2.2.0.25falsefalse006120 - Disclosure - Legal Proceedingstruefalsefalse1falsefalseUSDfalsefalse1/1/2011 - 3/31/2011
USD ($)
USD ($) / shares
$c00004http://www.sec.gov/CIK0000060849duration2011-01-01T00:00:002011-03-31T00:00:00u000Standardhttp://www.xbrl.org/2003/iso4217USDiso42170u002Dividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0lufk_NotesToFinancialStatementsAbstractlufkfalsenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_CommitmentsAndContingenciesDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00<div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">12. Legal Proceedings</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Class Action Complaint</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On March 7, 1997, a class action complaint was filed against Lufkin Industries, Inc. (“Lufkin”) in the U.S. District Court for the Eastern District of Texas by an employee and a former employee of Lufkin who alleged race discrimination in employment. Certification hearings were conducted in Beaumont, Texas in February 1998 and in Lufkin, Texas in August 1998. In April 1999, the District Court issued a decision that certified a class for this case, which included all black employees employed by Lufkin from March 6, 1994, to the present. The case was administratively closed from 2001 to 2003 while the parties unsuccessfully attempted mediation. Trial for this case began in December 2003, and after the close of plaintiff’s evidence, the court adjourned and did not complete the trial until October 2004. Although plaintiff’s class certification encompassed a wide variety of employment practices, plaintiffs presented only disparate impact claims relating to discrimination in initial assignments and promotions at trial.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On January 13, 2005, the District Court entered its decision finding that Lufkin discriminated against African-American employees in initial assignments and promotions. The District Court also concluded that the discrimination resulted in a shortfall in income for those employees and ordered that Lufkin pay those employees back pay to remedy such shortfall, together with pre-judgment interest in the amount of 5%. On August 29, 2005, the District Court determined that the back pay award for the class of affected employees was $3.4 million (including interest to January 1, 2005) and provided a formula for attorney fees that Lufkin estimates will result in a total not to exceed $2.5 million. In addition to back pay with interest, the District Court (i) enjoined and ordered Lufkin to cease and desist all racially biased assignment and promotion practices and (ii) ordered Lufkin to pay court costs and expenses. </font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Lufkin reviewed this decision with its outside counsel and on September 19, 2005, appealed the decision to the U.S. Court of Appeals for the Fifth Circuit. On April 3, 2007, Lufkin appeared before the appellate court in New Orleans for oral argument in this case. The appellate court subsequently issued a decision on February 29, 2008 that reversed and vacated the plaintiff’s claim regarding the initial assignment of black employees into the Foundry Division. The court also denied plaintiff’s appeal for class certification of a class disparate treatment claim. Plaintiff’s claim on the issue of Lufkin’s promotional practices was affirmed but the back pay award was vacated and remanded for re-computation in accordance with the opinion.  The District Court’s injunction was vacated and remanded with instructions to enter appropriate and specific injunctive relief. Finally, the issue of plaintiff’s attorney’s fees was remanded to the District Court for further consideration in accordance with prevailing authority.   </font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"> </div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On December 5, 2008, the U.S. District Court Judge Clark held a hearing in Beaumont, Texas during which he reviewed the 5<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: text-top">th</font> U.S. Circuit Court of Appeals class action decision and informed the parties that he intended to implement the decision in order to conclude this litigation. At the conclusion of the hearing Judge Clark ordered the parties to submit positions regarding the issues of attorney fees, a damage award and injunctive relief. Subsequently, Lufkin reviewed the plaintiff’s submissions which described the formula and underlying assumptions that supported their positions on attorney fees and damages. After careful review of the plaintiff’s submission to the District Court Lufkin continued to have significant differences regarding legal issues that materially impacted the plaintiff’s requests. As a result of these different results, the court requested further evidence from the parties regarding their positions in order to render a final decision.  The judge reviewed both parties arguments regarding legal fees, and awarded the plaintiffs an interim fee, but at a reduced level from the plaintiffs original request. Lufkin and the plaintiffs reconciled the majority of the differences and the damage calculations which also lowered the originally requested amounts of the plaintiffs on those matters.  Due to the resolution of certain legal proceedings on damages during first half of 2009 and the District Court awarding the plaintiffs an interim award of attorney fees and cost totaling $5.8 million, Lufkin recorded an additional provision of $5.0 million in the first half of 2009 above the $6.0 million recorded in fourth quarter of 2008. The plaintiffs filed an appeal of the District Court’s interim award of attorney fees with the U.S. Fifth Circuit Court of Appeals. The Fifth Circuit subsequently dismissed these appeals on August 28, 2009 on the basis that an appealable final judgment in this case had not been issued.  The court commented that this issue can be reviewed with an appeal of final judgment.  </font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On January 15, 2010, the U.S. District Court for the Eastern District of Texas notified Lufkin that it had entered a final judgment related to Lufkin’s ongoing class-action lawsuit.  On January 15, 2010, the plaintiffs filed a notice of appeal with the U.S. Fifth Circuit Court of Appeals of the District Court’s final judgment.  On January 21, 2010, Lufkin filed a notice of cross-appeal with the same court.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On January 15, 2010, in its final judgment, the Court ordered Lufkin Industries to pay the plaintiffs $3.3 million in damages, $2.2 million in pre-judgment interest and 0.41% interest for any post-judgment interest. Lufkin had previously estimated the total liability for damages and interest to be approximately $5.2 million. The Court also ordered the plaintiffs to submit a request for legal fees and expenses from January 1, 2009 through the date of the final judgment. The plaintiffs were required to submit this request within 14 days of the final judgment. On January 21, 2010, Lufkin filed a motion with the District Court to stay the payment of damages referenced in the District Court’s final judgment pending the outcome of the Fifth Circuit’s decision on both parties’ appeals.  The District Court granted this motion to stay.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On January 29, 2010, the plaintiffs filed a motion with the U.S. District Court for the Eastern District of Texas for a supplemental award of $0.7 million for attorney’s fees, costs and expenses incurred between January 1, 2009 and January 15, 2010, as allowed in the final judgment. In the fourth quarter of 2009, Lufkin recorded a provision of $1.0 million for these legal expenses and accrual adjustments for the final judgment award of damages.  On September 28, 2010, the District Court granted plaintiffs’ motion for supplemental attorney’s fees, costs and expenses in the amount of $0.7 million for the period of January 1, 2009 through January 15, 2010.  In order to cover these cost, Lufkin recorded an additional provision of $1.0 million in September 2010 for anticipated costs through the end of 2010.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On February 2, 2011 the United States Fifth Circuit Court of Appeals accepted the oral arguments from the plaintiffs and Lufkin on their respective appeals to the court.  We anticipate the court’s decision before the end of the second quarter of 2011.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Intellectual Property Matter</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In 2009, Lufkin Industries, Inc. (“Lufkin”) brought suit in a Texas State Court against the former owners of a business acquired by Lufkin in order to protect certain of Lufkin’s intellectual property rights. The acquired company was the first acquisition by Lufkin that began what is today known as Lufkin Automation. The former owners responded by counter suit against Lufkin as well as its outside counsel, Andrews Kurth LLP (“Outside Counsel”), claiming that Lufkin through Outside Counsel had acquired title to their inventions improperly. The case was removed from the Texas State Court to a Federal District Court in order to address intellectual property and patent issues as well as other claims made by the parties. After reviewing the facts and positions of the parties, in February 2011, the Federal Court granted summary judgment for Lufkin disposing of all federal claims and remanded the remains of the case back to the Texas State Court.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Outside Counsel independently elected to appeal the Federal Court’s decision to the Federal Appeals Court in Washington D.C. opposing the Federal Court’s decision to remand the case.  As a result, Lufkin and the plaintiffs filed separate appeals to the Federal District on separate issues.  Concurrently, with the Federal appeals in place, the plaintiffs have asked the State Court to proceed with a trial on this case.  Because the State Court will not have defined issues in order to proceed until the Federal appeals issues are resolved, Lufkin has filed a motion to stay any trial in State Court pending the outcome of the Federal appeal.  If such issues are identified and placed before the State Court, Lufkin believes it will continue to prevail on the merits and this suit will have no material impact on the Company’s financial position, results of operations or cash flow. </font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Other Matters</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">An industrial accident involving a vendor who was injured while performing work on Company property resulted in the vendor filing suit against Lufkin.  The vendor alleged that he was injured as a result of the equipment he was provided.  Lufkin defended its position with a vendor provided Hold Harmless Agreement as well as the vendor’s certificate of general liability insurance naming Lufkin as an insure.  A mediation between the parties and the insurance representative resulted in a settlement of this case within policy limits.  During the quarter ended March 31, 2011 the Company reserved the deductible amount of $1.0 million.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"></font> </div><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 19.3pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">There are various other claims and legal proceedings arising in the ordinary course of business pending against or involving the Company wherein monetary damages are sought.  For certain of these claims, the Company maintains insurance coverage while retaining a portion of the losses that occur through the use of deductibles and retention limits.  Amounts in excess of the self-insured retention levels are fully insured to limits believed appropriate for the Company’s operations.  Self-insurance accruals are based on claims filed and an estimate for claims incurred but not reported.  While the Company does maintain insurance above its self-insured levels, a decline in the financial condition of its insurer, while not currently anticipated, could result in the Company recording additional liabilities.  It is management’s opinion that the Company’s liability under such circumstances or involving any other non-insured claims or legal proceedings would not materially affect its consolidated financial position, results of operations, or cash flow.</font></div><div style="TEXT-INDENT: 0pt; DISPLAY: block"><br /></div>12. Legal ProceedingsClass Action ComplaintOn March 7, 1997, a class action complaint was filed against Lufkin Industries, Inc. (“Lufkin”) in thefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringIncludes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 14
-Paragraph 3
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
-Paragraph 9, 10, 11, 12
falsefalse12Legal ProceedingsUnKnownUnKnownUnKnownUnKnownfalsetrue