XML 26 R26.htm IDEA: XBRL DOCUMENT v2.4.0.8
CONTINGENCIES
9 Months Ended
Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
CONTINGENCIES
CONTINGENCIES
 
In the ordinary course of business, the Company is subject to lawsuits, investigations, government inquiries and claims, including, but not limited to, product liability claims, advertising disputes and inquiries, consumer fraud suits, other commercial disputes, premises claims and employment and environmental, health, and safety matters.

The Company is not aware of any environmental, health or safety-related litigation or significant environmental, health and safety-related financial obligations or liabilities arising from current or former operations or properties that are likely to have a material impact on the Company’s business, financial position, results of operations or cash flows. Liabilities or obligations, which could require the Company to make significant expenditures, could arise in the future, however, as the result of, among other things, changes in, or new interpretations of, existing laws, regulations or enforcement policies, claims relating to on- or off-site contamination, or the imposition of unanticipated investigation or cleanup obligations.

On November 14, 2011, the Company’s subsidiary Mead Johnson & Company, LLC (“MJC”) obtained final trial court approval of a nationwide class settlement with plaintiffs in eight putative consumer class actions that had been consolidated and transferred to the U.S. District Court for the Southern District of Florida.  The suits all involved allegations of false and misleading advertising with respect to certain Enfamil LIPIL infant formula advertising.  The settlement allowed consumers who purchased Enfamil LIPIL infant formula between October 13, 2005, and March 31, 2010, to receive infant formula or cash. The period for submitting claims has expired, and the total amount claimed by class members was less than $8.0 million. As a result and consistent with the Company’s previously reported obligations under the settlement agreement, MJC distributed the difference between $8.0 million and the total amount claimed in the form of infant formula to Feeding America, the nation’s largest domestic hunger relief charity.  MJC also agreed not to oppose, and the court approved, attorneys’ fees and expenses to plaintiffs’ counsel of $3.5 million and $140 thousand, respectively.  As previously reported, MJC agreed to pay costs of notice and settlement administration.  The trial court’s approval of the settlement was affirmed on appeal, and the settlement became final in October 2012. The distribution to class members was completed as of the end of the third quarter of 2013.

As previously reported in the Company’s Annual Report on Form 10-K for fiscal year 2012, the Company was served with a lawsuit filed on October 16, 2012 in St. Clair County (Illinois) Circuit Court under the caption Shelby Schrack, et al. v. Mead Johnson Nutrition Company and Mead Johnson & Company, which lawsuit alleges that certain bacteria in powdered formula were responsible for the death of one infant and serious illness in two others and seeks unspecified monetary damages. These illnesses were widely publicized in December 2011 and January 2012. The infants allegedly consumed formula from batches that were extensively tested by the Company, the Centers for Disease Control (“CDC”) and the U.S. FDA. These tests detected no bacteria in our infant formula. The CDC further noted that while these bacteria have sometimes been found in formula, they also exist in the environment and may potentially cause illness through person to person contact or through contamination of infant feedings at the point of use. We believe that the claims in this matter are without merit, and we intend to defend such claims vigorously. Nevertheless, we cannot guarantee the outcome of this litigation. The Company is currently in settlement discussions with the plantiffs in this case.

The Company records accruals for contingencies when it is probable that a loss will be incurred and can be reasonably estimated. Although MJN cannot predict with certainty the final resolution of these lawsuits, investigations and claims asserted against the Company, MJN does not believe any currently pending legal proceeding to which MJN is a party will have a material effect on the Company’s business or financial condition, although an unfavorable outcome in excess of amounts recognized as of September 30, 2013, with respect to one or more of these proceedings, could have a material effect on the Company’s results of operations and cash flows for the periods in which a loss is recognized.

The China Antitrust Review, discussed in Note 8 above, was resolved during the third quarter of 2013. In connection with the China Antitrust Review, the NDRC assessed an administrative penalty of $33.4 million against the Company, which penalty was paid during the third quarter and is non-deductible for tax purposes. The Company accrued $7.4 million in the second quarter of 2013 in connection with this matter and recognized the remaining charge of $26.0 million upon final resolution in the third quarter.

The Company has initiated an internal investigation of, and is voluntarily complying with an SEC request for documents relating to, certain business activities of the Company’s local subsidiary in China. The Company’s investigation is focused on certain expenditures that were made by the subsidiary in connection with the promotion of the Company’s products or may have otherwise been made and that may not have complied with Company policies and applicable U.S. and/or local laws. The Company has retained outside legal counsel to conduct the investigation, which is being overseen by a committee of independent members of the Company’s board of directors. At this time, the Company is unable to predict the scope, timing or outcome of this ongoing matter or any regulatory or legal actions that may be commenced related to this matter.