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Contingencies
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6 Months Ended |
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Jun. 30, 2011
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| Contingencies [Abstract] | |
| Contingencies |
15. Contingencies
Legal Proceedings
On
September 30, 2008, AUS, a former subsidiary of the
Company, filed a complaint against Benz Air Engineering, Inc. (“Benz Air”). The Company sold the
majority of the assets of AUS to Johnson Matthey on October 1,
2009 (see Note 13), however, this lawsuit was
excluded from the sale. The complaint was amended on January 16, 2009, and asserted claims against
Benz Air for breach of contract, common counts and slander. AUS was seeking $0.2 million in
damages, plus interest, costs and applicable penalties. In response to the complaint, Benz Air
filed a cross-complaint on November 17, 2008, which named both AUS and the Company as defendants.
The cross-complaint asserted claims against AUS and the Company for breach of oral contract, breach
of express warranty, breach of implied warranty, negligent misrepresentation and intentional
misrepresentation and was seeking not less than $0.3 million in damages, plus interest, costs and
punitive damages. The trial was concluded on July 29, 2011 with the jury awarding AUS $0.2 million
plus interest as well as an additional $0.3 million for false statements. The Company is evaluating
collectability of the jury award. As such, the financial statements as of June 30, 2011 do not
include any adjustments related to this jury award.
On April 30, 2010, CDTI received a complaint from the Hartford, Connecticut office of the U.S.
Department of Labor under Section 806 of the Corporate and Criminal Fraud Accountability Act of
2001, Title VIII of the Sarbanes-Oxley Act of 2002, alleging that a former employee had been
subject to discriminatory employment practices. CDTI’s Board of Directors terminated the employee’s
employment on April 19, 2010. The complainant in this proceeding does not demand specific relief.
However, the statute provides that a prevailing employee shall be entitled to all relief necessary
to make the employee whole, including compensatory damages, which may be reinstatement, back pay
with interest, front pay, and special damages such as attorney’s and expert witness fees. CDTI
responded on June 14, 2010, denying the allegations of the complaint. Based upon current
information, management, after consultation with legal counsel defending the Company’s interests,
believes the ultimate disposition will have no material effect upon its business, results or
financial position. As no specific quantification of damages has been provided by the Claimant, the
Company cannot provide a reasonable range of possible outcomes.
In addition to the above, the Company is from time to time involved in collection matters
routine to its business.
Sales and use tax audit
The Company is undergoing a sales and use tax audit by the State of California on AUS for the
period of 2007 through 2009. The audit has identified a project performed by the Company during
that time period for which sales tax was not collected and remitted and for which the State of
California asserts that proper documentation of resale
may not have been obtained. The Company contends and believes that it received sufficient and
proper documentation from its customer to support not collecting and remitting sales tax from that
customer and is actively disputing the audit report with the State of California. Accordingly, no
accrual has been recorded for this matter. The potential outcomes of this matter range from zero to
$1.2 million. Should the Company not prevail in this matter, it has certain indemnifications from
its customer related to sales tax and would pursue reimbursement from the customer for all
assessments from the State.
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