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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;u&gt;&lt;b&gt;Note

      5. Commitments and Contingencies&lt;/b&gt;&lt;/u&gt;&lt;/font&gt;

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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;b&gt;&lt;i&gt;Litigation&lt;/i&gt;&lt;/b&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt" id="PARA4732"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;We

      are party to numerous legal proceedings arising in the normal

      course of our business. Although we do not anticipate that

      the resolution of legal proceedings arising in the normal

      course of business or the proceedings described below will

      have a material adverse effect on our business, results of

      operations, financial condition, or cash flows, we cannot

      predict this with certainty.&lt;/font&gt;

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      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;&lt;i&gt;Alaska

      Consumer Protection Act Claims&lt;/i&gt;&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt" id="PARA4735"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;In

      December 2006, a suit was filed against us (Jackie Neese, et

      al vs. Lithia Chrysler Jeep of Anchorage, Inc, et al, Case

      No. 3AN-06-13341 CI), and in April, 2007, a second case

      (Jackie Neese, et al vs. Lithia Chrysler Jeep of Anchorage,

      Inc, et al, Case No. 3AN-06-4815 CI) was filed against us, in

      the Superior Court for the State of Alaska, Third Judicial

      District at Anchorage. These suits were subsequently

      consolidated. In the suits, plaintiffs alleged that we,

      through our Alaska dealerships, engaged in three practices

      that purportedly violate Alaska consumer protection laws: (i)

      charging customers dealer fees and costs (including document

      preparation fees) not disclosed in the advertised price, (ii)

      failing to disclose the acquisition, mechanical and accident

      history of used vehicles or whether the vehicles were

      originally manufactured for sale in a foreign country, and

      (iii) engaging in deception, misrepresentation and fraud by

      providing to customers financing from third parties without

      disclosing that we receive a fee or discount for placing that

      loan. The suit sought statutory damages of $500 for each

      violation or three times plaintiff&amp;#8217;s actual damages,

      whichever was greater, and attorney fees and costs.&lt;/font&gt;

    &lt;/p&gt;&lt;br/&gt;&lt;p style="TEXT-ALIGN: justify; LINE-HEIGHT: 1.25; MARGIN-TOP: 0pt; MARGIN-BOTTOM: 0pt; MARGIN-LEFT: 0pt" id="PARA4737"&gt;

      &lt;font style="FONT-FAMILY: Times New Roman, Times, serif; FONT-SIZE: 10pt"&gt;In

      June 2013 the parties agreed to mediate the claims without

      pre-conditions.&amp;#160; The mediation resulted in a settlement

      agreement with the plaintiffs under which we estimate we will

      pay $3.8 million to settle all claims against us and to pay

      plaintiffs&amp;#8217; legal fees. The estimated payment assumes a

      participation rate by eligible class members based on

      historically experienced claim rates. An increased claim rate

      would result in additional payments. The estimated settlement

      amount was recorded as a component of selling, general and

      administrative expense in our Consolidated Statements of

      Operations and, as of June 30, 2013, was included as

      components of accrued liabilities and other long term

      liabilities in our Consolidated Balance Sheets. The

      settlement is subject to court approval and we cannot assure

      that the court will approve the settlement.&lt;/font&gt;

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