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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 | 16. Commitments and Contingencies Future minimum lease payments under purchase obligations and non-cancellable operating leases are as follows (in thousands):
|  | Purchase Obligations |  | Operating Leases
2017 |  | $ | 54,751 |  |  | $ | 7,018 |
2018 |  | — |  |  | 6,235 |
2019 |  | — |  |  | 5,646 |
2020 |  | — |  |  | 4,529 |
2021 |  | — |  |  | 3,760 |
Thereafter |  | — |  |  | 6,967 |
Total long-term obligations |  | $ | 54,751 |  |  | $ | 34,155 |
The Company has contractual obligations to utilize an external vendor for certain customer support functions and to utilize network facilities from certain carriers with terms greater than one year. The Company’s rent expense under operating leases was $5.3 million, $5.0 million and $5.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. The rent expense for the year ended December 31, 2016 includes costs associated with the terminations of facilities leases. Litigation The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s Consolidated Financial Statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its Consolidated Financial Statements. The Company records a liability in its Consolidated Financial Statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary for the Consolidated Financial Statements not to be misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its Consolidated Financial Statements. Primus/Xplornet License Matters On July 16, 2013, Plaintiffs Xplornet Communications Inc. and Xplornet Broadband, Inc. (“Xplornet”) initiated an action against Inukshuk Wireless Inc. (“Inukshuk”), Globility Communications Corporation (“Globility”), MIPPS Inc., Primus Telecommunications Canada Inc. ("PTCI") and Primus Telecommunications Group, Incorporated (n/k/a HC2). Xplornet alleges that it entered into an agreement to acquire certain licenses for radio spectrum in Canada from Globility but that Globility breached the letter of intent by selling the licenses to Inukshuk. Xplornet also alleges similar claims against Inukshuk, and seeks damages from all defendants in the amount of $50 million. On January 29, 2014, Globility, MIPPS Inc., and PTCI, demanded indemnification pursuant to the Equity Purchase Agreement among PTUS, Inc., PTCAN, Inc., the Company (f/k/a Primus Telecommunications Group, Incorporated), Primus Telecommunications Holding, Inc., Lingo Holdings, Inc., and Primus Telecommunications International, Inc., dated as of May 10, 2013. On February 14, 2014, the Company assumed the defense of this litigation, while reserving all of its rights under the Equity Purchase Agreement. Inukshuk filed a cross claim against Globility, MIPPS, PTCI, and the Company. Inukshuk asserts that if Inukshuk is found liable to Xplornet, then Inukshuk is entitled to contribution and indemnity, compensatory damages, interest, and costs from the Company. The Company and Inukshuk have moved for summary judgment against Xplornet, arguing that there was no agreement between Globility and Xplornet to acquire the licenses at issue. On January 19, 2016, PTCI sought and obtained an order under the Companies’ Creditors Arrangement Act from the Ontario Superior Court of Justice. PTCI received an Initial Order staying all proceedings against PTCI until February 26, 2016 - which it has moved to extend through September 2016. On February 25, 2016, the Ontario Superior Court of Justice extended the stay of proceedings until September 19, 2016. PTCI has advised the Company that this stays all proceedings against PTCI, Globility, and MIPPS, except against the Company. In October 2016, the Company settled the matter. On November 8, 2016, the Court entered a consent order dismissing this action. DBMG Class Action On November 6, 2014, a putative stockholder class action complaint challenging the tender offer by which HC2 acquired approximately 721,000 of the issued and outstanding common shares of DBMG was filed in the Court of Chancery of the State of Delaware, captioned Mark Jacobs v. Philip A. Falcone, Keith M. Hladek, Paul Voigt, Michael R. Hill, Rustin Roach, D. Ronald Yagoda, Phillip O. Elbert, HC2 Holdings, Inc., and Schuff International, Inc., Civil Action No. 10323 (the “Complaint”). On November 17, 2014, a second lawsuit was filed in the Court of Chancery of the State of Delaware, captioned Arlen Diercks v. Schuff International, Inc. Philip A. Falcone, Keith M. Hladek, Paul Voigt, Michael R. Hill, Rustin Roach, D. Ronald Yagoda, Phillip O. Elbert, HC2 Holdings, Inc., Civil Action No. 10359. On February 19, 2015, the court consolidated the actions (now designated as Schuff International, Inc. Stockholders Litigation) and appointed lead plaintiff and counsel. The currently operative complaint is the Complaint filed by Mark Jacobs. The Complaint alleges, among other things, that in connection with the tender offer, the individual members of the DBMG's Board of Directors and HC2, the now-controlling stockholder of DBMG, breached their fiduciary duties to members of the plaintiff class. The Complaint also purports to challenge a potential short-form merger based upon plaintiff’s expectation that the Company would cash out the remaining public stockholders of DBMG following the completion of the tender offer. The Complaint seeks rescission of the tender offer and/or compensatory damages, as well as attorney’s fees and other relief. The defendants filed answers to the Complaint on July 30, 2015. On February 24, 2017, the parties agreed to a framework for the potential settlement of the litigation. On February 28, 2017, the Court entered an order vacating the current scheduling order and deadlines and giving the parties until April 21, 2017 to submit a stipulation of settlement or status report to the Court. There can be no assurance that a settlement will be finalized or that the Court would approve such a settlement even if the parties were to enter into a settlement stipulation or agreement. The Company believes that the settlement under discussion would not have a material effect on the Company's financial condition or operating results. DBMG Wage and Hours Claims On July 9, 2015, a putative class action wage and hour lawsuit was filed against SSC and Schuff International (now d/b/a DBMG) (collectively “Schuff”) in the Los Angeles County Superior Court BC587322, captioned Dylan Leonard, individually and on behalf of other members of the general public v. Schuff Steel Company and Schuff International, Inc. The complaint makes generic allegations of numerous violations of the California wage and hour laws and claims that Schuff failed to: pay for overtime, pay for meal and rest breaks, to fulfill its obligations under minimum wage laws, to timely pay business expenses, wages and final wages, to keep requisite payroll records, and to provide compliant wage statements. On August 11, 2015, another putative class action wage and hour lawsuit was filed against SSC in San Joaquin County Superior Court, 39-2015-003282720CU-OE-STK, captioned Pablo Dominguez, on behalf of himself and all other similarly situated v. Schuff Steel Company. The complaint alleges non-compliant wage statements and demands penalties pursuant to the California Labor Code. On October 11, 2015, an amended complaint was filed in the Dominguez claim pursuing only the statutory claim based on the non-compliant wage statements. On December 17, 2015, the matters were designated as the Schuff Steel Wage and Hour Cases and assigned a coordination trial judge. On August 4, 2016, the Court denied the Dominguez motion for continuance and determined that the claim for civil penalties ended when Mr. Dominguez passed away on August 10, 2015. The Company settled the remaining Dominguez claims under a confidential agreement which we believe will have no material adverse effect on us, and the case was dismissed on December 20, 2016. On January 17, 2017, counsel for Leonard agreed to dismiss the individual claims with prejudice and the class-action claims without prejudice; however the dismissal was not approved by Court due to failure to obtain the appropriate consent of the plaintiff. The Company believes that the allegations and claims set forth in the Complaint are without merit and intends to defend them vigorously, and that the matter will be disposed of. Chemours Demand for Arbitration On December 28, 2015, the Chemours Company Mexico S. de R.L de C.V. (“Chemours”) filed a Demand for Arbitration (the “Demand”) against SSC with the American Arbitration Association, International Centre for Dispute Resolution Case No. 01-15-0006-0956. SSC had a purchase order to provide fabricated steel for the expansion of Line 2 at DuPont’s chemical plant in Altamira, Mexico (the “Project”). The Demand seeks recovery of an alleged mistaken payment of approximately $5 million to SSC and additional damages in excess of $18 million for alleged breaches, including delays, failure to expedite, assignment of subcontracting clauses, and backcharges for additional costs and rework of fabricated steel provided for the Project. On January 25, 2016, SSC filed an answer and counterclaim denying liability alleged by Chemours and seeking to recover the principal sum of approximately $0.3 million for unpaid work on the Project as well as an additional sum for damages due to alleged delays, impacts, and other wrongful conduct by Chemours and its agents. Document discovery has begun and an arbitration hearing is scheduled for March 2018. The Company believes that the allegations and claims set forth in the Demand are without merit and intends to defend them vigorously and aggressively pursue Chemours for additional monies owed and damages sustained. CGI Class Action On November, 28 2016, CGI, a subsidiary of the Company GAFRI, American Financial Group, Inc., and CIGNA Corporation were served with a class action complaint filed by John Fastrich and Universal Investment Services, Inc. in the United States District Court for the District of Nebraska alleging breach of contract, tortious interference with contract and unjust enrichment. The plaintiffs contend that they were agents of record under various CGI policies and that CGI allegedly instructed policyholders to switch to other CGI products and caused the plaintiffs to lose commissions, renewals, and overrides on policies that were replaced. The complaint also alleges breach of contract claims relating to vesting of commissions. CGI believes that the allegations and claims set forth in the complaint are without merit and intends to vigorously defend against them. To that end, CGI, GAFRI and CIGNA Corporation filed a joint motion to dismiss the complaint on February 27, 2017. The motion is pending and is not yet fully briefed. Further, the Company and CGI are seeking defense costs and indemnification for any losses that may stem from the claims from GAFRI and Continental General Corporation (“CGC”). GAFRI and CGC rejected CGI’s demand for defense and indemnification and, on January 18, 2017, the Company and CGI filed a complaint against GAFRI and CGC in the Superior Court of Delaware seeking a declaratory judgment to enforce their indemnification rights under the SPA. GAFRI and CGC filed their answer on February 23, 2017. The dispute is ongoing. VAT assessment On February 20, 2017, the Company's ICS subsidiary received a notice from Her Majesty’s Revenue and Customs office in the U.K. (the “HMRC”) indicating that it was required to pay certain Value-Added Taxes (“VAT”) for the 2015 tax year. ICS disagrees with HMRC’s assessment on technical and factual grounds and intends to dispute the assessed liabilities and vigorously defend its interests. We do not believe the assessment to be probable and expect to prevail based on the facts and merits of our existing VAT position. Global Marine Dispute GMSL is in dispute with Alcatel-Lucent Submarine Networks Limited ("ASN") related to a Marine Installation Contract between the parties, dated March 11, 2016 (the "ASN Contract"). Under the ASN Contract, GMSL's obligations were to install and bury an optical fibre cable in Prudhoe Bay, Alaska. As of the date hereof, neither party has commenced legal proceedings. Pursuant to the ASN Contract any such dispute would be governed by English law and would be required to be brought in the English courts in London. ASN has alleged that GMSL committed material breaches of the ASN Contract, which entitles ASN to terminate the ASN Contract, take over the work themselves, and claim damages for their losses arising as a result of the breaches. The alleged material breaches include failure to use appropriate equipment and procedures to perform the work and failure to accurately estimate the amount of weather downtime needed. ASN has indicated to GMSL it has incurred $3.1 million in damages for overpayment to GSML and $1.2 million in liquidated damages for the period September 2016 to October 2016, plus interest and costs. GMSL believes that it has not breached the terms and conditions of the contract and also believes that ASN has not properly terminated the contract in manner that would allow it to make a claim. However, ASN has ceased making payments to GMSL and as of December 31, 2016, the total sum of GMSL invoices rejected by ASN are $10.7 million. ASN has also reserved their position on an additional $1.4 million of invoices already submitted to ASN and has indicated it will do so for future invoices. We believe that the allegations and claims by ASN are without merit, that ASN is required to make all payments under unpaid invoices and we intend to defend our interests vigorously. Tax Matters Currently, the Canada Revenue Agency (“CRA”) is auditing a subsidiary previously held by the Company. The Company intends to cooperate in audit matters. To date, CRA has not proposed any specific adjustments and the audit is ongoing.

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