Legal Matters

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Legal Matters

Legal Matters

Certain lawsuits and claims arising in the ordinary course of business have been filed or are pending against us and/or our affiliates, and we may from time to time be involved in other legal or regulatory proceedings. In accordance with applicable accounting guidance, we establish accruals for all such matters, including expected settlements, when we believe it is probable that a loss has been incurred and the amount of the loss is reasonably estimable. When a loss contingency is not both probable and estimable, we do not establish an accrual. Any such loss estimates are inherently uncertain, based on currently available information and are subject to management’s judgment and various assumptions. Due to the inherent subjectivity of these estimates and unpredictability of outcomes of legal proceedings, any amounts accrued may not represent the ultimate resolution of such matters.

To the extent we believe any potential loss relating to such matters may have a material impact on our liquidity, consolidated financial position, results of operations, and/or our business as a whole and is reasonably possible but not probable, we aim to disclose information relating to such potential loss. Assessments of litigation and claims exposure are difficult because they involve inherently unpredictable factors including, but not limited to, the following: whether the proceeding is in the early stages of litigation; whether damages are unspecified, unsupported, or uncertain; whether there is a potential for punitive or other pecuniary damages; whether the matter involves legal uncertainties, including novel issues of law; whether the matter involves multiple parties and/or jurisdictions; whether discovery has not begun or is not complete; whether meaningful settlement discussions have commenced; and whether the lawsuit involves class allegations. Assessments of class action litigation, which is generally more complex than other types of litigation, are particularly difficult, especially in the early stages of the proceeding when it is not known whether a class will be certified or how a potential class,

if certified, will be defined. As a result, even if a loss is reasonably possible, the Company may be unable to estimate reasonably possible losses with respect to some matters.

We also aim to disclose information relating to any material potential loss that is probable but not reasonably estimable. In such cases, where reasonably practicable, we aim to provide an estimate of loss or range of potential loss. No disclosures are generally made for any loss contingencies that are deemed to be remote.

Silicon Valley Bank is among the lenders named as defendants in a complaint originally filed on September 27, 2016 by Unicom Systems, Inc. (“Unicom”) in Los Angeles County Superior Court. The lawsuit alleges breach of the syndicated 2015 Credit Agreement between Unicom and the defendants, breach of the implied covenant of good faith and fair dealing, and seeks monetary damages and declaratory relief. Pursuant to the Credit Agreement and California law, the matter has been referred to a duly appointed judicial referee for trial. The parties have engaged in extensive fact discovery which we currently expect to be concluded in November 2022, with expert witness depositions to follow. Trial is currently scheduled to take place over a three week period in late March 2023.

The Company currently estimates that it is reasonably possible that it may experience a loss in relation to the Unicom matter. However, for various reasons including the current stage of discovery proceedings, the uncertainty regarding damage claims and certain of the other factors noted above, the Company is unable to estimate the reasonably possible loss or range of losses at this time.

Based upon information available to us, our review of lawsuits and claims filed or pending against us to date and consultation with our outside legal counsel, we have not recognized a material accrual liability for any such matters, nor do we currently expect that these matters will result in a material liability to the Company. However, the outcome of litigation and other legal and regulatory matters is inherently uncertain, and it is possible that one or more of such matters currently pending or threatened could have an unanticipated material adverse effect on our liquidity, consolidated financial position, results of operations, and/or our business as a whole, in the future.