Coca Cola 2007 Annual Report Download - page 25

September 2004 earnings warning issued by the Company resulted from factors known by the individual defendants as
early as January 2003 that were not adequately disclosed to the investing public until the earnings warning. The factors
cited in the complaint include (i) a flawed business strategy and a business model that was not working; (ii) a
workforce so depleted by layoffs that it was unable to properly react to changing market conditions; (iii) impaired
relationships with key bottlers; and (iv) the fact that the foregoing conditions would lead to diminished earnings. The
plaintiff, purportedly on behalf of the Company, seeks damages in an unspecified amount, extraordinary equitable and/
or injunctive relief, restitution and disgorgement of profits, reimbursement for costs and disbursements of the action,
and such other and further relief as the Court deems just and proper. The Company’s motion to dismiss the complaint
and the plaintiff’s response were filed and fully briefed. The Court heard oral argument on the Company’s motion to
dismiss on June 6, 2006. Following the hearing, the Court took the matter under advisement and the parties are
awaiting a ruling. There were no material developments in this case during 2007.
The Company intends to vigorously defend its interests in this matter.
CCE Shareholders Litigation
In February 2006, the International Brotherhood of Teamsters, a purported shareholder of CCE, filed a derivative
suit (International Brotherhood of Teamsters v. The Coca-Cola Company, et al.) in the Delaware Court of Chancery
for New Castle County naming the Company and current and former CCE board members, including certain current
and former Company officers who serve or served on CCE’s board, as defendants. The plaintiff alleged that the
Company breached fiduciary duties owed to CCE shareholders based upon alleged control of CCE by the Company.
The complaint also alleged that the Company had actual control over CCE and that the Company abused its control by
maximizing its own financial condition at the expense of CCE’s financial condition. Subsequently, two lawsuits
virtually identical to Teamsters were filed in the same court: Lang v. The Coca-Cola Company, et al., filed March 30,
2006, and Gordon v. The Coca-Cola Company, et al., filed April 10, 2006. On April 6, 2006, the Company moved to
dismiss Teamsters or, in the alternative, for a stay of discovery. On May 19, 2006, the Chancery Court entered an order
consolidating Teamsters, Lang and Gordon under the caption In re Coca-Cola Enterprises, Inc. Shareholders
Litigation and requiring the plaintiffs to file an amended consolidated complaint in the consolidated action as soon as
practicable.
On September 29, 2006, plaintiffs filed their Consolidated Amended Shareholders’ Derivative Complaint (the
“Amended Complaint”). The Amended Complaint omits certain former Company officers from the group of individual
defendants and defines the “relevant time period” for purposes of the claims as October 15, 2003, through the date of the
filing. The original complaint did not identify any specific dates. The Amended Complaint also includes additional
allegations about the conduct of the Company and certain of its executive officers, including new allegations about the
Company’s purported control over CCE and allegations of improper conduct in connection with the establishment of a
warehouse delivery system to supply Powerade to a major customer. On December 7, 2006, the Company filed its motion
to dismiss the Amended Complaint and accompanying brief. The plaintiffs’ reply brief was filed on January 22, 2007. On
October 17, 2007, the Chancery Court dismissed plaintiffs’ Amended Complaint. The plaintiffs appealed the Chancery
Court’s decision to the Delaware Supreme Court.
The Company will vigorously defend its interests on appeal.
American Canyon Matter
The Company has received notices of violations from local environmental authorities alleging that certain
violations of the United States Clean Water Act (the “CWA”) and applicable local law have occurred at the Company’s
production plant in American Canyon, California. That plant treats and discharges wastewater under permit authority
issued under the CWA and local law. The alleged violations relate to handling of wastewater discharge and required
regulatory reporting. The Company believes that the regulatory authorities may pursue enforcement action against the
Company and may seek potential monetary and/or other sanctions, although the Company believes that any sanctions
that may be imposed on the Company as a result of these alleged violations will not be material to the Company’s
business or financial condition.
The Company is working with the local environmental authorities to resolve and settle the matter.
23