What changed in this filing

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Item 3. Legal Proceedings

2022-02-28 compared with 2021-03-01 · 43 added, 18 removed, 22 unchanged (73% of the section changed)

2 unchanged sentences

See “Note 11—Commitments and Contingencies” in the notes to the audited financial statements.

In November 2018, Chanel filed a lawsuit against us in the U.S.

District Court for the Southern District of New York bringing various trademark and advertising-related claims under the Lanham Act and New York state law analogues.

Chanel alleges, among other things, that we have misrepresented certain counterfeit Chanel products as authentic Chanel products, that our resale of Chanel products confuses consumers into believing that Chanel is affiliated with us and involved in authenticating consignors’ goods and that only Chanel is capable of authenticating second-hand Chanel goods.

The Court issued an Opinion & Order on March 30, 2020 denying in part and granting in part the Company’s motion to dismiss.

The Company filed its answer and affirmative defenses on May 29, 2020.

Chanel’s claims are now in the discovery phase.

On November 3, 2020, with the court’s permission, the Company filed a motion to amend its answer to add counterclaims against Chanel alleging anticompetitive conduct in violation of the federal and state antitrust laws as well as tortious interference.

That motion was granted on February 24, 2021, permitting the Company to file its amended pleading.

On November 14, 2018, Chanel, Inc.

sued the Company in the U.S.

District Court for the Southern District of New York.

The Complaint alleged federal and state law claims of trademark infringement, unfair competition, and false advertising.

On February 1, 2019, Chanel, Inc.

filed its First Amended Complaint that included substantially similar claims against the Company.

On March 4, 2019, the Company filed a Motion to Dismiss the First Amended Complaint, which was granted in part and dismissed in part on March 30, 2020.

The surviving claims against the Company include trademark infringement under 15 U.S.C.

§ 1114, false advertising under 15 U.S.C.

§ 1125, and unfair competition under New York common law.

On May 29, 2020, the Company filed its Answer to the Amended Complaint.

On October 30, 2020, the Company sought leave to amend its Answer to assert counterclaims against Chanel, Inc.

for violations of the Sherman Act, 15 U.S.C.

§§ 1 & 2, the Donnelly Act, N.Y.

§ 340, and New York common law.

The motion for leave to amend was granted on February 24, 2021.

moved to dismiss the Company’s counterclaims;

the motion to dismiss remains pending.

The parties agreed to a stay in April 2021 to engage in settlement discussions.

After several mediation sessions, the parties were unable to reach a resolution, and the stay was lifted in November 2021.

The Court entered an Amended Scheduling Order on December 20, 2021.

Under the Amended Scheduling Order, all fact discovery is to be completed by August 1, 2022 and all discovery is to be completed by November 14, 2022.

Fact discovery is underway, and the parties are actively working to resolve several ongoing discovery disputes.

This litigation is in its early stages and the final outcome, including our liability, if any, with respect to Chanel’s claims, is uncertain.

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On August 4, 2020, the court granted defendants’ motion to stay the state court action and deferred ruling on the demurrer and motion to strike pending the outcome of the federal court action.

A motion to dismiss the federal court action was filed on May 15, 2020, which motion remains pending.

The state and federal complaints each allege claims under the Securities Act of 1933 on behalf of a purported class of shareholders who acquired our stock pursuant to or traceable to the registration statement for our IPO.

The federal complaint also alleges claims under the Securities Exchange Act of 1934 on behalf of a purported class of shareholders who purchased our stock from June 27, 2019 through November 20, 2019.

The complaints each allege, among other things, that the defendants violated federal securities laws by issuing false or misleading statements in the registration statement regarding certain of our financial and operating metrics, and related to the Company’s authentication processes.

The complaints seek, among other things, damages and interest, rescission, and attorneys’

fees and costs.

A motion to dismiss the federal court action was filed on May 15, 2020.

On March 31, 2021, the court entered an order on the motion to dismiss, dismissing the Securities Exchange Act of 1934 (the “Exchange Act”) claims and some of the claims alleged under the Securities Act of 1933 (the “Securities Act”).

The court provided plaintiffs with an opportunity to amend the complaint and, on April 30, 2021, plaintiffs filed a Second Amended Complaint in federal court.

The state court complaint, and the Second Amended Complaint in federal court each allege claims under the Securities Act of 1933 on behalf of a purported class of shareholders who acquired the Company’s stock pursuant to or traceable to the registration statement for the Company’s IPO.

The federal complaint also alleges claims under the Exchange Act on behalf of a purported class of shareholders who purchased the Company’s stock from June 27, 2019 through November 20, 2019.

The complaints seek, among other things, damages and interest, rescission, and attorneys’ fees and costs.

On July 27, 2021, the Company reached an agreement in principle to settle this shareholder class action.

On November 5, 2021, plaintiff filed the executed stipulation of settlement and motion for preliminary approval of the settlement with the federal court.

The stipulation of settlement is subject to preliminary and final approval by the court.

The financial terms of the stipulation of settlement provide that the Company will pay $11.0 million within thirty (30) days of the later of preliminary approval of the settlement or plaintiff’s counsel providing payment instructions.

In connection with the settlement, the Company recorded approximately $11.0 million for the year ended December 31, 2021 under our Operating expenses as a Legal settlement.

The Company intends to pay for the settlement with available resources.

On September 10, 2020 and December 7, 2020, purported shareholders filed putative derivative actions in the United States District Court for the District of Delaware.

The de rivative complaints allege factual allegations largely tracking the above referenced lawsuits.

The two derivative cases have been consolidated and the consolidated case has been stayed pending a ruling on the motion to dismiss in the federal securities cas e.

While we intend to vigorously defend against the litigation described above, the cases are at a very early stage and there can be no assurance that we will be successful in our defense.

For this same reason, we cannot currently estimate the loss or the range of possible losses we may experience in connection with this litigation.

The derivative complaints allege factual allegations largely tracking the above referenced purported shareholder class actions.

The two derivative cases have been consolidated.

On September 13, 2021, the parties reached a settlement in principle of the derivative case.

The settlement in principle provides for certain corporate governance reforms in exchange for a release and dismissal of the lawsuit.

On October 21, 2021, the parties reached agreement to pay up to $0.5 million in attorneys’ fees and costs to plaintiffs’ counsel in the derivative case.

On November 5, 2021, the parties entered into a stipulation of settlement, and, on February 11, 2022, the court entered an order and final judgment approving the settlement.

In connection with the derivative settlement, the Company recorded approximately $0.5 million for the year ended December 31, 2021 under our Operating expenses as a Legal settlement.

The stipulation of settlement was preliminarily approved on December 8, 2021, and the $0.5 million was paid within thirty (30) days of the preliminary approval, or on January 7, 2022, with available resources .

We are currently involved in, and may in the future be involved in, legal proceedings in the ordinary course of business.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings