Tecumseh Products 2012 Annual Report Download - page 63

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While we have taken steps to avoid fines, penalties and other sanctions as the result of proceedings brought by regulatory
authorities, the amnesty grants do not extend to civil actions brought by private plaintiffs. The public disclosure of these
investigations has resulted in class action lawsuits filed in Canada and numerous class action lawsuits filed in the United States,
including by both direct and indirect purchaser groups. All of the U.S. actions have been transferred to the U.S. District Court
for the Eastern District of Michigan for coordinated or consolidated pretrial proceedings under Multidistrict Litigation
(“MDL”) procedures.
As previously reported, Tecumseh Products Company, Tecumseh Compressor Company, Tecumseh do Brasil, Ltda, and
Tecumseh do Brasil U.S.A. LLC entered into a settlement agreement with the direct-purchaser plaintiffs on June 24, 2010 to
resolve claims in the action in order to avoid the costs and distraction of this ongoing class action litigation.
On June 13, 2011, the Court issued an order denying without prejudice a motion for preliminary approval of our proposed
settlement with the direct purchaser plaintiffs because the time frame and products covered by the proposed settlement class
were inconsistent with the Court’s rulings of the same date granting, in part, a motion by the other defendants to dismiss claims
by the direct purchaser plaintiffs.
The direct purchaser plaintiffs subsequently filed a Second Amended Master Complaint to reflect the court’s rulings on the
motion to dismiss which allowed them to cover fractional compressors, or compressors of less than one horsepower, used for
refrigeration purposes (but excluding those used for air conditioning) purchased from February 25, 2005 to December 31, 2008
(the "Covered Products").
On October 15, 2012 we entered into a new settlement agreement with the direct-purchaser plaintiffs (the "Settlement
Agreement"), which must be approved by the court. The Settlement Agreement was made by and between us and our
subsidiaries and affiliates, and plaintiffs, both individually and on behalf of a class of persons who purchased the Covered
Products in the United States, its territories and possessions, directly from a defendant. Under the terms of the Settlement
Agreement, in exchange for plaintiffs' full release of all U.S. direct-purchaser claims against us relating to refrigeration
compressors, we agreed to pay a settlement amount of $7.0 million and, in addition, agreed to pay up to $150,000 for notice
and administrative costs associated with administering the settlement. These costs were recorded as an expense in the second
quarter ended June 30, 2010 (and paid in the third quarter of 2010) in the line item captioned "Impairments, restructuring
charges, and other items". Under the original agreement, administrative costs were $250,000; however upon signing the new
settlement, the difference was refunded to Tecumseh Products Company.
For the remaining indirect purchaser class actions in the U.S., a consolidated amended complaint was filed on June 30, 2010,
and we filed a motion to dismiss the indirect purchaser class action on August 30, 2010. On June 7, 2012, the court partially
granted a motion to dismiss the consolidated amended complaint with regard to claims for purchasers in several states in which
the complaint identified no named plaintiff. Supplemental briefs on the remaining issues raised in motions to dismiss have been
submitted to the court, which has not yet ruled on the issues. In Canada, the class actions are still in a preliminary stage.
Persons who engage in price-fixing in violation of U.S. antitrust law generally are jointly and severally liable to private
claimants for three times the actual damages caused by the joint conduct. As a conditional amnesty recipient, however, our civil
liability will be limited pursuant to the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, as amended
(“ACPERA”). As long as we continue to cooperate with the civil claimants and comply with the requirements of ACPERA, we
will be liable only for actual, as opposed to treble, damages and will not be jointly and severally liable for claims against other
participants in the alleged anticompetitive conduct being investigated.
On March 12, 2012, a proceeding was commenced by Electrolux do Brasil S.A., in the Civil Division of the State District
Court in São Paulo, Brazil, against Tecumseh Do Brasil Ltda. and two other defendants, jointly and severally. The complaint
alleges that Electrolux suffered damages from over pricing due to the activities of a cartel of which we and Whirlpool were
members. The complaint states that the amount in controversy is Brazilian Real 1,000,000. However, Electrolux would be
entitled to recover any damages it is able to prove in the proceeding, in the event that they exceed this amount. We timely filed
opposition to this claim. Electroluxs' expert reports were filed for consideration by the court that states the claim is time barred
due to the expiration of the applicable statute of limitations. We intend to continue to vigorously contest the claim.
Due to uncertainty of our liability in these cases, or other cases that may be brought in the future, we have not accrued any
liability in our financial statements, other than for the claims subject to the Settlement Agreement. Our ultimate liability or the
amount of any potential future settlements or resolution of these claims, if any, could be material to our financial position,
consolidated results of operations and cash flows.
We anticipate that we will incur additional expenses as we continue to cooperate with the investigations and defend the
lawsuits. We expense all legal costs as incurred in the Consolidated Statements of Operations. Such expenses and any
restitution payments could negatively impact our reputation, compromise our ability to compete and result in financial losses in
an amount which could be material to our financial position, consolidated results of operations and cash flows.