Avon 2015 Annual Report Download - page 132

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
insurance. Settlement is conditioned upon court approval of the proposed resolution of the derivative actions. In the event that the court
does not approve the settlement of the derivative actions, or that the agreements are otherwise terminated before becoming final, 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 the Company and 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 filed an amended complaint, and the defendants moved to dismiss the amended complaint on June 14, 2012. On
September 29, 2014, the Court granted the defendants’ motion to dismiss and also granted the plaintiffs leave to amend their complaint.
On October 24, 2014, plaintiffs filed their second 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 second
amended complaint names as defendants the Company and two individuals 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 and
declaratory, injunctive, and other equitable relief. Defendants moved to dismiss the Second Amended Complaint on November 21, 2014.
The parties have reached an agreement on a settlement of this class action. The terms of settlement include releases by members of the class
of claims against the Company and the individual defendants and payment of $62. Under the terms of the settlement, approximately $60 of
the settlement was paid by the Company’s insurers and approximately $2 was paid by the Company (which represented the remaining
deductible under the Company’s applicable insurance policy) into escrow. On August 21, 2015, the court granted preliminary approval of
the settlement, and on December 1, 2015 the court held a hearing to consider final approval of the settlement and expressed an intent to
grant final approval. However, the court has not yet entered a final judgment approving the settlement. If the settlement is not approved by
the court, or is otherwise terminated before it is finalized, the Company will be unable to predict the outcome of this matter. Furthermore,
in that event, it is reasonably possible that the Company may incur a loss in connection with this matter, which the Company is unable to
reasonably estimate.
Between December 23, 2014 and March 12, 2015, two purported class actions were filed in the United States District Court for the
Southern District of New York – Poovathur v. Avon Products, Inc., et al. (No. 14-CV-10083) and McCoy et al. v. Avon Products, Inc., et al.
(No. 15-CV-01828) asserting claims under the Employee Retirement Income Security Act (“ERISA”) against the Company, the Plan’s
administrator, benefits board and investment committee, and certain individuals alleged to have served as Plan fiduciaries. On April 8, 2015,
the Court consolidated the two actions and recaptioned the consolidated case as In re 2014 Avon Products, Inc. ERISA Litigation, (No. 14-
CV-10083). On May 8, 2015, plaintiffs filed a consolidated complaint, asserting claims for alleged breach of fiduciary duty and failure to
monitor under ERISA on behalf of a purported class of participants in and beneficiaries of the Plan who invested in and/or held shares of the
Avon Common Stock Fund between July 31, 2006 and May 1, 2014 and between December 14, 2011 and the present. Plaintiffs seek, inter
alia, certain monetary relief, damages, and declaratory, injunctive and other equitable relief. On July 9, 2015, Defendants moved to dismiss
the consolidated complaint. The parties have reached an agreement on a settlement of this class action. The terms of settlement include
releases by members of the class of claims against the Company and the individual defendants and payment of approximately $6. Under the
terms of the settlement, approximately $5 of the settlement will be paid by the Company’s insurer and approximately $1 will be paid by the
Company (which represents the remaining deductible under the Company’s applicable insurance policy). Certain documentation relating to
the settlement has not yet been finalized, and the settlement is subject to court approval. If the settlement is not approved by the court, or is
otherwise terminated before it is finalized, the Company will be unable to predict the outcome of this matter. Furthermore, in that event, it
is reasonably possible that the Company may incur a loss in connection with this matter, which the Company is unable to reasonably
estimate.
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). In the second quarter of 2014, the PIS and COFINS assessments were officially closed in favor of
Avon Brazil. The 2002 and the 2012 IPI assessments assert that the establishment in 1995 of separate manufacturing and distribution
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