INVESTOOLS INC 10-K 3/7/2006 12/31/2005
Item 3. Legal Proceedings
From time to time we are involved in certain legal actions arising in the ordinary course of business. It is the opinion of management that such litigation will be resolved without a material adverse effect on our liquidity, financial position or results of operations.
On March 4, 2003, a foreign national filed a complaint in the San Diego Superior Court against ZiaSun Technologies, Inc., one of our wholly-owned subsidiaries. The complaint alleges that certain individuals, who are not parties in the lawsuit, persuaded the plaintiff to purchase shares of ZiaSun common stock and the complaint also alleges a failure to deliver a stock certificate. ZiaSun does not have any ownership or control of the third party brokerage house from whom plaintiff claims to have purchased stock. The plaintiff was seeking unspecified damages for the alleged fraud in the sale of the stock. On February 9, 2005, the court awarded a summary judgment in our favor. In March 2005, the plaintiff filed for an appeal to continue to pursue this litigation. We believe that this matter will be resolved without material adverse effect on us.
In October 2005, the Supreme Court of Queensland, ruled on a lawsuit filed on July 9, 2004, by the Australian Securities and Investment Commission (ASIC) against Online Investors Advantage, one of our wholly-owned subsidiaries (OIA). The Court found that most of the claims pursued by ASIC had not been made out against OIA, but found for ASIC in respect to certain claims, all of which hinged on the Court’s finding that the website was a ‘financial product’, as that term is defined under the Australian Corporations Act. There were no penalties assessed against us as a result of this ruling. On October 31, 2005, the Court dismissed ASIC’s claim regarding the repayment of money to participants at the workshops. Accordingly, $0.3 million of funds previously held in escrow have been released to us. Given OIA’s success on the majority of ASIC’s claims, ASIC was ordered to pay 80% of OIA’s legal costs. Given that ASIC succeeded in respect to a small number of its claims, OIA was ordered to pay 20% of ASIC’s legal costs. The net of these amounts can not be estimated at this time and therefore no amounts have been recorded in the Consolidated Financial Statements. We expect these amounts to be settled in the first half of 2006.
On November 1, 2005, Ross Jardine and True North Academy L.L.C. filed a lawsuit against us in the Third Judicial District Court, Salt Lake City, Utah. The lawsuit alleges that we abused Mr. Jardine’s personal identity under Utah state
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law, his name and likeness, and appropriated the commercial value of Mr. Jardine’s identity and violated his privacy. In January 2006, we filed our answer and counterclaim and in February 2006 we filed a motion for summary judgment. We intend to vigorously defend this action.
In February 2006, we filed a complaint against Stock Investor.com, LLC, True North Academy, L.L.C., Wade Hallam, Leroy Hartman and Tony Montoya in the Fourth Judicial Court, Utah County, Utah. The complaint alleges breach of contract, tortuous interference, violation of the Utah Trade Secrets Act, common law unfair competition, violation of the Utah Unfair Competition Act, common law trademark infringement and trade name infringement, and civil conspiracy. We are seeking damages and injunctive relief.
We establish liabilities when a particular contingency is probable and estimable. For contingencies noted above, we have accrued amounts considered probable and estimable. We are not aware of pending claims or assessments, other than as described above, which may have a material adverse impact on our liquidity, financial position or results of operation. |
