Contingencies

6 Months Ended

Jun. 30, 2012

Contingencies [Abstract]

Contingencies

7.   CONTINGENCIES

Leases - The Company leases offices and facilities and office equipment under certain operating leases, which expire on various dates through October 2016.  Under the terms of the facility leases, a pro rata share of operating expenses and real estate taxes are charged as additional rent.

Legal - The Company is party to various legal proceedings arising in the normal course of business activities, none of which, in the opinion of management, are expected to have a material impact on the Company's consolidated financial position or results of operations.

We are party to several legal proceedings relating to the proposed transaction with Laboratory Corporation of America Holdings ("LabCorp"), as follows:

On June 6, 2012, a putative class action lawsuit was commenced against us and our directors in the District Court, Second Judicial District, Ramsey County, of the State of Minnesota. The lawsuit is captioned John Siciliano v. MEDTOX Scientific, Inc. et al. In the lawsuit, plaintiff alleges generally that our directors breached their fiduciary duties in connection with the transaction by, among other things, carrying out an unfair process and agreeing to a transaction that was unfair to our stockholders and that the Company aided and abetted our directors' breach of fiduciary duty. Plaintiff purports to bring the lawsuit on behalf of the public stockholders of the Company and seeks equitable relief to enjoin consummation of the merger, rescission of the merger and fees and costs, among other relief. The Company believes the lawsuit is without merit.

On June 12, 2012, a putative class action lawsuit was commenced against us, our directors, LabCorp and Merger Sub in the District Court, Second Judicial District, Ramsey County, of the State of Minnesota. The lawsuit is captioned Carol A. Kiel v. Richard Braun et al. In the lawsuit, plaintiff alleges generally that our directors breached their fiduciary duties in connection with the transaction by, among other things, agreeing to a transaction that was unfair to our stockholders, that provisions of the merger agreement unlawfully preclude our directors from further soliciting potential buyers and that the Company, LabCorp and Merger Sub aided and abetted our directors' breach of fiduciary duties. Plaintiff purports to bring the lawsuit on behalf of the public stockholders of the Company and seeks equitable relief to enjoin consummation of the merger, rescission of the merger and/or awarding rescissory damages, damages and fees and costs, among other relief. The Company believes the lawsuit is without merit.

On June 21, 2012, a putative class action lawsuit was commenced against us, our directors, LabCorp and Merger Sub in the District Court, Second Judicial District, Ramsey County, of the State of Minnesota. The lawsuit is captioned Louis Perlman v. Medtox Scientific, Inc. et al. In the lawsuit, plaintiff alleges generally that our directors breached their fiduciary duties in connection with the transaction by, among other things, agreeing to a transaction that was unfair to our stockholders, that provisions of the merger agreement unlawfully preclude our directors from further soliciting potential buyers and that the Company, LabCorp and Merger Sub aided and abetted our directors' breach of fiduciary duties. Plaintiff purports to bring the lawsuit on behalf of the public stockholders of the Company and seeks equitable relief to enjoin consummation of the merger, rescission of the merger and/or awarding rescissory damages, damages and fees and costs, among other relief. The Plaintiff was a director of the Company from July 1996 through September 1998. The Company believes the lawsuit is without merit.

On June 26, 2012, each of the plaintiffs in the foregoing actions filed a joint motion in the District Court, Second Judicial District, Ramsey County, of the State of Minnesota to (i) consolidate the three foregoing actions and all later-filed actions filed in the same court arising out of the same facts and circumstances, (ii) appoint plaintiffs Perlman, Siciliano and Kiel as lead plaintiffs in the consolidated action and (iii) appoint plaintiffs' counsel in the initial actions in various capacities as lead counsel, members of an executive committee and as liaison counsel in the consolidated action. The court has not yet ruled on the motion.

On July 19, 2012, counsel for the parties in the foregoing actions (the "Minnesota Litigation") entered into a Memorandum of Understanding ("MOU") in which they agreed on the terms of a settlement of the Minnesota Litigation, which includes supplementation of the Definitive Proxy Statement and the dismissal with prejudice of all claims against all of the defendants in the Minnesota Litigation. The proposed settlement is conditioned upon, among other things, the execution of an appropriate stipulation of settlement and final approval of the proposed settlement by the Ramsey County Court.  Counsel for the named plaintiffs in all of these actions have agreed to stay the actions pending consideration of final approval of the settlement in the Ramsey County Court. Assuming such approval, the named plaintiffs in all actions would dismiss their respective lawsuits with prejudice against all defendants. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the Ramsey County Court will approve the settlement as stipulated by the parties. In such event, the proposed settlement as contemplated by the MOU may be terminated.