Commitments and Contingencies

9 Months Ended

Jul. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Canadian Grant

During fiscal 2018, Ciena entered into agreements related to the Evolution of Networking Services through a Corridor in Quebec and Ontario for Research and Innovation (“ENCQOR”) project with the Canadian federal government, the government of the province of Ontario and the government of the province of Quebec to develop a 5G technology corridor between Quebec and Ontario to promote research and development, small business enterprises and entrepreneurs in Canada. Under these agreements, Ciena can receive up to an aggregate CAD$57.6 million (approximately $43.6 million) in reimbursement from the three Canadian government entities for eligible costs over a period commencing on February 20, 2017 and ending on March 31, 2022. Ciena anticipates receiving recurring disbursements over this period. Amounts received under the agreements are subject to recoupment in the event that Ciena fails to achieve certain minimum investment, employment and project milestones. As of July 31, 2019, Ciena has recorded CAD$25.9 million (approximately $19.6 million) in cumulative benefits as a reduction in research and development expense of which CAD$9.3 million (approximately $7.0 million) was recorded in the first nine months of fiscal 2019. As of July 31, 2019, amounts receivable from this grant were CAD$10.8 million (approximately $8.2 million).

Tax Contingencies

Ciena is subject to various tax liabilities arising in the ordinary course of business. Ciena does not expect that the ultimate settlement of these tax liabilities will have a material effect on its results of operations, financial position or cash flows.

Litigation

As a result of the acquisition of Cyan in August 2015, Ciena became a defendant in a securities class action lawsuit. On April 1, 2014, the first of two purported stockholder class action lawsuits was filed in the Superior Court of California, County of San Francisco, against Cyan, the members of Cyan’s board of directors, Cyan’s former Chief Financial Officer, and the underwriters of Cyan’s initial public offering. The cases were consolidated as Beaver County Employees Retirement Fund, et al. v. Cyan, Inc. et al., Case No. CGC-14-538355. The consolidated complaint alleged violations of federal securities laws on behalf of a purported class consisting of purchasers of Cyan’s common stock pursuant or traceable to the registration statement and prospectus for Cyan’s initial public offering in April 2013, and sought unspecified compensatory damages and other relief. On May 19, 2015, the proposed class was certified. During the fourth quarter of fiscal 2018, the parties agreed to the terms of a settlement of the action, which settlement was subject to notice to class members and approval by the court. On August 8, 2019, the court approved the settlement and entered judgment in the case. The terms of the settlement, which include a release and dismissal of all claims against all defendants without any liability or wrongdoing attributed to them, are not material to Ciena’s financial results.

Internal Investigation

As first disclosed in Ciena’s Form 10-K for fiscal 2017, during that year one of Ciena’s third-party vendors raised allegations about certain questionable payments to one or more individuals employed by a customer in a country in the ASEAN region. Ciena promptly initiated an internal investigation into the matter, with the assistance of outside counsel, which investigation corroborated direct and indirect payments to one such individual and sought to determine whether the payments may have violated applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act. In September 2017, Ciena voluntarily contacted the SEC and the U.S. Department of Justice (the “DOJ”) to advise them of the relevant events and the findings of Ciena’s internal investigation. On December 10, 2018, the DOJ advised that it declined to prosecute this matter and that its investigation into this matter is closed. On September 9, 2019, the SEC advised that it has concluded its investigation into this matter and that its staff does not intend to recommend any enforcement action by the SEC against Ciena.

In addition to the matters described in “Litigation” and “Internal Investigation” above, Ciena is subject to various legal proceedings, claims and other matters arising in the ordinary course of business, including those that relate to employment, commercial, tax and other regulatory matters. Ciena is also subject to intellectual property related claims, including claims against third parties that may involve contractual indemnification obligations on the part of Ciena. Ciena does not expect that the ultimate costs to resolve such matters will have a material effect on its results of operations, financial position or cash flows.