14.  LITIGATION

In September 2010, a securities class-action lawsuit captioned Duncan v. Ginsburg, et al, was filed against the Company and certain of its officers and directors in the U.S. District Court for the Southern District of New York (10 Civ. 6523). Subsequently, an identical lawsuit by the same plaintiff, also captioned Duncan v. Ginsburg, et al, was filed in the U.S. District Court for the Northern District of Texas (10 Civ. 1769), and a similar lawsuit, captioned Tours v. Digital Generation, Inc., et al, was filed in the U.S. District Court for the Southern District of New York by a different plaintiff (10 Civ. 6930). The Northern District of Texas lawsuit was voluntarily dismissed by the plaintiff and the other two lawsuits were consolidated before Judge Richard J. Sullivan in the U.S. District Court for the Southern District of New York, captioned In re Digital Generation, Inc. Securities Litigation (10 Civ. 6523). On November 24, 2010, Judge Sullivan appointed a lead plaintiff and ordered that a consolidated amended complaint be filed. On January 24, 2011, the lead plaintiff filed a consolidated amended complaint on behalf of a purported class of persons who purchased or otherwise acquired Digital Generation common stock between August 4, 2010 and August 27, 2010, inclusive. The consolidated amended complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder. The lawsuit alleges, among other things, that the defendants made false or misleading statements of material fact, or failed to disclose material facts, about the Company’s financial condition during the class period. The plaintiffs sought unspecified monetary damages and other relief.  On May 5, 2011, the parties signed a memorandum of understanding (“MOU”) to settle the class action for an amount within the coverage limits of our directors’ and officers’ liability insurance.  The MOU provides, among other things, that: (i) the litigation will be dismissed with prejudice as to all defendants; (ii) defendants believe the claims are without merit and continue to deny liability, but agree to settle in order to avoid the potential cost, burden and uncertainty of continued litigation; and (iii) the parties will jointly and promptly seek court approval of the settlement.  On June 17, 2011, the parties jointly submitted a stipulation of settlement to the U.S. District Court for the Southern District of New York.  On June 22, 2011, the Court entered an order preliminarily approving the settlement and directing the Lead Plaintiff to notify the class of the settlement.  In July 2011, our insurance carrier funded the settlement amount approved by the Court.  On September 13, 2011, the Court entered a final order approving the settlement.

We are involved in a variety of other legal actions arising from the ordinary course of business. We do not believe the ultimate resolution of these matters will have a material effect on our financial statements.