (the ‘‘Derivative Defendants’’). Two
January 2003, LAUNCH settled the LAUNCH litigation
similar shareholder derivative actions were filed in the Cal-
as to Sony Music Entertainment, Inc. In October 2003,
ifornia Superior Court for the County of San Mateo on
LAUNCH settled the litigation as to Capitol
February 13, 2004. The complaints generally allege
Records, Inc. and Virgin Records America, Inc. Accord-
breaches of fiduciary duties by the Derivative Defendants
ingly, BMG Music d/b/a/ The RCA Records Label is the
related to the alleged purchase of shares in initial public
sole remaining plaintiff in this proceeding as of
offerings or the alleged acquiescence in such conduct. The
October 2003.
complaints seek unspecified monetary damages and other
On July 12, 2001, the first of several purported securities relief purportedly on behalf of Yahoo! from the Derivative
class action lawsuits was filed in the United States District Defendants. We understand the Derivative Defendants
Court, Southern District of New York against certain deny any impropriety and intend to defend the lawsuits
underwriters involved in Overture’s initial public offering, vigorously. We do not believe that the ultimate costs to
Overture, and certain of Overture’s current and former resolve these matters will have a material adverse effect on
officers and directors. The Court consolidated the cases our financial condition, results of operations or cash flows.
against Overture into case number 01 Civ. 6339. Plaintiffs In addition, we believe there are procedural defects to
allege, among other things, violations of the Securities Act permitting these complaints to proceed on Yahoo!’s behalf.
of 1933 and the Securities Exchange Act of 1934 involv- Item 4. Submission of Matters to a Vote of Security
ing undisclosed compensation to the underwriters, and Holders
improper practices by the underwriters, and seek unspeci-
fied damages. Similar complaints were filed in the same No matters were submitted to a vote of security holders
court against numerous public companies that conducted during the fourth quarter of 2003.
initial public offerings of their common stock since the
mid-1990s. All of these lawsuits were consolidated for pre-
trial purposes before Judge Shira Scheindlin. On April 19,
2002, plaintiffs filed an amended complaint, alleging
Rule 10b-5 claims of fraud. On July 15, 2002, the issuers
filed a motion to dismiss for failure to comply with appli-
cable pleading standards. On October 8, 2002, the Court
entered an Order of Dismissal as to all of the individual
defendants in the Overture IPO litigation, without
prejudice. On February 19, 2003, the Court denied the
motion to dismiss the Rule 10b-5 claims against certain
defendants, including Overture. Settlement discussions
relating to this case on behalf of the named defendants
have occurred over the last several months, resulting in a
final settlement memorandum of understanding with the
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