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Contingencies
3 Months Ended
Mar. 27, 2016
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
CONTINGENCIES

We are involved in certain legal and regulatory actions, all of which have arisen in the ordinary course of business, except for the matters described in the following paragraphs.

Additionally, management believes that the ultimate resolution of such matters is unlikely to have a material adverse effect on our consolidated results of operations and/or financial condition, except as described below.

Matters related to All-Tag Security S.A. and All-Tag Security Americas, Inc.

We originally filed suit on May 1, 2001, alleging that the disposable, deactivatable radio frequency security tag manufactured by All-Tag Security S.A. and All-Tag Security Americas, Inc.'s (jointly All-Tag) and sold by Sensormatic Electronics Corporation (Sensormatic) infringed on a U.S. Patent No. 4,876,555 (the 555 Patent) owned by us. On April 22, 2004, the United States District Court for the Eastern District of Pennsylvania (the Pennsylvania Court) granted summary judgment to defendants All-Tag and Sensormatic on the ground that the 555 Patent was invalid for incorrect inventorship. We appealed this decision. On June 20, 2005, we won an appeal when the United States Court of Appeals for the Federal Circuit (the Appellate Court) reversed the grant of summary judgment and remanded the case to the Pennsylvania Court for further proceedings. On January 29, 2007 the case went to trial, and on February 13, 2007, a jury found in favor of the defendants on infringement, the validity of the 555 Patent and the enforceability of the 555 Patent. On June 20, 2008, the Pennsylvania Court entered judgment in favor of defendants based on the jury's infringement and enforceability findings. On February 10, 2009, the Pennsylvania Court granted defendants' motions for attorneys' fees designating the case as an exceptional case and awarding an unspecified portion of defendants' attorneys' fees under 35 U.S.C. § 285. Defendants sought approximately $5.7 million plus interest. We recognized this amount during the fourth fiscal quarter ended December 28, 2008 in litigation settlements on the Consolidated Statement of Operations. On March 6, 2009, we filed objections to the defendants' bill of attorneys' fees. On November 2, 2011, the Pennsylvania Court finalized the decision to order us to pay the attorneys' fees and costs of the defendants in the amount of $6.6 million. The additional amount of $0.9 million was recorded in the fourth quarter ended December 25, 2011 in the Consolidated Statement of Operations. On November 15, 2011, we filed objections to and appealed the Pennsylvania Court's award of attorneys' fees to the defendants. Following the filing of briefs and the completion of oral arguments, the Appellate Court reversed the decision of the Pennsylvania Court on March 25, 2013. As a result of the final decision, we reversed the All-Tag reserve of $6.6 million in the first quarter ended March 31, 2013. The Appellate Court decision was appealed by All-Tag and Sensormatic to the U.S. Supreme Court.

While the appeal was still pending, the U.S. Supreme Court agreed to hear two cases (Octane Fitness, LLC v. ICON Health & Fitness, Inc. and Highmark, Inc. v. Allcare Health Management Systems) arguing that the governing standard for finding a case exceptional under 35 U.S.C. § 285 was too rigid. On December 30, 2013, based on the Supreme Court’s willingness to re-evaluate the exceptional case standard, defendants requested that the Supreme Court also hear our case. On April 29, 2014, the Supreme Court issued its rulings in Octane Fitness and Highmark and relaxed the standard for determining when a case is exceptional. As a result, on May 5, 2014, the Supreme Court vacated the judgment of the Appellate Court in our case (reinstating the Pennsylvania Court’s exceptional case finding) and sent the case back to the Appellate Court for further consideration in light of the new standards set forth in Octane Fitness and Highmark. On June 10, 2014, defendants filed a motion in the Appellate Court asking that the Appellate Court either affirm the Pennsylvania Court’s exceptional case finding outright or send the case back to the Pennsylvania Court so that it could consider the case again under the new exceptional case standard. On June 23, 2014, we filed our opposition to the motion to remand and moved the Appellate Court to once again reverse the Pennsylvania Court’s exceptional case finding. On October 14, 2014, the Appellate Court remanded the case to the Pennsylvania Court for further proceedings.

On August 18, 2015, the Pennsylvania Court granted defendants' motions for attorney fees designating the case as an exceptional case under the new exceptional case standard. The Pennsylvania Court reinstated the original award in the amount of $6.6 million and awarded an unspecified portion of defendants' attorney fees, including appellate fees, and post-judgment interest under 35 U.S.C. § 285. On December 21, 2015, the Pennsylvania Court issued a judgment awarding the defendants $10.3 million. We have accrued the full amount of this award within other accrued expenses on the Consolidated Balance Sheet and in litigation matters on the Consolidated Statement of Operations. We filed an appeal of the Pennsylvania Court’s decision to the Appellate Court on January 4, 2016.

Matter related to Universal Surveillance Corporation EAS RF Anti-trust Litigation

Universal Surveillance Corporation (USS) filed a complaint against us in the United States Federal District Court of the Northern District of Ohio (the Ohio Court) on August 19, 2011. USS claims that, in connection with our competition in the electronic article surveillance market, we violated the federal antitrust laws (Sherman Act and Clayton Act) and state antitrust laws (Ohio Valentine Act). USS also claims that we violated the federal Lanham Act, the Ohio Deceptive Trade Practices Act, and the Ohio Trade Secrets Act, and engaged in conduct that allegedly disparaged USS and tortiously interfered with USS's business relationships and contracts. USS is seeking injunctive relief as well as approximately $65 million in claimed damages for alleged lost profits, plus treble damages and attorney's fees under the Sherman Act. On May 3, 2016, we entered into a settlement agreement with USS whereby we will pay USS $8.0 million in settlement of the outstanding litigation. The settlement is contingent upon approval of the merger by the affirmative vote of a majority of the outstanding shares of Checkpoint common stock entitled to vote thereon at a special meeting or at any adjournment or postponement thereof. As a result of the settlement agreement, we accrued $8.0 million within other accrued expenses on the Consolidated Balance Sheet and in litigation matters on the Consolidated Statement of Operations.

Matter related to Meier Class Action Lawsuit

On November 11, 2015, a purported shareholder class action lawsuit was filed against us and certain of our current and former officers captioned, Meier v. Checkpoint Systems, Inc., et al., No. 1:15-cv-08007 (RBK)(KMW) (D.N.J.).  The complaint alleges violations of the federal securities laws related to the restatement of the Company’s previously-issued financial statements announced on November 3, 2015.  The complaint names as defendants our Chief Executive Officer and President George Babich, Jr., our Chief Financial Officer James M. Lucania, our former Chief Financial Officer Jeffrey O. Richard, and the Company.  The complaint alleges that we had filed false and misleading reports with the Securities and Exchange Commission beginning on March 5, 2015 through November 3, 2015, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act), 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5. On February 19, 2016, the Court entered an Order appointing a lead plaintiff and approving the lead plaintiff’s selection of lead counsel.  On April 4, 2016, the lead plaintiff filed an amended class action complaint, which named the same defendants as the original complaint and additionally alleged that the Company’s statements about the effectiveness of its internal control over the tax function and use of EPS in evaluating quarterly financial performance were false or misleading. We, together with the individual defendants expect to file a motion to dismiss the amended complaint at the appropriate time.

Matters related to proposed merger with CCL Industries Inc.

Since the announcement of the proposed merger with CCL Industries Inc., Checkpoint and its directors have been named as defendants in complaints filed by four shareholders. On March 7, 2016 and March 8, 2016, respectively, plaintiffs Louis Levine and Shiva Stein filed complaints in the Court of Common Pleas for the Philadelphia County, First Judicial District of Pennsylvania, Civil Division (Pennsylvania State Court Consolidated Action). On March 15, 2016, the Court consolidated these actions; and on April 5, 2016, plaintiffs Levine and Stein filed a consolidated complaint. On March 14, 2016, plaintiff Feivel Gottleib Defined Benefit Pension Plan filed a complaint in the Superior Court of New Jersey, Gloucester County Chancery Division. On March 18, 2016, plaintiff Harold Litwin filed a complaint in the Court of Common Pleas for the Philadelphia County, First Judicial District of Pennsylvania, Civil Division, which the Court entered an order to discontinue without prejudice on April 6, 2016. On April 6, 2015, Litwin filed a second complaint in the United States District Court for the Eastern District of Pennsylvania. The complaints allege that our Board breached its fiduciary duties in connection with the merger agreement and seek an injunction preventing the consummation of the merger, compensatory damages and attorneys’ fees and costs. Mr. Litwin’s federal complaint further alleges that our Board violated the federal securities laws in connection with our preliminary proxy statement filed on March 17, 2016. Additionally, our Board received four shareholder demands, one on March 8, 2016, one on March 9, 2016, one on March 10, 2016 and one on March 14, 2016, to investigate and take any necessary action to remedy alleged harms to Checkpoint caused by alleged breaches of fiduciary duty by the directors in connection with the merger agreement. The demands seek to cause us to investigate the alleged breaches, commence litigation against the directors, and abandon the merger agreement or renegotiate its terms. Additional lawsuits arising out of or relating to the merger agreement or the merger may be filed in the future. There can be no assurance that we or any of the other defendants will be successful in the outcome of the pending or any potential future lawsuits. An adverse judgment for monetary damages could have a material adverse effect on our operations and liquidity. A preliminary injunction could delay or jeopardize the completion of the merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin the completion of the merger. On April 29, 2016, Checkpoint and the other defendants in the Pennsylvania State Court Consolidated Action executed a memorandum of understanding reflecting their agreement to settle all claims asserted in the Pennsylvania State Court Consolidated Action. The parties subsequently executed a memorandum of understanding reflecting their agreement. In connection with the settlement contemplated by the memorandum of understanding, Checkpoint agreed to make certain additional disclosures related to the proposed transaction with CCL, and to waive the provisions of the nondisclosure agreement with a previous bidder that could have potentially prevented that bidder from making a superior proposal. The memorandum of understanding contemplates that the parties will enter in a stipulation of settlement that will be subject to customary conditions, including approval by the Court of Common Pleas. We recorded an estimated settlement obligation of $0.1 million within other accrued expenses on the Consolidated Balance Sheet and in litigation matters on the Consolidated Statement of Operations during the first quarter of 2016.