OfficeMax 2006 Annual Report Download - page 14

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10
ITEM 3.LEGAL PROCEEDINGS
OfficeMaxIncorporated and certain of its subsidiaries are namedas defendantsin a number of
lawsuits,claims and proceedings arising out of the operation of the paper andforest products assets
prior to the closing ofthe Sale, for which OfficeMax agreed to retain responsibility. Also,as part of the
Sale, we agreed to retain responsibility for all pending or threatened proceedings and future
proceedings alleging asbestos-related injuriesarising out of theoperation of the paper and forest
products assets prior to the closing of the Sale. We do not believe any of these retained proceedings
are material to our business.
We have been notified thatwe are a “potentially responsible party” under the Comprehensive
Environmental Response Compensation andLiability Act (“CERCLA”) or similar federal andstate
laws,or have received a claim from a private party, with respect to 15 active sites where hazardous
substances or other contaminants are or may be located. The number of active sites is now12. All 12
active sites relateto operations either no longer owned by the Company or unrelated to its ongoing
operations.In most cases, we are one of many potentially responsible parties, and our alleged
contribution to these sites is relatively minor. Forsites where a range of potential liability can be
determined, we have established appropriate reserves. We believe we have minimal or no
responsibility with regard to several other sites. We cannot predict with certainty the total response
and remedial costs, our share ofthe total costs, the extent to which contributions will be available from
other parties or the amount of time necessaryto complete the cleanups. Based on our investigations;
our experience with respect to cleanup of hazardous substances; the factthat expenditures will, in
many cases, be incurred overextended periods of time; and the number ofsolvent potentially
responsible parties, we do not believe that the known actual and potential response costs will, in the
aggregate, materially affectour financial position or results of operations.
Over the past several years andcontinuing into 2006, we have been named a defendant in a
number of cases where the plaintiffs allege asbestos-relatedinjuriesfrom exposure toasbestos
products or exposure to asbestos while working atjob sites.The claims vary widely and often are not
specific about the plaintiffs’contacts withthe Company. None ofthe claimants seeks damages from
us individually, and we are generally one ofnumerous defendants. Many of the cases filed against us
have beenvoluntarily dismissed, although we have settled some cases. The settlements we havepaid
have been covered mostly by insurance, and we believe any future settlements or judgments in these
cases would be similarly covered. To date, no asbestos caseagainst us has gone to trial, and the
natureof these cases makes any prediction as to the outcome ofpending litigation inherently
subjective. At this time, however, we believe our involvement in asbestos litigation is not material to
either our financial position or our results ofoperations.
The Company and several former officers and/or directors of the Company or its predecessor are
defendants in a consolidated, putative class action proceeding (Roth v. OfficeMax Inc., et. al, U.S.
District Court, Northern District ofIllinois)alleging violations of the Securities Exchange Act of 1934.
TheComplaint alleges, insummary,that the Company failed to disclose (a) that vendor incomehad
been improperly recorded,(b) thatthe Company lacked internal controls necessary to ensure the
proper reporting of revenue and compliance with generally accepted accounting principles, and
(c) that the Company’s 2004 and later results would be adversely affected bythe Company’s allegedly
improper practices.The relief sought includes unspecified compensatory damages, interest and
costs, including attorneys’ fees. On September 21, 2005, the defendantsfiled a motion to dismiss the
consolidated amended complaint. On September 12, 2006, the court granted the defendant group’s
joint motion to dismiss the consolidated amended complaint. On November 9,2006, the plaintiffs filed
a purported amended complaint. On January 19,2007, the defendants filed a motion to dismiss the
amended complaint,which is pending. The Company believes there are valid factual and legal
defenses to these claims and intends to vigorously defend against them.