<p style= text-align: justify; >According to the docket, on March 26, 2007 the judge ruled on the defendant’s motion to dismiss, granting it without prejudice providing plaintiffs leave to file a second complaint. The plaintiffs filed a notice of appeal on April 23, 2007 against the judge’s ruling, which the US Court of Appeals removed from active consideration, with leave to reactivate should plaintiffs fail to file an amended complaint.</p> <p style= text-align: justify; >As summarized by a law firm’s website, additional cases were filed on behalf of investors. On November 19, 2004, motions were made to consolidate the various cases and appoint lead plaintiff and counsel. Pursuant to an order dated December 20, 2004, the Court consolidated the actions, Lead Case No. 1:04-cv-07447-RJH. Lead plaintiff and counsel were appointed. On May 20, 2005, plaintiffs filed an amended consolidated complaint. On July 5, 2005, plaintiffs filed a verified consolidated derivative complaint, as well. On September 15, 2005, defendants filed their motions to dismiss both complaints, and on November 30, 2005, plaintiffs filed their response in opposition. On January 6, 2006, defendants filed their reply. The court has yet to rule on the motions to dismiss.</p>
<p style= text-align: justify; >The original complaint charges IAC and certain of its officers and directors with violations of the Securities Exchange Act of 1934. IAC largely acts as intermediary between suppliers and consumers, aggregating large blocks of consumer goods and services (primarily travel-related products such as hotel rooms and airline tickets) from suppliers and selling them to consumers over the Internet. IAC’s Travel segment’s business model was built on the ability of the Company’s majority-owned subsidiaries, Expedia, Inc. and Hotels.com, to contract with the major hotel chains for non-exclusive rights to sell hotel room bookings for the major hotel chains in exchange for a fee.</p>
<p style= text-align: justify; >The complaint alleges that beginning in early 2003, defendants began to artificially inflate the price of the Company’s common stock in order to decrease the amount of stock IAC would ultimately have to issue to acquire all of the outstanding shares of Expedia and Hotels.com that it did not already own, permitting IAC to use inflated IAC stock as acquisition currency which would not further dilute defendants’ own interests in IAC. Throughout the Class Period, defendants also caused IAC to spend over $1.5 billion to repurchase over 47 million shares of its own common stock to further prop-up the Company’s stock price.</p>
<p style= text-align: justify; >The complaint alleges that defendants’ statements made in connection with the announcement of the acquisitions of Expedia, Hotels.com and LearningTree.com, and with the Company’s financial reports and other statements made throughout the Class Period, were materially false and misleading because they did not disclose that:<br /><br /> (a) certain of the Company’s online customers were being double-billed for hotel rooms, leading to great customer dissatisfaction;<br /> (b) certain hotel chains were contesting the Company’s slow payment for hotel room sales made on its Web site and were threatening to stop doing business with the Company;<br /> (c) certain of the Company’s Web site customers were being charged rates exceeding the hotel’s public prices, leading to further customer dissatisfaction;<br /> (d) certain IAC hotel customers were dissatisfied with the Company’s practice of displaying a message on its Web sites that all of a particular hotel’s rooms were sold out when the hotel was not actually sold out;<br /> (e) the Company had previously been selling a large number of hotel rooms and airline seats through more than 24,000 affiliate Web sites, but since October 2002, many of these Web sites were either privately threatening and/or actually pursuing litigation against the Company, alleging among other things copyright infringement and predatory advertising;<br /> (f) one substantial business partner of Hotels.com, Metroguide, had commenced a lawsuit against Hotels.com alleging violations of federal copyright law and unfair business practices; <br />(g) the Company was under-reporting its state and local sales tax expenses for some locations; and <br />(h) certain hotels and airlines were decreasing the Company’s allotment of rooms and seats because of the Company’s bad business practices.</p>
<p style= text-align: justify; >On August 4, 2004, the Company issued its Q2 2004 earnings release disclosing that its Q2 2004 net income fell 24% from the same quarter in 2003 and that it was cutting its forecast for full-year operating profits, admitting that it was being provided less airline seats and hotel rooms to sell. On this news the Company’s stock plummeted on extremely high volume of almost 90 million shares. The Company’s stock price dropped precipitously from its Class Period high of $42.74 per share on July 7, 2003 to close at $22.80 per share on August 4, 2004, erasing over $10 billion in market capitalization.</p>