Computer Associates 2016 Annual Report Download - page 91

Note 11 — Commitments and Contingencies
The Company leases real estate and equipment with lease terms expiring through fiscal year 2027. Certain leases provide for
renewal options and additional rentals based on escalations in operating expenses and real estate taxes.
Rental expense, including short-term leases, maintenance charges and taxes on leased facilities, was approximately $142 million,
$144 million and $144 million for fiscal years 2016, 2015 and 2014, respectively. Rental expense does not include rent expense
associated with facilities exited as part of the Company’s Fiscal 2014 Plan or previous restructuring plans and actions.
Future minimum lease payments under non-cancelable operating leases, including facilities exited as part of the Company’s
Fiscal 2014 Plan and previous restructuring plans and actions, at March 31, 2016 were as follows:
Fiscal Year (in millions)
2017 $83
2018 75
2019 65
2020 60
2021 51
Thereafter 85
Total $ 419
Less income from sublease (34)
Net minimum operating lease payments $ 385
The Company has additional commitments to purchase goods and services of approximately $268 million in future periods,
approximately $244 million of which expires by fiscal year 2021.
Litigation: The Company, various subsidiaries, and certain current and former officers have been or, from time to time, may be
named as defendants in various lawsuits and claims arising in the normal course of business. The Company may also become
involved with contract issues and disputes with customers, including government customers.
On March 24, 2014, the U.S. Department of Justice (DOJ) filed under seal in the United States District Court for the District of
Columbia a complaint against the Company in partial intervention under the qui tam provisions of the civil False Claims Act
(FCA). The underlying complaint was filed under seal by an individual plaintiff on August 24, 2009. On May 29, 2014, the case
was unsealed. Both the DOJ and the individual plaintiff have filed amended complaints. The current complaints relate to
government sales transactions under the Company’s General Services Administration (GSA) schedule contract, entered into in
2002 and extended until present through subsequent amendments. In sum and substance, the current complaints allege that the
Company provided inaccurate commercial discounting information to the GSA during contract negotiations and that, as a result,
the GSA’s contract discount was lower than it otherwise would have been. In addition, the complaints allege that the Company
failed to apply the full negotiated discount in some instances and to pay sufficient rebates pursuant to the contract’s price
reduction clause. In addition to FCA claims, the current complaints also assert common law causes of action. The DOJ complaint
seeks an unspecified amount of damages, including treble damages and civil penalties. The complaint by the individual plaintiff
alleges that the U.S. government has suffered damages in excess of $100 million and seeks an unspecified amount of damages,
including treble damages and civil penalties. The Company filed motions to dismiss the current complaints. On March 31, 2015,
the court issued decisions denying the Company’s motion to dismiss the DOJ complaint, and granting in part and denying in part
the Company’s motion to dismiss the individual plaintiff’s complaint. The discovery phase of the case is proceeding pursuant to
the court’s scheduling orders. On October 30, 2014, the GSA Suspension and Debarment Division issued a Show Cause Letter to
the Company in response to the complaints summarized above. In sum, the letter called on the Company to demonstrate why the
U.S. government should continue to contract with the Company, given the litigation allegations made in these complaints. On
December 19, 2014, the Company provided a detailed response to the Show Cause Letter. In July 2015, after the Company agreed
to assume certain additional reporting requirements during the pendency of the litigation, the GSA Suspension and Debarment
Division advised the Company that it had concluded its review and determined that the Company is a responsible contractor with
which government agencies could continue to contract. The Company cannot predict the amount of damages likely to result from
the litigation summarized above. Although the timing and ultimate outcome of this litigation cannot be determined, the Company
believes that the material aspects of the liability theories set forth in the litigation complaints are unfounded. The Company also
believes that it has meritorious defenses and intends to vigorously contest the lawsuit.
Based on the Company’s experience, management believes that the damages amounts claimed in a case are not a meaningful
indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to
predict the ultimate outcome of cases. The Company believes that it has meritorious defenses in connection with its current
lawsuits and material claims and disputes, and intends to vigorously contest each of them.
81