H
154
34 Commitments and contingencies (continued)
Ahold at a glance
Notes to the consolidated
financial statements
Our strategy
Our performance
Governan
Financials
Investors
Ahold Annual Report 2013
Legal proceedings
Ahold and certain of its former or current subsidiaries are involved in a number of legal proceedings, which include litigation as a result of divestments, tax, employment, and other litigation and
inquiries. The legal proceedings discussed below, whether pending, threatened or unasserted, if decided adversely or settled, may result in liability material to Ahold's financial condition, results
of operations or cash flows. Ahold may enter into discussions regarding settlement of these and other proceedings, and may enter into settlement agreements, if it believes settlement is in the
best interests of Ahold's shareholders. In accordance with IAS 37 "Provisions, Contingent Liabilities, and Contingent Assets," Ahold has recognized provisions with respect to these proceedings,
where appropriate, which are reflected on its balance sheet.
U.S. Foodservice - Waterbury litigation
In October 2006, a putative class action was filed against U.S. Foodservice by Waterbury Hospital, Cason, Inc. and Frankie's Franchise Systems Inc. with the United States District Court for the
District of Connecticut in relation to certain U.S. Foodservice pricing practices (the Waterbury Litigation). Two additional putative class actions were filed in 2007 by customers of U.S.
Foodservice, Catholic Healthcare West and Thomas King, Inc., in the U.S. District Courts for the Northern District of California and the Southern District of Illinois, respectively. These two new
actions involved the same pricing practices as those in the Waterbury Litigation. The new actions also named Ahold and two individuals as defendants. In accordance with the decision of the
Judicial Panel on Multidistrict Litigation, in 2008 the actions were consolidated with the Waterbury litigation before the U.S. District Court in Connecticut. Ahold was (among other parties)
named as defendant. In July 2009, the Plaintiffs filed a motion to certify a Plaintiff class in the action. Both Ahold and U.S. Foodservice filed a motion to dismiss against the complaint and also
filed motions opposing the certification of a class in the action. In December 2009, the Court in Connecticut granted Ahold's motion to dismiss, as a result of which Ahold is no longer party
in the proceedings. U.S. Foodservice's motion to dismiss was partially rejected by the Court, as a result of which U.S. Foodservice remains defendant in the ongoing proceedings.
On November 30, 2011the U.S. District Court granted the Plaintiffs' motion to certify a class in the action certifying a class consisting of any person in the United States who purchased
products from U.S. Foodservice pursuant to an arrangement that defined a sale price in terms of a cost component plus a markup ("cost-plus contract"), and for which U.S. Foodservice used
a so-called "Value Added Service Provider" or "VASP" transaction to calculate the cost component. On August 30, 2013, the U.S. Court of Appeals for the Second Circuit ("Second Circuit")
affirmed the decision of the U.S. District Court. The effect of the District Court's class certification order, if it is not reversed, vacated or otherwise modified, is to increase the potential liability
exposure because it allows the named Plaintiffs to litigate breach of contract claims and claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) on behalf of all Class
Members. A RICO claim, if it were to be successful, could lead to an award to the plaintiffs of three times their compensatory damages. Parties are conducting discovery on the merits of the
case with the trial currently expected to begin in late 2015 or 2016.
Ahold cannot at this time provide a reliable estimate of any of its potential liability in connection with the indemnification obligation mentioned in the table above because there are significant
uncertainties regarding the possible outcomes of the litigation. Ahold believes that there are substantial defenses to these claims and it will continue to vigorously defend its interests in the
pending litigation. Also, as is customary for this type of litigation, the dispute may be resolved through mediation and/or direct settlement negotiations with Plaintiffs. Any negotiated or court
imposed resolution of this dispute may have a material adverse effect on Ahold's consolidated financial position.
U.S. Foodservice - Governmental regulatory investigations
The Civil Division of the U.S. Department of Justice was conducting an investigation, which related to certain past pricing practices of U.S. Foodservice for sales made to the U.S. government
prior to the date of completion of the divestment of U.S. Foodservice (July 3, 2007).
In September 2010, a settlement was reached with the Department of Justice under which U.S. Foodservice was obliged to pay an amount of $33 million (€24 million) to the U.S. government.
Ahold paid, under its indemnification agreement with U.S. Foodservice, an amount of $23 million (€17 million). Ahold cannot exclude the possibility of further indemnification obligations
resulting from other governmental or regulatory actions.
Uruguayan litigation
Ahold, together with Disco and Disco Ahold International Holdings N.V. (DAIH), is a party to or bears the risk of legal proceedings in one lawsuit in Uruguay related to Ahold's 2002 acquisition
of Velox Retail Holdings' shares in the capital of DAIH. The two other related lawsuits in Uruguay have been decided in favor of Ahold. The damages alleged by the plaintiffs, alleged creditors
of certain Uruguayan and other banks, amount to approximately $62 million (€45 million) plus interest and costs. As part of the sale of Disco to Cencosud in 2004, Ahold indemnified
Cencosud and Disco against the outcome of these legal proceedings. The proceedings in the one remaining lawsuit are ongoing. Ahold continues to believe that the plaintiffs' claims are
without merit and will continue to vigorously oppose such claims.
