XML 69 R20.htm IDEA: XBRL DOCUMENT v2.4.1.9
Legal Contingencies
3 Months Ended
Mar. 31, 2015
Commitments and Contingencies Disclosure [Abstract]  
Legal Contingencies
Legal Contingencies

The Company has been named as a defendant in certain pending lawsuits in the normal course of business (the “Pending Lawsuits”).  It is the policy of management to disclose the amount or range of reasonably possible losses.  In the opinion of management, after consulting with legal counsel, any losses resulting from Pending Lawsuits should not have a material effect on the Company’s financial position, cash flows or results of operations. The Company is also the subject of other proceedings as further described below.

In August 2013, the Environmental Protection Agency (“EPA”) and the U.S. Dept. of Justice (“DoJ”) commenced an investigation into allegations of low pH wastewater releases claimed to have occurred between 2009 and 2013 at Ozark Mountain Technologies ("OMT"), a subsidiary of LMI, (the “Waste Water Allegations”). In response to the EPA/DoJ investigation and to ensure OMT’s full compliance with both environmental and health and safety regulations, the Company initiated a voluntary, comprehensive internal audit of the facility, which was completed in October 2013 (the “OMT Audit”). The OMT Audit uncovered other possible instances of environmental non-compliance, which the Company voluntarily reported (the “Voluntarily Disclosed Matters”) to the EPA on December 3, 2013, as part of the EPA’s Audit Policy. The Company concurrently disclosed these matters to the Missouri Department of Natural Resources (“MDNR”). On April 24, 2015, the Company settled the Waste Water Allegations pursuant to a settlement agreement with DoJ (“Plea Agreement”). As part of the settlement, OMT plead guilty to one count of negligently violating the Federal Water Pollution Control Act (the “Clean Water Act”) and agreed to a fine of $694.  This amount is consistent with the previously established loss contingency as disclosed in the Company's 2014 Form 10-K, Item 3 - Legal Proceedings.  Further, in exchange for the Plea Agreement, DoJ agreed that no further federal criminal or civil prosecution will be brought against OMT relative to the Voluntarily Disclosed Matters.

In November, 2013, the Attorney General of the State of Missouri (the “Missouri AG”) contacted LMI regarding alleged violations of certain state environmental regulations involving the discharge of pollutants and water contaminants claimed to have occurred in 2011 by OMT (the “Missouri AG Matter”).  On February 25, 2015, the Missouri AG filed a Petition against OMT alleging pollution of state waters, violation of pretreatment regulations and violation of water quality standards.  The Company believes it is probable that the Missouri AG’s office will assess a penalty on OMT.  In the opinion of management, after consulting with legal counsel and based on the discussions the Company has had with the Missouri AG, the Company has established a loss contingency of $175 which represents management’s current estimate of the penalty the Missouri Attorney General is contemplating assessing on the Company.
OMT became a subsidiary of LMI as a result of LMI’s acquisition of Valent Aerostructures, LLC (“Valent”) in December 2012. The Company believes certain environmental representations set forth in the purchase agreement pursuant to which Valent acquired OMT; and the purchase agreement pursuant to which LMI acquired Valent, provide the Company with certain rights of indemnification with respect to the matters disclosed herein. The Company also has insurance policies that it believes are applicable to the various environmental issues at Valent and its subsidiaries, including OMT, and breaches by Valent and OMT of their respective environmental representations and warranties in each of the purchase agreements. As a result, the Company believes its rights of indemnification and insurance coverage may provide for a recovery of some or all of the costs associated with the matters disclosed herein. We cannot provide any assurance, however, that we will ultimately prevail in any claim for indemnification or secure any insurance proceeds from our insurance policies.

In December 2014, two of the former members of Valent, Tech Investments, LLC  and Tech Investments II, LLC, which collectively own approximately 5.5% of the Company’s common stock, filed suit in the Circuit Court of St. Louis County against the Company seeking declaratory judgment (a) declaring that the Company is not entitled to indemnification on certain claims asserted against the former members of Valent, (b) ordering the release of the remaining escrow funds associated with the Company’s purchase of Valent, and (c) ordering that  the Company is not entitled to exercise a right of redemption on 360,301 shares of the Company’s stock, currently held under a Lock Up Agreement pending resolution of the indemnification claims (the “Tech Lawsuit”).  In February 2015, the Company filed its response moving to dismiss the Tech Lawsuit on the grounds that the declaratory judgment is not proper in this matter. On March 24, 2015, the Company’s motion was denied.  On April 23, 2015, the Company filed its answer and counterclaims in the Tech Lawsuit, asserting its rights to indemnification. In the opinion of management, the losses, if any, resulting from the Tech Lawsuit should not have a material effect on the Company’s financial position, cash flows or results of operations.