LEGAL PROCEEDINGS

12 Months Ended

Dec. 31, 2011

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

NOTE 17: LEGAL PROCEEDINGS

Employee Arbitration

        Epiq Systems, Inc. and one of its subsidiaries are currently in arbitration before the American Arbitration Association in New York, New York, regarding claims alleging wrongful employment termination. Arbitration proceedings were initiated in 2009 and have been completed as of January 18, 2012, and the parties are currently engaged in post-trial briefing to the arbitration panel. We believe that the employment claims are meritless and we currently intend to continue to defend vigorously against them. No amounts associated with this matter have been accrued in the accompanying Consolidated Financial Statements.

Purported Software License Complaint

        On or about June 24, 2011, Epiq eDiscovery Solutions, Inc., an indirect, wholly owned subsidiary of Epiq Systems, Inc. ("EDS"), filed a lawsuit against Sybase, Inc. ("Sybase") and Does 1 to 50, et al. in the Superior Court of the State of California, Alameda County (the "Superior Court"), alleging breach of contract and requesting a declaratory judgment against Sybase. EDS's complaint against Sybase relates to a dispute that has arisen under a software license agreement between EDS and Sybase (the "Agreement") and encompasses a request by EDS for the Superior Court to issue an order: (a) declaring that EDS currently owes Sybase nothing under the Agreement, and (b) requiring Sybase to provide EDS with certain license keys to software licenses that EDS purchased from Sybase under the Agreement. On or about July 29, 2011, Sybase filed an answer to the complaint and a cross-complaint, which Sybase subsequently amended, against EDS and Does 51-60 relating to that same dispute and Agreement, alleging that, among other things, EDS owes Sybase additional amounts under the Agreement totaling at least $7.0 million, plus interest and costs of the lawsuit.

        We believe that Sybase's amended cross-complaint has no merit and we and EDS currently intend to defend against Sybase's amended cross-complaint vigorously. No amounts associated with this matter have been accrued in the accompanying Consolidated Financial Statements. EDS filed the lawsuit in order to protect and defend its rights and to demonstrate that, at all relevant times, EDS acted in good faith and in accordance with the terms of the Agreement.

Purported Derivative Shareholder Complaint

        On July 29, 2008, the Alaska Electrical Pension Fund filed a putative shareholder derivative action on behalf of Epiq Systems, Inc. in the United States District Court for the District of Kansas (the "Court") (Civil Action No. 08-CV-2344 CM/JPO), alleging, among other things, improper conduct by each of our current directors and certain current and former executive officers and directors regarding stock option grants. The company has stated consistently that the claims made in the action are meritless.

        Also as previously reported, on April 27, 2010, on the determination of the company's Board of Directors, the company entered into a Stipulation of Settlement (the "Settlement Agreement") with plaintiff and defendants relating to the settlement of this litigation and mutual release of claims, and the company and its insurance carrier agreed to pay plaintiff's counsel's fees and expenses, which totaled $3.5 million. On June 22, 2010, the Court entered an order which, among other things, preliminarily approved the Settlement Agreement and scheduled a final hearing. On August 25, 2010, the Court entered a final order, dated August 24, 2010, approving the Settlement Agreement and dismissing with prejudice the lawsuit and all claims contained therein (the "Final Order"). During the third quarter of 2010 the settlement amount, which had been fully accrued for in prior periods, was paid by the company and the insurance company. On or about September 24, 2010, the Final Order became final and non-appealable because no appeal was filed prior to such date.