Alcoa 2011 Annual Report Download - page 42

As previously reported, in November 2006, in Curtis v. Alcoa Inc., Civil Action No. 3:06cv448 (E.D. Tenn.), a class
action was filed by plaintiffs representing approximately 13,000 retired former employees of Alcoa or Reynolds Metals
Company and spouses and dependants of such retirees alleging violation of the Employee Retirement Income Security
Act (ERISA) and the Labor-Management Relations Act by requiring plaintiffs, beginning January 1, 2007, to pay
health insurance premiums and increased co-payments and co-insurance for certain medical procedures and
prescription drugs. Plaintiffs alleged these changes to their retiree health care plans violated their rights to vested health
care benefits. Plaintiffs additionally alleged that Alcoa had breached its fiduciary duty to plaintiffs under ERISA by
misrepresenting to them that their health benefits would never change. Plaintiffs sought injunctive and declaratory
relief, back payment of benefits, and attorneys’ fees. Alcoa had consented to treatment of plaintiffs’ claims as a class
action. During the fourth quarter of 2007, following briefing and argument, the court ordered consolidation of the
plaintiffs’ motion for preliminary injunction with trial, certified a plaintiff class, bifurcated and stayed the plaintiffs’
breach of fiduciary duty claims, struck the plaintiffs’ jury demand, but indicated it would use an advisory jury, and set
a trial date of September 17, 2008. In August 2008, the court set a new trial date of March 24, 2009 and, subsequently,
the trial date was moved to September 22, 2009. In June 2009, the court indicated that it would not use an advisory jury
at trial. Trial in the matter was held over eight days commencing September 22, 2009 and ending on October 1, 2009 in
federal court in Knoxville, TN before the Honorable Thomas Phillips, U.S. District Court Judge. At the conclusion of
evidence, the court set a post-hearing briefing schedule for submission of proposed findings of fact and conclusions of
law by the parties and for replies to the same. Post trial briefing was submitted on December 4, 2009. On March 9,
2011, the court issued a judgment order dismissing plaintiffs’ lawsuit in its entirety with prejudice for the reasons
stated in its Findings of Fact and Conclusions of Law. On March 23, 2011, plaintiffs filed a motion for clarification
and/or amendment of the judgment order, which seeks, among other things, a declaration that plaintiffs’ retiree benefits
are vested subject to an annual cap and an injunction preventing Alcoa, prior to 2017, from modifying the plan design
to which plaintiffs are subject or changing the premiums and deductibles that plaintiffs must pay. Also on March 23,
2011, plaintiffs filed a motion for award of attorney’s fees and expenses. Alcoa filed its opposition to both motions on
April 11, 2011. The time for plaintiffs to appeal from the court’s March 9, 2011 judgment will not begin until the court
disposes of these motions.
As previously reported, on February 27, 2008, Alcoa Inc. received notice that Aluminium Bahrain B.S.C. (Alba) had
filed suit against Alcoa Inc. and Alcoa World Alumina LLC (collectively, “Alcoa”), and others, in the U.S. District
Court for the Western District of Pennsylvania (the “Court”), Civil Action number 08-299, styled Aluminium Bahrain
B.S.C. v. Alcoa Inc., Alcoa World Alumina LLC, William Rice, and Victor Phillip Dahdaleh. The complaint alleges
that certain Alcoa entities and their agents, including Victor Phillip Dahdaleh, have engaged in a conspiracy over a
period of 15 years to defraud Alba. The complaint further alleges that Alcoa and its employees or agents (1) illegally
bribed officials of the government of Bahrain and (or) officers of Alba in order to force Alba to purchase alumina at
excessively high prices, (2) illegally bribed officials of the government of Bahrain and (or) officers of Alba and issued
threats in order to pressure Alba to enter into an agreement by which Alcoa would purchase an equity interest in Alba,
and (3) assigned portions of existing supply contracts between Alcoa and Alba for the sole purpose of facilitating
alleged bribes and unlawful commissions. The complaint alleges that Alcoa and the other defendants violated the
Racketeer Influenced and Corrupt Organizations Act (RICO) and committed fraud. Alba’s complaint seeks
compensatory, consequential, exemplary, and punitive damages, rescission of the 2005 alumina supply contract, and
attorneys’ fees and costs. Alba seeks treble damages with respect to its RICO claims.
On February 26, 2008, Alcoa Inc. had advised the U.S. Department of Justice (DOJ) and the Securities and Exchange
Commission (SEC) that it had recently become aware of these claims, had already begun an internal investigation, and
intended to cooperate fully in any investigation that the DOJ or the SEC may commence. On March 17, 2008, the DOJ
notified Alcoa that it had opened a formal investigation and Alcoa has been cooperating with the government.
In response to a motion filed by the DOJ on March 27, 2008, the Court ordered the suit filed by Alba to be
administratively closed and that all discovery be stayed to allow the DOJ to fully conduct an investigation without the
interference and distraction of ongoing civil litigation. The Court further ordered that the case will be reopened at the
close of the DOJ’s investigation. On November 8, 2011, at Alcoa’s request, the Court removed the case from
administrative stay and ordered Alba to file an Amended Complaint by November 28, 2011 and a RICO case statement
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