ADT 2011 Annual Report Download - page 129

With respect to Mr. Kozlowski, on December 1, 2010, the U.S. District Court for the Southern
District of New York ruled in favor of several of the Company’s affirmative claims against him before
trial, while dismissing all of Mr. Kozlowski’s counterclaims for pay and benefits after 1995. With respect
to Mr. Swartz, on March 3, 2011, the same Court granted the Company’s motion for summary
judgment. The Court further ruled that issues related to damages will need to be resolved at trial. No
trial date has been set. The Company expects Mr. Kozlowski and Mr. Swartz to contest these decisions.
As a result, the Company has and will continue to maintain the reserve recorded in its Consolidated
Balance Sheet for the amounts allegedly due under their compensation and retention arrangements and
under ERISA until the appeals process is complete. Although the ultimate resolution of these matters
could differ materially from these estimates, the Company does not believe such resolution would have
a material adverse effect on its financial position, results of operations or cash flows.
Tyco has also brought an action against Mr. Walsh in connection with the damages suffered by
Tyco arising from Mr. Walsh’s breach of his fiduciary duties to Tyco. In October 2010, the U.S. District
Court for the Southern District of New York denied Tyco’s affirmative claims for recovery of damages
against Mr. Walsh. Tyco is pursuing an appeal. This affirmative matter, and the affirmative matters
against Messrs. Kozlowski and Swartz, are not subject to the liability sharing provisions of the
Separation and Distribution Agreement. Separately, Mr. Walsh is pursuing a New York state court
claim against the Company asserting his entitlement to indemnification. This action is subject to the
liability sharing provisions of the Separation and Distribution Agreement.
Environmental Matters
Tyco is involved in various stages of investigation and cleanup related to environmental
remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given
the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and
regulations and alternative cleanup methods. As of September 30, 2011, Tyco concluded that it was
probable that it would incur remedial costs in the range of approximately $38 million to $86 million. As
of September 30, 2011, Tyco concluded that the best estimate within this range is approximately
$60 million, of which $18 million is included in accrued and other current liabilities and $42 million is
included in other liabilities in the Company’s Consolidated Balance Sheet. In view of the Company’s
financial position and reserves for environmental matters, the Company believes that any potential
payments of such estimated amounts will not have a material adverse effect on its financial position,
results of operations or cash flows.
Asbestos Matters
The Company and certain of its subsidiaries along with numerous other companies are named as
defendants in personal injury lawsuits based on alleged exposure to asbestos-containing materials.
These cases typically involve product liability claims based primarily on allegations of manufacture, sale
or distribution of industrial products that either contained asbestos or were attached to or used with
asbestos-containing components manufactured by third-parties. Each case typically names between
dozens to hundreds of corporate defendants. While the Company has observed an increase in the
number of these lawsuits over the past several years, including lawsuits by plaintiffs with mesothelioma-
related claims, a large percentage of these suits have not presented viable legal claims and, as a result,
have been dismissed by the courts. The Company’s strategy has been, and continues to be, to mount a
vigorous defense aimed at having unsubstantiated suits dismissed, and, where appropriate, settling suits
before trial. Although a large percentage of litigated suits have been dismissed, the Company cannot
predict the extent to which it will be successful in resolving lawsuits in the future. As of September 30,
2011, there were approximately 4,500 lawsuits pending against the Company, its subsidiaries or entities
for which the Company has assumed responsibility. Each lawsuit typically includes several claims, and
the Company has determined that there were approximately 5,600 claims outstanding as of
26 2011 Financials