Commitments and contingencies

9 Months Ended

Sep. 30, 2011

Commitments and contingencies

Commitments and contingencies

18.          Commitments and contingencies

Outstanding contracts to purchase property, plant and equipment were approximately $6,520,000 at September 30, 2011 (December 31, 2010 - $43,658,000). Additionally, outstanding contracts for project-related costs at the Porto Cupecoy development were approximately $480,000 at September 30, 2011 (December 31, 2010 - $5,535,000).

OEH agreed to pay the vendor of Grand Hotel Timeo and Villa Sant’Andrea a further €5,000,000 (equivalent to $6,709,000 at September 30, 2011) if, by 2015, additional rooms are constructed at Grand Hotel Timeo and certain required permits are granted to expand and add a swimming pool to Villa Sant’Andrea.  In February 2011, €1,500,000 (equivalent to $2,062,000 at February 28, 2011) of this amount was paid to the vendor as the appropriate permits to add a swimming pool to Villa Sant’Andrea have been obtained.  See Note 4.

‘21’ Club is a defendant in a putative class action lawsuit brought by private banqueting service staff seeking to recover alleged retained gratuities and overtime wages pursuant to New York State and US federal wage and hour laws. In August 2011, the parties agreed in principle to settle the case by OEH paying plaintiffs $2,000,000, which has been accrued. In September, the court preliminarily approved the settlement and scheduled a final fairness hearing in January 2012. Funding of the settlement will occur promptly after court approval. Additionally, OEH has accrued $500,000 in legal and tax costs associated with the lawsuit and settlement.

The Company and certain of its subsidiaries are parties to various legal proceedings arising in the normal course of business. The outcome of each of these matters cannot be absolutely determined, and the liability that the relevant parties may ultimately incur with respect to any one of these matters in the event of a negative outcome may be in excess of amounts currently accrued for with respect to these matters.

In May 2010, OEH settled litigation for infringement of its “Cipriani” trademark in Europe.  An amount of $3,947,000 was paid by the defendants to OEH in March 2010 with the balance of $9,833,000 being payable in instalments over five years with interest.  The remaining payments totaling $8,183,000 at September 30, 2011 have not been recognized by OEH because of the uncertainty of collectability.

See Note 7 regarding assignment of the purchase and development agreements between OEH and the New York Public Library, including put and call options which are part of the contractual provisions under that assignment.