Lockheed Martin 2011 Annual Report Download - page 85

Note 13 – Legal Proceedings, Commitments, and Contingencies
We are a party to or have property subject to litigation and other proceedings, including matters arising under provisions
relating to the protection of the environment. We believe the probability is remote that the outcome of each of these matters,
including the legal proceedings discussed below, will have a material adverse effect on the Corporation as a whole,
notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular
quarter. Among the factors that we consider in this assessment are the nature of existing legal proceedings and claims, the
asserted or possible damages or loss contingency (if estimable), the progress of the case, existing law and precedent, the
opinions or views of legal counsel and other advisers, our experience in similar cases and the experience of other companies,
the facts available to us at the time of assessment, and how we intend to respond to the proceeding or claim. Our assessment
of these factors may change over time as individual proceedings or claims progress. Unless otherwise indicated, a range of
loss associated with any individual legal proceeding set forth below reasonably cannot be estimated. We cannot predict the
outcome of legal proceedings with certainty. These matters include the following items.
Legal Proceedings
On July 20, 2011, the City of Pontiac General Employees’ Retirement System filed a class action lawsuit against us and
three of our executive officers (Robert J. Stevens, Chairman and Chief Executive Officer, Bruce L. Tanner, Executive Vice
President and Chief Financial Officer, and Linda R. Gooden, Executive Vice President, IS&GS) in the U.S. District Court for
the Southern District of New York. The complaint was filed on behalf of purchasers of our common stock from
April 21, 2009 through July 21, 2009 and alleges that we violated certain sections of the federal securities laws by allegedly
making statements, primarily about the then-expected performance of our IS&GS business segment, that contained either
false statements of material facts or omitted material facts necessary to make the statements made not misleading, or engaged
in other acts that operated as an alleged fraud upon class members who purchased our common stock during that period. The
complaint further alleges that the statutory safe harbor provided for forward-looking statements does not apply to any of the
allegedly false statements. The complaint does not allege a specific amount of monetary damages. We believe that the
allegations are without merit and are defending against them.
Two additional actions were filed that repeat substantially the same allegations as those in the City of Pontiac General
Employees’ Retirement System case (described above). On September 9, 2011, Joyce Cavanagh-Wood, filed a shareholder
derivative action in the Circuit Court for Montgomery County, Maryland, naming Mr. Stevens, Mr. Tanner, and each of the
current directors of Lockheed Martin as well as the individuals who were Lockheed Martin directors at the time of the
activities alleged in the complaint. The two actions allege breach of fiduciary duty, mismanagement, unjust enrichment,
abuse of control, and waste of corporate assets relating to substantially the same allegations as the City of Pontiac General
Employees’ Retirement System case. Similarly, on October 11, 2011, Renee Smith, individually and on behalf of others,
filed a shareholder derivative action in the U.S. District Court for the Southern District of New York, naming the same
defendants (excluding Rosalind Brewer) and making substantially the same allegations. We believe that the allegations are
without merit and are defending against them.
On April 24, 2009, we filed a declaratory judgment action against the N.Y. Metropolitan Transportation Authority and
its Capital Construction Company (collectively, the MTA) asking the U.S. District Court for the Southern District of N.Y. to
find that the MTA is in material breach of our agreement based on the MTA’s failure to provide access to sites where work
must be performed and customer-furnished equipment necessary to complete the contract. The MTA filed an answer and
counterclaim alleging that we breached the contract, and subsequently terminated the contract for alleged default. The MTA
is seeking monetary damages and other relief under the contract, including the cost to complete the contract and potential
re-procurement costs. The contract had a total value of $323 million, of which $241 million was paid to us. We dispute the
MTA’s allegations and are defending against them.
On September 11, 2006, we and Lockheed Martin Investment Management Company (LMIMCo), a subsidiary, were
named as defendants in a lawsuit filed in the U.S. District Court for the Southern District of Illinois, seeking to represent a
class of purportedly similarly situated participants and beneficiaries in two of our 401(k) plans. Plaintiffs allege that we or
LMIMCo caused our plans to pay expenses that were higher than reasonable by, among other actions, permitting service
providers of the plans to engage in revenue sharing, paying investment management fees for the company stock funds, and
causing the company stock funds to hold cash for liquidity, thus reducing the return on those funds. The plaintiffs also allege
that we failed to disclose information appropriately relating to the fees associated with managing the plans. In August 2008,
plaintiffs filed an amended complaint, adding allegations that we breached fiduciary duties under ERISA by providing
inadequate disclosures with respect to the Stable Value Fund offered under our 401(k) plans. The complaint does not allege a
specific calculation of damages, and we cannot reasonably estimate the possible loss, or range of loss, which could be
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