COMMITMENTS AND CONTINGENCIES

Product Liability Litigation

Riata® Litigation: On December 17, 2014, the Company entered into an agreement that establishes a private settlement program to resolve the actions, disputes and claims-both filed and unfiled-of certain claimants against St. Jude Medical, Inc. relating to its Riata® and Riata® ST Silicone Defibrillation Leads. The agreement was entered into with a group of counsel representing plaintiffs in proceedings in jurisdictions around the country as well as claimants with Riata leads who have not initiated litigation. St. Jude Medical, Inc. accrued $15 million in the fourth quarter of 2014 to fund the settlement, which resolved approximately 950 of the outstanding, pending cases and claims. The terms of the agreement provide that, under certain circumstances, the Company can elect to terminate the settlement program and exercise its “walk away” right. The time period in which eligible claimants can submit their documentation to participate in the settlement closed during the first quarter of 2015.

Most of the resolved lawsuits were brought by single plaintiffs, but some of them named multiple individuals as plaintiffs. Among the resolved lawsuits are eight separate multi-plaintiff lawsuits filed from April 2013 through October 2014 in both the state and federal courts of California that involved 173 unrelated claimants.

Although the majority of the claimants in the aforementioned suits and claims identified no specific injuries, some of the claimants alleged 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 sought recovery for implantation and/or surgical removal of Riata® leads sought compensatory damages in unspecified amounts, and declaratory judgments that the Company is liable to them for any past, present and future evaluative monitoring, and corrective medical, surgical and incidental expenses and losses. Several claimants also sought punitive damages.

As of May 1, 2015, the Company is aware of four lawsuits, of more than 70 filed as of December 17, 2014, which were filed by plaintiffs in the U.S. alleging injuries caused by, and asserting product liability claims concerning, Riata® and Riata® ST Silicone Defibrillation Leads where counsel for the claimant has advised that the claimant will not participate in the above-described settlement program. The four remaining lawsuits are pending in the state courts of Georgia, Illinois, Kentucky and South Carolina.

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.

The Company is financially responsible for legal costs incurred in the continued defense of the Riata product liability claims, including any potential settlements, judgments and other legal defense costs. The Company believes that a material loss in excess of the accrued amount is not probable and estimable and the Company is not able to estimate a possible loss or range of loss at this time.

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. In October 2013, the defendants filed a motion for summary judgment. In November 2014, the defendants filed a motion for leave to proceed with a motion to decertify the class, which the Court denied in December 2014. On February 18, 2015, the parties entered into a written settlement agreement resolving the case, pending notification to class members and subject to court approval. Under the settlement, the Company agreed to make a payment of $50 million to resolve all of the class claims and recorded a charge of that amount during the fourth quarter of 2014. The Company had estimated its damages exposure on the claims alleged to be approximately $475 million. A preliminary order approving the settlement was entered by the District Court on March 9, 2015. The final settlement approval hearing will take place on June 12, 2015. During the first quarter of 2015, the Company received insurance recoveries of $40 million. The Company intends to pursue collection of additional insurance recoveries from one of its insurance carriers.

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 assert any specific amount of compensation in the second amended complaint. The plaintiffs filed their motion for class certification on January 15, 2015. The Company will file a response, and a hearing before the Court on the plaintiffs' class certification will be scheduled at some point in the future. The Company intends to continue to vigorously defend against the claims asserted in this matter.

The Company has not recorded an expense related to any potential damages in connection with the December 2012 Securities Litigation 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 implantable cardioverter defibrillator (ICD)s 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. On April 1, 2015, the U.S. District Court for the Southern District of Alabama unsealed a qui tam complaint upon which the CID was based. The unsealed record revealed that the DOJ declined to intervene on February 13, 2015. Thereafter, the qui tam relator moved to dismiss the complaint without prejudice. On April 1, 2015, the Court granted the relator’s motion and dismissed the action.

As indicated, the Company has cooperated with these investigations and has responded to the requests received. However, the Company cannot predict when the outstanding investigations will be resolved, their outcome 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.

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 months ended April 4, 2015 and March 29, 2014 were as follows (in millions):



	Three Months Ended
	April 4, 2015			March 29, 2014
Balance at beginning of period	$	35		$	37
Warranty expense (income) recognized	(2		)	1
Warranty credits issued	(1		)	(1		)
Balance at end of period	$	32		$	37