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27. Legal proceedings
Various legal proceedings, claims and governmental investigations
are pending against Daimler AG and its subsidiaries on a wide
range of topics, including vehicle safety, emissions, fuel economy,
financial services, dealer, supplier and other contractual rela-
tionships, intellectual property rights, product warranties, envi-
ronmental matters, and shareholder matters. Some of these
proceedings allege defects in various components in several differ-
ent vehicle models or allege design defects relating to vehicle
stability, pedal misapplication, brakes or crashworthiness. Some of
these proceedings are filed as class action lawsuits that seek
repair or replacement of the vehicles or compensation for their
alleged reduction in value, while others seek recovery for
damage to property, personal injuries or wrongful death. Adverse
decisions in one or more of these proceedings could require us
to pay substantial compensatory and punitive damages or under-
take service actions, recall campaigns or other costly actions.
On August 17, 2009, the Official Committee of Unsecured Credi-
tors of OldCarCo LLC (formerly Chrysler LLC) filed a lawsuit
with the United States Bankruptcy Court, Southern District of
New York, against Daimler AG, Daimler North America Corpo-
ration and certain (former) board members of Chrysler LLC. The
Committee claims unspecified damages based on theories of
constructive and intentional fraudulent transfer, breach of fiduciary
duty, and other legal theories, alleging that the consideration
received in certain transactions effected in connection with the
investment by Cerberus in Chrysler LLC was not fair consid-
eration. Daimler considers these claims and allegations to be
without merit and will defend itself vigorously.
The Federal Republic of Germany initiated arbitration proceedings
against Daimler Financial Services AG, Deutsche Telekom AG
and Toll Collect GbR and submitted its statement of claims in
August 2005. It seeks damages, contractual penalties and
the transfer of intellectual property rights to Toll Collect GmbH.
In particular, the Federal Republic of Germany is claiming
– lost revenue of €3.33 billion for the period September 1, 2003
through December 31, 2004 plus interest (€1.1 billion through
May 18, 2009 plus 5% per annum over the respective base rate
since then),
– and contractual penalties of approximately €1.65 billion through
July 31, 2005 plus interest (€107 million through July 31, 2005
plus 5% per annum over the respective base rate since then),
– plus refinancing costs of €56 million.
Since, among other things, some of the contractual penalties are
dependent on time and further claims for contractual penalties
have been asserted by the Federal Republic of Germany, the amount
claimed as contractual penalties may increase. Defendants
submitted their response to the statement of claims on June 30,
2006. The Federal Republic of Germany delivered its reply to
the arbitrators on February 15, 2007, and the defendants deliv-
ered their rebuttal on October 1, 2007 (see also Note 28).
The arbitrators held the first hearing on June 16 and 17, 2008.
Additional briefs from the claimant and the defendants were
filed in May 2009. Following a motion by defendants to disqualify
the arbitrator nominated by plaintiff, the arbitration panel can-
celled a hearing scheduled for October 2009. We do not expect the
hearing to be rescheduled before the motion to disqualify has
been finally resolved. Daimler believes the claims are without merit
and will continue to defend itself vigorously.
As previously reported, the US Securities and Exchange Commis-
sion (“SEC”) and the US Department of Justice (“DOJ”) are
conducting an investigation into possible violations of law by
Daimler including the anti-bribery, record-keeping and internal
control provisions of the US Foreign Corrupt Practices Act (“FCPA”).
Daimler has voluntarily shared with the DOJ and the SEC infor-
mation from its own internal investigation of certain accounts,
transactions and payments, primarily relating to transactions
involving government entities, and has provided the agencies with
information pursuant to outstanding subpoenas and other
requests. Daimler has also had communications with and pro-
vided documents to the offices of German public prosecutors
regarding the matters that have been under investigation by the
DOJ and SEC.
Daimler has completed its internal investigation and has deter-
mined that in a number of jurisdictions, primarily in Africa, Asia
and Eastern Europe, improper payments were made which raise
concerns under the FCPA, under German law, and under the laws of
other jurisdictions. Daimler has taken various actions designed
to address and resolve the issues identified in the course of its
investigation and to safeguard against the recurrence of improper
conduct. These include establishing a company-wide compliance
organization, evaluating and revising Daimler’s governance
policies and internal control procedures and taking personnel
actions.
Daimler has been in discussions with the DOJ and SEC regarding
consensually resolving the agencies’ investigations. There can
be no assurance about whether and when settlements with the
DOJ or SEC will become final and effective.