Contingencies and Other

6 Months Ended

Jul. 02, 2011

Contingencies and Other [Abstract]

Contingencies and Other

Note 14 - Contingencies and Other

We are involved in various legal proceedings that arise from time to time in the ordinary course of doing business and believe that adequate reserves have been established for any probable losses.  Expenses related to litigation are included in operating income.

On September 9, 2010, we were one of eight containerboard producers named as defendants in a class action complaint that alleged a civil violation of Section 1 of the Sherman Act.  The suit is captioned Kleen Products LLC v. Packaging Corp. of America (N.D. Ill.).  The complaint alleges that the defendants, beginning in August 2005, conspired to limit the supply and thereby increase prices of containerboard products.  The alleged class is all persons who purchased containerboard products directly from any defendant for use or delivery in the United States during the period August 2005 to November 2010.  The complaint seeks to recover an unspecified amount of treble actual damages and attorney's fees on behalf of the purported class.  Four similar complaints were filed and have been consolidated in the Northern District of Illinois.  We strongly dispute the allegations made against us and intend to defend vigorously against this litigation.  However, because this action is in its preliminary stages, we are unable to predict an outcome or estimate a range of reasonably possible loss.  There were no significant changes to the status of this litigation in first six months 2011.

Two putative class action lawsuits (the "Shareholder Actions") have been filed by stockholders against us and the members of our board of directors in the Delaware Court of Chancery, styled Raul vs. Doyle R. Simons, et al., Case No. 6690 (filed July 22, 2011) (the "Raul Action"); and Kahn v. Temple-Inland, Inc., et al., Case No. 6702 (filed July 25, 2011) (the "Kahn Action").  The Shareholder Actions allege, among other things, that the members of our board of directors have breached their fiduciary duties by refusing to negotiate with IP regarding its proposed acquisition, failing to solicit alternative offers, and adopting the Rights Plan.  The Raul Action also purports to assert claims derivatively on behalf of the company.  The complaints variously seek an order declaring that our board of directors breached its fiduciary duties; enjoining the company from initiating further defensive measures; and awarding costs and attorneys' fees, and in the Kahn action, compensatory damages.  We and our directors believe that the claims made by the stockholder plaintiffs are without merit and intend to defend them vigorously.  Please read Note 3 for additional information.

In second quarter 2011, we reversed $3 million in litigation reserves related to alleged violations of the California on duty meal break laws.  This reversal was based on the settlement of existing cases, a review of our operational practices, and an examination of the statute of limitations.

We do not believe that the outcome of any of these matters should have a significant adverse effect on our financial position, long-term results of operations, or cash flows.  It is possible however that charges related to these matters could be significant to our results or cash flows in any one accounting period.