COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2012

Notes To Consolidated Financial Statement [Abstract]

COMMITMENTS AND CONTINGENCIES

20.       COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is currently party to various legal proceedings, including those noted in this section. Unless specifically noted below, any possible range of loss associated with the legal proceedings described below is not reasonably estimable at this time. The Company is engaged in numerous other legal actions not described below arising in the ordinary course of its business and, while there can be no assurance, the Company believes that the ultimate outcome of these actions will not have a material adverse effect on its operating results, liquidity or financial position.

From time to time the Company may conclude it is in the best interests of its stockholders, employees and customers to settle one or more litigation matters, and any such settlement could include substantial payments; however, other than as noted below, the Company has not reached this conclusion with respect to any particular matter at this time. There are a variety of factors that influence the Company's decisions to settle and the amount the Company may choose to pay, including the strength of its case, developments in the litigation, the behavior of other interested parties, the demand on management time and the possible distraction of the Company's employees associated with the case and/or the possibility that the Company may be subject to an injunction or other equitable remedy. It is difficult to predict whether a settlement is possible, the amount of an appropriate settlement or when is the opportune time to settle a matter in light of the numerous factors that go into the settlement decision. Unless otherwise specified below, any settlement payment made pursuant to any of the completed settlement agreements described below is immaterial to the Company for financial reporting purposes.

Revance Litigation

On May 18, 2012, the Company received notice that Revance Therapeutics, Inc. (“Revance”) filed a lawsuit against the Company in the Court of Chancery of the State of Delaware. As previously disclosed, the Company is a minority owner of Revance and had an option to acquire Revance or license Revance's topical product that is under development. Revance alleged that the option period had commenced and sought specific performance and an injunction against the Company. The Company believed that the option period had not commenced. Revance amended its complaint on June 8, 2012. The Company filed an answer to Revance's amended complaint on June 25, 2012 and, on the same day, filed counterclaims against Revance seeking declaratory relief, injunctive relief and specific performance from Revance. Trial began on September 12, 2012 and lasted through September 14, 2012. On October 8, 2012, the parties entered into a Settlement and Termination Agreement (the “Revance Settlement Agreement”). The terms of the settlement provide for the upfront payment by Revance to the Company of $7.0 million to be made within 30 days of the Revance Settlement Agreement, payments to the Company of up to $14.0 million to be made upon certain Revance capital raising achievements and a payment to the Company of $4.0 million to be made upon the achievement of certain regulatory milestones. The Revance Settlement Agreement also terminated (i) the option to acquire Revance or to exclusively license certain of Revance's topical botulinum toxin products purchased by the Company on December 11, 2007 and (ii) the License Agreement dated July 28, 2009 between the Company and Revance. Pursuant to the Revance Settlement Agreement, the litigation filed by Revance against the Company and the Company's counterclaims were dismissed with prejudice on October 8, 2012 and all claims under the terminated agreements, whether known or unknown, were released.

Stockholder Litigation Related to the Merger with Valeant

On September 11, 2012, October 1, 2012, and October 25, 2012, putative class action lawsuits were filed in the Court of Chancery of the State of Delaware by Susan Omohundro Wood (Wood v. Shacknai, C.A. No. 7857-CS), Leslie Russell (Russell v. Shacknai, C.A. No. 7916-CS) and Maureen Collier (Collier v. Shacknai, C.A. No. 7984-CS), and on September 11, 2012 in the Superior Court of Arizona in Maricopa County by Kimberly Swint (Swint v. Medicis Pharmaceutical Corporation, CV2012-055635), alleged stockholders of the Company. Plaintiffs Swint and Wood subsequently amended their lawsuits on September 26, 2012 and September 28, 2012, respectively. The Delaware lawsuits have been consolidated under the name In re Medicis Pharmaceutical Corporation Shareholder Litigation, Consolidated C.A. No-7857-CS (the “Delaware Actions”)

The lawsuits allege that the members of the Company's board of directors breached their fiduciary duties in negotiating and approving the Merger Agreement, that the Merger consideration negotiated in the Merger Agreement undervalues the Company, that the Company's stockholders will not receive adequate or fair value for their Company common stock in the Merger, that the terms of the Merger Agreement impose improper deal protection devices that preclude competing offers, and that the Preliminary Proxy Statement filed in connection with the Merger contains material misstatements and/or omissions. They further allege that the Company, Valeant Pharmaceuticals International, Inc., and in the case of the Delaware Action, Valeant Pharmaceuticals International and its wholly-owned subsidiary Merlin Merger Sub, Inc., aided and abetted the purported breaches of fiduciary duty. The lawsuits seek, among other things, an injunction against the completion of the Merger and rescission in the event that the Merger has already been consummated prior to the entry of the Court's final judgment, and an award of damages and costs and expenses, including attorneys' and experts' fees and expenses. The Company believes the lawsuits are meritless and intends to defend against them vigorously.

Q-Med AB Complaint Related to the Merger with Valeant

On November 7, 2012, Q-Med AB (“Q-Med”) filed a complaint (the “Complaint”) against the Company, HA North American Sales AB, a wholly-owned subsidiary of the Company (“HANA”) and Medicis Aesthetics Holdings Inc., in the United States District Court for the Southern District of New York.

The Company and HANA hold exclusive U.S. and Canadian rights to market certain dermal filler products, including RESTYLANE®, RESTYLANE-L®, PERLANE®, PERLANE-L® and RESTYLANE FINE LINES™, through certain license and supply agreements with Q-Med (the “Agreements”). The Complaint alleges that Q-Med has the right under the Agreements to withhold consent to a change of control of the Company that would result in a transfer to Valeant of the exclusive rights to market and sell the dermal filler products under the Agreements, and that the Company has breached or anticipatorily breached the Agreements. Q-Med alleges that the action is in aid of arbitration to prevent the Company from transferring such rights to Valeant as a result of the Merger.

The Complaint seeks (1) a declaration that Q-Med has the right to withhold consent in accordance with the terms of the Agreements; (2) a finding that the Company has materially breached its obligations under the Agreements, entitling Q-Med to contractual remedies, including termination or rescission of the Agreements; (3) a preliminary injunction prohibiting the Company from transferring its rights under the Agreements to Valeant during the pendency of the arbitration proceedings that Q-Med will bring; and (4) other relief as the court deems just and proper.

The Company believes that Q-Med's action is without merit and intends to vigorously defend itself. The Merger Agreement does not require the consent of Q-Med as a condition to consummating the Merger.

In addition to the matters discussed above, in the ordinary course of business, the Company is involved in a number of legal actions, both as plaintiff and defendant, and could incur uninsured liability in any one or more of them.  Although the outcome of these actions is not presently determinable, it is the opinion of the Company's management, based upon the information available at this time, that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations, financial condition or cash flows of the Company.