Coca Cola 2010 Annual Report Download - page 27

(Century Indemnity Company, et al. v. Aqua-Chem, Inc., The Coca-Cola Company, et al., Case No. 04CV002852) in the
Circuit Court, Civil Division of Milwaukee County, Wisconsin, against the Company, Aqua-Chem and 16 insurance
companies. Several of the policies that were the subject of the coverage action had been issued to the Company during
the period (1970 to 1981) when the Company owned Aqua-Chem. The complaint sought a determination of the
respective rights and obligations under the insurance policies issued with regard to asbestos-related claims against
Aqua-Chem. The action also sought a monetary judgment reimbursing any amounts paid by the plaintiffs in excess of
their obligations. Two of the insurers, one with a $15 million policy limit and one with a $25 million policy limit,
asserted cross-claims against the Company, alleging that the Company and/or its insurers are responsible for
Aqua-Chem’s asbestos liabilities before any obligation is triggered on the part of the cross-claimant insurers to pay for
such costs under their policies.
Aqua-Chem and the Company filed and obtained a partial summary judgment determination in the coverage action that
the insurers for Aqua-Chem and the Company were jointly and severally liable for coverage amounts, but reserving
judgment on other defenses that might apply. During the course of the Wisconsin coverage litigation, Aqua-Chem and
the Company reached settlements with several of the insurers, including plaintiffs, who have paid or will pay funds into
an escrow account for payment of costs arising from the asbestos claims against Aqua-Chem. On July 24, 2007, the
Wisconsin trial court entered a final declaratory judgment regarding the rights and obligations of the parties under the
insurance policies issued by the remaining defendant insurers, which judgment was not appealed. The judgment directs,
among other things, that each insurer whose policy is triggered is jointly and severally liable for 100 percent of
Aqua-Chem’s losses up to policy limits. The Company and Aqua-Chem have continued to pursue and obtain coverage
agreements for the asbestos-related claims against Aqua-Chem with those insurance companies that did not settle in the
Wisconsin coverage litigation.
The court’s judgment concluded the Wisconsin insurance coverage litigation. The Georgia Case remains subject to the
stay agreed to in 2004.
Chapman
On June 30, 2005, Maryann Chapman filed a purported shareholder derivative action (Chapman v. Isdell, et al.) in the
Superior Court of Fulton County, Georgia, alleging violations of state law by certain individual current and former
members of the Board of Directors of the Company and senior management, including breaches of fiduciary duties,
abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment, between January 2003 and the
date of filing of the complaint that have caused substantial losses to the Company and other damages, such as to its
reputation and goodwill. The defendants named in the lawsuit include Neville Isdell, Douglas Daft, Gary Fayard,
Ronald Allen, Cathleen Black, Warren Buffett, Herbert Allen, Barry Diller, Donald McHenry, Sam Nunn, James
Robinson, Peter Ueberroth, James Williams, Donald Keough, Maria Lagomasino, Pedro Reinhard, Robert Nardelli and
Susan Bennett King. The Company is also named a nominal defendant. The complaint further alleges that the
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 2010.
The Company intends to vigorously defend its interests in this matter.
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