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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2014
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | 11. Commitments and Contingencies Legal Matters The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business. For example, the Company is currently named as a defendant or co-defendant in some patent infringement lawsuits in the U.S. and is indirectly participating in other U.S. patent infringement actions pursuant to its contractual indemnification obligations to certain customers. Based on an evaluation of these matters and discussions with the Company’s intellectual property litigation counsel, the Company believes that liabilities arising from or sums paid in settlement of these existing matters would not have a material adverse effect on its consolidated results of operations or financial condition. On September 15, 2008 and September 18, 2008, two putative securities class action lawsuits were filed in the U.S. District Court for the Southern District of California (the “Court”) on behalf of alleged stockholders of the Company. On December 11, 2008, these lawsuits were consolidated into a single action and in May 2010, the consolidated lawsuits were captioned the case In re Novatel Wireless Securities Litigation (the “Litigation”). The Litigation was filed on behalf of persons who purchased the Company’s common stock between February 27, 2007 and September 15, 2008. As previously disclosed, on December 6, 2013, to avoid the costs, disruption and distraction of further litigation, legal counsel for the defendants entered into a binding Memorandum of Understanding. On June 23, 2014, the Court entered its judgment approving a final settlement agreement with respect to the Litigation. The settlement agreement does not admit any liability and the Company and the individual defendants continue to deny any and all liability. Under the terms of the settlement agreement, the plaintiff class has agreed to settle all claims asserted in the Litigation and grant the defendants and released parties a full and complete release in exchange for (i) a cash payment of $6.0 million to the plaintiff’s class, approximately $1.7 million of which is to be funded by the Company’s insurers, (ii) the issuance of unrestricted and freely tradable shares of the Company’s stock with an aggregate value of $5.0 million and (iii) the issuance of a $5.0 million secured promissory note, which such note shall have a 30-month maturity, carry interest at 5% per annum, payable quarterly, and be secured by the accounts receivable of the Company. On July 1, 2014, the Company and the individual defendants filed a motion to amend the judgment entered on June 23, 2014, specifically requesting the Court to amend the effective date of such judgment to June 20, 2014 – the date the court held the final approval hearing. The Court granted this motion on July 8, 2014, and the judgment date was deemed entered on June 20, 2014. Based on a judgment date of June 20, 2014, the Company believes that it will be relieved from an additional cash payment of approximately $725,000, which would have been triggered, pursuant to the terms of the stipulation of settlement, if the date of the Court’s entry of judgment had remained June 23, 2014 (based on the then-current trading price of the Company’s common stock, which was below a certain threshold price established by the stipulation of settlement). On August 1, 2014, the Plaintiffs filed a motion with the Court claiming that since the Company’s stock price traded intraday below the aforementioned threshold price, that the $725,000 was still due and payable. The Company is contesting the plaintiffs’ motion and has not accrued the $725,000 asserted claim in the accompanying consolidated financial statements. A hearing date is set for November 14, 2014 to adjudicate this matter. On July 8, 2014, the Company funded the cash portion of the settlement with $4.3 million of Company cash and $1.7 million previously funded into escrow by the Company’s insurers. On July 17, 2014, the Company issued 2,407,318 unrestricted shares of the Company’s common stock to the class members in satisfaction of the $5.0 million stock payment. The Company also issued a $5.0 million secured promissory note on July 8, 2014, which remains accrued as of September 30, 2014 in non-current liabilities. Indemnification In the normal course of business, the Company periodically enters into agreements that require the Company to indemnify and defend its customers for, among other things, claims alleging that the Company’s products infringe third-party patents or other intellectual property rights. The Company’s maximum exposure under these indemnification provisions cannot be estimated but the Company does not believe that there are any matters individually or collectively that would have a material adverse effect on its financial condition, results of operation or cash flows.

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