DIRECTV 2012 Annual Report Download - page 120

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
originally asserted, all of which have expired, and the validity and infringement of responsible for collecting performance rights fees under Brazilian law. Sky Brasil has
which are disputed by DIRECTV. been withholding payments to ECAD since 2004, and has accrued amounts we and
Sky Brasil believe are adequate to satisfy amounts owed to ECAD. In order to
Other Intellectual Property Litigation. We are a defendant in several unrelated continue its opposition to ECAD’s claims, Sky Brasil has provided letters of credit
lawsuits claiming infringement of various patents relating to various aspects of our in the amount of approximately $103 million. Sky Brasil’s dispute with ECAD is
businesses. In certain of these cases other industry participants are also defendants, currently pending in the Superior Justice Tribunal, and there are other claims by
and also in certain of these cases we expect that at least some potential liability the Brazilian pay television association, known as ABTA, against ECAD before the
would be the responsibility of our equipment vendors pursuant to applicable Brazilian antitrust board, or CADE, which may affect ECAD or the rights fees it is
contractual indemnification provisions. To the extent that the allegations in these attempting to collect.
lawsuits can be analyzed by us at this stage of their proceedings, we believe the
claims are without merit and intend to defend the actions vigorously. We have Waste Disposal Inquiry. On August 20, 2012, DIRECTV U.S. received from
determined that the likelihood of a material liability in such matters is remote or the State of California subpoenas and interrogatories related to our generation,
have made appropriate accruals. The final disposition of these claims is not handling, recordkeeping, transportation and disposal of hazardous waste, including
expected to have a material effect on our consolidated financial position or results universal waste, in the State of California, and the training of employees regarding
of operations. However, if an adverse ruling is made in a lawsuit involving key the same. The investigation is jointly conducted by the Office of the Attorney
intellectual property, such ruling could result in a loss that would be material to General and the District Attorney for Alameda County and appears to be part of a
our consolidated results of operations of any one period. No assurance can be given broader effort to investigate waste handling and disposal processes of a number of
that any adverse outcome would not be material to our consolidated financial industries. We are diligently reviewing our policies and procedures applicable to all
position. facilities and cooperating with the investigation. As this inquiry is in its early stages,
we are currently unable to reasonably estimate the outcome of this matter.
Early Cancellation Fees. In 2008, a number of plaintiffs filed putative class
From time to time, we receive investigative inquiries or subpoenas from state
action lawsuits in state and federal courts challenging the early cancellation fees we
and federal authorities with respect to alleged violations of state and federal statutes.
assess our customers when they do not fulfill their programming commitments.
These inquiries may lead to legal proceedings in some cases. DIRECTV U.S. has
Several of these lawsuits are pending, some in California state court purporting to
received a request for information from the Federal Trade Commission, or FTC, on
represent statewide classes, and some in federal courts purporting to represent
advertising and sales practices similar to those resolved in 2010 with a multistate
nationwide classes. The lawsuits seek both monetary and injunctive relief. While the
group of state attorneys general. We are cooperating with the FTC by providing
theories of liability vary, the lawsuits generally challenge these fees under state
information about our sales and marketing practices and customer complaints.
consumer protection laws as both unfair and inadequately disclosed to customers.
Our motions to compel arbitration have been granted in all of the federal cases,
Income Tax Matters
except as to claims seeking injunctive relief under California statutes. The denial of
our motion as to those claims is currently on appeal. We believe that our early We have received tax assessments from certain foreign jurisdictions and have
cancellation fees are adequately disclosed, and represent reasonable estimates of the agreed to indemnify previously divested businesses for certain tax assessments
costs we incur when customers cancel service before fulfilling their programming relating to periods prior to their respective divestitures. These assessments are in
commitments. various stages of the administrative process or litigation. While the outcome of
these assessments and other tax issues cannot be predicted with certainty, we believe
ECAD. Sky Brasil, along with other video distributors in Brazil, is disputing
charges assessed by Escritorio Central de Arrecadacao, or ECAD, the organization
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