Lockheed Martin 2010 Annual Report Download - page 84

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On September 11, 2006, we and Lockheed Martin Investment Management Company (LMIMCo), our wholly-owned
subsidiary, were named as defendants in a lawsuit filed in the U.S. District Court for the Southern District of Illinois, seeking to
represent a class of purportedly similarly situated participants and beneficiaries in our Salaried Savings Plan and the Hourly Savings
Plan (the Plans). Plaintiffs allege that we or LMIMCo caused the Plans to pay expenses that were higher than reasonable by, among
other actions, permitting service providers of the Plans to engage in revenue sharing, paying investment management fees for the
company stock funds, and causing the company stock funds to hold cash for liquidity, thus reducing the return on those funds. The
plaintiffs further allege that we or LMIMCo failed to disclose information appropriately relating to the fees associated with managing
the Plans. In August 2008, plaintiffs filed an amended complaint, adding allegations that we or LMIMCo breached fiduciary duties
under ERISA by providing inadequate disclosures with respect to the Stable Value Fund offered under our 401(k) plans. In April
2009, the Judge dismissed the plaintiffs’ claims that were based on revenue sharing but let stand the claims about the company stock
funds, the Stable Value Fund, and the overall fees paid by the plans. The Judge also certified a class for each plan for the claims
concerning the Stable Value Fund and the overall fees paid by the plans. We are appealing that order. The complaint does not allege a
specific calculation of damages, and we cannot reasonably estimate the possible loss, or range of loss, which could be incurred if the
plaintiff were to prevail in the allegations, but believe that we have substantial defenses. We dispute the allegations and are defending
against them.
On August 28, 2003, the DoJ filed complaints in partial intervention in two lawsuits filed under the qui tam provisions of the
Civil False Claims Act in the United States District Court for the Western District of Kentucky, United States ex rel. Natural
Resources Defense Council, et al., v. Lockheed Martin Corporation, et al., and United States ex rel. John D. Tillson v. Lockheed
Martin Energy Systems, Inc., et al. The DoJ alleges that we committed violations of the Resource Conservation and Recovery Act at
the Paducah Gaseous Diffusion Plant by not properly handling, storing, and transporting hazardous waste and that we violated the
False Claims Act by misleading Department of Energy officials and state regulators about the nature and extent of environmental
noncompliance at the plant. The complaint does not allege a specific calculation of damages, and we cannot reasonably estimate the
possible loss, or range of loss, which could be incurred if the plaintiff were to prevail in the allegations, but believe that we have
substantial defenses. We dispute the allegations and are defending against them.
As described in the “Environmental Matters” discussion below, we are subject to federal and state requirements for protection of
the environment, including those for discharge of hazardous materials and remediation of contaminated sites. As a result, we are a
party to or have property subject to various other lawsuits or proceedings involving environmental matters and remediation
obligations. This includes the litigation we have been in with certain residents of Redlands, California since 1997 before the California
Superior Court for San Bernardino County regarding allegations of personal injury, property damage, and other tort claims on behalf
of individuals arising from our alleged contribution to regional groundwater contamination. In 2006, the California Court of Appeal
dismissed the plaintiffs’ punitive damages claim. In 2008, the trial court dismissed the remaining first tier plaintiffs, ending the first
round of individual trials. The dismissal was affirmed by both the California Court of Appeal and the California Supreme Court. The
parties are now working with the trial court to establish the procedures for the litigation of the next round of individual plaintiffs, and
pre-trial proceedings are now underway. The complaint does not allege a specific calculation of damages, and we cannot reasonably
estimate the possible loss, or range of loss, which could be incurred if the plaintiff were to prevail in the allegations, but believe that
we have substantial defenses. We dispute the allegations and are defending against them.
Environmental Matters
We are involved in environmental proceedings and potential proceedings relating to soil and groundwater contamination,
disposal of hazardous waste, and other environmental matters at several of our current or former facilities, or at third-party sites where
we have been designated as a potentially responsible party (PRP). At December 31, 2010 and 2009, the aggregate amount of liabilities
recorded relative to environmental matters was $935 million and $877 million. Approximately $807 million and $748 million are
recorded in other liabilities on the Balance Sheets, with the remainder recorded in other current liabilities. A portion of environmental
costs is eligible for future recovery in the pricing of our products and services on U.S. Government contracts. We have recorded assets
totaling $810 million and $740 million at December 31, 2010 and 2009 for the estimated future recovery of these costs, as we consider
the recovery probable based on government contracting regulations and our history of receiving reimbursement for such costs.
Approximately $699 million and $630 million are recorded in other assets on the Balance Sheets, with the remainder recorded in other
current assets.
Environmental cleanup activities usually span several years, which make estimating liabilities a matter of judgment because of
such factors as changing remediation technologies, assessments of the extent of contamination, and continually evolving regulatory
environmental standards. We consider these and other factors in estimates of the timing and amount of any future costs that may be
required for remediation actions, which results in the calculation of a range of estimates for a particular environmental site.