XML 40 R25.htm IDEA: XBRL DOCUMENT v3.19.3
Contingencies
9 Months Ended
Sep. 30, 2019
Contingencies [Abstract]  
Contingencies
Note 16. Contingencies

Other major tobacco companies are defendants in product liability claims. In a number of these cases, the amounts of punitive and compensatory damages sought are significant and could have a material adverse effect on our business and results of operations. The Company is a defendant in certain cases which have been dormant for many years, which cases have now been dismissed with prejudice.

The Company is subject to several lawsuits alleging personal injuries resulting from malfunctioning vaporizer devices and may be subject to claims in the future relating to other NewGen products. The Company is still evaluating these claims and the potential defenses to them.  For example, the Company did not design or manufacture the products at issue; rather, the Company was merely the distributor.  Nonetheless, there can be no assurance that the Company will prevail in these cases, and they could have a material adverse effect on the financial position, results of operations, or cash flows of the Company.

The Company has several subsidiaries engaged in making, distributing and retailing (online and in bricks-and-mortar) vapor products.  As a result of the overall publicity and controversy surrounding the vapor industry generally, many companies have received informational subpoenas from various regulatory bodies and in some jurisdictions regulatory lawsuits have been filed regarding marketing practices and possible underage sales.  The Company expects that its subsidiaries will be subject to some such cases and information requests. In the acquisition of the vapor businesses, the Company negotiated financial “hold-backs”, which it expects to be able to use to defray expenses associated with the information production and the cost of defending any such lawsuits. To the extent that litigation becomes necessary, the Company believes that the subsidiaries have strong factual and legal defenses against claims that it unfairly marketed vapor products.

On October 8, 2019, the City of New York filed a complaint against twenty-three companies, including IVG and VaporFi, making various allegations including selling to consumers over the age of 18 but under 21. In response, those subsidiaries have ceased all sales into New York City, which was an immaterial market for those businesses. The complaint has not been served on the Company’s subsidiaries. If the complaint is served, the Company believes that there are strong defenses and expect that the subsidiaries will vigorously defend the claims. Nonetheless, there can be no assurance that the subsidiaries will prevail, and an adverse result could have a material adverse effect on the Company’s business and results of operations.