CORRESP 1 filename1.htm axpresponsedec162010.htm
[On Letterhead of American Express Company]
 
 
December 16, 2010
By EDGAR Correspondence
 
Mr. Kevin W. Vaughn
Accounting Branch Chief
Division of Corporation Finance
Securities and Exchange Commission
Mail Stop 4561
100 F Street, N.E.
Washington, D.C. 20549
 
 
 
 Re:
American Express Company
 
Form 10-K for the Fiscal Year Ended December 31, 2009
Form 10-Q for the Fiscal Quarter Ended September 30, 2010
File No. 001-07657
 
           
Dear Mr. Vaughn:
 
We refer to the comment letter, dated November 18, 2010 (the “Comment Letter”), from the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (the “Commission”) concerning the American Express Company (the “Company”) filings referenced above.
 
We appreciate the time you spent in conversation with our Corporate Comptroller, Joan C. Amble, on November 30, 2010.  We found the discussion to be very helpful.
 
We have set forth below the text of the Staff’s comment, followed by the Company’s response.  The Company expects that it will revise its future filings, beginning with its Annual Report on Form 10-K for the year ending December 31, 2010, as noted in the response.
 
 
*  *  *  *  *
 
Form 10-Q for the period ended September 30, 2010
 
Note 15. Contingences, page 32
 
 
Comment 1
We note your response to prior comment 4 of the letter dated June 15, 2010 and your enhanced litigation-related disclosures here in your September 30, 2010 Form 10-Q.  It appears your threshold for disclosure is whether you can “reasonably estimate” what the eventual outcome of the pending matters will be, but that you are not able to do so for a number of, if not all of, your outstanding litigation matters
 
 
 
 
 
 
 
Mr. Kevin W. Vaughn
Securities and Exchange Commission
December 16, 2010
Page 2

 
due to the “inherent difficulty of predicting the outcome” of these cases.  We do not believe that your conclusion is consistent with the guidance in ASC 450.  We also note that for the vast majority of litigation matters discussed you have not provided any discussion of the possible loss or range of possible losses, which appears unusual given the different stages of each of the litigation matters discussed below.  Please either provide a range of loss, which may be aggregated for all of the litigation matters for which you are able to estimate the amount of the loss or range of possible loss, or provide explicit disclosure for each of the litigation matters that you are unable to estimate the loss or range of possible loss and the reasons why you are unable to provide an estimate.  Furthermore, if you cannot estimate the loss or possible range of losses, please consider providing additional disclosure that could allow a reader to evaluate the potential magnitude of the claim.
 
 
Response 1
In response to the Staff’s comment, the Company plans to include a revised Contingencies note to its financial statements in future filings.  Below is a draft revised note for our December 31, 2010 financial statements. Additions to disclosures made in our September 30, 2010 Form 10-Q are shown in italics.
 
Contingencies (Draft Revised Note)
 
The Company and its subsidiaries are involved in a number of legal proceedings concerning matters arising in connection with the conduct of their respective business activities, and are periodically subject to governmental examinations (including by regulatory and tax authorities), information gathering requests, subpoenas, inquiries and investigations (collectively, “governmental examinations”).  At December 31, 2010, the Company and various of its subsidiaries were named as a defendant or were otherwise involved in numerous legal proceedings and governmental examinations in various jurisdictions, both in the United States and internationally.  The Company discloses certain of its more significant legal proceedings and governmental examinations under “Legal Proceedings” on pages ___-___ of  its Annual Report on Form 10-K for the year ended December 31, 2010 (“Legal Proceedings”).
 
 
The Company has recorded liabilities for certain of its outstanding legal proceedings and governmental examinations.  A liability is accrued when it is both (a) probable that a loss with respect to the legal proceeding has occurred and (b) the amount of loss can be reasonably estimated (although, as discussed below, there may be an exposure to loss in excess of the accrued liability).  The Company evaluates, on a quarterly basis, developments in legal proceedings and governmental examinations that could cause an increase or decrease in the amount of the liability that has been previously accrued.  [To be added if loss accruals are material in any reporting period: Excluding fees paid to external legal counsel, the Company recognized litigation expense associated with an addition to its litigation-related liabilities of $___million and $___million during the XX months ended ___, 20XX and ___, 20XX, respectively.]
 
 
 
 
 
 
 
Mr. Kevin W. Vaughn
Securities and Exchange Commission
December 16, 2010
Page 3

 
 
The Company’s legal proceedings range from cases brought by a single plaintiff to class actions with hundreds of thousands of putative class members.  These legal proceedings, as well as governmental examinations, involve various lines of business of the Company and a variety of claims (including, but not limited to, common law tort, contract, antitrust and consumer protection claims), some of which present novel factual allegations and/or unique legal theories.  While some matters pending against the Company specify the damages claimed by the plaintiff, many seek a not-yet-quantified amount of damages or are at very early stages of the legal process.  Even when the amount of damages claimed against the Company are stated, the claimed amount may be exaggerated and/or unsupported. As a result, for some matters, it is not currently possible to estimate a range of possible loss. Despite these estimation challenges, for those legal proceedings and governmental examinations disclosed in Legal Proceedings as to which a loss is reasonably possible in future periods, whether in excess of a related accrued liability or where there is no accrued liability, and for which the Company is able to estimate a range of possible loss, the current estimated range is $XXX million to $XXX million in excess of the accrued liability (if any) related to those matters. This aggregate range represents management’s estimate of possible loss with respect to these matters and is based on currently available information. This estimated range of possible loss does not represent the Company's maximum loss exposure.  The legal proceedings and governmental examinations underlying the estimated range will change from time to time and actual results may vary significantly from the current estimate.
 
 
Based on its current knowledge, and taking into consideration its litigation-related liabilities, the Company believes it is not a party to, nor are any of its properties the subject of, any pending legal proceeding or governmental examination that would have a material adverse effect on the Company’s consolidated financial condition or liquidity.  However, in light of the uncertainties involved in such matters, the ultimate outcome of a particular matter could be material to the Company’s operating results for a particular period depending on, among other factors, the size of the loss or liability imposed and the level of the Company’s income for that period.
 
 
 
 
 
 
 
*  *  *  *  *
 
 
 
 
 
 
 
 
Mr. Kevin W. Vaughn
Securities and Exchange Commission
December 16, 2010
Page 4

 
The Company acknowledges that it is responsible for the adequacy and accuracy of the disclosure in the reports and other filings it makes with the Commission and that Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking action with respect to the reports and other filings.  The Company also acknowledges that it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
 
We appreciate and thank you for the Staff’s patience and cooperation in this matter. We are hopeful that we have adequately addressed the Staff’s comment. If you have any questions or comments regarding the foregoing, please do not hesitate to contact me at 212-640-5478 or Joan Amble at 212-640-2744.
 
     
   
Very truly yours,
 
  
 
 
 /s/ Daniel T. Henry  
    Daniel T. Henry  
    Executive Vice President and Chief Financial Officer  
 
                                                                    Executive                                      Chief

 
cc:        Ms. Brittany Ebbertt
Ms. Joan C. Amble
Richard M. Starr, Esq.
Mr. Ward R. Hamm, PricewaterhouseCoopers