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LITIGATION | 12 Months Ended
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Dec. 31, 2012
LITIGATION [Abstract] |
LITIGATION | NOTE 13: LITIGATION Business Arbitration and Litigation Marinova Pty. Limited v. Mannatech, Incorporated & Mannatech (International) Limited, Case No. 50-122-T-00635-09, International Centre for Dispute Resolution, a division of the American Arbitration Association On December 10, 2009, Marinova Pty. Limited ("Marinova") filed a Notice of Arbitration and Statement of Claim with the International Centre for Dispute Resolution, which is a division of the American Arbitration Association, against the Company and its subsidiary, Mannatech (International) Limited. Marinova's claims stem from the parties' April 27, 2007 purchase agreement. Through the purchase agreement, Marinova agreed to sell and the Company agreed to buy set quantities of glyconutrient powder that the Company uses to manufacture some of its products. Marinova claimed that the Company breached the purchase agreement by not buying the specified quantities of Marinova's product and by prematurely terminating the agreement. Marinova further claimed, based on the Company's alleged breach of contract, that Marinova suffered lost profits damages in the amount of $6,500,000, as well as attorneys' fees and costs. The Company subsequently filed an answer and counterclaim, seeking damages in the amount of $618,750, representing the price paid for alleged non-conforming product. On March 16, 2012, Mannatech and Marinova entered into a binding settlement agreement that fully disposes of the claims and controversies between them. Pursuant to that settlement agreement, Mannatech forgave the $618,750 payment owing and made a one-time payment of $2,600,000 to Marinova, which has been recorded in the December 31, 2011 financial statements. The settlement also includes a full release of both parties and a covenant not to sue. Product Liability Litigation Susan Chon vs. Mannatech, Inc. dba Mannatech Dietary Supplements; Eun-Sook Cho; Gina Park; Good News Acupunture/Couples Acupuncture, Case No. BC460029, Los Angeles County Superior Court On April 21, 2011, Susan Chon, an individual, filed suit against the Company in Los Angeles County Superior Court. The plaintiff is one of the Company's former associates and has alleged sustaining injuries and enduring complications from breast cancer as the result of taking Ambrotose®, one of the Company's products. The plaintiff also alleges that co-defendants En-Sook Cho, Gina Park and Good News Acupuncture represented to her that the Ambrotose® product cured serious medical problems. Unspecified damages are sought against all defendants. On March 1, 2012, the parties engaged in a private mediation session, and a settlement was reached resolving all outstanding issues between the parties in the amount of $200,000, $79,000 of which is covered by the Company's insurer. On March 19, 2012, the parties executed and filed a motion to dismiss the litigation with the court. The Company now considers this matter closed. Administrative Proceedings Our 2005-2009 tax years remain subject to examination by the IRS for U.S. federal tax purposes. On May 26, 2011 the IRS issued a Revenue Agent's report ("RAR") detailing proposed adjustments for the tax years under examination. The net tax deficiency associated with the RAR is $8.5 million plus penalties of $1.5 million. On July 8, 2011, we filed a protest letter challenging the proposed adjustments contained in the RAR and are pursuing resolution of these items with the Appeals Division of the IRS. On July 26, 2012, the Company participated in a hearing with the Appeals Division of the IRS, and the Company believes the net tax deficiency should approximate amounts previously recorded as uncertain income tax positions for the tax years 2005-2009. Therefore, the Company has made a reduction in its tax positions for tax years after 2009 of approximately $1.1 million. The Company was able to recognize deferred tax assets due to this reduction of prior year tax positions. There are other ongoing audits in various international jurisdictions that are not material to our financial statements. Litigation in General The Company has incurred several claims in the normal course of business. The Company believes such claims can be resolved without any material adverse effect on its consolidated financial position, results of operations, or cash flows. The Company maintains certain liability insurance; however, certain costs of defending lawsuits are not covered by or only partially covered by its insurance policies, including claims that are below insurance deductibles. Additionally, insurance carriers could refuse to cover certain claims in whole or in part. The Company accrues costs to defend itself from litigation as they are incurred or as they become determinable. The outcome of litigation is uncertain, and despite management's views of the merits of any litigation, or the reasonableness of the Company's estimates and reserves, the Company's financial statements could nonetheless be materially affected by an adverse judgment. The Company believes it has adequately reserved for the contingencies arising from current legal matters where an outcome was deemed to be probable, and the loss amount could be reasonably estimated. While it is not possible to predict what liability or damages the Company might incur in connection with any litigation, based on the advice of counsel and management review of the existing facts and circumstances related to certain legal proceedings, and related legal fees, the Company has accrued $0.2 million as of December 31, 2012 for these matters, which is included in accrued expenses in its Consolidated Balance Sheet.

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