Berkshire Hathaway 2007 Annual Report Download - page 49

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Notes to Consolidated Financial Statements (Continued)
(19) Contingencies and Commitments (Continued)
Berkshire cannot at this time predict the outcome of these matters and is unable to estimate a range of possible loss and cannot
predict whether or not the outcomes will have a material adverse effect on Berkshire’ s business or results of operations for at least the
quarterly period when these matters are completed or otherwise resolved.
b) Civil Litigation
Litigation Related to ROA
General Reinsurance and several current and former employees, along with numerous other defendants, have been sued in
thirteen federal lawsuits involving Reciprocal of America (“ROA”) and related entities. ROA was a Virginia-based reciprocal insurer
and reinsurer of physician, hospital and lawyer professional liability risks. Nine are putative class actions initiated by doctors,
hospitals and lawyers that purchased insurance through ROA or certain of its Tennessee-based risk retention groups. These
complaints seek compensatory, treble, and punitive damages in an amount plaintiffs contend is just and reasonable.
General Reinsurance is also subject to actions brought by the Virginia Commissioner of Insurance, as Deputy Receiver of
ROA, the Tennessee Commissioner of Insurance, as Receiver for purposes of liquidating three Tennessee risk retention groups, a
state lawsuit filed by a Missouri-based hospital group that was removed to federal court and another state lawsuit filed by an
Alabama doctor that was also removed to federal court. The first of these actions was filed in March 2003 and additional actions
were filed in April 2003 through June 2006. In the action filed by the Virginia Commissioner of Insurance, the Commissioner asserts
in several of its claims that the alleged damages are believed to exceed $200 million in the aggregate as against all defendants.
All of these cases are collectively assigned to the U.S. District Court for the Western District of Tennessee for pretrial
proceedings. General Reinsurance filed motions to dismiss all of the claims against it in these cases and, in June 2006, the court
granted General Reinsurance’ s motion to dismiss the complaints of the Virginia and Tennessee receivers. The court granted the
Tennessee receiver leave to amend her complaint, and the Tennessee receiver filed her amended complaint on August 7, 2006.
General Reinsurance has filed a motion to dismiss the amended complaint in its entirety and that motion was granted, with the court
dismissing the claim based on an alleged violation of RICO with prejudice and dismissing the state law claims without prejudice.
One of the other defendants filed a motion for the court to reconsider the dismissal of the state law claims, requesting that the court
retain jurisdiction over them. That motion is pending.
The Tennessee Receiver subsequently filed three Tennessee state court actions against General Reinsurance, essentially
asserting the same state law claims that had been dismissed without prejudice by the Federal court. General Reinsurance removed
those actions to Federal court, and the Tennessee Receiver filed a motion to remand to state court. That motion is the subject of
briefing. General Reinsurance has filed a motion with the Judicial Panel on Multi-District Litigation to transfer the three Tennessee
state court actions now pending in the Middle District of Tennessee to the U.S. District Court for the Western District of Tennessee.
The Virginia receiver has moved for reconsideration of the dismissal and for leave to amend his complaint, which was opposed
by General Reinsurance. The court affirmed its original ruling but has given the Virginia receiver leave to amend. In September
2006, the court also dismissed the complaint filed by the Missouri-based hospital group. The Missouri-based hospital group has filed
a motion for reconsideration of the dismissal and for leave to file an amended complaint. General Reinsurance has filed its
opposition to that motion and awaits a ruling by the court. The court has also not yet ruled on General Reinsurance’ s motions to
dismiss the complaints of the other plaintiffs. The parties have commenced discovery.
General Reinsurance filed a Complaint and a motion in federal court to compel the Tennessee and Virginia receivers to
arbitrate their claims against General Reinsurance. The receivers filed motions to dismiss the Complaint. These motions are
pending.
Actions related to AIG
General Reinsurance is a defendant in In re American International Group Securities Litigation, Case No. 04-CV-8141-(LTS),
United States District Court, Southern District of New York, a putative class action asserted on behalf of investors who purchased
publicly-traded securities of AIG between October 1999 and March 2005. The complaint, originally filed in April 2005, asserts
various claims against AIG and certain of its officers, directors, investment banks and other parties, including Messrs. Ferguson,
Napier and Houldsworth (whom the Complaint defines, together with General Reinsurance, as the “General Re Defendants”). The
Complaint alleges that the General Re Defendants violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 in
connection with the AIG Transaction. The Complaint seeks damages and other relief in unspecified amounts. General Reinsurance
has answered the Complaint, denying liability and asserting various affirmative defenses. Document production has begun, but no
other discovery has taken place. No trial date has been scheduled.
A member of the putative class in the litigation described in the preceding paragraph has asserted similar claims against
General Re and Mr. Ferguson in a separate complaint, Florida State Board of Administration v. General Re Corporation, et al., Case
No. 06-CV-3967, United States District Court, Southern District of New York. The claims against General Re and Mr. Ferguson
closely resemble those asserted in the class action. The complaint does not specify the amount of damages sought. General Re has
answered the Complaint, denying liability and asserting various affirmative defenses. No trial date has been established. The parties
are coordinating discovery and other proceedings among this action, a similar action filed by the same plaintiff against AIG and
others, the class action described in the preceding paragraph, and the shareholder derivative actions described in the next paragraph.
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,