Alcoa 2010 Annual Report Download - page 45

Alcoa received since January 2006 (including interest). The amount of this recovery will be based on a calculation that
is being prepared by the Italian Government. Pending formal notification from the Italian Government, Alcoa estimates
that a payment in the range of $300 to $500 million will be required during 2011. In late 2009, after discussions with
legal counsel and reviewing the bases on which the EC decided, including the different considerations cited in the EC
decision regarding Alcoa’s two smelters in Italy, Alcoa recorded a charge of $250 million, including $20 million to
write-off a receivable from the Italian Government for amounts due under the now expired tariff structure. On April 19,
2010, Alcoa filed an appeal of this decision with the General Court of the EU. Alcoa will pursue all substantive and
procedural legal steps available to annul the EC’s decision. On May 22, 2010, Alcoa also filed with the General Court a
request for injunctive relief to suspend the effectiveness of the decision, but, on July 12, 2010, the General Court
denied such request. On September 10, 2010, Alcoa appealed the July 12, 2010 decision to the European Court of
Justice; a judgment by that Court is expected in early 2011.
Separately, on November 29, 2006, Alcoa filed an appeal before the General Court (formerly the European Court of
First Instance) seeking the annulment of the EC’s decision to open an investigation alleging that such decision did not
follow the applicable procedural rules. On March 25, 2009, the General Court denied Alcoa’s appeal. On May 29,
2009, Alcoa appealed the March 25, 2009 ruling. The hearing of the May 29, 2009 appeal was held on June 24, 2010
and a decision from the Court of Justice is expected in 2011.
As previously reported, in November 2006, in Curtis v. Alcoa Inc., Civil Action No. 3:06cv448 (E.D. Tenn.), a class
action was filed by plaintiffs representing approximately 13,000 retired former employees of Alcoa or Reynolds and
spouses and dependents of such retirees alleging violation of the Employee Retirement Income Security Act (ERISA)
and the Labor-Management Relations Act by requiring plaintiffs, beginning January 1, 2007, to pay health insurance
premiums and increased co-payments and co-insurance for certain medical procedures and prescription drugs.
Plaintiffs allege these changes to their retiree health care plans violate their rights to vested health care benefits.
Plaintiffs additionally allege that Alcoa has breached its fiduciary duty to plaintiffs under ERISA by misrepresenting to
them that their health benefits would never change. Plaintiffs seek injunctive and declaratory relief, back payment of
benefits, and attorneys’ fees. Alcoa has consented to treatment of plaintiffs’ claims as a class action. During the fourth
quarter of 2007, following briefing and argument, the court ordered consolidation of the plaintiffs’ motion for
preliminary injunction with trial, certified a plaintiff class, bifurcated and stayed the plaintiffs’ breach of fiduciary duty
claims, struck the plaintiffs’ jury demand, but indicated it would use an advisory jury, and set a trial date of
September 17, 2008. In August 2008, the court set a new trial date of March 24, 2009 and, subsequently, the trial date
was moved to September 22, 2009. In June 2009, the court indicated that it would not use an advisory jury at trial. Trial
in the matter was held over eight days commencing September 22, 2009 and ending on October 1, 2009 in federal court
in Knoxville, TN before the Honorable Thomas Phillips, U.S. District Court Judge. At the conclusion of evidence, the
court set a post-hearing briefing schedule for submission of proposed findings of fact and conclusions of law by the
parties and for replies to the same. Post trial briefing was submitted on December 4, 2009; however, no schedule was
set for handing down a decision. Alcoa believes that it presented substantial evidence in support of its defenses at trial.
However, at this stage of the proceeding, the Company is unable to reasonably predict the outcome. Alcoa estimates
that, in the event of an unfavorable outcome, the maximum exposure would be an additional postretirement benefit
liability of approximately $300 million.
As previously reported, in January 2007, the EC announced that it had opened an investigation to establish whether the
regulated electricity tariffs granted by Spain comply with EU state aid rules. At the time the EC opened its
investigation, Alcoa had been operating in Spain for more than nine years under a power supply structure approved by
the Spanish Government in 1986, an equivalent tariff having been granted in 1983. The investigation is limited to the
year 2005 and is focused both on the energy-intensive consumers and the distribution companies. The investigation
provided 30 days to any interested party to submit observations and comments to the EC. With respect to the energy-
intensive consumers, the EC opened the investigation on the assumption that prices paid under the tariff in 2005 were
lower than a pool price mechanism, therefore being, in principle, artificially below market conditions. Alcoa submitted
comments in which the company provided evidence that prices paid by energy-intensive consumers were in line with
the market, in addition to various legal arguments defending the legality of the Spanish tariff system. It is Alcoa’s
understanding that the Spanish tariff system for electricity is in conformity with all applicable laws and regulations,
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