Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies [Abstract]

Commitments and contingencies

9. Commitments and contingencies

Product Litigation

The Company is currently named as a defendant in 26 lawsuits in which the plaintiffs allege either wrongful death or personal injury in situations in which a TASER CEW was used (or present) by law enforcement officers in connection with arrests or during training exercises. Companion cases arising from the same incident have been combined into one for reporting purposes. While the facts vary from case to case, the product liability claims are typically based on an alleged product defect resulting in injury or death, usually involving a failure to warn, and the plaintiffs are seeking monetary damages. The Company is defending each of these lawsuits vigorously and does not expect these lawsuits to individually, or in the aggregate, materially affect our business, results of operations or financial condition. The information throughout this note is current through the filing date of this Annual Report on Form 10-Q.

Turner (NC) lawsuit

The Turner (NC) lawsuit was tried in July 2011 and resulted in a jury verdict of $10.0 million against the Company. The Company filed post-trial motions seeking judgment as a matter of law notwithstanding the verdict and in the alternative, a new trial or alternatively, a remittitur of the jury award. Based on this verdict, the Company recorded litigation judgment expense of $3.3 million in 2011. During March 2012, the Federal District Court for the Western District of North Carolina granted the Company’s motion for remittitur and ordered the reduction of the original jury award from $10.0 million to approximately $4.4 million after offsets. On April 20, 2012, the court issued an order which adjusted the award to $5.5 million. On May 4, 2012, the court issued another order which entered judgment in the amount of $5.5 million plus costs and post-judgment interest. Based on this action by the court, the Company reversed a portion of the previously accrued litigation judgment during the year ended December 31, 2012, which resulted in a benefit of $2.2 million during the quarter ended March 31, 2012, and leaving a reserve of $1.1 million as of March 31, 2012. The Company has appealed this verdict. The appeal is fully briefed but the Court has not yet set a date for oral argument. As of March 31, 2013 and December 31, 2012, the reserve related to this case was $1.1 million.

With respect to each of the pending lawsuits, the following table lists the name of plaintiff, the date the Company was served with process, the jurisdiction in which the case is pending, the type of claim and the status of the matter.

	Month
Plaintiff	Served	Jurisdiction	Claim Type	Status
Salinas	Aug-08	US District Court, ND CA	Wrongful Death	Motion Phase, trial scheduled June 2013
Grable	Aug-08	6th Judicial Circuit Court, Pinellas County, FL	Training Injury	Discovery Phase
Koon	Dec-08	17th Judicial Circuit Court, Broward County, FL	Training Injury	Discovery Phase
Peppler	Apr-09	5th Judicial Circuit Court, Sumter City, FL	Training Injury	Discovery Phase
Athetis	May-09	US District Court, AZ	Wrongful Death	Discovery Phase
Derbyshire	Nov-09	Ontario, Canada Superior Court of Justice	Officer Injury	Discovery Phase, trial scheduled May 2013
Rich	Feb-10	US District Court, NV	Wrongful Death	Trial scheduled August 2013
Thompson	Mar-10	11th Judicial Circuit Court Miami-Dade County, FL	Suspect Injury During Arrest	Discovery Phase
Doan	Apr-10	The Queens Bench Alberta, Red Deer Judicial Dist.	Wrongful Death	Pleading Phase
Piskura	May-10	US District Court, OH	Wrongful Death	Trial scheduled October 2013
Shymko	Dec-10	The Queens Bench, Winnipeg Centre, Manitoba	Wrongful Death	Pleading Phase
Juran	Dec-10	Hennepin County District Court, 4th Judicial District	Officer Injury	Discovery Phase
Wilson	May-11	US District Court, ED MO	Wrongful Death	Stayed until June 2013
Russell	Dec-11	U.S. District Court, VA	Wrongful Death	Trial scheduled Fall 2013
Ramsey	Jan-12	17th Judicial Circuit Court, Broward County Circuit Court, FL	Wrongful Death	Discovery Phase
Duensing	Feb-12	US District Court, NV	Suspect Injury During Arrest	Pleading Phase
Mitchell	Apr-12	US District Court, ED MI	Wrongful Death	Discovery Phase, trial scheduled May 2014
Firman	Apr-12	Ontario, Canada Superior Court of Justice	Wrongful Death	Pleading Phase
Ricks	May-12	US District Court, WD LA	Wrongful Death	Discovery Phase
Wingard	Oct-12	US District Court, WD PA	Wrongful Death	Pleading Phase
Manjares	Nov-12	US District Court, ED WA	Suspect Injury During Arrest	Discovery Phase, trial scheduled January 2014
McCarthy	Dec-12	US District Court, WD NC	Wrongful Death	Discovery Phase, trial scheduled June 2014
Miller	Jan-13	New Castle County Superior Court, DE	Wrongful Death	Discovery Phase
Salgado	Feb-13	US District Court, SD FL	Wrongful Death	Stayed
Armstrong	Apr-13	General Court of Justice, Superior Div, Moore County, NC	Wrongful Death	Pleading Phase
Barnes	Apr-13	US District Court, WD PA	Wrongful Death	Pleading Phase

In addition, other product litigation matters in which the Company is involved that are currently on appeal are listed below:

	Month
Plaintiff	Served	Jurisdiction	Claim Type	Status
Kandt	Jun-09	US District Court, ND NY	Training injury	Appeal is fully briefed. Oral argument set for May 2013.
Turner	Feb-10	US District Court, ED NC	Wrongful death	Appeal is fully briefed. Waiting for Court to set date for oral argument.
Jacobs	Oct-10	District Court, Travis County, TX	Wrongful death	Appellants opening brief filed March 2013. TASER’s answering brief currently due May 2013.
Williams	Dec-10	US District Court, ND MS	Wrongful death	Appellant’s opening brief filed January 2013. TASER’s answering brief filed March 2013.
Butler	Jan-11	US District Court, ND TX, Dallas	Training injury	Appellant’s opening brief filed January 2013. TASER’s answering brief filed March 2013. Reply brief due April 2013.
Bachtel	Aug-11	14th Judicial District Circuit Court, Randolph County, MO	Wrongful Death	Apellant’s opening brief due May 2013.
Fahy	Dec-09	Circuit Court of City of St. Louis	Suspect injury during arrest	Notice of appeal filed April 2013.

Cases that were dismissed or judgment entered during the first quarter of 2013 and through the filing date of this Annual Report on Form 10-Q are listed in the table below. Cases that were dismissed or judgment entered in prior fiscal quarters are not included in this table.

	Month
Plaintiff	Served	Jurisdiction	Claim Type	Status
Stough	Feb-11	US District Court, ED MO	Training Injury	Voluntary Dismissal
Bachtel	Aug-11	14th Judicial District Circuit Court, Randolph County, MO	Wrongful Death	Summary Judgment granted for TASER, appeal filed
Payne	Mar-11	Blount County Circuit Court, TN	Suspect Injury During Arrest	Voluntary Dismissal
Nelson	Aug-11	CA Superior Court, Riverside County	Wrongful Death	Voluntary Dismissal
Norman	Aug-12	US District Court, WD MO	Wrongful Death	Dismissed
Washington	May-05	US District Court, ED CA	Wrongful Death	Dismissed
Glowczenski	Oct-04	U.S. District Court, ED NY	Wrongful Death	Summary Judgment granted for TASER
Hollman	Aug-06	US District Court, ED NY	Wrongful Death	TASER’s motion for summary judgment granted in March 2013
Humphreys	Oct-09	CA Superior Court, San Joaquin County	Wrongful Death	Dismissal filed in March 2013
City of Warren MI *	Apr-12	US District Court, ED MI	Third Party Complaint	Dismissed
Fressadi	Feb-13	US District Court, AZ	Suspect Injury During Arrest	Dismissed

* companion case to Mitchell

The claims, and in some instances the defense, of each of these lawsuits have been submitted to the Company’s insurance carriers that maintained insurance coverage during the applicable periods. The Company continues to maintain product liability insurance coverage with varying limits and deductibles. The following table provides information regarding the Company’s product liability insurance. Remaining insurance coverage is based on information received from the Company’s insurance provider.

Policy Year	Policy Start Date		Policy End Date		Insurance Coverage		Deductible Amount		Defense Costs Covered		Remaining Insurance Coverage		Active Cases and Cases on Appeal
2004		12/01/03		12/01/04	$	2.0	$	0.1		N	$	2.0	n/a
2005		12/01/04		12/01/05		10.0		0.3		Y		7.0	n/a
2006		12/01/05		12/01/06		10.0		0.3		Y		3.7	n/a
2007		12/01/06		12/01/07		10.0		0.3		Y		8.0	n/a
2008		12/01/07		12/15/08		10.0		0.5		Y		—	Salinas, Grable, Koon, Peppler, Rich, Turner
2009		12/15/08		12/15/09		10.0		1.0		N		10.0	Athetis, Kandt, Derbyshire
2010		12/15/09		12/15/10		10.0		1.0		N		10.0	Thompson, Jacobs, Shymko, Doan, Piskura, Juran, Williams, Fahy
2011		12/15/10		12/15/11		10.0		1.0		N		10.0	Butler, Wilson, Russell, Bachtel
Jan—Jun 2012		12/15/11		06/25/12		7.0		1.0		N		7.0	Ramsey, Duensing, Mitchell, Firman, Ricks
Jul—Dec 2012		06/25/12		12/15/12		12.0		1.0		N		12.0	Wingard, Manjares
2013		12/15/12		12/15/13		12.0		1.0		N		12.0	McCarthy, Miller, Salgado, Barnes, Armstrong

The amount of the remaining insurance coverage for the 2008 policy year is shown based on what has actually been paid out on cases in that policy year or held for the appellate bond in Turner (NC). If the Company is not successful in its appeal related to the Turner (NC) lawsuit, the policy will be fully exhausted for that policy year and as a result, the Company will have no remaining insurance coverage for other cases relating to the 2008 policy year. See additional information related to the Turner (NC) lawsuit discussed above in this Note.

Other Litigation

In January 2011, we were served with a complaint in the matter of GEOTAG, Inc. v. TASER International, et. al. that was filed in the United States District Court for the Eastern District of Texas, Marshall Division, which alleges that a dealer geographical locator feature on TASER’s website infringes upon plaintiff’s US Patent No. 5,930,474. The complaint seeks a judgment of infringement, a permanent injunction against infringement, an award for damages, costs, expenses and prejudgment and post-judgment interest, and an award for enhanced damages and attorneys’ fees. TASER licensed this locator feature from a third party and has denied liability for infringement. This lawsuit is at the discovery phase and no trial date has been set.

In July 2011, the Company filed a complaint against Karbon Arms, LLC for infringement of TASER’s U.S. Patent Nos. 7,800,885 and 7,782,592 in US District Court for the District of Delaware seeking damages, injunctive relief and an award of attorneys’ fees. Karbon Arms filed a counterclaim on July 18, 2011, alleging invalidity and non-infringement of four of TASER’s patents, tortuous interference with prospective contractual relations and for false advertising under the Lanham Act. TASER thereafter filed counter-counterclaims for infringement of U.S. Patent Nos. 7,602,597 and 6,999,295. This lawsuit is at the discovery phase, a Markman hearing was held, and a trial date has been set for January 2014.

In February 2012, the Company was served with a complaint in the matter of AA & Saba Consultants, Inc. v. TASER International, Inc. that was filed in the Superior Court for the County of Maricopa, Arizona, which alleges that the Company breached a contract by unilaterally terminating a distributor agreement between the Company and plaintiff without good cause. The complaint seeks an award for damages, costs, expenses and attorneys’ fees. TASER filed a counterclaim for breach of contract and fraud. This lawsuit is at the discovery phase and a trial date has been set for October 2013. The Company has made a settlement offer of $0.8 million to AA & SABA Consultants, Inc. which has not been accepted at the time of this filing. The Company has recorded the amount of the offer as an estimated liability.

General

From time to time, the Company is notified that it may be a party to a lawsuit or that a claim is being made against it. It is the Company’s policy to not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on the Company. After carefully assessing the claim, and assuming we determine that we are not at fault, we vigorously defend and pursue any lawsuit filed against or by the Company. Although we do not expect the outcome in any pending individual case to be material, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts provided by insurance coverage and will not have a material adverse effect on our business, operating results or financial condition. The Company may settle a lawsuit in situations where a settlement can be obtained for nuisance value and for an amount that is expected to be less than the cost of defending a lawsuit. The number of product liability lawsuits dismissed includes a small number of police officer training injury lawsuits that were settled by the Company and dismissed in cases where the settlement economics to the Company were significantly less than the cost of litigation. In addition, it is the Company’s policy to not settle suspect injury or death cases, although the Company’s insurance company may settle such lawsuits over the Company’s objection where the case is over the Company’s liability insurance deductibles. Due to the confidentiality of our litigation strategy and the confidentiality agreements that are executed in the event of a settlement, the Company does not identify or comment on which specific lawsuits have been settled or the amount of any settlement.