First Data 2013 Annual Report Download - page 95

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The Company is involved in various legal proceedings. Accruals have been made with respect to these matters, where appropriate, which are reflected in
the Company’s Consolidated Financial Statements. The Company may enter into discussions regarding settlement of these matters, and may enter into
settlement agreements, if it believes settlement is in the best interest of the Company. The matters discussed below, if decided adversely to or settled by the
Company, individually or in the aggregate, may result in liability material to the Company’s financial condition and/or results of operations.
On July 2, 2004, a class action complaint was filed against the Company, its subsidiary Concord EFS, Inc., and various financial institutions.
Plaintiffs claim that the defendants violated antitrust laws by conspiring to artificially inflate foreign ATM fees that were ultimately charged to ATM
cardholders. Plaintiffs seek a declaratory judgment, injunctive relief, compensatory damages, attorneys’ fees, costs and such other relief as the nature of the
case may require or as may seem just and proper to the court. Similar suits were filed and served in July, August and October 2004 (referred to collectively as
the “ATM Fee Antitrust Litigation”). The Court granted judgment in favor of the defendants, dismissing the case on September 17, 2010. On October 14,
2010, the plaintiffs appealed the summary judgment. On July 12, 2012, the United States Court of Appeals for the Ninth Circuit affirmed the Northern
District Court of California’s dismissal of all the claims against the defendants. On July 26, 2012, the plaintiffs petitioned the Ninth Circuit for rehearing en
banc and on March 13, 2013 the United States Court of Appeals for the Ninth Circuit issued an order denying the plaintiffs’ petition for rehearing. On
July 11, 2013 the plaintiffs filed a petition for a writ of certiorari with the United States Supreme Court and on October 7, 2013, the United States Supreme
Court denied the plaintiffs’ petition for a writ of certiorari.
There are asserted claims against the Company where an unfavorable outcome is considered to be reasonably possible. These claims can generally be
categorized in the following areas: (1) patent infringement which results from claims that the Company is using technology that has been patented by another
party; (2) merchant customer matters often associated with alleged processing errors or disclosure issues and claims that one of the subsidiaries of the
Company has violated a federal or state requirement regarding credit reporting or collection in connection with its check verification guarantee, and collection
activities; and (3) other matters which may include issues such as employment. The Company’s estimates of the possible ranges of losses in excess of any
amounts accrued are $0 to $30 million for patent infringement, $0 to $30 million for merchant customer matters and $0 to $5 million for other matters,
resulting in a total estimated range of possible losses of $0 to $65 million for all of the matters described above.
The estimated range of reasonably possible losses is based on currently available information and involves elements of judgment and significant
uncertainties. As additional information becomes available and the resolution of the uncertainties becomes more apparent, it is possible that actual losses may
exceed even the high end of the estimated range.
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In the normal course of business, the Company is subject to claims and litigation. Management of the Company believes that such matters will not have
a material adverse effect on the Company’s results of operations, liquidity or financial condition.
As discussed in Note 3 of these Consolidated Financial Statements, during the year ended December 31, 2013, contingent consideration was recorded
related to the acquisition of Perka, Inc. The transaction called for cash consideration as well as contingent payments for achievement of certain milestones. As
part of the purchase price, the Company recorded a $6.3 million liability for the contingent consideration.
During the year ended December 31, 2012, contingent consideration was recorded related to the acquisition of Clover Network, Inc. The transaction
called for cash consideration as well as a series of contingent payments based on the achievement of specified sales targets. These contingent payments are
classified as purchase consideration if made to outside investors and compensation if made to current and future employees. As part of the purchase price, the
Company recorded a $20 million liability for the contingent consideration due to outside investors based upon the net present value of the Company’s estimate
of the future payments.
Also during the year ended December 31, 2012, contingent consideration was recorded related to a small divestiture. The transaction called for a series
of contingent payments based on revenue over three years. As part of the sale price, the Company recorded a $14 million asset for the contingent consideration
due based upon the net present value of the Company’s estimate of future receipts from the buyer. During 2013, the asset for contingent consideration
decreased due to collections and as of December 31, 2013 totaled $8.3 million.
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