Coca Cola 2011 Annual Report Download - page 23

currently has approximately 40,000 active claims pending against it.
The parties agreed in 2004 to stay the Georgia Case pending the outcome of insurance coverage litigation filed by certain
Aqua-Chem insurers on March 26, 2004. In the coverage action, five plaintiff insurance companies filed suit (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 insurance 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 court’s judgment concluded
the Wisconsin insurance coverage litigation.
The Company and Aqua-Chem 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 insurance coverage litigation. The Company
anticipated that a final settlement with three of those insurers would be finalized in May 2011, but such insurers repudiated their
settlement commitments and, as a result, Aqua-Chem and the Company filed suit against them in Wisconsin state court to enforce
the coverage-in-place settlement or, in the alternative, to obtain a declaratory judgment validating Aqua-Chem and the Company’s
interpretation of the court’s judgment in the Wisconsin coverage litigation. Whether or not Aqua-Chem and the Company prevail
in the coverage-in-place settlement litigation, these three insurance companies will remain subject to the court’s judgment in 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 2011.
The Company intends to vigorously defend its interests in this matter.
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