Amtrak 2014 Annual Report Download - page 52

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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1509-1694994 44
10. Commitments and Contingencies (continued)
With the exception of the Fraternal Order of Police, the agreements for the unions provide for
specified general wage increases beginning July 1, 2010, and every six months thereafter, until
and including January 1, 2015. The agreement with the Fraternal Order of Police provides for
specified general wage increases beginning April 1, 2011, and every six months thereafter, until
October 1, 2015.
The Company generally accrues for retroactive wages for unions with unratified contracts on the
basis that the remaining contracts would ratify with similar wage increases, which is what
occurred for unions with unratified contracts as of September 30, 2013. All retroactive wages as
of September 30, 2013 were paid in FY2014. As all unions had ratified contracts as of
September 30, 2014, no accrual was recorded as of September 30, 2014. An accrual of
$39.3 million was included in “Accrued expenses and other current liabilities” in the
Consolidated Balance Sheet as of September 30, 2013.
Legal Proceedings
In May 2008, APU, corporate successor to Penn Central, filed a lawsuit in federal court in
Cincinnati, Ohio, asserting that Amtrak “eroded” the value of its common stock. APU sought
$52.0 million plus 40 years of interest. APU owns 55.8% of Amtrak’ s common stock. Under the
Rail Passenger Service Act of 1970, APU was permitted to have Amtrak assume APU’ s
responsibility to operate intercity passenger rail service in return for paying Amtrak one-half of
APU’ s 1969 passenger service losses. APU took advantage of that opportunity, entered into a
1971 agreement with Amtrak, paid $52.0 million as required, and chose to receive Amtrak
common stock at par value (rather than tax deductions of equal value). APU’ s claims were
litigated in arbitration proceedings and before the federal court. In an order dated June 21, 2011,
the federal court granted Amtrak’ s motion to dismiss APU’ s lawsuit. In a second order dated
September 13, 2011, the court also denied APU’ s motion to alter the court’ s judgment for
Amtrak. APU filed an appeal to the U.S. Court of Appeals for the Sixth Circuit. The Sixth
Circuit affirmed the District Court’ s dismissal of APU’ s complaint except for one procedural due
process claim that was remanded to the District Court. On remand, the District Court granted
Amtrak’ s motion to dismiss the case, for a second time, and also dismissed APU’ s subsequent
motion to reconsider or alter that decision. APU appealed the second dismissal on June 29, 2015.
Legal briefing before the Sixth Circuit Court of Appeals is scheduled to be completed by the end
of October 2015. The Company believes it is reasonably possible, but not probable, that a loss
could be incurred related to this claim. Amtrak has not recorded a liability related to this claim in
the consolidated financial statements.