Intel 2013 Annual Report Download - page 108

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In October 2013, the court certified a class consisting of approximately 66,000 current or former employees of the
seven defendants. This so-called “technical class” consists of a group of current and former technical, creative, and
R&D employees at each of the defendants. In January 2014, Intel filed a motion for summary judgment which is
scheduled for hearing in March 2014. Trial is scheduled to begin in late May 2014. Given the procedural posture
and the nature of this case, we are unable to make a reasonable estimate of the potential loss or range of losses, if
any, that might arise from this matter. We dispute the plaintiffs’ claims and intend to defend the lawsuit vigorously.
Lehman Brothers Holdings Inc. and Lehman Brothers OTC Derivatives Inc. v. Intel
In May 2013, Lehman Brothers OTC Derivatives Inc. (LOTC) and Lehman Brothers Holdings Inc. (LBHI) filed an
adversary complaint in the United States Bankruptcy Court in the Southern District of New York asserting claims
against us arising from a 2008 contract between Intel and LOTC. Under the terms of the 2008 contract, we prepaid
$1.0 billion to LOTC, in exchange for which LOTC was required to deliver to us on or before September 29, 2008,
quantities of Intel common stock and cash determined by a formula set forth in the contract. LOTC's performance
under the contract was secured by $1.0 billion of cash collateral. Under the terms of the contract, LOTC was
obligated to deliver approximately 50 million shares of our common stock to us on September 29, 2008. LOTC
failed to deliver any Intel common stock or cash, and we exercised our right of set-off against the $1.0 billion
collateral. LOTC and LBHI acknowledge in their complaint that we were entitled to set off our losses against the
collateral, but they assert that we withheld collateral in excess of our losses that should have been returned to
LOTC. The complaint asserts a claim for breach of contract, a claim for “turnover” under section 542(a) of the
Bankruptcy Code, and a claim for violation of the automatic stay under section 362(a)(3) of the Bankruptcy Code.
The complaint does not expressly quantify the amount of damages claimed but does assert multiple theories of
damages that impliedly seek up to $312 million of alleged excess collateral, plus interest based on LOTC's claimed
cost of borrowing. In June 2013, we filed a motion to dismiss plaintiffs' bankruptcy claims and for a determination
that the breach of contract claim is “non-core” under the Bankruptcy Code. The bankruptcy court granted our motion
in its entirety in December 2013. In January 2014, based on the bankruptcy court’s ruling, we filed a motion in the
United States District Court for the Southern District of New York requesting that the district court withdraw its
reference to the bankruptcy court of plaintiffs’ adversary complaint. Given the procedural posture and the nature of
this case, including that discovery has just begun, we are unable to make a reasonable estimate of the potential
loss or range of losses, if any, that might arise from this matter. We believe that we acted in a manner consistent
with our contractual rights, and we intend to defend against any claim to the contrary.
McAfee, Inc. Shareholder Litigation
On August 19, 2010, we announced that we had agreed to acquire all of McAfee’s common stock for $48.00 per
share. Four McAfee shareholders filed putative class-action lawsuits in Santa Clara County, California Superior
Court challenging the proposed transaction. The cases were ordered consolidated in September 2010. Plaintiffs
filed an amended complaint that named former McAfee board members, McAfee and Intel as defendants, and
alleged that the McAfee board members breached their fiduciary duties and that McAfee and Intel aided and
abetted those breaches of duty. The complaint requested rescission of the merger agreement, such other equitable
relief as the court may deem proper, and an award of damages in an unspecified amount. In June 2012, the
plaintiffs’ damages expert asserted that the value of a McAfee share for the purposes of assessing damages should
be $62.08.
In January 2012, the court certified the action as a class action, appointed the Central Pension Laborers’ Fund to
act as the class representative, and scheduled trial to begin in January 2013. In March 2012, defendants filed a
petition with the California Court of Appeal for a writ of mandate to reverse the class certification order; the petition
was denied in June 2012. In March 2012, at defendants’ request, the court held that plaintiffs were not entitled to a
jury trial, and ordered a bench trial. In April 2012, plaintiffs filed a petition with the California Court of Appeal for a
writ of mandate to reverse that order, which the court of appeal denied in July 2012. In August 2012, defendants
filed a motion for summary judgment. The trial court granted that motion in November 2012, and entered final
judgment in the case in February 2013. In April 2013, plaintiffs filed a notice of appeal. Because the resolution of the
appeal may materially impact the scope and nature of the proceeding, we are unable to make a reasonable
estimate of the potential loss or range of losses, if any, arising from this matter. We dispute the class-action claims
and intend to continue to defend the lawsuit vigorously.
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INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)