COMMITMENTS AND CONTINGENCIES

Product Liability Litigation

Riata® Litigation: As of October 31, 2014, the Company is aware of seventy-three lawsuits from plaintiffs alleging injuries caused by, and asserting product liability claims concerning, Riata® and Riata® ST Silicone Defibrillation Leads. Of the seventy-three lawsuits, thirty-nine cases are pending in federal courts, including three in the U.S. District Court for the District of Minnesota, twenty-nine in the U.S. District Court for the Central District of California, one in the U.S. District Court for the Southern District of Illinois, one in the U.S. District Court for the Southern District of Indiana, one in the U.S. District Court for the Northern District of New York, one in the U.S. District Court for the Southern District of New York, two in the U.S. District Court for the Western District of Kentucky and one in the U.S. District Court for the Western District of Pennsylvania. The remaining thirty-four lawsuits are pending in state courts across the country, including seven in Minnesota, twenty in California, one in Alaska, one in Indiana, one in Georgia, one in Kentucky, one in Florida, one in South Carolina and one in Illinois.

Most of the lawsuits have been brought by single plaintiffs, but some of them name multiple individuals as plaintiffs. The seventy-three lawsuits include eight separate multi-plaintiff lawsuits that have been initiated against the Company that involve more than one unrelated plaintiff: a multi-plaintiff lawsuit joining twenty-nine unrelated claimants was filed in the Superior Court of California for the city and county of Los Angeles on April 4, 2013; a multi-plaintiff lawsuit joining two unrelated claimants was filed in the Superior Court of California for the city and county of Los Angeles on April 4, 2013; a multi-plaintiff lawsuit joining two claimants was filed in the United States District Court for the Central District of California on April 4, 2013; a multi-plaintiff lawsuit joining three unrelated claimants was filed in the Superior Court of California for the city and county of Los Angeles on April 29, 2013; a multi-plaintiff lawsuit joining twenty-one unrelated claimants was filed in the Superior Court of California for the city and county of Los Angeles on July 15, 2013; a multi-plaintiff lawsuit joining thirty unrelated claimants was filed in the Superior Court of California for the city and county of Los Angeles on April 2, 2014; a multi-plaintiff lawsuit joining twenty-eight unrelated claimants was filed in the Superior Court of California for the city and county of Los Angeles on June 10, 2014; and a multi-plaintiff lawsuit joining fifty-eight unrelated claimants was filed in the Superior Court of California for the city and county of Los Angeles on October 3, 2014.

On June 24, 2014, the judge presiding over the three cases in the District of Minnesota granted the Company’s motion for summary judgment, dismissing four of the plaintiffs’ five manufacturing defect causes of action as preempted by the Medical Device Amendments to the Food, Drug, and Cosmetic Act (FDCA). The judge also noted that the plaintiffs’ fifth manufacturing defect claim relating to lead sterilization should not proceed unless the plaintiffs can show proof that the Company failed to comply with Premarket Approval (PMA) requirements with respect to that claim. Plaintiffs have not taken substantive steps to further pursue their remaining claim.

In November 2013, an amended claim was filed in a Canadian proposed class proceeding alleging that Riata® leads were prone to insulation abrasion and breach, failure to warn and conspiracy. The plaintiffs took no action between their 2008 filing and the amended claim they filed in November 2013. The Company has filed its statement of intent to defend in response to the amended claims, and the plaintiffs have not taken any further action.

Although some of the claimants in the aforementioned suits allege no specific injuries, the majority of the claimants allege bodily injuries as a result of surgical revision or removal and replacement of Riata® leads, or other complications, which they attribute to the leads. The majority of the claimants who seek recovery for implantation and/or surgical removal of Riata® leads are seeking compensatory damages in unspecified amounts, and declaratory judgments that the Company is liable to the claimants for any past, present and future evaluative monitoring, and corrective medical, surgical and incidental expenses and losses. Several claimants also seek punitive damages. The Company is financially responsible for legal costs incurred in defense of the Riata product liability claims, including any potential settlements, judgments and other legal defense costs. The Company believes that a material loss is not probable and estimable and the Company is not able to estimate a possible loss or range of loss at this time.

Silzone® Litigation and Insurance Receivables: Beginning in March 2000, the Company was sued in various jurisdictions by some patients who received a heart valve product with Silzone® coating, which the Company stopped selling in January 2000. The Company's outstanding Silzone cases consist of one individual case in Ontario for which no substantive activity or proceedings have occurred since the case was filed in 2004.

The Company has remaining historical insurance coverage of approximately $10 million and believes any potential costs or losses in excess of that are not reasonably possible.

In June 2012, the Ontario Court ruled in the Company's favor on all nine common class issues in a class action involving Silzone patients, and the case was dismissed. On July 2, 2014, the Ontario Superior Court of Justice approved a settlement of the class action, the essential terms of which included a dismissal of the plaintiffs' previously filed appeal and a payment to the Company in the amount of $250,000 Canadian Dollars. By order dated August 20, 2014, the Court of Appeals for the Province of Ontario entered an order dismissing the appeal.

Patent and Other Intellectual Property Litigation

Litigation with Volcano Corporation: The Company's subsidiary, LightLab Imaging, had outstanding litigation with Volcano Corporation (Volcano) and Axsun Technologies, Inc. (Axsun), a subsidiary of Volcano, in the Massachusetts state court and in state court in Delaware. LightLab Imaging makes and sells optical coherence tomography (OCT) imaging systems. Volcano is a LightLab Imaging competitor in medical imaging. Axsun makes and sells lasers and is a supplier of lasers to LightLab Imaging for use in OCT imaging systems. The lawsuits arose out of Volcano's acquisition of Axsun in December 2008. Before Volcano acquired Axsun, LightLab Imaging and Axsun had worked together to develop a tunable laser for use in OCT imaging systems. While the laser was in development, LightLab Imaging and Axsun entered into an agreement pursuant to which Axsun agreed to sell its tunable lasers exclusively to LightLab in the field of human coronary artery imaging for a certain period of time.

After Volcano acquired Axsun in December 2008, LightLab Imaging sued Axsun and Volcano in Massachusetts, asserting a number of claims arising out of Volcano's acquisition of Axsun. In January 2011, the Court ruled that Axsun's and Volcano's conduct constituted knowing and willful violations of a statute which prohibits unfair or deceptive acts or practices or acts of unfair competition, entitling LightLab Imaging to double damages, and furthermore, that LightLab Imaging was entitled to recover attorneys' fees. In February 2011, Volcano and Axsun were ordered to pay the Company for reimbursement of attorneys' fees and double damages, which Volcano paid to the Company in July 2011. The Court also issued certain injunctions and declaratory relief against Volcano.

Since that time, additional appeals and rulings have been made, but no further monetary payments have been made between the parties related to this litigation.

In July 2010, the Company filed a lawsuit in federal district court in Delaware against Volcano for patent infringement of the St. Jude Medical PressureWire® technology platform, which was acquired as part of St. Jude Medical's purchase of Radi Medical Systems in December 2008. Since that time, counterclaims have been made by Volcano, the Company filed other patent litigation against Volcano, various rulings in these cases were made in favor of either party and certain appeals have been initiated.

On August 7, 2014, the Company entered into a settlement, release, license agreement, and covenants not to sue (the “Agreement”) with Volcano to settle all litigation with no payments being made in connection with the Agreement. This settlement resolves all outstanding St. Jude Medical/ LightLab Imaging and Volcano/ Axsun Technologies litigation and civil actions as well as all St. Jude Medical and Volcano patent litigation associated with St. Jude Medical’s PressureWire® technology platform. Pursuant to the Agreement, the parties agreed to cause outstanding litigation matters to be dismissed with prejudice. The Agreement contains mutual releases covering all claims that the parties have or may have against the other in connection with the litigation matters.

Securities and Other Shareholder Litigation

March 2010 Securities Class Action Litigation: In March 2010, a securities lawsuit seeking class action status was filed in federal district court in Minnesota against the Company and certain officers (collectively, the defendants) on behalf of purchasers of St. Jude Medical common stock between April 22, 2009 and October 6, 2009. The lawsuit relates to the Company's earnings announcements for the first, second and third quarters of 2009, as well as a preliminary earnings release dated October 6, 2009. The complaint, which seeks unspecified damages and other relief as well as attorneys' fees, alleges that the defendants failed to disclose that it was experiencing a slowdown in demand for its products and was not receiving anticipated orders for cardiac rhythm management devices. Class members allege that the defendant's failure to disclose the above information resulted in the class purchasing St. Jude Medical stock at an artificially inflated price. In December 2011, the Court issued a decision denying a motion to dismiss filed by the defendants in October 2010. In October 2012, the Court granted plaintiffs' motion to certify the case as a class action and the discovery phase of the case closed in September 2013. On October 15, 2013, the defendants filed a motion for summary judgment. A hearing concerning that motion took place with the Court in January 2014 and the Court issued an order on August 11, 2014 granting in part and denying in part defendants’ motion for summary judgment. The Court has set a trial date of February 23, 2015. Based on filings they have made, the class members are claiming damages of approximately $475 million. The defendants intend to continue to vigorously defend against the claims asserted in this lawsuit.

December 2012 Securities Litigation: On December 7, 2012, a putative securities class action lawsuit was filed in federal district court in Minnesota against the Company and an officer (collectively, the defendants) for alleged violations of the federal securities laws, on behalf of all purchasers of the publicly traded securities of the defendants between October 17, 2012 and November 20, 2012. The complaint, which sought unspecified damages and other relief as well as attorneys' fees, challenges the Company’s disclosures concerning its high voltage cardiac rhythm lead products during the purported class period. On December 10, 2012, a second putative securities class action lawsuit was filed in federal district court in Minnesota against the Company and certain officers for alleged violations of the federal securities laws, on behalf of all purchasers of the publicly traded securities of the Company between October 19, 2011 and November 20, 2012. The second complaint alleged similar claims and sought similar relief. In March 2013, the Court consolidated the two cases and appointed a lead counsel and lead plaintiff. A consolidated amended complaint was served and filed in June 2013, alleging false or misleading representations made during the class period extending from February 5, 2010 through November 7, 2012. In September 2013, the defendants filed a motion to dismiss the consolidated amended complaint. On March 10, 2014, the Court ruled on the motion to dismiss, denying the motion in part and granting the motion in part. On October 7, 2014, the lead plaintiff filed a second amended complaint. Like the original consolidated amended complaint, the plaintiffs did not in the second amended complaint assert any specific amount of compensation that that they seek. The Company intends to continue to vigorously defend against the claims asserted in this matter.

December 2012 Derivative Litigation: In December 2012, a shareholder derivative action was initiated in Minnesota state court in Ramsey County, on behalf of the Company, against members of St. Jude Medical’s Board of Directors as well as certain officers of the Company (collectively, the defendants). The plaintiffs in this action allege breach of fiduciary duty, waste of corporate assets and unjust enrichment. The claims center around and involve the Company’s high voltage cardiac rhythm lead products and related activities and events. No damages are sought against the Company. In March 2013, the defendants filed a motion to dismiss the plaintiffs' complaint. The matter was transferred to a new judge effective July 31, 2013 and an oral hearing on the Company’s motion to dismiss was heard on June 5, 2014. On August 28, 2014, the Court ruled on the motion to dismiss, granting the motion in its entirety and dismissing the case with prejudice.

The Company has not recorded an expense related to any potential damages in connection with these securities and other shareholder litigation matters because any potential loss is not probable or reasonably estimable. Because, based on the Company’s historical experience, the amount ultimately paid, if any, often does not bear any relationship to the amount claimed, the Company cannot reasonably estimate a loss or range of loss, if any, that may result from these matters.

Governmental Investigations

In March 2010, the Company received a Civil Investigative Demand (CID) from the Civil Division of the Department of Justice (DOJ). The CID requests documents and sets forth interrogatories related to communications by and within the Company on various indications for tachycardia implantable cardioverter defibrillator systems (ICDs) and a National Coverage Decision issued by Centers for Medicare and Medicaid Services. Similar requests were made of the Company's major competitors. The Company provided its response to the DOJ in June 2010 and no further activity involving the Company has occurred in this matter since then.

On September 20, 2012, the Office of Inspector General for the Department of Health and Human Services (OIG) issued a subpoena requiring the Company to produce certain documents related to payments made by the Company to healthcare professionals practicing in California, Florida, and Arizona, as well as policies and procedures related to payments made by the Company to non-employee healthcare professionals. The Company provided its response to the OIG in May 2013 and no further activity involving the Company has occurred in this matter since then.

In April 2014, the Company received a CID from the Civil Division of the DOJ stating that it was investigating the Company for potential False Claims Act violations relating to allegations that certain health care facilities and a physician group may have submitted false claims to federal health care programs as a result of alleged inducements paid by the Company to implant the Company’s cardiac devices. The Company provided its response to the OIG beginning in July 2014 and ending in October 2014.

As indicated, the Company is cooperating with the three open investigations and is responding to these requests. However, the Company cannot predict when these investigations will be resolved, the outcome of these investigations or their impact on the Company. Based on the Company’s historical experience, the amount paid, if any, in connection with any governmental investigation typically does not bear any relationship the nature or subject of the investigation, the Company cannot reasonably estimate a loss or range of loss, if any, that may result from these matters. The Company has not recorded an expense related to any potential damages in connection with these governmental matters because any potential loss is not probable or reasonably estimable.

Regulatory Matters

The FDA inspected the Company's Plano, Texas manufacturing facility at various times between March 5 and April 6, 2009. On April 6, 2009, the FDA issued a Form 483 identifying certain inspectional observations with current Good Manufacturing Practice (cGMP). Following the receipt of the Form 483, the Company provided written responses to the FDA detailing proposed corrective actions and immediately initiated efforts to address the FDA's inspectional observations. The Company subsequently received a warning letter dated June 26, 2009 from the FDA relating to these inspectional observations with respect to its legacy Neuromodulation division's Plano, Texas and Hackettstown, New Jersey facilities. The Company has worked to address the observations and in January 2014, the Company provided the FDA with a final closeout notification for all items in Form 483 observations pertaining to the Plano, Texas and Hackettstown, New Jersey facilities and the June 2009 warning letter. In May 2014, the FDA conducted a follow-up warning letter inspection at the Company's Plano, Texas facility to evaluate progress made remediating the warning letter issues and Form 483 observations in Plano, Texas and Hackettstown, New Jersey facilities. On August 26, 2014, the Company announced that it had been notified by the FDA that issues cited in the warning letter concerning the Company’s Plano, Texas and Hackettstown, New Jersey facilities have been addressed and the warning letter has been successfully resolved.

Product Warranties

The Company offers a warranty on various products, the most significant of which relate to pacemaker and ICD systems. The Company estimates the costs it expects to incur under its warranties and records a liability for such costs at the time the product is sold. Factors that affect the Company's warranty liability include the number of units sold, historical and anticipated rates of warranty claims and cost per claim. The Company regularly assesses the adequacy of its warranty liabilities and adjusts the amounts as necessary.

Changes in the Company’s product warranty liability during the three and nine months ended September 27, 2014 and September 28, 2013 were as follows (in millions):



	Three Months Ended						Nine Months Ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Balance at beginning of period	$	37		$	37		$	37		$	38
Warranty expense (income) recognized	1			(2		)	4			1
Warranty credits issued	(1		)	—			(4		)	(4		)
Balance at end of period	$	37		$	35		$	37		$	35