DIRECTV 2010 Annual Report Download - page 49

DIRECTV
ITEM 1B. UNRESOLVED STAFF COMMENTS Transaction. The plaintiff purports to represent approximately 85 former Liberty
Media Corporation stockholders (other than the defendants) that allegedly held
None. approximately 1.8 million Liberty Media Corporation shares prior to the
consummation of the Liberty Transaction. The complaint alleges, among other
ITEM 2. PROPERTIES things, that John Malone and certain other Liberty Media Corporation stockholders
As of December 31, 2010, we had approximately 250 owned and leased received disparate allocation of consideration in the Liberty Transaction. The
locations operating in the United States and Latin America. The major locations of complaint seeks equitable reallocation and disgorgement of the improper
the DIRECTV U.S. segment include eight administrative offices; two broadcast consideration received by the defendants and other relief. The defendants have
centers and six call centers. The major locations of the DIRECTV Latin America requested indemnification and have tendered defense of this litigation to DIRECTV
segment include 10 administrative offices, four broadcast centers and eight call pursuant to agreements executed as part of the Liberty Transaction and DIRECTV
centers. We consider our properties adequate for our present needs. has elected to take control of the defense.
Early Cancellation Fees. In 2008, a number of plaintiffs filed putative class
ITEM 3. LEGAL PROCEEDINGS action lawsuits in state and federal courts challenging the early cancellation fees we
(a) Material pending legal proceedings, other than ordinary routine litigation assess our customers when they do not fulfill their programming commitments.
incidental to the business, to which we became or were a party during the year Several of these lawsuits are pending—some in California state court purporting to
ended December 31, 2010 or subsequent thereto, but before the filing of the represent statewide classes, and some in federal courts purporting to represent
report, are summarized below: nationwide classes. The lawsuits seek both monetary and injunctive relief. While the
theories of liability vary, the lawsuits generally challenge these fees under state
Intellectual Property Litigation. We are a defendant in several unrelated consumer protection laws as both unfair and inadequately disclosed to customers.
lawsuits claiming infringement of various patents relating to various aspects of our Each of the lawsuits is at an early stage. Where possible, we are moving to compel
businesses. In certain of these cases other industry participants are also defendants, these cases to arbitration in accordance with our Customer Agreement, but in states
and also in certain of these cases we expect that any potential liability would be the such as California where the enforceability of the arbitration provision is limited,
responsibility of our equipment vendors pursuant to applicable contractual we intend to defend against these allegations in court. We believe that our early
indemnification provisions. To the extent that the allegations in these lawsuits can cancellation fees are adequately disclosed, and represent reasonable estimates of the
be analyzed by us at this stage of their proceedings, we believe the claims are costs we incur when customers cancel service before fulfilling their programming
without merit and intend to defend the actions vigorously. The final disposition of commitments.
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 From time to time, we receive investigative inquiries or subpoenas from state
operations of any one period. No assurance can be given that any adverse outcome and federal authorities with respect to alleged violations of state and federal statutes.
would not be material to our consolidated financial position. These inquiries may lead to legal proceedings in some cases. DIRECTV U.S. has
received a request for information from the Federal Trade Commission, or FTC, on
Liberty Media Corporation Litigation. As previously reported, a purported issues similar to those resolved with the multistate group of state attorneys general
class action complaint was filed on February 9, 2010 and amended on April 23, discussed in (b) below. We are cooperating with the FTC by providing information
2010 in Delaware Chancery Court against certain past and present directors of about our sales and marketing practices and customer complaints.
Liberty Media Corporation alleging, among other things, that the defendants
breached their fiduciary duties as Liberty board members in connection with the Other. We are subject to other legal proceedings and claims that arise in the
business terms and approval process by Liberty stockholders of the merger of ordinary course of our business. The amount of ultimate liability with respect to
Liberty Entertainment, Inc. with a subsidiary of DIRECTV as part of the Liberty
27