Avon 2012 Annual Report Download - page 112

Litigation Matters
In July and August 2010, derivative actions were filed in state court against certain present or former officers and/or directors of the
Company (Carol J. Parker, derivatively on behalf of Avon Products, Inc. v. W. Don Cornwell, et al. and Avon Products, Inc. as nominal
defendant (filed in the New York Supreme Court, Nassau County, Index No. 600570/2010); Lynne Schwartz, derivatively on behalf of Avon
Products, Inc. v. Andrea Jung, et al. and Avon Products, Inc. as nominal defendant (filed in the New York Supreme Court, New York County,
Index No. 651304/2010)). These actions allege breach of fiduciary duty, abuse of control, waste of corporate assets, and, in one complaint,
unjust enrichment, relating to the Company’s compliance with the FCPA, including the adequacy of the Company’s internal controls. The
relief sought against the individual defendants in one or both of these derivative complaints includes certain declaratory and equitable relief,
restitution, damages, exemplary damages and interest. The Company is a nominal defendant, and no relief is sought against the Company
itself. In the Parker case, plaintiff has agreed that defendants’ time to file an answer, motion to dismiss or other response is adjourned until
plaintiff files an amended pleading. In Schwartz, the parties have agreed to defer the filing of an amended complaint and the defendants’
response thereto until the parties submit a further stipulation addressing the scheduling of proceedings. On May 14, 2012, County of York
Retirement Plan (“County of York”) – which had been a plaintiff in a previously-filed but now discontinued derivative action – filed a
complaint against the Company seeking enforcement of its demands for the inspection of certain of the Company’s books and records
(County of York Retirement Plan v. Avon Products, Inc., New York Supreme Court, New York County, Index No. 651673/2012). On July 10,
2012, the Company moved to dismiss County of York’s complaint. We are unable to predict the outcome of these matters.
On July 6, 2011, a purported shareholder’s class action complaint (City of Brockton Retirement System v. Avon Products, Inc., et al., No. 11-
CIV-4665) was filed in the United States District Court for the Southern District of New York against certain present or former officers and/or
directors of the Company. On September 29, 2011, the Court appointed LBBW Asset Management Investmentgesellschaft mbH and SGSS
Deutschland Kapitalanlagegesellschaft mbH as lead plaintiffs and Motley Rice LLC as lead counsel. Lead plaintiffs have filed an amended
complaint on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of Avon’s common
stock from July 31, 2006 through and including October 26, 2011. The amended complaint names the Company and two individual
defendants and asserts violations of Sections 10(b) and 20(a) of the Exchange Act based on allegedly false or misleading statements and
omissions with respect to, among other things, the Company’s compliance with the FCPA, including the adequacy of the Company’s
internal controls. Plaintiffs seek compensatory damages as well as injunctive relief. Defendants moved to dismiss the amended complaint on
June 14, 2012. In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of this matter.
However, it is reasonably possible that we may incur a loss in connection with this matter. We are unable to reasonably estimate the amount
or range of such reasonably possible loss.
In April 2012, several purported shareholders’ actions were filed against the Company and certain present or former directors of the
Company in New York Supreme Court, New York County (Pritika v. Jung, et al., Index No. 651072/2012; Feinman v. Avon Products, Inc., et
al., Index No. 651087/2012; Gaines v. Jung, et al., Index No. 651097/2012; Schwartz v. Avon Products, Inc., et al., Index No. 651152/2012;
Robaczynki, individually and on behalf of all others similarly situated and derivatively on behalf of Avon Products, Inc. v. Jung, et al., Index
No. 651176/2012). On April 26, 2012, the actions were consolidated in New York Supreme Court, New York County (In re Avon Products,
Inc. Shareholder Litigation, Consolidated Index No. 651087/2012E). An amended consolidated complaint was filed on May 18, 2012. The
amended consolidated complaint asserts a derivative claim against the individual defendants based on alleged breaches of fiduciary duties in
connection with indications of interest by Coty, Inc. in acquiring the Company. The Company is named as a nominal defendant on the
purported derivative claim, and no relief appears to be sought against the Company on that claim. The amended consolidated complaint
also asserts a purported direct claim on behalf of a class of shareholders against the individual defendants based on alleged breaches of such
fiduciary duties. Plaintiffs seek compensatory damages as well as injunctive relief. On June 27, 2012, defendants moved to dismiss the
consolidated action. In light of, among other things, the early stage of the litigation, we are unable to predict the outcome of the matter.
However, it is reasonably possible that we may incur a loss in connection with this matter. We are unable to reasonably estimate the amount
or range of such reasonably possible loss.
Under some circumstances, any losses incurred in connection with adverse outcomes in the litigation matters described above could be
material.
Brazilian Tax Matters
In 2002, our Brazilian subsidiary received an excise tax (IPI) assessment from the Brazilian tax authorities for alleged tax deficiencies during
the years 1997-1998. In December 2012, additional assessments were received for the year 2008 with respect to excise tax (IPI) and taxes
charged on gross receipts (PIS and COFINS), totaling approximately $392, $58 and $271 each, including penalties and accrued interest, at
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