Berkshire Hathaway 2006 Annual Report Download - page 53

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Notes to Consolidated Financial Statements (Continued)
(21) Contingencies and Commitments (Continued)
On July 27, 2005, General Reinsurance received a Summons and a Verified and Amended Shareholder Derivative Complaint
in In re American International Group, Inc. Derivative Litigation, Case No. 04-CV-08406, United States District Court, Southern
District of New York. The complaint, brought by several alleged shareholders of AIG, seeks damages, injunctive and declaratory
relief against various officers and directors of AIG as well as a variety of individuals and entities with whom AIG did business,
relating to a wide variety of allegedly wrongful practices by AIG. The allegations relating to General Reinsurance focus on the AIG
Transaction, and the complaint purports to assert causes of action in connection with that transaction for aiding and abetting other
defendants’ breaches of fiduciary duty and for unjust enrichment. The complaint does not specify the amount of damages or the
nature of any other relief sought. In August 2005, General Reinsurance received a Summons and First Amended Consolidated
Shareholders’ Derivative Complaint in In re American International Group, Inc. Consolidated Derivative Litigation, Case No. 769-N,
Delaware Chancery Court. The claims asserted in the Delaware complaint are substantially similar to those asserted in the New York
derivative complaint, except that the Delaware complaint makes clear that the plaintiffs are asserting claims against both General
Reinsurance and General Re. Proceedings in both the New York derivative suit and the Delaware derivative suit are stayed until
March 14, 2007.
FAI/HIH Matter
In December 2003, the Liquidators of both FAI Insurance Limited (“FAI”) and HIH Insurance Limited (“HIH”) advised GRA
and Cologne Re that they intended to assert claims arising from insurance transactions GRA entered into with FAI in May and June
1998. In August 2004, the Liquidators filed claims in the Supreme Court of New South Wales in order to avoid the expiration of a
statute of limitations for certain plaintiffs. The focus of the Liquidators’ allegations against GRA and Cologne Re are the 1998
transactions GRA entered into with FAI (which was acquired by HIH in 1999). The Liquidators contend, among other things, that
GRA and Cologne Re engaged in deceptive conduct that assisted FAI in improperly accounting for such transactions as reinsurance,
and that such deception led to HIH’ s acquisition of FAI and caused various losses to FAI and HIH. The Liquidator of HIH served its
Complaint on GRA and Cologne Re in June 2006. The FAI Liquidator has until March 30, 2007 to serve his complaint on GRA and
Cologne Re.
Insurance Brokerage Antitrust Litigation
Berkshire, General Re and General Reinsurance are defendants in this multi-district litigation, In Re: Insurance Brokerage
Antitrust Litigation, MDL No. 1663 (D.N.J.), in which plaintiffs allege an industry-wide scheme on the part of commercial insurance
brokers and insurance companies to defraud a purported class of insurance purchasers through bid-rigging and contingent
commission arrangements. The plaintiffs claim that all defendants engaged in a pattern of racketeering activity, in violation of RICO,
and that they conspired to restrain trade. They further allege that the broker defendants breached fiduciary duties to the plaintiffs,
that the insurer defendants aided and abetted that breach, and that all defendants were unjustly enriched in the process. Plaintiffs seek
treble damages in an unspecified amount, together with interest and attorneys fees and expenses. They also seek a declaratory
judgment of wrongdoing as well as an injunction against future anticompetitive practices. In November 2006, General Re, General
Reinsurance and Berkshire, together with the other defendants, filed motions to dismiss the complaint which are awaiting resolution.
Berkshire has established reserves for certain of the legal proceedings discussed above where it has concluded that the
likelihood of an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. For other legal
proceedings discussed above, either Berkshire has determined that an unfavorable outcome is reasonably possible but it is unable to
estimate a range of possible losses or it is unable to predict the outcome of the matter. Management believes that any liability to the
Company that may arise as a result of current pending civil litigation, including the matters discussed above, will not have a material
effect on Berkshire’ s financial condition or results of operations.
c) Commitments
Berkshire subsidiaries lease certain manufacturing, warehouse, retail and office facilities as well as certain equipment. Total
rent expense for all leases was $578 million, $432 million and $422 million in 2006, 2005 and 2004, respectively. Minimum rental
payments for operating leases having initial or remaining non-cancelable terms in excess of one year are as follows. Amounts are in
millions.
After
2007 2008 2009 2010 2011 2011 Total
$503 $420 $337 $255 $198 $601 $2,314
Several of Berkshire’ s subsidiaries have made long-term commitments to purchase goods and services used in their businesses.
The most significant of these relate to NetJets’ commitments to purchase up to 483 aircraft through 2015 and MidAmerican’ s
commitments to purchase coal, electricity and natural gas. Commitments under all such subsidiary arrangements are approximately
$6.4 billion in 2007, $3.4 billion in 2008, $3.0 billion in 2009, $2.8 billion in 2010, $2.1 billion in 2011 and $7.3 billion after 2011.