ADT 2007 Annual Report Download - page 133

December 21, 2005, Earth Tech filed a lawsuit against the City of Phoenix in the Maricopa County
Superior Court alleging $3 million in damages plus interest for the City’s failure to pay dewatering and
computer systems costs related to the 91st Avenue project. After the City rejected Earth Tech’s
administrative claim against the City, Earth Tech filed and served a First Amended Complaint upon the
City of Phoenix. In its First Amended Complaint, Earth Tech alleged eighteen causes of action and
requested the following: (i) a recovery of at least $73 million for the value of the services performed by
Earth Tech in connection with the contract; (ii) a rescission of the contract; (iii) an equitable
adjustment of the Contract price for additional dewatering services and the Computer Control System;
and (iv) costs for demobilization and termination of the contract. The City of Phoenix filed a Motion to
Dismiss rather than filing an answer to the First Amended Complaint on May 18, 2006. The Court
granted the City’s Motion to Dismiss without prejudice on September 19, 2006 allowing Earth Tech
30 days to file a Second Amended Complaint. Earth Tech filed its Second Amended Compliant against
the City of Phoenix on September 25, 2006. In connection with this matter, the Company has assets,
which it has assessed as recoverable, of $50 million at September 28, 2007 and September 29, 2006.
On December 29, 2005, the City of Phoenix filed a lawsuit against Earth Tech, Inc., its surety,
Federal Insurance Company and other unnamed parties in the Maricopa County Superior Court, The
City of Phoenix v. Earth Tech, Inc., Federal Insurance Company and John Does 1-50. The lawsuit is in
connection with the City of Phoenix’s termination on August 12, 2005 of Earth Tech’s contract with the
City of Phoenix, Arizona for expansion of the City’s 91st Avenue Waste Water Treatment Plant. The
City alleges the following causes of action: (i) Earth Tech breached its Pre-Construction Services and
Construction Management at Risk Contracts; (ii) Earth Tech did not properly, reasonably or timely
manage, supervise or inspect the work under the Contracts; (iii) Federal Insurance breached the terms
and conditions of the performance bond; and (iv) Federal Insurance failed to investigate the City’s
Bond Claims. The City requested unspecified general, consequential, incidental, special and liquidated
damages plus interest as its relief. On February 8, 2006, Earth Tech filed a Motion to Dismiss the City’s
Complaint in which Federal Insurance Company joined. The Court denied Earth Tech’s Motion to
Dismiss on September 25, 2006. The City of Phoenix filed an Amended Complaint against Earth Tech
and Federal Insurance on September 25, 2006. In the Amended Complaint, the City of Phoenix alleged
damages of $128 million.
The Presiding Judge of Maricopa County Superior Court on July 11, 2006 consolidated all of the
pending lawsuits related to this dispute on the Court’s complex litigation docket. On June 6, 2007, the
Court granted Earth Tech’s motion for partial summary judgment, ordering that application of
Arizona’s Prompt Payment Act was appropriate and that any material inconsistencies in the contract be
resolved in favor of the Act’s requirements. On October 19, 2007, Earth Tech filed a second motion
related to the Prompt Payment Act, arguing that the City of Phoenix breached its contract with Earth
Tech by failing to make payment on a Payment Application that was deemed certified and approved
under the Proper Payment Act. The Court is likely to rule on the motion sometime in the spring of
2008. Tyco cannot predict the outcome of this matter and therefore cannot estimate the range of
potential loss or extent of risk, if any, that may result from an adverse resolution of this matter.
Fitzpatrick Contractors Limited v. Tyco Fire and Integrated Solutions (UK) Ltd. On July 18, 2007,
Fitzpatrick Contractors Limited (‘‘FCL’’) commenced an action against Tyco Fire and Integrated
Solutions (UK) Ltd. in the High Court of Justice, Queen Bench Division, Technology and Construction
Court, United Kingdom, alleging that Tyco entered into a binding contract in 2002 for the design,
manufacture and installation of mechanical and electrical works for the refurbishment of a portion of
London Transport’s Blackwell Tunnel. FCL seeks a declaratory judgment that a contract was formed
between the parties and seeks damages for breach of contract in the amount of approximately $38
million. Tyco believes it has valid counterclaims for unpaid amounts owed to it by FCL for design work,
purchased equipment and subcontracted construction work associated with the project, but denies that
it entered a binding contract with FCL for the project and intends to defend this action vigorously.
While it is not possible at this time to predict the final outcome of this dispute, Tyco does not believe
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