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Legal Matters
3 Months Ended
Mar. 31, 2013
Commitments and Contingencies/Legal Matters [Abstract]  
Legal Matters

11. Legal Matters

On February 5, 2013, the Company was notified by one of its customers that certain product purchased by that customer had quality issues. On March 11, 2013, the Company and the customer entered into an agreement whereby the Company will reimburse the customer for reasonable costs and expenses incurred on or before December 31, 2013 by the customer in its efforts to resolve the quality issue. At December 31, 2012, the Company recorded a liability of $50,000 for estimated costs to be reimbursed to the customer pursuant to the terms of the agreement. As of March 31, 2013, the balance of this liability was $39,169. The Company has no current obligation to reimburse the customer for costs incurred after December 31, 2013 and has in place liability coverage for third-party injury and property damage that might occur as a result of the product’s quality issue.

In February 2013, a customer brought legal action against the Company alleging the Company defaulted on its obligations and failed to perform pursuant to the terms of a written agreement entered into with the Company in February 2012. The customer sought to recover its damages in an unspecified sum and liquidated damages in the amount of $50,000 as well as costs and fees. In April 2013, the customer and the Company agreed to a settlement of the customer’s claims in which the Company will pay to the customer an aggregate amount of $30,000. Under terms of the settlement agreement, the Company will make five monthly payments of $6,000 to the customer beginning May 1, 2013. At March 31, 2013, the Company recorded expense of $30,000 related to this settlement.

In March 2012, the Company was named as a defendant in a legal action brought by a competitor (which was also a former customer and supplier) who alleged that the Company and certain other third-party defendants profited improperly from the use of intellectual property developed by the competitor. Shortly after commencing the suit, the plaintiff unsuccessfully sought injunctive relief against the Company. Based on the Company’s review of the facts and its success in defeating the plaintiff’s desired injunctive relief and based on the fact that the plaintiff never identified specific monetary damages incurred as a result of the Company’s alleged conduct, the Company has consistently believed that the asserted claims were without merit and that the Company’s chances of prevailing without material liability to be high. In May 2013, due largely to the costs of the ongoing litigation, the Company and the plaintiff agreed to a settlement of the plaintiff’s claims through execution of a term sheet (the “Term Sheet”). Under the terms of the Term Sheet, the parties agreed, among other things, that the Company would pay to the plaintiff all outstanding invoices due to the plaintiff as of the date of the settlement, net of existing amounts due to the Company from the plaintiff, and would pay license, service and other fees to the plaintiff in return for the plaintiff providing maintenance services on lockers distributed to certain of the Company’s customers. At March 31, 2013, the Company recorded an expense of approximately $412,000 related to the settlement. Of this amount, approximately $377,000 was recorded as accrued settlement and approximately $35,000 was included in other accrued expenses on the accompanying consolidated balance sheet as of March 31, 2013. The Company will pay amounts due to the plaintiff under the terms of the settlement over a minimum period of 29 months beginning June 1, 2013.

The Company is involved in other claims and litigation from time to time in the normal course of business. The Company does not believe these matters will have a significant adverse impact on the Company’s operations or financial condition.