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Commitments and Contingencies - Legal Matters | 6 Months Ended
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Jun. 30, 2013
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies - Legal Matters |
13. | Commitments and Contingencies – Legal Matters
On October 12, 2012 the Company received a letter from the Sheet Metal Workers’ Local Union No. 80 (“the Union”) alleging that the Company had completely withdrawn from the Union’s Pension Trust Fund (“the Fund”) and may be liable for an amount up to $5.3 million plus interest. The Company is disputing the allegation in its entirety. The Company has obtained legal counsel and plans to vigorously defend itself. Based on currently available information, as of June 30, 2013, we have not recorded any reserves related to this matter. One of our subsidiaries, Fisher-Klosterman, Inc. (“FKI”), is a defendant party in a products liability lawsuit filed in Harris County, Texas on August 23, 2010 by four Valero refining companies. The plaintiffs claim that FKI (and its co-Defendants) used an allegedly defective refractory material included in cyclones it supplied to Valero that caused damages to refineries they own and operate. Plaintiffs claim to have suffered property damages including catalyst loss, regenerator repair costs, replacement part costs, damage to other property and business interruption loss of up to $75 million. The case is still in early stages. The Company intends to vigorously defend the matter. Based on currently available information, as of June 30, 2013, we have not recorded any reserve with respect to this matter. On January 14, 2013, CECO Environmental Corp., The Kirk & Blum Manufacturing Company and K&B Duct were served as defendants in the United States District Court for the Western District of Virginia. The plaintiffs are Jeffrey Hodges, Tommy Lee Bonds, and John Paul Spangler. It is a product liability case in which the plaintiffs are alleging (i) breach of warranty with respect to aluminum dust collection equipment, including back-blast dampers and (ii) negligence, including in the design of the explosion isolation control equipment (back-blast dampers). CECO Environmental Corp. (but not its subsidiaries) has been dropped as a defendant. Two of the plaintiffs are asking for $5 million each plus interest and costs. The third plaintiff is asking for $1 million, plus interest and costs. To date the Company’s insurance carrier has agreed to defend the claims, and have retained counsel to defend the Company. We intend to vigorously defend this suit. Based on currently available information, as of June 30, 2013, we have not recorded any reserve with respect to this matter. On January 13, 2011, the SEC initiated a non-public formal investigation of the Company. The investigation is focused on certain activities by a former director of the Company. We have been cooperating with and intend to continue to cooperate with the SEC. The Company believes, after discussions with the staff of the SEC’s Enforcement Division, that the Company will not be subject to any claims. Because the matter is ongoing, no conclusion can be reached as to what impact, if any, this inquiry may have on us or our operations. Based on currently available information as of June 30, 2013, we have not recorded any reserve with respect to this matter. The Company was involved in an arbitration proceeding initiated in April 2011 by William L. Heumann, Gerald J. Plappert, and Paul S. Brannick, related to the 2008 acquisition of Fisher-Klosterman Inc., in which the plaintiffs were claiming amounts owed pursuant to an earn-out provision in the purchase agreement. The arbitrator ruled on February 15, 2012 favorably to the Company resulting in a payment of the Company’s stock worth $20,500 and half of the plaintiffs’ legal and arbitrator costs of $106,000. The Company is also a party to routine contract and employment-related litigation matters and routine audits of state and local tax returns arising in the ordinary course of its business. The final outcome and impact of open matters, and related claims and investigations that may be brought in the future, are subject to many variables, and cannot be predicted. In accordance with ASC 450, “Contingencies,” and related guidance, we record reserves for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. Accordingly, we have not accrued any amount as of June 30, 2013. While it is currently not possible to reasonably estimate the aggregate amount of costs which we may incur in connection with these matters, such costs could have a material adverse effect on our financial position, liquidity, results of operations, or cash flows. The Company expenses legal costs as they are incurred. We are not aware of pending claims or assessments, other than as described above, which may have a material adverse impact on our liquidity, financial position, results of operations, or cash flows.

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