Northrop Grumman 2011 Annual Report Download - page 94

NORTHROP GRUMMAN CORPORATION
14. INVESTIGATIONS, CLAIMS AND LITIGATION
Spin-Off of Shipbuilding Business – As provided in the Separation and Distribution Agreement with HII described in
Note 6, HII generally has responsibility for investigations, claims and litigation matters related to the Shipbuilding
business. The company has therefore excluded from this report certain previously disclosed Shipbuilding-related
investigations, claims and litigation matters for which HII has lead responsibility. The company does not believe
these HII matters are likely to have a material adverse effect on the company’s consolidated financial position as of
December 31, 2011 or its annual results of operations or cash flows.
Litigation
The company is one of several defendants in litigation brought by the Orange County Water District in Orange
County Superior Court in California on December 17, 2004, for alleged contribution to volatile organic chemical
contamination of the County’s shallow groundwater. The lawsuit includes counts against the defendants for
violation of the Orange County Water District Act, the California Super Fund Act, negligence, nuisance, trespass
and declaratory relief. Among other things, the lawsuit seeks unspecified damages for the cost of remediation,
payment of attorney fees and costs, and punitive damages. Trial on the statutory claims is scheduled to begin on
February 10, 2012.
On March 27, 2007, the U.S. District Court for the Central District of California consolidated two Employee
Retirement Income Security Act (ERISA) lawsuits that had been separately filed on September 28, 2006, and
January 3, 2007, into In Re Northrop Grumman Corporation ERISA Litigation. The plaintiffs filed a consolidated
Amended Complaint on September 15, 2010, alleging breaches of fiduciary duties by the Administrative
Committees and the Investment Committees (as well as certain individuals who served on or supported those
Committees) for two 401(k) Plans sponsored by Northrop Grumman Corporation. The company itself is not a
defendant in the lawsuit. The plaintiffs claim that these alleged breaches of fiduciary duties caused the Plans to
incur excessive administrative and investment fees and expenses to the detriment of the Plans’ participants. On
August 6, 2007, the District Court denied plaintiffs’ motion for class certification, and the plaintiffs appealed the
District Court’s decision on class certification to the U.S. Court of Appeals for the Ninth Circuit. On
September 8, 2009, the Ninth Circuit vacated the Order denying class certification and remanded the issue to the
District Court for further consideration. As required by the Ninth Circuit’s Order, the case was also reassigned to
a different judge. By order dated March 29, 2011, the District Court granted the plaintiffs’ motion for class
certification. The District Court held a hearing on May 16, 2011 on various cross motions for summary judgment.
The supplemental briefing requested by the District Court has been filed and the motions have been submitted.
No trial date has been set.
On June 22, 2007, a putative class action was filed against the Northrop Grumman Pension Plan and the Northrop
Grumman Retirement Plan B and their corresponding administrative committees, styled as Skinner et al. v. Northrop
Grumman Pension Plan, etc., et al., in the U.S. District Court for the Central District of California. The putative class
representatives alleged violations of ERISA and breaches of fiduciary duty concerning a 2003 modification to the
Northrop Grumman Retirement Plan B. The modification relates to the employer-funded portion of the pension
benefit available during a five-year transition period that ended on June 30, 2008. The plaintiffs dismissed the
Northrop Grumman Pension Plan, and in 2008, the District Court granted summary judgment in favor of all
remaining defendants on all claims. The plaintiffs appealed, and in May 2009, the U.S. Court of Appeals for the
Ninth Circuit reversed the decision of the District Court and remanded the matter back to the District Court for
further proceedings, finding that there was ambiguity in a 1998 summary plan description related to the employer-
funded component of the pension benefit. After the remand, the plaintiffs filed a motion to certify a class. The parties
also filed cross-motions for summary judgment. On January 26, 2010, the District Court granted summary judgment
in favor of the Plan and denied the plaintiffs’ motion for summary judgment. The District Court also denied the
plaintiffs’ motion for class certification and struck the trial date of March 23, 2010, as unnecessary given the District
Court’s grant of summary judgment for the Plan. The plaintiffs appealed the District Court’s order to the Ninth
Circuit and we are awaiting a decision. Oral argument is set for February 9, 2012.
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