Alcoa 2010 Annual Report Download - page 47

August 7, 2009, the director and officer defendants filed an unopposed motion to coordinate the case with the
Teamsters Local #500 suit, described immediately above, in the Allegheny County Common Pleas Court. The
Allegheny County court issued its order consolidating the case on September 18, 2009. Thereafter, on October 31,
2009, the court assigned this action to the Commerce and Complex Litigation division of the Allegheny Court of
Common Pleas and on November 20, 2009, the court granted defendants’ motion to stay all proceedings in the
Philadelphia Gas action until the earlier of the court lifting the stay in the Teamsters derivative action or further order
of the court in this action. This derivative action is in its preliminary stages and the company is unable to reasonably
predict an outcome or to estimate a range of reasonably possible loss.
As previously reported, on July 29, 2008 as a result of electricity supply issues at Alcoa’s Rockdale, Texas smelter,
Alcoa filed a lawsuit in the 20th Judicial District Court of Milam County, Texas, against Luminant Generation
Company LLC (Luminant) and certain of its affiliates and parents (collectively, the “defendants”). The lawsuit sought
remedies, including actual damages, for improper actions alleged in the lawsuit to have been caused by the defendants,
including the excess electricity supply costs that led to smelter curtailment, excess costs charged to Alcoa to install
certain environmental control upgrades at the power plant, excess costs charged to Alcoa due to improperly conducting
mining operations at the Three Oaks Mine and alleging that the defendants had refused to permit Alcoa to exercise its
audit rights regarding power plant and mining operations. In response to Alcoa’s lawsuit, the Luminant defendants
filed counterclaims against Alcoa for alleged non-payment of shared costs for the upgrade at the power plant and for
mining operations. The claims related to the power plant and electricity supply costs were tried before a jury; the
claims related to the mining operations were tried before the court.
The trials in the case commenced on May 17, 2010 with the jury rendering a verdict on June 2nd and the court issuing
its ruling from the bench on June 9th. The jury found that (i) Luminant had not breached the contract between the
parties by charging Alcoa for electricity supply and to install certain environmental control upgrades at the power
plant; (ii) Luminant had breached the contract by not permitting Alcoa to exercise its audit rights relating to the power
plant, and (iii) Alcoa had breached the contract by failing to pay its entire share of the environmental control upgrade
costs. Alcoa was ordered to pay to Luminant approximately $10 million for the environmental control upgrades. The
court found that (i) there was no credible evidence that Luminant had breached the contracts between the parties with
regard to its mining operations, (ii) Alcoa has to pay the amount that it owes for the mine services that Luminant has
billed to Alcoa (approximately $1.7 million) but Alcoa may contest the invoice in accordance with the dispute
resolution provisions in the contract, (iii) Luminant is entitled to have the mine permit transferred to it, (iv) Alcoa may
submit certain disputed amounts that it believes that it is owed by Luminant to an accounting arbitrator (approximately
$4 million), and (v) Alcoa is entitled to exercise its right to review the books and records of Luminant associated with
its mining operations. Alcoa has not appealed the verdicts. Alcoa has initiated an audit of Luminant’s power plant
operations and an accounting arbitration of certain amounts that Alcoa believes that it is owed associated with the sale
of the Three Oaks Mine to Luminant (approximately $4 million). There will be no further reporting of this matter.
Mine Safety.
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the
Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 99 of this report, which is
incorporated herein by reference.
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