Toro 2008 Annual Report Download - page 27

also sought an injunction, unspecified compensatory and punitive potential loss that could result from the litigation. Therefore, no
damages, treble damages under RICO, and attorneys’ fees. accrual has been established for potential loss in connection with
In May 2006, the case was removed to federal court in the these lawsuits. We are also unable to assess at this time whether
Southern District of Illinois. In August 2006, we, together with the these lawsuits will have a material adverse effect on our annual
other defendants other than MTD Products Inc. (‘‘MTD’’), filed a consolidated operating results or financial condition, although an
motion to dismiss the amended complaint. Also in August 2006, unfavorable resolution could be material to our consolidated oper-
the plaintiffs filed a motion for preliminary approval of a settlement ating results for a particular period.
agreement with MTD and certification of a settlement class. In
Textron Innovations Inc. v. The Toro Company; The Toro
December 2006, another defendant, American Honda Motor Com-
Company v. Textron Inc. and Jacobsen
pany (‘‘Honda’’), notified us that it had reached a settlement agree-
In July 2005, Textron Innovations Inc., the patent holding company
ment with the plaintiffs.
of Textron, Inc., filed a lawsuit in Delaware Federal District Court
In May 2008, the court issued a memorandum and order that
against us for patent infringement. Textron alleges that we willfully
(i) dismissed the RICO claim in its entirety with prejudice;
infringe certain claims of three Textron patents by selling our
(ii) dismissed all non-Illinois state-law claims without prejudice and
Groundsmaster commercial mowers. Textron seeks damages for
with instructions that such claims must be filed in local courts; and
our past sales and an injunction against future infringement. In
(iii) rejected the proposed settlement with MTD. The proposed
August and November 2005, we answered the complaint, asserting
Honda settlement was not under consideration by the court and
defenses and counterclaims of non-infringement, invalidity, and
was not addressed in the memorandum and order. Also in May
equitable estoppel. Following the Court’s order in October 2006
2008, the plaintiffs (i) re-filed the Illinois claims with the court; and
construing the claims of Textron’s patents, discovery in the case
(ii) filed non-Illinois claims in federal courts in the District of New
was closed in February 2007. In March 2007, following unsuccess-
Jersey and the Northern District of California with essentially the
ful attempts to mediate the case, we filed with the USPTO to have
same state law claims.
Textron’s patents reexamined. The reexamination proceedings are
In June 2008, the plaintiffs filed a motion with the United States
pending in the USPTO, and all of the claims asserted against us in
Judicial Panel on Multidistrict Litigation (the ‘‘MDL Panel’’) that
all three patents stand rejected. In April 2007, the Court granted
(i) stated their intent to file lawsuits in all 50 states and the District
our motion to stay the litigation and, in June 2007, denied Tex-
of Columbia; and (ii) sought to have all of the cases transferred for
tron’s motion for reconsideration of the Court’s order staying the
coordinated pretrial proceedings. In August 2008, the MDL Panel
proceedings.
issued an order denying the transfer request. New lawsuits, some
We continue to evaluate these lawsuits and are unable to rea-
of which include new plaintiffs, were filed in various federal and
sonably estimate the likelihood of loss or the amount or range of
state courts asserting essentially the same state law claims.
potential loss that could result from the litigation. Therefore, no
In September 2008, we and other defendants filed a new motion
accrual has been established for potential loss in connection with
with the MDL Panel that sought to transfer the multiple actions for
these lawsuits. While we do not believe that these lawsuits will
coordinated pretrial proceedings. In early December 2008, the
have a material adverse effect on our consolidated financial condi-
MDL Panel issued an order that (i) transferred 23 lawsuits, which
tion, an unfavorable resolution could be material to our consoli-
collectively assert claims under the laws of 16 states, for coordi-
dated operating results.
nated or consolidated pretrial proceedings, (ii) selected the United
States District Court for the Eastern District of Wisconsin as the
ITEM 4. SUBMISSION OF MATTERS TO A
transferee district, and (iii) provided that additional lawsuits will be
treated as ‘‘tag-along’’ actions in accordance with its rules. To VOTE OF SECURITY HOLDERS
date, more than 40 lawsuits have been filed in various federal and
No matters were submitted to a vote of our security holders during
state courts, which collectively assert claims under the laws of
the fourth quarter of fiscal 2008.
approximately 30 states.
We continue to evaluate these lawsuits and are unable to rea-
sonably estimate the likelihood of loss or the amount or range of
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