Redbox 2011 Annual Report Download - page 92

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a time period in excess of that allowed under the Video Privacy Protection Act, 18 U.S.C. §§ 2710, et seq. A
substantially similar complaint was filed in the same court in March 2011 by an Illinois resident, Kevin
Sterk. Since the filing of the complaint, Blake Boesky has been replaced by a different named plaintiff, Jiah
Chung, and an amended complaint has been filed alleging disclosures of personally identifiable information, in
addition to plaintiffs’ claims of retention of such information. Plaintiffs are seeking statutory damages, injunctive
relief, attorneys’ fees, costs of suit, and interest. The court has consolidated the cases. The court has denied
Redbox’s motion to dismiss the plaintiffs’ claims involving retention of information, and is still considering
Redbox’s motion to dismiss plaintiffs’ claims involving disclosure of information. We believe that the claims
against us are without merit and intend to defend ourselves vigorously in this matter. Currently, no accrual has
been established as it is not possible to estimate the possible loss or range of loss because this matter had not
advanced to a stage where we could make any such estimate.
In February 2011, a California resident, Michael Mehrens, individually and on behalf of all others similarly
situated, filed a putative class action complaint against our Redbox subsidiary in the Superior Court of the State
of California, County of Los Angeles. The plaintiff alleges that, among other things, Redbox violated
California’s Song-Beverly Credit Card Act of 1971 (“Song-Beverly”) with respect to the collection and recording
of consumer personal identification information, and violated the California Business and Professions Code §
17200 based on the alleged violation of Song-Beverly. A similar complaint alleging violations of Song-Beverly
and the right to privacy generally was filed in March 2011 in the Superior Court of the State of California,
County of Alameda, by a California resident, John Sinibaldi. A third similar complaint alleging only a violation
of Song-Beverly, was filed in March 2011 in the Superior Court of the State of California, County of San Diego,
by a California resident, Richard Schiff. Plaintiffs are seeking compensatory damages and civil penalties,
injunctive relief, attorneys’ fees, costs of suit, and interest. Redbox removed the Mehrens case to the U.S. District
Court for the Central District of California, the Sinibaldi case to the U.S. District Court for the Northern District
of California, and the Schiff case to the U.S. District Court for the Southern District of California. The Sinibaldi
case was subsequently transferred to the U.S. District Court for the Central District of California, where the
Mehrens case is pending, and these two cases have been consolidated. At the same time, the plaintiffs substituted
Nicolle DiSimone as the named plaintiff in the Mehrens case. After Redbox filed a motion to dismiss, stay, or
transfer, the Schiff case was transferred to the U.S. District Court for the Central District of California but has not
been consolidated with the Mehrens case. Redbox moved to dismiss the DiSimone/Sinibaldi case, and DiSimone/
Sinibaldi moved for class certification. In January 2012, the Court granted Redbox’s motion to dismiss with
prejudice and denied DiSimone/Sinibaldi’s motion for class certification as moot. Plaintiffs have until February
2012 to appeal. We believe that the claims against us are without merit and intend to defend ourselves vigorously
in this matter. Currently, no accrual has been established as it is not possible to estimate the possible loss or range
of loss because this matter had not advanced to a stage where we could make any such estimate.
Other Contingencies
In 2011, we recorded a loss contingency in the amount of $11.6 million related to a supply agreement under
which we operated during 2011 and 2010 in our Consolidated Statements of Net Income. During the fourth
quarter of 2011, we made payments totaling $7.5 million to the supplier. Based on currently available
information, our best estimate of the aggregate range for reasonably possible losses, including the $7.5 million of
payments made in the fourth quarter of 2011, is from $7.5 million to $11.6 million. As of December 31, 2011,
the amount accrued within other accrued liabilities in our Consolidated Balance Sheets was $4.1 million. We
believe the likelihood of additional losses material to our accrual as of December 31, 2011 is remote.
NOTE 19: SUBSEQUENT EVENTS
Joint Venture
On February 3, 2012, Redbox and Verizon Ventures IV LLC (“Verizon”), a wholly owned subsidiary of Verizon
Communications Inc., entered into a Limited Liability Company Agreement (the “LLC Agreement”) and related
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