Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

8.  Commitments and Contingencies

The Company is a defendant in various lawsuits and claims arising in the normal course of business.  Management believes it has valid defenses in these cases and is defending them vigorously.  While the results of litigation cannot be predicted with certainty, except as set forth below, management believes the final outcome of such litigation will not have a material adverse effect on the Company's financial position or results of operations.

As a result of a 2001 corporate restructuring, the Company filed for a transfer of its state unemployment tax reserve account with the Employment Development Department of the State of California (“EDD”).  The EDD approved the Company's request for transfer of the reserve account in May 2002 and also notified the Company of its new contribution rates based upon the approved transfer.  In December 2003, the Company received a Notice of Duplicate Accounts and Notification of Assessment (“Notice”) from the EDD.  The Notice stated that the EDD was collapsing the accounts of the Company's subsidiaries into the account of the entity with the highest unemployment tax rate.  The Notice also retroactively imposed the higher unemployment insurance rate on all of the Company's California employees for 2003, resulting in an assessment of $5.6 million.  In January 2004, the Company filed petitions with an administrative law judge of the California Unemployment Insurance Appeals Board (“ALJ”) to protest the validity of the Notice, asserting several procedural and substantive defenses.

One procedural defense included in the Company's appeal asserts that EDD failed to meet the statutory requirement related to serving a proper notice within the stipulated time frame and that all of the statutes of limitations concerning EDD's ability to reassess or modify unemployment tax rates for the periods addressed in the Notice had expired (“Notification Defense”).  During 2010, a California Circuit Court issued a ruling in favor of EDD regarding a dispute involving a taxpayer who made arguments similar to the Company's Notification Defense. The Supreme Court of California subsequently denied the taxpayer's petition for review.  The Company subsequently received a statement of account from the EDD indicating taxes, penalties and interest due of approximately $8.1 million.

While still denying all liability, the Company entered into a written agreement with the EDD in September 2011 to fully and finally settle this dispute (the “Settlement Agreement”).  Pursuant to the terms of the Settlement Agreement, which is subject to the approval of the ALJ, the Company agreed to pay $3.1 million (the “Settlement Amount”) to the EDD.  The Settlement Amount of $3.1 million was recorded in other income (expense) in the third quarter of 2011.