Comcast 2006 Annual Report Download - page 67

65 Comcast 2006 Annual Report Notes to Consolidated Financial Statements
Under the terms of our 2002 acquisition of AT&T Corp.’s cable
business, we are contractually liable for 50% of any liabilities of
AT&T in the actions described in items (i) and (ii) above (in which
we are also a defendant).
We deny any wrongdoing in connection with the claims that have
been made directly against us, our subsidiaries and Brian L. Roberts,
and are defending all of these claims vigorously. The final disposi-
tion of these claims is not expected to have a material adverse
effect on our consolidated financial position, but could possibly
be material to our consolidated results of operations of any one
period. Further, no assurance can be given that any adverse out-
come would not be material to our consolidated financial position.
AT&T — TCI Cases
In June 1998, class action lawsuits were filed by then-shareholders
of Tele-Communications, Inc. (“TCI”) Series A TCI Group Common
Stock (“Common A”) against AT&T and the directors of TCI relating
to the acquisition of TCI by AT&T, alleging that former members of
the TCI board of directors breached their fiduciary duties to Com-
mon A shareholders by agreeing to transaction terms whereby
holders of the Series B TCI Group Common Stock received a 10%
premium over what Common A shareholders received.
In connection with the TCI acquisition (completed in early 1999),
AT&T agreed under certain circumstances to indemnify TCI’s former
directors for certain liabilities, potentially including those incurred in
connection with this action. Under the terms of our acquisition of
AT&T Corp.’s cable business, (i) we agreed to indemnify AT&T for
certain liabilities, potentially including those incurred by AT&T in
connection with this action, and (ii) we assumed certain obligations
of TCI to indemnify its former directors, potentially including those
incurred in connection with this action.
In October 2006 these lawsuits were settled. We agreed to contrib-
ute approximately $44 million to the settlement. This amount was
paid in November 2006 and did not have a material impact on our
results of operations for the year ended December 31, 2006. The
settlement was approved in February 2007.
Patent Litigation
We are a defendant in several unrelated lawsuits claiming
infringement of various patents relating to various aspects of our
businesses. In certain of these cases other industry participants
are also defendants, and also in certain of these cases we expect
that any potential liability would be in part or in whole the responsi-
bility of our equipment vendors pursuant to applicable contractual
indemnification provisions. To the extent that the allegations in
these lawsuits can be analyzed by us at this stage of their pro-
ceedings, we believe the claims are without merit and intend to
defend the actions vigorously. The final disposition of these claims
is not expected to have a material adverse effect on our con-
solidated financial position, but could possibly be material to our
consolidated results of operations of any one period. Further, no
assurance can be given that any adverse outcome would not be
material to our consolidated financial position.
Antitrust Cases
We are defendants in two purported class actions originally filed in
the United States District Courts for the District of Massachusetts
and the Eastern District of Pennsylvania, respectively. The poten-
tial class in the Massachusetts case is our subscriber base in the
“Boston Cluster” area, and the potential class in the Pennsylvania
case is our subscriber base in the “Philadelphia and Chicago clus-
ters,” as those terms are defined in the complaints. In each case,
the plaintiffs allege that certain subscriber exchange transactions
with other cable providers resulted in unlawful “horizontal market
restraints” in those areas and seek damages pursuant to antitrust
statutes, including treble damages.
As a result of recent events in both cases relating to the proce-
dural issue of whether the plaintiffs’ claims could proceed in court
or, alternatively, whether the plaintiffs should be compelled to
arbitrate their claims pursuant to arbitration clauses in their sub-
scriber agreements, it has become more likely that these cases
will proceed in court. Our motion to dismiss the Pennsylvania case
on the pleadings was denied, and the plaintiffs have moved to
certify a class action. We are opposing the plaintiffs’ motion and
are proceeding with class discovery. We have moved to dismiss
the Massachusetts case. The Massachusetts case was recently
transferred to the Eastern District of Pennsylvania and plaintiffs are
seeking to consolidate it with the Pennsylvania case.
We believe the claims in these actions are without merit and are
defending the actions vigorously. The final disposition of these
claims is not expected to have a material adverse effect on our
consolidated financial position, but could possibly be material to
our consolidated results of operations of any one period. Further,
no assurance can be given that any adverse outcome would not
be material to our consolidated financial position.
Other
We are subject to other legal proceedings and claims that arise in
the ordinary course of our business. The amount of ultimate liability
with respect to such actions is not expected to materially affect our
financial position, results of operations or liquidity.
Note 14: Financial Data by Business Segment
Our reportable segments consist of our Cable and Programming
businesses. In evaluating the profitability of our segments, the
components of net income (loss) below operating income (loss)
before depreciation and amortization are not separately evaluated
by our management. Assets are not allocated to segments for
management reporting. Our financial data by business segment
is as follows: