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Commitments and Contingencies
3 Months Ended
Feb. 02, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

In September 2003, the New Jersey Department of Environmental Protection (“NJDEP”) issued a directive to approximately 30 companies, including Franklin-Burlington Plastics, Inc., a subsidiary of the Company (“Franklin-Burlington”), to undertake an assessment of natural resource damage and perform interim restoration of the Lower Passaic River, a 17-mile stretch of the Passaic River in northern New Jersey.  The directive, insofar as it relates to the Company and its subsidiary, pertains to the Company's plastic resin manufacturing facility in Kearny, New Jersey, located adjacent to the Lower Passaic River.  The Company acquired the facility in 1986, when it purchased the stock of the facility's former owner, Franklin Plastics Corp.  The Company acquired all of Franklin Plastics Corp.'s environmental liabilities as part of the acquisition. Franklin-Burlington responded to the directive, and no further action under the directive as yet has been required by NJDEP.

Also in 2003, the United States Environmental Protection Agency (“USEPA”) requested that companies located in the area of the Lower Passaic River, including Franklin-Burlington, cooperate in an investigation of contamination of the Lower Passaic River.  In response, the Company and approximately 70 other companies (collectively, the “Cooperating Parties”) agreed, pursuant to an Administrative Order of Consent with the USEPA, to assume responsibility for completing a remedial investigation/feasibility study (“RIFS”) of the Lower Passaic River.  The RIFS and related activities are currently estimated to cost approximately $125 million to complete and are currently expected to be completed by mid-2015.  However, the RIFS costs are exclusive of any costs that may ultimately be required to remediate the Lower Passaic River area being studied or costs associated with natural resource damages that may be assessed. By agreeing to bear a portion of the cost of the RIFS, the Company did not admit to or agree to bear any such remediation or natural resource damage costs. In 2007, the USEPA issued a draft study that evaluated nine alternatives for early remedial action of a portion of the Lower Passaic River. The estimated cost of the alternatives in the aggregate ranged from $900 million to $2.3 billion.  The Cooperating Parties provided comments to the USEPA regarding this draft study, but the USEPA has not yet finalized its study. Currently, the Cooperating Parties understand that USEPA is finalizing this study and expects to issue it in 2013, and that the preferred early remedial alternatives are estimated by USEPA to cost $1.9 billion to $3.4 billion. The Cooperating Parties have submitted comments to the USEPA for consideration prior to issuance of the final study. In early calendar year 2012, the USEPA indicated to the Cooperating Parties that it would like to move forward with early remedial activity at a specific location along the river. In the third quarter of 2012, the Company and the other Cooperating Parties, with one exception, have agreed with USEPA to undertake a removal action at the specific location and the Company accrued $0.2 million. By agreeing to participate in this specific removal action, the Company did not admit ultimate responsibility for the removal action at such location, nor did the Company admit to or agree to bear costs for any other removal action at or remediation of the river, or for natural resource damages.
 
In 2009, the Company's subsidiary and over 300 other companies were named as third-party defendants in a suit brought by the NJDEP in Superior Court of New Jersey, Essex County, against Occidental Chemical Corporation and certain related entities (collectively, the “Occidental Parties”) with respect to alleged contamination of the Newark Bay Complex, including the Lower Passaic River.  The third-party complaint seeks contributions from the third-party defendants with respect to any award to NJDEP of damages against the Occidental Parties in the matter.

As of February 2, 2013, the Company had approximately $1.3 million accrued related to these Lower Passaic River matters described above, representing funding of the RIFS costs and related legal expenses of the RIFS, participation in the removal action agreed to with USEPA and the litigation matter.  Given the uncertainties pertaining to this matter, including that the RIFS is ongoing, the ultimate remediation has not yet been determined and because the extent to which the Company may be responsible for such remediation or natural resource damages is not yet known, it is not possible at this time to estimate the Company's ultimate liability related to this matter.  Based on currently known facts and circumstances, the Company does not believe that this matter is likely to have a material effect on the Company's results of operations, consolidated financial position, or cash flows because the Company's Kearny, New Jersey, facility could not have contributed contamination along most of the river's length and did not store or use the contaminant that is of the greatest concern in the river sediments and because there are numerous other parties who will likely share in the cost of remediation and damages.  However, it is reasonably possible that the ultimate liability resulting from this matter could materially differ from the February 2, 2013 accrual balance, and in the event of one or more adverse determinations related to this matter, the impact on the Company's results of operations, consolidated financial position or cash flows could be material to any specific period.

On December 14, 2009, Simmons Bedding Company and The Simmons Manufacturing Co., LLC (collectively, “Simmons”) filed suit in the Superior Court of New Jersey, Essex County (Simmons Bedding Company and The Simmons Manufacturing Co., LLC v. Creative Vinyl/Fabrics, Inc. and its owner, Spartech Corporation, Spartech Polycom Calendared and Converted Products, Granwell Products, Inc., Nan Ya Plastics Corporation USA - Docket No. ESX-L-10197-09) alleging that vinyl product supplied to Simmons failed to meet certain specifications and claiming, among other things, a breach of contract, breach of warranty and fraud for which Simmons was seeking unspecified damages, including costs related to a voluntary product recall. Creative Vinyl/Fabrics, Inc. (“Creative”) was seeking common law indemnification and contribution from the Company. The Company supplied Creative with PVC film pursuant to purchase orders submitted by Creative, which Creative further processed and then sold to Simmons. On November 16, 2012, the Court granted summary judgment on behalf of all of the Defendants in the case for full dismissal of the matter. Simmons filed its notice of appeal on January 3, 2013 and their appellate brief is due on March 18, 2013. The matter will be fully briefed by April 29, 2013. Based upon these recent developments, management does not believe that the ultimate liabilities resulting from this proceeding, if any, will be material to the Company's results of operations and will not have a material adverse effect on the Company's consolidated financial position or cash flows.

On September 15, 2011, we received a $4.8 million tax assessment for additional taxes, interest and penalties from the Mexico Tax Authorities related to our 2007 income tax and value added tax filings.  The Company continues to contest the assessment and is pursuing litigation with respect to certain items. Based on developments to date, we do not expect the ultimate outcome of this matter to have a material adverse impact on our results of operations, financial position or cash flows.

Five purported class action lawsuits have been filed by alleged Spartech stockholders in connection with the proposed merger transactions among Spartech, PolyOne Corporation (“PolyOne”), 2012 Redhawk, Inc. (“Merger Sub”) and 2012 Redhawk, LLC (n/k/a PolyOne Designed Structures and Solutions LLC) (“Merger LLC”).

Two of these purported class actions were filed in the Circuit Court of St. Louis County, Missouri against Spartech, its directors, PolyOne, Merger Sub, and Merger LLC. These actions, Weinreb v. Spartech, et al. and Warren v. Spartech, et al., have been consolidated for all purposes as In re Spartech Corporation Shareholder Litigation (the “Missouri Stockholder Actions”). The Missouri Stockholder Actions allege, among other things, that the directors of Spartech breached their fiduciary duties owed to stockholders by approving the proposed acquisition of Spartech by PolyOne and by failing to disclose certain information to stockholders. The Missouri Stockholder Actions further allege that PolyOne, Merger Sub, and Merger LLC aided and abetted the directors of Spartech in breaching their fiduciary duties. Among other things, the Missouri Stockholder Actions seek to enjoin the merger.

Two of these purported class actions were filed in Delaware Chancery Court (the “Delaware Stockholder Actions”). One of the Delaware Stockholder Actions, Gross v. Spartech, et al., was filed against Spartech, its directors, PolyOne, Merger Sub, and Merger LLC. The other Delaware Stockholder Action, Pill v. Spartech, et al., was filed against Spartech and its directors. The Delaware Stockholder Actions alleged, among other things, that the directors of Spartech breached their fiduciary duties owed to stockholders by approving the proposed acquisition of Spartech by PolyOne and by failing to disclose certain information to stockholders. Gross v. Spartech, et al. also alleged that PolyOne, Merger Sub, and Merger LLC aided and abetted the directors of Spartech in breaching their fiduciary duties. Among other things, the Delaware Stockholder Actions sought to enjoin the merger. After their request to stay the Delaware Stockholder Actions was denied, plaintiffs in the Delaware Stockholder Actions filed a Notice and (Proposed) Order of Dismissal on January 31, 2013, which was granted with modifications on February 1, 2013.

A purported class action was also filed in the United States District Court for the Eastern District of Missouri against Spartech, its directors, PolyOne, Merger Sub, and Merger LLC. Faulkner v. Holt, et al. (the “Missouri District Court Stockholder Action”), alleges, among other things, that the directors of Spartech breached their fiduciary duties owed to stockholders by approving the proposed acquisition of Spartech by PolyOne and by failing to disclose certain information to stockholders. The Missouri District Court Stockholder Action further alleges that PolyOne, Merger Sub, and Merger LLC aided and abetted the directors of Spartech in breaching their fiduciary duties. The Missouri District Court Stockholder Action also brings a claim, individually, against the directors of Spartech under Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder. Among other things, the Missouri District Court Stockholder Action seeks to enjoin the merger.

PolyOne, Merger Sub, Merger LLC, Spartech, and Spartech's directors believe the Missouri Stockholder Action, the Delaware Stockholder Actions, and the Missouri District Court Stockholder Action and the underlying claims are without merit.

On March 5, 2013, counsel for the parties in each of the above-described lawsuits entered into a Memorandum of Understanding (the “MOU”), in which they agreed on the terms of a settlement of the Missouri Stockholder Action, including the dismissal with prejudice of the Missouri Stockholder Action and a release of all claims made therein against all of the defendants. The MOU also provides for dismissal with prejudice of the Missouri District Court Stockholder Action. The proposed settlement is conditioned upon, among other things, the execution of an appropriate stipulation of settlement, consummation of the merger, and final approval of the proposed settlement by the Circuit Court of St. Louis County, Missouri. In addition, in connection with the settlement and as provided in the MOU, the parties contemplate that plaintiffs' counsel will seek an award of attorneys' fees and expenses as part of the settlement. There can be no assurance that the merger will be consummated, that the parties ultimately will enter into a stipulation of settlement, or that the court will approve the settlement even if the parties enter into such stipulation. If the settlement conditions are not met, the proposed settlement as contemplated by the MOU would become void. The settlement will not affect the amount of the merger consideration that Spartech stockholders are entitled to receive in the merger.

The defendants deny all fault or liability and deny that they have committed any unlawful or wrongful act alleged in the Missouri State Action, the Delaware Stockholder Actions, and the Missouri District Court Stockholder Action or otherwise in relation to the merger. The defendants have agreed to the terms of the proposed settlement described above solely to avoid the substantial burden, expense, risk, inconvenience and distraction of continued litigation, including the risk of delaying or adversely affecting the merger.

The Company is also subject to various other claims, lawsuits and administrative proceedings arising in the ordinary course of business with respect to commercial, product liability, employment and other matters, several of which claim substantial amounts of damages. While it is not possible to estimate with certainty the ultimate legal and financial liability with respect to these claims, lawsuits, and administrative proceedings, the Company believes that the outcome of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows.