8. Commitments and Contingencies

Operating Leases

The Company leases manufacturing space, equipment and apartments under lease agreements that expire at various dates through March 2020. Rental expenses were $656, $1,049, and $1,760, for the years ended June 30, 2017, 2016, and 2015, respectively. The decrease in rent expense in fiscal 2017 and 2016 relates to the completion of construction of the Company’s headquarters, which replaced space previously leased by the Company. In March 2017, the Company sold the headquarters facility and began leasing that facility.

Future minimum lease payments under the agreements as of June 30, 2017 are as follows:



2018	$	551
2019	472
2020	354
2021	—
2022	—
Thereafter	—
	$	1,377

Employment Litigation

The Company is party to Steven Babyak v. Cardiovascular Systems, Inc., a lawsuit originally filed in the Superior Court of California, County of Los Angeles, on November 16, 2015. The plaintiff, a former Regional Sales Manager of the Company, made claims under California law relating to whistleblower retaliation; defamation; discrimination on the basis of association with protected group; harassment on the basis of sex in violation of FEHA; retaliation for exercising rights under FEHA; failure to prevent discrimination, harassment & retaliation in violation of FEHA; wrongful termination in violation of public policy; and violation of business and professions code. Following an April 2017 trial, a jury awarded the plaintiff $2,700 in compensatory damages with respect to his claims for whistleblower retaliation and wrongful termination in violation of public policy. The jury also awarded the plaintiff $22,400 in punitive damages with respect to the same claims. The Company filed post-trial motions for judgment notwithstanding the verdict and a new trial, on the grounds that this case was incorrectly decided as to liability, the compensatory and punitive damages were not appropriate and were excessive, and the Company was prevented from a fair trial by the improper exclusion of critical evidence. On June 29, 2017, the Court partially granted the Company’s motions, reducing the punitive damages award from $22,400 to $2,700 but denied the Company’s other motions. The Company believes that this case was incorrectly decided as to liability and the appropriateness and amount of any damages and the Company filed a Notice of Appeal on July 24, 2017.

The Company has accrued $2,600 as of June 30, 2017 based on the estimate of the range of the loss that the Company believes is probable of occurring. However, it is reasonably possible that the ultimate loss, if the Company is not able to successfully challenge the verdict, could be materially different than the amount that the Company has recorded. The Company will continue to monitor the accrual associated with this matter each reporting period and make adjustments, if necessary, based on additional facts as they arise. The amounts are reflected in selling, general and administrative expenses on the Company’s consolidated statement of operations. Additionally, as of June 30, 2017, the Company has recorded a receivable of $1,300 associated with its present assessment of the probable amount of insurance proceeds the Company would receive related to the claim, based on the accrued amount of loss referenced above. The Company estimates insurance receivables based on an analysis of its policies, including their exclusions, an assessment of the nature of each claim and remaining coverage, information from its insurance carrier, and the probable loss range referenced above. The Company then records an amount it has concluded is probable. Similar to the accrual pertaining to this matter, the Company will continue to assess the probable amount of insurance proceeds expected to be received in this case each reporting period and make adjustments, if necessary, based on additional facts as they arise.

Stockholder Securities Litigation

On February 12, 2016, a stockholder purporting to represent a class of persons who purchased the Company’s securities between September 12, 2011 and January 21, 2016 filed a lawsuit against the Company and certain of its officers in the U.S. District Court for the Central District of California, Paradis v. Cardiovascular Systems, Inc., et al., 2:16-cv-01011 (C.D. Cal.). The lawsuit alleges that the Company made materially false and misleading statements and failed to disclose material adverse facts about the Company’s business, operational and financial performance, in violation of federal securities laws, relating to (1) alleged kickbacks to health care providers, (2) alleged off-label promotion of medical devices, and (3) alleged violations of the Food and Drug Administration’s laws and regulations in connection with the Company’s medical devices. On March 4, 2016, a second stockholder filed a similar lawsuit against the Company and certain of its officers in the U.S. District Court for the District of Minnesota, Shoemaker v. Cardiovascular Systems, Inc. et al., 0:16-cv-00568 (D. Minn.). The plaintiffs seek unspecified monetary damages on behalf of the alleged class, interest, and attorney’s fees and costs of litigation.

On April 12, 2016, four motions for appointment as lead plaintiff were filed in the Paradis action and three of the four proposed plaintiffs also filed a motion for appointment as lead plaintiff in the Shoemaker action.

On April 26, 2016, the Paradis action was voluntarily dismissed by plaintiffs in favor of the Shoemaker action. That same day, the Shoemaker court entered an order appointing the City of Miami Fire Fighters’ & Police Officers’ Retirement Trust and the County Retirement Systems as Co-Lead Plaintiffs for representing the putative class. On June 28, 2016, the Co-Lead Plaintiffs filed a new complaint. The Company filed a motion to dismiss the complaint in this action on August 29, 2016. A hearing was held on the motion to dismiss on December 2, 2016. On March 29, 2017, the court granted the Company’s motion to dismiss the complaint and dismissed the plaintiffs’ amended complaint without prejudice. The court granted the plaintiffs’ request for leave to amend their complaint, and on June 27, 2017, the plaintiffs filed an amended complaint. The complaint makes similar allegations as the original complaint, namely, that the Company made materially false and misleading statements and failed to disclose material adverse facts about its business, operational and financial performance, in violation of federal securities laws, relating to alleged kickbacks to health care providers. The plaintiffs seek unspecified monetary damages on behalf of the alleged class, interest, and attorney’s fees and costs of litigation. The Company filed a motion to dismiss the amended complaint on August 11, 2017. The Company believes that this lawsuit is without merit and intends to defend itself vigorously.

Other Matters

In the ordinary conduct of business, the Company is subject to various lawsuits and claims covering a wide range of matters including, but not limited to, employment claims and commercial disputes. While the outcome of these matters is uncertain, the Company does not believe there are any other significant matters as of June 30, 2017 that are probable or estimable, for which the outcome is reasonably possible of having a material adverse impact on its consolidated balance sheets or statements of operations.