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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies (a) Contractual Federated is obligated to make certain future payments under various agreements to which it is a party, including debt and operating leases (see Note (9) and Note (15), respectively). The following table summarizes minimum noncancelable payments contractually due under Federated's significant service contracts and employment arrangements:
|  | Payments due in |
in millions |  | 2017 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | Total |
Purchase obligations 1 |  | $ | 14.2 |  |  | $ | 4.4 |  |  | $ | 2.4 |  |  | $ | 2.2 |  |  | $ | 23.2 |
Employment-related commitments 2 |  | 9.0 |  |  | 2.5 |  |  | 1.6 |  |  | 0.0 |  |  | 13.1 |
Other obligations 3 |  | 0.7 |  |  | 1.0 |  |  | 0.0 |  |  | 0.0 |  |  | 1.7 |
Total |  | $ | 23.9 |  |  | $ | 7.9 |  |  | $ | 4.0 |  |  | $ | 2.2 |  |  | $ | 38.0 |
1 | Federated is a party to various contracts pursuant to which it receives certain services, including services for marketing and information technology, access to various fund-related information systems and research databases, trade order transmission and recovery services as well as other services. These contracts contain certain minimum noncancelable payments, cancellation provisions and renewal terms. The contracts require payments through the year 2020. Costs for such services are expensed as incurred.
2 | Federated has certain domestic and international employment arrangements pursuant to which Federated is obligated to make minimum compensation payments.
3 | Amounts include acquisition-related contingent purchase price payments and other liabilities recorded on the Consolidated Balance Sheets.
Federated may be required to make certain compensation-related payments through 2019 in connection with various significant employment and incentive arrangements. In addition to the $13.1 million of employment-related commitments included in the table above, based on asset levels as of December 31, 2016 and performance goals, incentive payments could total up to approximately $11 million over the remaining terms of these arrangements. (b) Guarantees and Indemnifications On an intercompany basis, various wholly owned subsidiaries of Federated guarantee certain financial obligations of Federated Investors, Inc., and Federated Investors, Inc. guarantees certain financial and performance-related obligations of various wholly owned subsidiaries. In addition, in the normal course of business, Federated has entered into contracts that provide a variety of indemnifications. Typically, obligations to indemnify third parties arise in the context of contracts entered into by Federated, under which Federated agrees to hold the other party harmless against losses arising out of the contract, provided the other party's actions are not deemed to have breached an agreed upon standard of care. In each of these circumstances, payment by Federated is contingent on the other party making a claim for indemnity, subject to Federated's right to challenge the other party's claim. Further, Federated's obligations under these agreements may be limited in terms of time and/or amount. It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of Federated's obligations and the unique facts and circumstances involved in each particular agreement. As of December 31, 2016, management does not believe that a material loss related to any of these matters is reasonably possible. (c) Legal Proceedings CCM Rochester, Inc. (CCM). On February 10, 2017, Judge Caproni, United States District Judge for the United States District Court for the Southern District of New York, issued an Opinion and Order granting Federated’s motion for summary judgment in its entirety and directed that CCM’s (f/k/a Clover Capital Management, Inc.) lawsuit against Federated be closed. In granting Federated's motion for summary judgment in its entirety, Judge Caproni determined based on the evidence that there existed no genuine dispute of any material fact in concluding that no rational juror could find in favor of CCM on its remaining claims of fraudulent inducement and breach of the implied covenant of good faith and fair dealing; accordingly, Federated was entitled to summary judgment as a matter of law. While CCM can appeal Judge Caproni's decision within 30 days (or by March 13, 2017), management believes Judge Caproni's Opinion and Order affirms Federated's position that CCM's claims were meritless and without factual support and that at all times Federated acted in good faith and complied with its contractual obligations contained in the Asset Purchase Agreement, dated September 12, 2008 (APA). If CCM appeals, Federated intends to continue to vigorously defend the lawsuit. The CCM case stemmed from Federated's acquisition of certain assets of CCM in December 2008. CCM was an investment manager that specialized in value investing. The purchase was consummated in the midst of the U.S. financial markets crisis. The payment terms under the APA included an upfront payment of $30 million paid by Federated at closing and the opportunity for contingent payments over a five year earn-out period following the acquisition date based on the growth in revenue associated with the acquired assets. Under the APA, in order to reach the maximum contingent payments totaling approximately $55 million, the revenue associated with the acquired assets would have had to have grown at a 30% compound annual growth rate. Under the APA, Federated paid CCM an additional $18 million, in the aggregate, in contingent payments for the last three years of the earn-out period. On May 20, 2014, shortly after the final contingent payment was paid to CCM, Federated Investors, Inc. was named as the defendant in a case filed by CCM in the U.S. District Court for the Southern District of New York (CCM Rochester, Inc., f/k/a Clover Capital Management, Inc. v. Federated Investors, Inc., Case No. 14-cv-3600 (S.D.N.Y.)). In this lawsuit, CCM asserted claims against Federated Investors, Inc. for fraudulent inducement, breach of contract (including CCM's allegations relating to implied duties of best efforts and good faith and fair dealing) and indemnification based on Federated's alleged failure to effectively market and distribute the investment products associated with the acquired assets and to pay CCM the maximum contingent payments. CCM sought approximately $37 million in alleged damages plus attorneys' fees from Federated Investors, Inc. Federated filed a motion to dismiss the lawsuit on the basis that, among other reasons, CCM's claims are implausible, have no factual support, and are contrary to the express terms of the APA and to settled law. On November 25, 2014, the Court issued an order granting Federated's motion to dismiss in part and denying Federated's motion to dismiss in part. The Court dismissed CCM's claim for breach of contract and for breach of an implied obligation to use best efforts. Under the strict standards applicable to motions to dismiss that require the Court to accept the allegations of the Complaint as true and draw all inferences in CCM's favor, the Court concluded that CCM's "claim of fraud is at the edge of plausibility" but specifically noted that "[w]hether CCM can successfully prove facts necessary to support that artfully-pled theory remains to be seen." On June 9, 2016, following oral argument, the Court granted Federated's evidentiary motion seeking to exclude CCM's expert testimony, ruling CCM's expert reports and testimony inadmissible. Federated filed its motion for summary judgment on July 15, 2016, seeking to have the Court rule in Federated's favor as a matter of law. As noted above, on February 10, 2017, Judge Caproni issued an Opinion and Order granting Federated's motion for summary judgment in its entirety and directed that CCM's lawsuit against Federated be closed. Federated believes a material loss related to this lawsuit (even if CCM appeals) is remote and, as such, does not believe this lawsuit is material to Federated or its Consolidated Financial Statements. Based on this assessment and the current stage of the lawsuit, Federated currently estimates the loss from damages as a result of CCM's claims to be zero. Other Litigation. Federated also has claims asserted and threatened against it in the ordinary course of business. As of December 31, 2016, Federated does not believe that a material loss related to these claims is reasonably possible. See Item 1A - Risk Factors under the caption Potential Adverse Effects of Litigation, Investigations, Proceedings and Other Claims for additional information regarding risks related to claims asserted or threatened against Federated.

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