Health Net 2015 Annual Report Download - page 57

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Item 2. Properties.
We lease office space for our principal executive offices in Woodland Hills, California, which is used by each of
our reportable segments. The operating lease for our executive offices expires on December 31, 2017 and relates to
approximately 115,488 square feet. We also lease a separate 339,417 square foot facility in Woodland Hills primarily to
house the operations for a significant portion of our Western Region Operations reportable segment. The lease for this
two-building facility expires December 31, 2021.
In Rancho Cordova and San Rafael, California, we lease an aggregate of approximately 611,445 square feet of
office space that is used for operations in our Western Region Operations and Government Contracts reportable
segments. The related leases expire at various dates ranging from February 2016 to June 2022.
In addition to the office space referenced above, we lease approximately 47 sites in 11 states, totaling
approximately 735,625 square feet of space, which are used by our reportable segments for their respective operations.
We also lease approximately 364,142 square feet of office space in Shelton, Connecticut under leases expiring at
various dates ranging from 2016 to 2017. We no longer conduct operations in Shelton, and have subleased a portion of
this space under subleases expiring at various dates ranging from 2016 to 2017.
We also own a facility in Rancho Cordova, California comprising approximately 82,000 square feet of space,
which is used to support operations for all of our reportable segments.
We believe that our properties are adequate and suitable to meet our business needs.
Item 3. Legal Proceedings.
Overview
We record reserves and accrue costs for certain legal proceedings and regulatory matters to the extent that we
determine an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such
reserves and accrued costs reflect our best estimate of the probable loss for such matters, our recorded amounts may
differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of
loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and
regulatory proceedings, which may be exacerbated by various factors, including but not limited to that they may involve
indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal
theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of
parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate
proceedings, each with a wide range of potential outcomes; or result in a change of business practices. Further, there
may be various levels of judicial review available to the Company in connection with any such proceeding in the event
damages are awarded or a fine or penalty is assessed. As of the date of this report, amounts accrued for legal
proceedings and regulatory matters were not material. However, it is possible that in a particular quarter or annual
period our financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by
an ultimate unfavorable resolution of or development in legal and/or regulatory proceedings depending, in part, upon
our financial condition, results of operations, cash flow or liquidity in such period, and our reputation may be adversely
affected. Management believes that the ultimate outcome of any of the regulatory and legal proceedings that are
currently pending against us should not have a material adverse effect on our financial condition, results of operations,
cash flow and liquidity.
Military and Family Life Counseling Program Putative Class and Collective Actions
We are a defendant in three related litigation matters pending in the United States District Court for the Northern
District of California (the “Northern District of California”) relating to the independent contractor classification of
counselors (“MFLCs”) who contracted with our subsidiary, MHN Government Services, Inc., to provide short-term,
non-medical counseling at U.S. military installations throughout the country under our Military and Family Life
Counseling (formerly Military and Family Life Consultants) program. Plaintiffs in these matters claim that MFLCs
were misclassified as independent contractors under state and federal law, and are seeking unpaid wages, overtime pay,
statutory penalties, attorneys’ fees and interest. Each of these matters is currently stayed pending final resolution by the
U.S. Supreme Court of our motion to compel arbitration. The U.S. Supreme Court granted our writ of certiorari on
September 30, 2015.
On December 29, 2015, we entered into a settlement agreement with all the named plaintiffs in the three related
litigation matters as well as their counsel. Pursuant to the settlement agreement, plaintiffs filed a separate class action in
arbitration that is intended to resolve each of the federal and state law claims asserted in the three related litigation