Quest Diagnostics 2008 Annual Report Download - page 44

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Location Leased or Owned
Cypress, California ................................... Leased
Los Angeles, California. .............................. Leased
San Juan Capistrano, California . . ..................... Owned
Tampa, Florida ....................................... Owned
Atlanta, Georgia...................................... Owned
Chicago, Illinois (2) .................................. One owned, one leased
Baltimore, Maryland .................................. Owned
Teterboro, New Jersey . . .............................. Owned
Horsham, Pennsylvania . .............................. Leased
Norristown, Pennsylvania ............................. Leased
Dallas, Texas. . ....................................... Leased
Chantilly, Virginia.................................... Leased
Item 3. Legal Proceedings
In addition to the matters described below, in the normal course of business, we have been named, from
time to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation,
arising in connection with our activities as a provider of diagnostic testing, information and services. These legal
actions may include lawsuits alleging negligence or other similar legal claims. Certain of the actual or threatened
legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate
amounts of damages, and could have an adverse impact on our client base and reputation.
The Company is also involved, from time to time, in other reviews, investigations and proceedings by
governmental agencies regarding our business, including, among other matters, operational matters, certain of
which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. The number of
these reviews, investigations and proceedings has increased in recent years with regard to many firms in the
healthcare services industry, including our Company.
We maintain various liability insurance coverages for claims that could result from providing or failing to
provide clinical testing services, including inaccurate testing results and other exposures. Our insurance coverage
limits our maximum exposure on individual claims; however, we are essentially self-insured for a significant
portion of these claims.
The Company contests liability or the amount of damages as appropriate in each pending matter. In view of
the inherent difficulty of predicting the outcome of such matters, particularly in cases where claimants seek
substantial or indeterminate damages or where investigations or proceedings are in the early stages, we cannot
predict with certainty the loss or range of loss, if any, related to such matters, how or if such matters will be
resolved, when they ultimately will be resolved, or what the eventual settlement, fine, penalty or other relief, if
any, might be. Subject to the foregoing, and except for the NID Matter which is discussed further below and in
Note 14 in “Notes to Consolidated Financial Statements” in Part II, Item 8, we believe, based on current
knowledge, that the outcome of all other pending matters will not have a material adverse effect on our
consolidated financial condition, although the outcome of such matters could be material to our results of
operations and cash flows in the period that such matters are determined or paid, depending on, among other
things, the levels of our revenues or income for such period.
NID Matter.
NID, a test kit manufacturing subsidiary, and the Company each received a subpoena from the United States
Attorney’s Office for the Eastern District of New York during the fourth quarter of 2004. The subpoenas
requested a wide range of business records, including documents regarding parathyroid hormone (“PTH”) test kits
manufactured by NID and PTH testing performed by the Company. The Company has voluntarily and actively
cooperated with the investigation, providing information, witnesses and business records of NID and the
Company, including documents related to PTH tests and test kits, as well as other tests and test kits. In the
second and third quarters of 2005, the FDA conducted an inspection of NID and issued a Form 483 listing the
observations made by the FDA during the course of the inspection. NID responded to the Form 483.
During the fourth quarter of 2005, NID instituted its second voluntary product hold within a six-month
period, due to quality issues, which adversely impacted the operating performance of NID. As a result, the
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