Quest Diagnostics 2015 Annual Report Download - page 115

QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED
(in millions unless otherwise indicated)
F- 40
At December 31, 2015, the approximate total future purchase commitments are $206 million, of which $96 million are
expected to be incurred in 2016, $84 million are expected to be incurred in 2017 through 2018 and the balance thereafter.
Contingent Lease Obligations
The Company remains subject to contingent obligations under certain real estate leases that were entered into by
certain predecessor companies of a subsidiary prior to the Company's acquisition of the subsidiary. While over the course
of many years, the title to the properties and interest in the subject leases have been transferred to third parties and the
subject leases have been amended several times by such third parties, the lessors have not formally released the subsidiary
predecessor companies from their original obligations under the leases and therefore remain contingently liable in the event
of default. The remaining terms of the lease obligations and the Company's corresponding indemnifications range from 8 to
32 years. The lease payments under certain leases are subject to market value adjustments and contingent rental payments
and therefore, the total contingent obligations under the leases cannot be precisely determined but are likely to total several
hundred million dollars. A claim against the Company would be made only upon the current lessee's default and after a
series of claims and corresponding defaults by third parties that precede the Company in the order of liability. The
Company also has certain indemnification rights from other parties to recover losses in the event of default on the lease
obligations. The Company believes that the likelihood of its performance under these contingent obligations is remote and
no liability has been recorded for any potential payments under the contingent lease obligations.
Settlements
In 2010, a purported class action entitled In re Celera Corp. Securities Litigation was filed in the United States District
Court for the Northern District of California against Celera Corporation and certain of its directors and current and former
officers. An amended complaint filed in October 2010 alleges that from April 2008 through July 22, 2009, the defendants made
false and misleading statements regarding Celera's business and financial results with an intent to defraud investors. The
complaint was further amended in 2011 to add allegations regarding a financial restatement. Celera and the director and officer
defendants have reached an agreement to settle this action; the court has given its final approval of the settlement. The
settlement is fully covered by insurance.
Legal Matters
The Company is involved in various legal proceedings. Some of the proceedings against the Company involve claims
that could be substantial in amount.
In addition to the matters described below, in the normal course of business, the Company has been named, from time
to time, as a defendant in various legal actions, including arbitrations, class actions and other litigation, arising in connection
with the Company's activities as a provider of diagnostic testing, information and services. These legal actions may include
lawsuits alleging negligence or other similar legal claims. These actions could involve claims for substantial compensatory
and/or punitive damages or claims for indeterminate amounts of damages, and could have an adverse impact on the Company's
client base and reputation.
The Company is also involved, from time to time, in other reviews, investigations and proceedings by governmental
agencies regarding the Company's business, including, among other matters, operational matters, 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 the Company.
In June 2010, the Company received a subpoena from the Florida Attorney General's Office seeking documents
relating to the Company's pricing and billing practices as they relate to Florida’s Medicaid program. The Company cooperated
with the requests. In November 2013, the State of Florida intervened as a plaintiff in a civil lawsuit, Florida ex rel. Hunter
Laboratories LLC v. Quest Diagnostics Incorporated, et al., filed in Florida Circuit Court. The suit, originally filed by a
competitor laboratory, alleges that the Company overcharged Florida’s Medicaid program. The Company's motion to dismiss
the state's amended complaint was denied.
In April 2015, a qui tam civil lawsuit entitled United States ex rel. Mayes v. Berkeley HeartLab, Inc., et al., filed in the
U.S. District Court for the District of South Carolina, was unsealed. The complaint alleges that certain alleged business
practices of the defendants violate the False Claims Act, and seeks monetary relief. The United States has intervened as a
QUEST DIAGNOSTICS 2015 ANNUAL REPORT ON FORM 10-K