Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies
9 Months Ended
Jun. 30, 2011
Commitments and Contingencies.  
Commitments and Contingencies

15.         Commitments and Contingencies


Antitrust Litigation


In 2005, the Funeral Consumers Alliance, Inc. (FCA) and a number of individual consumer casket purchasers filed a purported class action antitrust lawsuit on behalf of certain consumer purchasers of Batesville® caskets against the Company and our former parent company, Hillenbrand Industries, Inc., now Hill-Rom Holdings, Inc. (Hill-Rom), and three national funeral home businesses (the FCA Action).  A similar purported antitrust class action lawsuit was later filed by Pioneer Valley Casket Co. and several so-called “independent casket distributors” on behalf of casket sellers who were unaffiliated with any licensed funeral home (the Pioneer Valley Action).  Class certification hearings in the FCA Action and the Pioneer Valley Action were held before a Magistrate Judge in early December 2006.  On November 24, 2008, the Magistrate Judge recommended that the plaintiffs’ motions for class certification in both cases be denied.  On March 26, 2009, the District Judge adopted the memoranda and recommendations of the Magistrate Judge and denied class certification in both cases.  On April 9, 2009, the plaintiffs in the FCA case filed a petition with the United States Court of Appeals for the Fifth Circuit for leave to file an appeal of the Court’s order denying class certification.  On June 19, 2009, a three-judge panel of the Fifth Circuit denied the FCA plaintiffs’ petition.  On July 9, 2009, the FCA plaintiffs filed a request for reconsideration of the denial of their petition.  On July 29, 2009, a three-judge panel of the Fifth Circuit denied the FCA plaintiffs’ motion for reconsideration and their alternative motion for leave to file a petition for rehearing en banc (by all the judges sitting on the Fifth Circuit Court of Appeals).


The Pioneer Valley plaintiffs did not appeal the District Court’s order denying class certification and, on April 29, 2009, pursuant to a stipulation among the parties, the District Court dismissed the Pioneer Valley Action with prejudice (i.e., Pioneer Valley cannot appeal or otherwise reinstitute the case).  Neither the Company nor Hill-Rom provided any payment or consideration for the plaintiffs to dismiss this case, other than agreeing to bear their own costs rather than pursuing plaintiffs for costs.


Plaintiffs in the FCA Action have generally sought monetary damages on behalf of a class, trebling of any such damages that may be awarded, recovery of attorneys’ fees and costs, and injunctive relief.  The plaintiffs in the FCA Action filed a report indicating that they were seeking damages ranging from approximately $947.0 million to approximately $1.46 billion before trebling on behalf of the purported class of consumers they seek to represent, based on approximately one million casket purchases by the purported class members.


Despite the ruling denying class certification, the FCA plaintiffs continued to pursue their individual injunctive and damages claims.  Their individual damages claims are limited to the alleged overcharges on the plaintiffs’ individual casket purchases (the complaint currently alleges a total of eight casket purchases by the individual plaintiffs), which would be trebled, plus reasonable attorneys’ fees and costs.


In June 2010, co-defendant Stewart Enterprises, Inc. announced a settlement with the plaintiffs.  Shortly thereafter, the remaining defendants filed a motion to dismiss for lack of subject matter jurisdiction.  On September 24, 2010, the District Court granted the motion and ordered full dismissal of the lawsuit, concluding that “plaintiffs shall take nothing by their suit.”


Plaintiffs have appealed both the Court’s final judgment of dismissal entered on September 24, 2010, and the Court’s order denying class certification entered on March 26, 2009 to the United States Court of Appeals for the Fifth Circuit.


On February 23, 2011, the plaintiffs filed their appellate brief with the Fifth Circuit Court of Appeals.  The defendants’ opposition brief was filed with the Court on April 27, 2011.  All appellate briefs have now been submitted.  We are currently awaiting either notification from the Court of Appeals that it wants to hear oral argument on the briefs before making its ruling, or if no argument is requested by the Court of Appeals, then its ruling as to whether or not the District Court’s decisions should be reversed or affirmed.


If plaintiffs succeed in overturning the judgment, reversing the District Court order denying class certification, and a class is subsequently certified in the FCA Action filed against Hill-Rom and Batesville, and if the plaintiffs prevail at a trial of the class action, the damages awarded to the plaintiffs, which would be trebled as a matter of law, could have a significant material adverse effect on our results of operations, financial condition, and cash flow.  In antitrust actions such as the FCA Action, the plaintiffs may elect to enforce any judgment against any or all of the co-defendants, who have no statutory contribution rights against each other.  We and Hill-Rom have entered into a judgment sharing agreement that apportions the costs and any potential liabilities associated with this litigation between us and Hill-Rom.  See Note 6 to our Annual Report on Form 10-K for the fiscal year ended September 30, 2010.


Because Batesville continues to adhere to its long-standing policy of selling Batesville caskets only to licensed funeral directors operating licensed funeral homes, a policy that it continues to believe is appropriate and lawful, if the case goes to trial, the plaintiffs are likely to claim additional alleged damages for the period between the time they served their expert reports and the time of trial.  At this point, it is not possible to estimate the amount of any additional alleged damage claims they may make.  The defendants are vigorously contesting both liability and the plaintiffs’ damages theories.


As of June 30, 2011, we had incurred approximately $28.8 million in cumulative legal and related costs associated with the FCA matter since its inception.




Like most companies we are involved on an ongoing basis in claims and lawsuits relating to our operations, including environmental, antitrust, patent infringement, business practices, commercial transactions, and other matters. The ultimate outcome of these lawsuits cannot be predicted with certainty. An estimated loss from these contingencies is recognized when we believe it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated; however, it is difficult to measure the actual loss that might be incurred related to litigation.  If a loss is not considered probable and/or cannot be reasonably estimated, we are required to establish a disclosure if there is at least a reasonable possibility that a material loss may have been incurred.  Legal fees associated with claims and lawsuits are generally expensed as incurred.


We are also involved in other possible claims, including product and general liability, workers compensation, auto liability, and employment-related matters. Claims other than employment and related matters have deductibles and self-insured retentions ranging from $0.5 million to $1.0 million per occurrence or per claim, depending upon the type of coverage and policy period. Outside insurance companies and third-party claims administrators establish individual claim reserves, and an independent outside actuary provides estimates of ultimate projected losses, including incurred but not reported claims, which are used to establish reserves for losses. Claim reserves for employment-related matters are established based upon advice from internal and external counsel and historical settlement information for claims and related fees, when such amounts are considered probable of payment.


The recorded amounts represent our best estimate of the costs we will incur in relation to such exposures, but it is virtually certain that actual costs will differ from those estimates.