Note 5 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 5.  Commitments and Contingencies

On May 2, 2012, Sean Patterson, the former President of the Company’s subsidiary, Wilhelmina International, filed a lawsuit in the Supreme Court of the State of New York, County of New York, against the Company, Wilhelmina International and Mark Schwarz, the Company’s Chairman of the Board, asserting claims for alleged breach of Mr. Patterson’s expired employment agreement (the “Employment Agreement”) with Wilhelmina International, defamation, and declaratory relief with respect to the alleged invalidity and unenforceability of the Employment Agreement’s non-competition and non-solicitation provisions.  The Company and Wilhelmina International asserted counterclaims against Mr. Patterson for breach of the Employment Agreement, breach of fiduciary duty, and injunctive relief.  The parties are currently engaged in discovery. The Company believes Mr. Patterson’s claims are without merit and intends to vigorously defend itself and pursue the counterclaims.  On May 23, 2014, the court granted the defendants’ motion to dismiss Mr. Patterson’s defamation claim, and granted Mr. Patterson’s cross-motion for leave to file an amended defamation claim.

On October 10, 2012, an individual named Louisa Raske (“Raske”) commenced a purported class action lawsuit in New York State Supreme Court (New York County) against the Company's subsidiaries Wilhelmina International and Wilhelmina Models, Inc. (the “Wilhelmina Subsidiary Parties”), and others, as defendants (the “Raske Litigation”).  The Complaint asserted claims by Raske, individually, and on behalf of the purported class, for, among other things, breach of fiduciary duty, unjust enrichment, and conversion, arising out of the defendants’ allegedly unauthorized use of models’ images and the handling and reporting of funds received in connection therewith.   Other defendants in the Raske Litigation included other model management companies, advertising firms, and certain advertisers.  By Decision and Order dated September 6, 2013, amended September 12, 2013, the court granted the Wilhelmina Subsidiary Parties’ and the other defendants’ motions to dismiss the Complaint, and dismissed the Complaint, with prejudice, except as to the plaintiff’s claims for alleged unjust enrichment, which were dismissed without prejudice.    

On October 24, 2013, a second purported class action lawsuit naming the Wilhelmina Subsidiary Parties was initiated in New York State Supreme Court (New York County) by the same lead counsel who represented plaintiffs in the Raske Litigation (the “Shanklin Litigation”).  The claims in the Shanklin Litigation include breach of contract and unjust enrichment and are alleged to arise out of matters relating to those matters involved in the Raske Litigation, such as the handling and reporting of funds on behalf of models and the use of model images. Other parties named as defendants in the Shanklin Litigation include other model management companies, advertising firms and certain advertisers. The Company believes the new claims are without merit and intends to vigorously defend itself and its subsidiaries.  On January 6, 2014, the Wilhelmina Subsidiary Parties moved to dismiss the complaint in the Shanklin Litigation for failure to state a cause of action upon which relief can be granted and other grounds, and other defendants have also filed motions to dismiss.  The court has stayed all discovery in the case pending resolution of these motions.  On March 3, 2014, the judge assigned to the Shanklin Litigation wrote the Office of the New York Attorney General bringing the case to its attention, generally describing the claims asserted therein against the model management defendants, and stating that the case “may involve matters in the public interest”.  The judge’s letter also enclosed a copy of his decision in the Raske Litigation.

In addition to the legal proceedings disclosed herein, the Company is also engaged in various legal proceedings that are routine in nature and incidental to its business.  None of these routine proceedings, either individually or in the aggregate, are believed, in the Company's opinion, to have a material adverse effect on its consolidated financial position or its results of operations.

As of March 31, 2014, a number of the Company’s employees were covered by employment agreements that vary in length from one to three years.  As of March 31, 2014, total compensation payable under the remaining contractual term of these agreements was approximately $2,366.  In addition, the employment agreements contain non-compete provisions ranging from six months to one year following the term of the applicable agreement. Therefore, subject to certain exceptions, as of March 31, 2014, invoking the non-compete provisions would require the Company to compensate additional amounts to the covered employees during the non-compete period in the amount of approximately $1,809. During the three months ended March 31, 2014 and 2013, the Company paid no compensation cost in connection with certain non-compete and contractual arrangements of former employees.

During 2010, the Company received IRS notices totaling approximately $726 related to foreign withholding claims for tax years 2006 and 2008.  As part of settlement negotiations with the IRS, the Company determined that approximately $197 of the foreign withholding claim for 2008 related to tax liabilities which the Company assumed as a result of  its acquisition of  Wilhelmina International and its affiliates in February 2009 (the “Wilhelmina Acquisition”).  To satisfy this liability, the Company paid the IRS, including penalties and interest of $26, a total of $223 during the year ended December 31, 2011. Since this amount was previously accrued as a liability at the Wilhelmina Acquisition date, no adjustment was required. During February 2013, the IRS division of Appeals concluded that there was no basis for abatement of the 2006 and 2008 foreign withholding claims, within the protective framework of reasonable cause, and therefore, closed the case. During March 2013, the Company paid approximately $454in settlement of the foreign withholding claims for tax years 2006 and 2008. During March 2013, the Company offset approximately $454 of the Company’s remaining earnout obligation for losses incurred in the settlement of the foreign withholding claims for tax years 2006 and 2008. The Company is indemnified by certain of the selling parties in the Wilhelmina Acquisition for losses incurred as a result of such deficiency notice, and the selling parties have confirmed such responsibility to the Company.  Such indemnification was satisfied by offset to earn-out payments.