GNC 2011 Annual Report Download - page 106

Table of Contents
NOTE 16. COMMITMENTS AND CONTINGENCIES (Continued)
Following the recall, GNC was named, among other defendants, in approximately 60 lawsuits (note that prior to May 1, 2009, GNC was a co-defendant in one
Hydroxycut case, Ciavarra (see "Ciavarra Claim" entry below)) related to Hydroxycut-branded products in 13 states. Iovate previously accepted GNC's
tender request for defense and indemnification under its purchasing agreement with GNC and, as such, Iovate has accepted GNC's request for defense and
indemnification in the Hydroxycut matters. GNC's ability to obtain full recovery in respect of any claims against GNC in connection with products
manufactured by Iovate under the indemnity is dependent on Iovate's insurance coverage, the creditworthiness of its insurer, and the absence of significant
defenses by such insurer. To the extent GNC is not fully compensated by Iovate's insurer, it can seek recovery directly from Iovate. GNC's ability to fully
recover such amounts may be limited by the creditworthiness of Iovate.
As of December 31, 2010, there were 50 pending lawsuits related to Hydroxycut in which GNC had been named: 44 individual, largely personal injury
claims and six putative class action cases, generally inclusive of claims of consumer fraud, misrepresentation, strict liability and breach of warranty. Any
liabilities that may arise from these matters are not probable or reasonably estimable at this time.
By court order dated October 6, 2009, the United States Judicial Panel on Multidistrict Litigation consolidated pretrial proceedings of many of the
pending actions in the Southern District of California (In re: Hydroxycut Marketing and Sales Practices Litigation, MDL No. 2087).
Ciavarra Claim. Prior to the Hydroxycut recall, Ryan Ciavarra filed a personal injury lawsuit against, among others, General Nutrition Corporation,
in the District Court of Harris County, Texas on November 19, 2008. Plaintiff alleges that his use and consumption of the diet product Hydroxycut caused
severe liver damage, jaundice and elevated liver enzymes. Plaintiff asserts claims for strict liability, negligence and breach of warranty and seeks unspecified
monetary damages. On December 20, 2010, the court entered an order that all of the plaintiff's claims against General Nutrition Corporation be dismissed
without prejudice. Any liabilities that may arise from this matter are not probable or reasonably estimable at this time.
Pro-Hormone/Androstenedione Cases. The Company is currently defending six lawsuits (the "Andro Actions") relating to the sale by GNC of certain
nutritional products alleged to contain the ingredients commonly known as Androstenedione, Androstenediol, Norandrostenedione, and Norandrostenediol
(collectively, "Andro Products"). In each of the Andro Actions, plaintiffs sought, or are seeking, to certify a class and obtain damages on behalf of the class
representatives and all those similarly-situated who purchased from the Company certain nutritional supplements alleged to contain one or more Andro
Products. As any liabilities that may arise from these cases are not probable or reasonably estimable at this time, no liability has been accrued in the
accompanying financial statements.
Romero Claim. On April 27, 2009, plaintiff J.C. Romero, a professional baseball player, filed a complaint against, among others, GNC, in Superior
Court of New Jersey (Law Division/ Camden County). Plaintiff alleges that he purchased from a GNC store and consumed 6-OXO Extreme, which is
manufactured by a third party, and in August 2008, was alleged to have tested positive for a banned substance. Plaintiff served a 50 game suspension imposed
by Major League Baseball. The seven count complaint asserts, among other things, claims for negligence, strict liability, misrepresentation, breach implied
warranty and violations of the New Jersey Consumer Fraud Act, and seeks unspecified monetary damages. GNC tendered the claim to the insurance company
of the franchisee whose GNC store sold and allegedly misrepresented the product. On or about
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