Henry Schein 2003 Annual Report Download - page 60

HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data)
Note 13–Commitments and Contingencies (Continued)
In October 1999, the trial court, on motion, certified both a Windows®sub-class and a DOS sub-class to proceed as a class action
pursuant to Tex. R. Civ. P. 42. It is estimated that approximately 5,000 Windows®customers and approximately 10,000 DOS customers
were covered by the class action that was certified by the trial court. In November of 1999, we filed an interlocutory appeal of the trial
court’s determination to the Texas Court of Appeals on the issue of whether this case was properly certified as a class action. On
September 14, 2000, the Court of Appeals affirmed the trial court’s certification order. On January 5, 2001, we filed a Petition for Review
in the Texas Supreme Court asking the Court to find that it had "conflicts jurisdiction" to permit review of the trial court’s certification order.
The Texas Supreme Court heard oral argument on February 6, 2002. On October 31, 2002, the Texas Supreme Court issued an opinion
in the case holding that it had conflicts jurisdiction to review the decision of the Court of Appeals and the finding that the trial court’s
certification of the case as a class action was improper. The Texas Supreme Court further held that the judgment of the Court of Appeals,
which affirmed the class certification order, must be reversed in its entirety. Upon reversal of the class certification order, the Texas
Supreme Court remanded the case to the trial court for further proceedings consistent with its opinion.
On January 31, 2003, counsel for the class filed a Motion for Rehearing with the Texas Supreme Court seeking a reversal of the Supreme
Court’s earlier opinion reversing the class certification order. On May 8, 2003, the Texas Supreme Court denied the Motion for Rehearing,
letting stand its opinion dated October 31, 2002, which decertified both sub-classes in their entirety. On August 29, 2003, class counsel
filed amended papers seeking certification of an amended Windows®class and an amended DOS class. The only claim asserted for
class certification by the Windows®class was for the alleged breach of the implied warranty of merchantability. The only claim asserted
for class certification by the DOS class were claims for alleged violations of the Texas Unsolicited Goods Statute and the Federal
Unordered Merchandise Act. Defendants filed motions for partial summary judgment as to the claims asserted on behalf of the Windows®
Class and the DOS Class. A hearing on Defendants’ Motions for Partial Summary Judgment and Plaintiffs’ Amended Motion to Certify a
Class was held on November 18-20, 2003. By Order dated December 10, 2003, the trial court (1) denied Defendants’ Motion for Partial
Summary Judgment on the Windows®Class claims; (2) granted Defendants’ Motion for Partial Summary Judgment on the DOS Class
claims. By granting summary judgment on the claims asserted on behalf of the DOS class, the DOS motion for class certification became
moot because certain class claims asserted by the named class representatives for the DOS class were found to be without merit. By
Order dated January 13, 2004, the trial court denied the amended motion for class certification filed by the Windows®Class in its entirety.
The deadline for the Windows®Class to file an interlocutory appeal of the denial of the amended motion for class certification was February
2, 2004. No appeal was filed on or before that date. As a result of the favorable rulings obtained in the trial court, only certain individual
claims asserted on behalf of the named plaintiffs remain pending in this case.
Purported Class Action in New Jersey
In February 2002, we were served with a summons and complaint in an action commenced in the Superior Court of New Jersey, Law
Division, Morris County, entitled "West Morris Pediatrics, P.A. and Avenel-Iselin Medical Group, P.A. vs. Henry Schein, Inc., doing business
as Caligor", Case No. MRS-L-421-02. The plaintiffs’ complaint purports to be on behalf of a nationwide class, but there has been no court
determination that the case may proceed as a class action. Plaintiffs seek to represent a class of all physicians, hospitals and other
healthcare providers throughout New Jersey and across the United States. This complaint, as amended in August 2002, alleges, among
other things, breach of oral contract, breach of implied covenant of good faith and fair dealing, violation of the New Jersey Consumer
Fraud Act, unjust enrichment, conversion and promissory estoppel relating to sales of a vaccine product in the year 2001. We filed an
answer in October 2002. Because the plaintiffs have not specified damages, it is not possible to determine the range of damages or other
relief sought by the plaintiffs. We intend to vigorously defend ourselves against this claim, as well as all other claims, suits and complaints.
Employment, Consulting and Non-Compete Agreements
We have employment, consulting and non-compete agreements expiring through 2007, except for a lifetime consulting agreement with a
former principal stockholder, which provides for current compensation of $308 per year, increasing $25 every fifth year with the next
increase in 2007. The agreements provide for varying base aggregate annual payments of approximately $2.5 million, which decrease
periodically to approximately $344. In addition, some agreements have provisions for incentive and additional compensation.
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