Commitments and Contingencies

9 Months Ended

Oct. 01, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Environmental Matters

The Company’s operations are subject to various federal, state, local and foreign environmental, health and safety laws. Among other things, these laws regulate the emissions or discharge of materials into the environment; govern the use, storage, treatment, disposal and management of hazardous substances and wastes; protect the health and safety of its employees and the end-users of its products; regulate the materials used in its products; and impose liability for the costs of investigating and remediating (as well as other damages resulting from) present and past releases of hazardous substances. Violations of these laws or of any conditions contained in environmental permits could result in substantial fines or penalties, civil sanctions, injunctive relief, consent orders, or requirements to install pollution controls or other abatement equipment. The Company believes it is in material compliance with all applicable laws and regulations and has recorded a liability of $8.8 million at October 1, 2022 and $8.8 million at December 31, 2021.

Litigation Matters

The Company is a party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company does not believe that such normal and routine litigation will have a material impact on its consolidated financial results. The Company is also included in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines or penalties and other costs in substantial amounts and are described below.

Stockholder Litigation

Voigt

In November 2018, Gary D. Voigt, an individual common stockholder of Cornerstone Building Brands, file a putative class-action complaint against CD&R, Clayton, Dubilier & Rice Fund VIII, L.P. (together, the “CD&R Defendants”), and certain directors of Cornerstone Building Brands (collectively, the “Defendants”) in the Delaware Court of Chancery. Voigt purported to assert claims on behalf of himself, on behalf of a class of other similarly situated stockholders of the Company, and derivatively on behalf of the Company, the nominal defendant. The complaint, as amended, asserted claims for breach of fiduciary duty and unjust enrichment against the CD&R Defendants, and for breach of fiduciary duty against twelve director defendants in connection with the Ply Gem merger. The plaintiff sought damages in an amount to be determined at trial.

In August 2021, the parties filed a Stipulation of Compromise and Settlement (“Stipulation”) with the Court setting forth their agreement to settle the litigation. Under the Stipulation, as approved by the Court in January 2022, the defendants’ insurers paid $100 million and $23.5 million of this amount was paid to plaintiff’s counsel. The Company received cash settlement proceeds of $76.5 million in March 2022 and recognized a gain on legal settlements in the Consolidated Statements of Income.

Litigation Relating to the CD&R Merger

On September 2, 2022, a former shareholder of the Company, Matthew Giffuni, filed a Petition for Appraisal of Stock in the Delaware Court of Chancery pursuant to Section 262 of the Delaware General Corporation Law. The appraisal action is captioned Matthew Q. Giffuni v. Cornerstone Building Brands, Inc., C.A. No. 2022-0780-SG (Del. Ch.). The petitioner seeks, on behalf of himself and one other shareholder seeking appraisal, (i) a determination that petitioners are entitled to appraisal of their shares, (ii) a judgment requiring the Company to pay the fair value of the petitioners’ shares as determined by the court, and (iii) interest, costs, and attorneys’ fees. The litigation is ongoing.