In December 2006, the appellate court overturned the certification of classes in six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification was a condition of the settlement, it was unlikely that the settlement would receive final Court approval. On June 25, 2007, the Court entered an order terminating the proposed settlement based upon a stipulation among the parties to the settlement.

This is one of a number of actions coordinated for pretrial purposes as In re Initial Public Offering Securities Litigation, 21 MC 92 with the first action filed on January 12, 2001. Plaintiffs in the coordinated proceeding are bringing claims under the federal securities laws against numerous underwriters, companies, and individuals, alleging generally that defendant underwriters engaged in improper and undisclosed activities concerning the allocation of shares in the IPOs of more than 300 companies during late 1998 through 2000. In June 2004, a stipulation of settlement and release of claims against the issuer defendants, including the Company, was submitted to the court for approval. The terms of the settlement if approved, would dismiss and release all claims against the participating defendants (including the Company). In exchange for this dismissal, D&O insurance carriers would agree to guarantee a recovery by the plaintiffs from the underwriter defendants of at least $1 billion, and the issuer defendants would agree to an assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On August 31, 2005, the court confirmed preliminary approval of the settlement.

According to a Press Release dated April 23, 2001, a class action lawsuit was filed alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the SEC thereunder and seeks to recover damages. In exchange for the excessive commissions, the complaint alleges, lead underwriter The Goldman Sachs Group, Inc. and underwriters Salomon Smith Barney, Inc. and BancBoston Robertson Stephens, Inc. allocated NetZero shares to customers at the IPO price of $16.00 per share. To receive the allocations (i.e., the ability to purchase shares) at $16.00, the underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices as the price of NetZero stock rocketed upward (a practice known on Wall Street as "laddering") was intended to (and did) drive NetZero's share price up to artificially high levels. This artificial price inflation, the complaint alleges, enabled both the underwriters and their customers to reap enormous profits by buying stock at the $16.00 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $30.63 during its first day of trading. Rather than allowing their customers to keep their profits from the IPO, the complaint alleges, the underwriters required their customers to "kick back" some of their profits in the form of secret commissions. These secret commission payments were sometimes calculated after the fact based on how much profit each investor had made from his or her IPO stock allocation.
The complaint further alleges that defendants violated the Securities Act of 1933 because the Prospectus distributed to investors and the Registration Statement filed with the SEC in order to gain regulatory approval for the NetZero offering contained material misstatements regarding the commissions that the underwriters would derive from the IPO transaction and failed to disclose the additional commissions and "laddering" scheme discussed above.