Commitments and Contingencies

Sales Returns

The activity in the sales returns liability account was as follows (in thousands):



	Three Months Ended
	April 1, 2017			April 2, 2016
Balance at beginning of year	$	15,222		$	20,562
Additions that reduce net sales	21,184			23,636
Deductions from reserves	(18,205		)	(21,288		)
Balance at end of period	$	18,201		$	22,910

Warranty Liabilities

The activity in the accrued warranty liabilities account was as follows (in thousands):



	Three Months Ended
	April 1, 2017			April 2, 2016
Balance at beginning of year	$	8,633		$	10,028
Additions charged to costs and expenses for current-year sales	2,718			3,585
Deductions from reserves	(2,049		)	(3,272		)
Changes in liability for pre-existing warranties during the current year, including expirations	(57		)	(574		)
Balance at end of period	$	9,245		$	9,767

Legal Proceedings

We are involved from time to time in various legal proceedings arising in the ordinary course of our business, including primarily commercial, product liability, employment and intellectual property claims. In accordance with generally accepted accounting principles in the United States, we record a liability in our consolidated financial statements with respect to any of these matters when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. With respect to currently pending legal proceedings, we have not established an estimated range of reasonably possible additional losses either because we believe that we have valid defenses to claims asserted against us or the proceeding has not advanced to a stage of discovery that would enable us to establish an estimate. We currently do not expect the outcome of these matters to have a material effect on our consolidated results of operations, financial position or cash flows. Litigation, however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against us could adversely impact our consolidated results of operations, financial position or cash flows. We expense legal costs as incurred.

On January 12, 2015, Plaintiffs David and Katina Spade commenced a purported class action lawsuit in New Jersey state court against Select Comfort alleging that Select Comfort violated New Jersey consumer statutes by failing to provide to purchasing consumers certain disclosures required by the New Jersey Furniture Regulations. It is undisputed that plaintiffs suffered no actual damages or in any way relied upon or were impacted by the alleged omissions. Nonetheless, on behalf of a purported class of New Jersey purchasers of Select Comfort beds and bases, plaintiffs seek to recover a $100 statutory fine for each alleged omission, along with attorneys’ fees and costs. Select Comfort removed the case to the United States District Court for the District of New Jersey, which subsequently granted Select Comfort’s motion to dismiss. Plaintiffs appealed to the United States Court of Appeals for the Third Circuit, which has certified two questions of law to the New Jersey Supreme Court relating to whether plaintiffs who have suffered no actual injury may bring claims. The New Jersey Supreme Court has accepted the certified questions and the parties are in the process of preparing and submitting briefs. As the United States District Court for the District of New Jersey agreed, we believe that the case is without merit and the order of dismissal should be affirmed.