Commitments and Contingencies

Letters of Credit

As of December 31, 2018 and 2017, there were $29.6 million and $33.8 million, respectively, of outstanding letters of credit issued on the Company’s 2018 Senior Unsecured Revolving Line of Credit.

Bonds

The Company had outstanding surety bonds of $2.7 million as of December 31, 2018 and 2017. These bonds were issued primarily in connection with insurance requirements, special real estate assessments and construction obligations.

Construction Commitments

As of December 31, 2018, the Company had the following construction commitments related to its expansion of existing warehouse facilities:

Additionally, on November 8, 2018, the Company entered into an agreement whereby an affiliate of the Company would purchase land for approximately $46.6 million (approximately AUD$64.5 million) and upon which the Company intends to build a state-of-the-art automated facility for a customer. The customer has agreed to acquire the land at the amount the Company paid if construction of the facility is not substantially commenced within certain parameters.

Collective Bargaining Agreements

As of December 31, 2018, worldwide we employed approximately 11,000 people. Currently, 56% of the Company’s labor force is covered by collective bargaining agreements, and 84 of our 155 warehouses have unionized associates that are governed by 69 different collective bargaining agreements. We are currently in negotiations for 5 new agreements which will bring our total to 74 agreements. During 2019, the Company will be renegotiating 12 collective bargaining agreements, covering all or parts of 29 operating warehouses worldwide. The Company does not anticipate any workplace disruptions during this renegotiation process.

Legal Proceedings

In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company and its legal counsel evaluate the merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency suggests that a loss is probable, and the amount can be reasonably estimated, then a loss is recorded.

In addition to the matters discussed below, the Company may be subject to litigation and claims arising from the ordinary course of business. In the opinion of management, after consultation with legal counsel, the outcome of such matters is not expected to have a material impact on the Company’s financial condition, results of operations, or cash flows.

Kansas Breach of Settlement Agreement Litigation

This case was served against the Company in Wyandotte County, Kansas, on January 17, 2013, alleging breach of a 1994 Settlement Agreement reached with customers of our predecessor company, Americold Corporation. The plaintiffs originally brought claims in 1992 arising from a fire the previous year in an underground warehouse facility.

In 1994, a settlement was reached whereby Americold Corporation agreed to the entry of a $58.7 million judgment against it and assigned its rights to proceed against its insurer to satisfy the judgment. The settlement agreement contained a standard “cooperation provision” where Americold Corporation agreed to execute any additional documents necessary to fulfill the intent of the settlement agreement. The plaintiffs then sued Americold Corporation’s insurance company to recover on the consent judgments. The case was ultimately dismissed in 2012, and the Kansas Supreme Court ruled that the 1994 consent judgment had expired and were unrevivable as a matter of law.

On September 24, 2012, the plaintiffs filed a separate claim in the district court of Wyandotte County, Kansas, alleging that the Company and one of its subsidiaries, Americold Logistics, LLC, as successors to Americold Corporation, are liable for the full amount of the judgment, based upon the allegation that the Company failed to execute a document or take action to keep the judgment alive and viable.

On February 7, 2013, the Company removed the case to the U.S. federal court and ultimately filed a motion for summary judgment, which the plaintiffs vigorously opposed. On October 4, 2013, the court granted the Company's motion and dismissed the case in full. Only one plaintiff appealed the dismissal to the U.S. Court of Appeals where oral argument was heard in November 2014 before the Tenth Circuit in Denver. The Court of Appeals ordered that the case be remanded to the Kansas State Court and the judgment in favor of Americold be vacated, finding U.S. federal diversity jurisdiction did not exist over the Company. The Company petitioned the U.S. Supreme Court for certiorari and oral argument that occurred on January 19, 2016.

On March 7, 2016, the United States Supreme Court handed down a decision in the Kansas Breach of Settlement Agreement Litigation case. The decision was contrary to the position that the Company argued. Following the decision, the United States District Court for the District of Kansas entered an Order vacating the judgment and remanding the case to Kansas state court for further proceedings. Regardless of the venue, the Company remains confident that its defenses on the merits of plaintiffs’ claims are strong under Kansas law.

Following remand to Kansas state court, Plaintiffs initially petitioned the court to amend their complaint to drop their claim for damages and only seek an Order of Specific Performance-namely to require Americold sign a new document reinstating the consent judgment assigned in the 1994 Settlement Agreement. No amended complaint was filed, however, and plaintiffs filed a later motion to add back the damages claim, which was granted in February 2018. As of December 31, 2018, pending before the court are the Company's motions to prevent Kraft and Safeway to remain in the lawsuit as plaintiffs on the theory that they did not appeal the District Court's Order dismissing their claims and are bound by the judgment entered against them. Plaintiffs have served limited discovery to us seeking communications with insurance counsel and representatives. We continue to assert a strong defensive posture and will be in a better position to evaluate exposure as discovery and case preparation continues; however, given the status of the proceedings to date, a liability cannot be reasonably estimated. The Company believes the ultimate outcome of these matters will not have a material adverse impact on its consolidated financial statements.

Preferred Freezer Services, LLC Litigation

On February 11, 2019, Preferred Freezer Services, LLC (“PFS”) filed a complaint against Americold Realty Trust alleging breaches of a confidentiality agreement the parties had executed in connection with the bidding process for PFS. The complaint also alleges claims for breach of good faith and fair dealing, tortious interference with economic advantage, unfair competition and misappropriation of confidential information. PFS also filed motions seeking a temporary restraining order and preliminary injunction enjoining the Company from using PFS confidential information and continuing discussions with owners of property leased to PFS for its operations. The Company denies the allegations and believes PFS’s claims are without merit and intends to vigorously defend this claim. The Company believes the ultimate outcome of these matters will not have a material adverse impact on its consolidated financial statements.

Environmental Matters

The Company is subject to a wide range of environmental laws and regulations in each of the locations in which the Company operates. Compliance with these requirements can involve significant capital and operating costs. Failure to comply with these requirements can result in civil or criminal fines or sanctions, claims for environmental damages, remediation obligations, the revocation of environmental permits, or restrictions on the Company’s operations.

The Company records accruals for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. The Company adjusts these accruals periodically as assessment and remediation efforts progress or as additional technical or legal information become available. The Company recorded nominal environmental liabilities in accounts payable and accrued expenses as of December 31, 2018 and 2017. The Company believes it is in compliance with applicable environmental regulations in all material respects. Under various U.S. federal, state, and local environmental laws, a current or previous owner or operator of real estate may be liable for the entire cost of investigating, removing, and/or remediating hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the contamination. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for the entire clean-up cost. There are no material unrecorded liabilities as of December 31, 2018. Most of the Company’s warehouses utilize ammonia as a refrigerant. Ammonia is classified as a hazardous chemical regulated by the Environmental Protection Agency, and an accident or significant release of ammonia from a warehouse could result in injuries, loss of life, and property damage.

Occupational Safety and Health Act (OSHA)

The Company’s warehouses located in the U.S. are subject to regulation under OSHA, which requires employers to provide employees with an environment free from hazards, such as exposure to toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress, and unsanitary conditions. The cost of complying with OSHA and similar laws enacted by states and other jurisdictions in which we operate can be substantial, and any failure to comply with these regulations could expose us to substantial penalties and potentially to liabilities to employees who may be injured at our warehouses. The Company records accruals for OSHA matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. The Company believes that it is in substantial compliance with all OSHA regulations and that no material unrecorded liabilities exist as of December 31, 2018 and 2017.

Commitment start period

Committed construction cost (in thousands)

Construction completion period

Total construction commitments