Settles U.S. Payment Dispute

Jeff Berg
SYDNEY — Bringing an end to the on-going credit card processing problems that have besieged Australian adult Internet retail company, the company announced today that it had settled an outstanding legal claim against it that could have potentially cost more than $2.8 million in damages and brought the company before the U.S. Supreme Court.

The underlying lawsuit, brought by a California credit card payment processor in 2002, alleged that owed the processor approximately $1.86 million in outstanding charges and $1 million in general damages.

The case was also scheduled to be heard before the U.S. Supreme Court in January 2005.

“The legal fees that would have been incurred by the company were expected to have been significant,” said KJ Heitman, chairman of AdultShop, in a statement release Tuesday. “On the advice of the company’s United States-based legal advisors, the directors agreed to what is considered to be a fair and reasonable settlement.”

The terms of the agreement call for AdultShop to pay the processor $1.5 million to settle all claims against it.

AdultShop also made legal headlines recently when it initiated a multimillion dollar lawsuit against two Australian businessmen who had sold the company their online erotica division.

AdultShop paid roughly $12 million to Dean Shannon and Steve Jones in exchange for the division, but the credit card processor’s looming litigation caused AdultShop stock to drastically drop in price. The company sued Shannon and Jones in October 2004 to recoup some of its loss.

AdultShop alleged that the two businessmen breached the Australian Trades Practices Act and had misrepresented the benefits of merchant accounts.