2.4.0.8124 - Disclosure - CONTINGENCIEStruefalsefalse1falsefalsefalseP03_01_2013To05_31_2013http://www.sec.gov/CIK0000049534duration2013-03-01T00:00:002013-05-31T00:00:001true1us-gaap_CommitmentsAndContingenciesDisclosureAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse02false2us-gaap_CommitmentsAndContingenciesDisclosureTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseterseLabel1falsefalsefalse00 <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif "> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-INDENT: -0.25in; MARGIN: 0pt 0px 0pt 0.25in; FONT: bold 10pt Times New Roman, Times, Serif"> (14) CONTINGENCIES</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-INDENT: 0.5in; MARGIN: 0in" align="justify"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> We are aware of certain instances wherein the insurance companies denied payment on policies in which we arranged the settlement with purchasers. Most of these denials are related to unforeseeable reduction in face value. Face value of the policies in question total $108,814 and are recorded in accrued settlement expense at May 31, 2013. During the First Quarter of this year, we accrued no additional amounts for future claims that might arise in relation to these policies and paid $10,950 of settlements, which had been accrued in previous periods.</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">  </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> On June 26, 2013, the Federal court issued summary judgment in our favor and against all of the plaintiffs in the case styled <em> Angela Austin, et al. v. Life Partners, Inc., Life Partners Holdings, Inc., Doe Individuals 1-100, and Roe Corporations 1-100 inclusive, United States District Court, District of Nevada, Civ. Action No. 2:11-cv-01767-PMP-GWF</em> filed November 3, 2011. This suit is substantially similar to and overlaps with the other lawsuits brought by life settlement investors. Plaintiff alleged that LPI used improper life expectancies on its life and viatical settlement transactions and made false or misleading representations related to the life expectancies. The specific causes of action brought by the plaintiffs were fraudulent misrepresentation, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing (both on a contract and tort basis), violations of Nevada’s Viatical Settlement Act, violations of Nevada’s Deceptive Trade Practices Act, rescission, breach of contract, unjust enrichment, fraud in the inducement, and negligence per se.</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">  </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> On October 26, 2012, a Texas state court granted judgment in favor of LPI declaring that LPI did not breach any contractual duties to Plaintiffs; LPI disclosed that the life expectancy and rate of return were estimates only; LPI adequately informed Plaintiffs of the risks involved in the investment; LPI breached no contractual duties to Plaintiffs related to the life expectancies or rates of return, and there is no fiduciary or special relationship between LPI and Plaintiffs. The Texas court also awarded attorney’s fees against Plaintiffs.</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">  </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> In issuing its order, the Nevada Federal District Court found there was no genuine issue of material fact that the Texas state court entered a prior final judgment on the merits in the action between Plaintiffs and LPI; the Federal case is based on the same claims that were or could have been raised in the Texas state court action; and The Plaintiffs’ claims in the Federal case are barred under claim preclusion.</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">  </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Based on these findings, the Federal court ordered that judgment is entered in favor of Life Partners Inc. and against Plaintiffs.</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">  </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> Other than the foregoing, there have been no material developments during the current quarter for legal proceedings that were disclosed in our Annual Report on Form 10-K for the year ended February 28, 2013 (the <em>“2013 Annual Report”</em>). For a full disclosure of legal proceedings, please reference our 2013 Annual Report.</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">  </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"> We record provisions in the Consolidated Condensed Financial Statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. Except as discussed elsewhere in this note:</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-ALIGN: justify; TEXT-INDENT: -0.5in; MARGIN: 0pt 0px 0pt 0.75in; FONT: 10pt Times New Roman, Times, Serif">  </div> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> </div> </td> <td style="WIDTH: 0.5in"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> (i)</div> </td> <td style="TEXT-ALIGN: justify"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> management has not concluded that it is probable that a loss has been incurred in any pending litigation; or</div> </td> </tr> </table> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-INDENT: 0.5in; MARGIN: 0in" align="justify"> </div> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0in 0in 0pt; FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> </div> </td> <td style="WIDTH: 0.5in"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> (ii)</div> </td> <td style="TEXT-ALIGN: justify"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome of any pending litigation; and</div> </td> </tr> </table> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-INDENT: -0.5in; MARGIN: 0pt 0px 0pt 0.75in; FONT: 10pt Times New Roman, Times, Serif" align="justify"> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0in 0in 0pt; FONT-SIZE: 10pt"> <table style="clear:both;MARGIN-TOP: 0pt; FONT: 10pt Times New Roman, Times, Serif; MARGIN-BOTTOM: 0pt" cellspacing="0" cellpadding="0" width="100%"> <tr style="VERTICAL-ALIGN: top"> <td style="WIDTH: 0.25in"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> </div> </td> <td style="WIDTH: 0.5in"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> (iii)</div> </td> <td style="TEXT-ALIGN: justify"> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> accordingly, management has not provided any amounts in the Consolidated Condensed Financial Statements for unfavorable outcomes, if any.</div> </td> </tr> </table> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify">It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of any pending proceeding. Nevertheless, although litigation is subject to uncertainty, management believes, and we have been so advised by counsel handling the respective proceedings, that we have a number of valid legal defenses in all pending litigation to which we or our directors or officers are a party, as well as valid bases for appeal of potential adverse rulings that may be rendered against us. All such proceedings are, and will continue to be, vigorously defended, and, to the extent available, all valid counterclaims pursued. Notwithstanding this fact, we may enter into settlement discussions in particular proceedings if we believe it is in the best interests of our shareholders to do so.</div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify"> </div> <div style="clear:both;FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt;TEXT-INDENT: 0.5in; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif" align="justify">We have elected to advance premiums on certain older polices on which the initial premium payment reserves have been fully utilized. In the typical life settlement, policy premiums for the insured’s projected life expectancy are added to the purchase price and those future premium amounts are set aside in an escrow account to pay future premiums. When the future premium amounts are exhausted, purchasers are contractually obligated to pay the additional policy premiums. In some instances, purchasers have failed to pay the premiums and we have repurchased the policy or advanced the premiums to maintain the policies. While we have no contractual or other legal obligation to do so, and do not do so in every instance, we have made premium advances or repurchased the policies as an accommodation to certain purchasers, upon our desire to preserve business goodwill, and based on our assumptions that we will ultimately recoup the advances or investment. While some purchasers repay the advances directly, reimbursements of these premiums will come most likely as a priority payment from the policy proceeds when an insured dies. We record an allowance against the premium advances at the time of the advance and treat reimbursements as a reduction of the allowance. We are unable to estimate the amount of any future advances we may elect to make or the timing of the amount of reimbursements we are likely to receive. Since advances precede reimbursements, we expect the amount of advances will exceed reimbursements as our purchaser base increases. During the First Quarter of this year and last, we advanced premiums totaling $1,060,136 and $989,703,respectively, and received repayments of advances of $346,472 and $423,508, respectively.</div> </div> falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for commitments and contingencies.Reference 1: http://www.xbrl.org/2003/role/presentationRef
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