Charter 2009 Annual Report Download - page 19

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On February 6, 2009, Verizon responded to the complaint by denying Charter’ s allegations, asserting counterclaims
for non-infringement and invalidity of Charter’ s patents and asserting counterclaims against Charter for
infringement of eight patents. On January 15, 2009, Charter filed a complaint in the U.S. District Court for the
Southern District of New York seeking a declaration of non-infringement on two patents owned by
Verizon (Verizon III). On March 1, 2010, Charter and Verizon settled Verizon I, Verizon II, and Verizon III, and
both parties withdrew their respective claims.
We and our parent companies are also defendants or co-defendants in several other unrelated lawsuits claiming
infringement of various patents relating to various aspects of our businesses. Other industry participants are also
defendants in certain of these cases, and, in many cases including those described above, we expect that any
potential liability would be the responsibility of our equipment vendors pursuant to applicable contractual
indemnification provisions.
In the event that a court ultimately determines that we or our parent companies infringe on any intellectual property
rights, we may be subject to substantial damages and/or an injunction that could require us or our vendors to modify
certain products and services we offer to our subscribers, as well as negotiate royalty or license agreements with
respect to the patents at issue. While we believe the lawsuits are without merit and intend to defend the actions
vigorously, all of these patent lawsuits could be material to our consolidated results of operations of any one period,
and no assurance can be given that any adverse outcome would not be material to our consolidated financial
condition, results of operations, or liquidity.
Employment Litigation
On August 28, 2008, a lawsuit was filed against Charter and Charter Communications, LLC (“Charter LLC”) in the
United States District Court for the Western District of Wisconsin (now entitled, Marc Goodell et al. v. Charter
Communications, LLC and Charter Communications, Inc.). The plaintiffs seek to represent a class of current and
former broadband, system and other types of technicians who are or were employed by Charter or Charter LLC in
the states of Michigan, Minnesota, Missouri or California. Plaintiffs allege that Charter and Charter LLC violated
certain wage and hour statutes of those four states by failing to pay technicians for all hours worked. Although
Charter and Charter LLC continue to deny all liability and believe that they have substantial defenses, on March 16,
2010, the parties tentatively settled this dispute subject to court approval. We have been subjected, in the normal
course of business, to the assertion of other wage and hour claims and could be subjected to additional such claims
in the future. We cannot predict the outcome of any such claims.
Bankruptcy Proceedings
On March 27, 2009, Charter filed its chapter 11 Petition in the United States Bankruptcy Court for the Southern
District of New York. On the same day, JPMorgan Chase Bank, N.A., (“JPMorgan”), for itself and as
Administrative Agent under the Charter Operating Credit Agreement, filed an adversary proceeding (the “JPMorgan
Adversary Proceeding”) in Bankruptcy Court against Charter Operating and CCO Holdings seeking a declaration
that there have been events of default under the Charter Operating Credit Agreement. JPMorgan, as well as other
parties, objected to the Plan. The Bankruptcy Court jointly held 19 days of trial in the JPMorgan Adversary
Proceeding and on the objections to the Plan.
On November 17, 2009, the Bankruptcy Court issued its Order and Opinion confirming the Plan over the objections
of JPMorgan and various other objectors. The Court also entered an order ruling in favor of Charter in the
JPMorgan Adversary Proceeding. Several objectors attempted to stay the consummation of the Plan, but those
motions were denied by the Bankruptcy Court and the U.S. District Court for the Southern District of New York.
Charter consummated the Plan on November 30, 2009 and reinstated the Charter Operating Credit Agreement and
certain other debt of its subsidiaries.
Six appeals were filed relating to confirmation of the Plan. The parties initially pursuing appeals were: (i)
JPMorgan; (ii) Wilmington Trust Company (“Wilmington Trust”) (as indenture trustee for the holders of the 8%
Senior Second Lien Notes due 2012 and 8.375% senior second lien notes due 2014 issued by and among Charter
Operating and Charter Communications Operating Capital Corp. and the 10.875% senior second lien notes due 2014
issued by and among Charter Operating and Charter Communications Operating Capital Corp.); (iii) Wells Fargo
Bank, N.A. (“Wells Fargo”) (in its capacities as successor Administrative Agent and successor Collateral Agent for
the third lien prepetition secured lenders to CCO Holdings under the CCO Holdings credit facility); (iv) Law
Debenture Trust Company of New York (“Law Debenture Trust”) (as the Trustee with respect to the $479 million in
aggregate principal amount of 6.50% convertible senior notes due 2027 issued by Charter which are no longer