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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2015
Commitments and Contingencies |
Commitments and Contingencies | 7.Commitments and Contingencies Legal Matters Lac-Megantic, Quebec As described in Part II — Item 1 of this 10-Q Report, various lawsuits have been filed against us and other third parties related to the July 2013 train derailment in Lac-Mégantic, Quebec (the “Derailment”). On June 8, 2015, we entered into a settlement agreement (the “Settlement Agreement”) with the Trustee (the “Trustee”) for the U.S. bankruptcy estate of Montreal, Maine & Atlantic Railway, Ltd., Montreal, Maine and Atlantic Canada Co. (“MMAC”), and the monitor (the “Monitor”) in MMAC’s Canadian bankruptcy (collectively, the “MMA Parties”) to resolve all claims arising out of the Derailment. Under the terms of the Settlement Agreement, we will contribute US$110 million (the “Settlement Payment”) to a compensation fund established to compensate parties who suffered losses as a result of the Derailment. As part of the settlement, we will also assign to the Trustee and MMAC certain claims we have against third parties arising out of the Derailment. In consideration of the Settlement Payment and the assignment of claims to the Trustee and MMAC, we, as well as our former joint ventures, DPTS Marketing, LLC and Dakota Petroleum Transport Solutions, LLC and each of their affiliates (collectively, the “WFS Parties”), will receive the benefit of the global releases and injunctions set forth in the respective bankruptcy plans filed by the Trustee in the U.S. and by MMAC in Canada (the “U.S. Bankruptcy Plan” and the “CCAA Plan” respectively, each a “Plan” and collectively the “Plans”). The effect of these global releases and injunctions will be to bar all claims which may exist now or in the future against the WFS Parties arising out of the Derailment, other than criminal claims which by law may not be released. Neither the releases and injunctions set forth in the Plans nor our obligation to make the Settlement Payment will be effective unless and until the Plans are approved by creditors in both the U.S. and Canadian bankruptcies, an order sanctioning the CCAA Plan is issued by the Canadian bankruptcy court, orders confirming the U.S. Bankruptcy Plan and recognizing the CCAA Plan are issued by the U.S. bankruptcy court, an order confirming the U.S. Approval Order (as defined below) is issued by the U.S. District Court and each such order becomes final and non-appealable (“Final Approval”). The CCAA Plan was approved by creditors and the Canadian bankruptcy court entered an order sanctioning the CCAA Plan in July 2015 (the “Canadian Approval Order”). Canadian Pacific Railway (“CPR”) subsequently requested leave of court to appeal the Canadian Approval Order, which request remains pending. In October 2015, the Canadian bankruptcy court issued an order approving modifications to the Canadian Approval Order (the “Amended Canadian Approval Order”). Based on these modifications, and similar terms included in the U.S. Approval Order, CPR has agreed to withdraw, upon Final Approval, all of its objections and appeals relating to the Plans. In August 2015, the CCAA Plan and the Canadian Approval Order were recognized under the U.S. bankruptcy code by an order of the U.S. bankruptcy court. CPR subsequently appealed the order recognizing the CCAA Plan but, as previously noted, has agreed to withdraw its appeal upon Final Approval. In October 2015, the U.S. bankruptcy court entered a supplemental order recognizing the Amended Canadian Approval Order. The U.S. Bankruptcy Plan has been approved by creditors and the U.S. bankruptcy court entered an order confirming the U.S. Bankruptcy Plan in October 2015 (the “U.S. Approval Order”). The U.S. Approval Order remains subject to the review and approval of the U.S. District Court for the District of Maine. Allowable time periods for appeals of certain of the orders remain and any order issued by the U.S. District Court would not be final until expiration of an appeal period. As a result, Final Approval of both the U.S. Bankruptcy Plan and CCAA Plan and the related timing remain uncertain. For additional information regarding legal proceedings related to the Derailment, see Part II — Item 1 of this 10-Q Report. Based on anticipated payments under the Settlement Agreement, the value of the tank cars involved in the incident, payments under settlement agreements with certain lessors as well as legal and other costs incurred in connection with the incident, which we believe are probable and for which a reasonable estimate can be made, we have recorded total liabilities of $158.9 million. We believe that a substantial portion of these liabilities is covered by insurance and have recorded total receivables of $155.1 million. As of September 30, 2015, the remaining unpaid liabilities of $124.9 million are included primarily in accrued expenses and other current liabilities and the remaining uncollected receivable of $137.5 million is included in other current assets in the accompanying consolidated balance sheets. Other Matters In connection with a theft of fuel product valued at approximately $18.0 million, we recorded an insurance receivable for the full amount of the loss, which is included in other current assets in the accompanying consolidated balance sheets. On July 31, 2014, our insurer, AGCS Marine Insurance Company (“AGCS”), filed a declaratory judgment action against us in the United States District Court for the Southern District of New York seeking a court ruling that the loss is not covered under our policy. During the quarter ended December 31, 2014, we filed an answer to the AGCS complaint and counterclaims against AGCS for declaratory judgment and breach of contract seeking a court ruling that the loss is covered under the policy, an award of damages equal to the full amount of our loss plus interest, as well as fees and costs. We believe AGCS’ position is without merit and we intend to vigorously pursue our rights. However, due to the complexities and uncertainties inherent in litigation, we can provide no assurance that we will recover the full amount of the loss. We are a party to various claims, complaints and proceedings arising in the ordinary course of our business including, but not limited to, environmental claims, commercial and governmental contract claims, such as property damage, demurrage, personal injury, billing and fuel quality claims, as well as bankruptcy preference claims and tax and administrative claims. We have established loss provisions for these ordinary course claims as well as other matters in which losses are probable and can be reasonably estimated. As of September 30, 2015, we had recorded certain reserves which were not significant. For those matters where a reserve has not been established and for which we believe a loss is reasonably possible, as well as for matters where a reserve has been recorded but for which an exposure to loss in excess of the amount accrued is reasonably possible, we believe that such losses will not have a material adverse effect on our consolidated financial statements. However, any adverse resolution of one or more such claims, complaints or proceedings during a particular period could have a material adverse effect on our consolidated financial statements or disclosures for that period. Our estimates regarding potential losses and materiality are based on our judgment and assessment of the claims utilizing currently available information. Although we will continue to reassess our reserves and estimates based on future developments, our objective assessment of the legal merits of such claims may not always be predictive of the outcome and actual results may vary from our current estimates. Termination of Employment Agreement On March 13, 2015, we agreed with Mr. Michael S. Clementi that he would retire from his position as Aviation Segment President, effective March 16, 2015. In connection with the termination of his employment agreement, we recorded a charge totaling $3.8 million in March 2015, which included non-cash expenses of $0.8 million related to previously awarded stock compensation. As of September 30, 2015, $0.5 million of the cash portion of the termination of the employment agreement charge was included in accrued expenses and other current liabilities and $1.7 million was included in other long-term liabilities in the accompanying consolidated balance sheets.

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