CQB » Topics » Item 1 - Legal Proceedings

This excerpt taken from the CQB 10-Q filed May 5, 2009.

Item 1 - Legal Proceedings

The information included in Note 12 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q is incorporated by reference into this Item, in particular the third paragraph under “Colombia Related Matters” concerning a new lawsuit which has been filed and the second paragraph under “Italian Customs Cases” concerning an adverse decision in an Italian appeals court.

Reference is made to the discussion under “Part I, Item 3 – Legal Proceedings – Personal Injury Cases” in the company’s Annual Report on Form 10-K for the year ended December 31, 2008, regarding the DBCP cases pending in California and the Philippines. In the California cases, plaintiffs’ counsel continues to add additional plaintiffs from Costa Rica, Panama, Guatemala and Honduras. There are now approximately 6,100 plaintiffs in those cases. To date, none of the plaintiffs in California and very few of the plaintiffs in Panama have produced evidence to support the alleged exposure to DBCP or allegations of injury or illness related to such exposure. Although the company has little information with which to evaluate these lawsuits, it believes it has meritorious defenses, including (i) in 1998, Chiquita settled with approximately 4,000 plaintiffs in Panama, the Philippines and Costa Rica which, at the time, the company believed covered the great preponderance of workers who could have had claims against the company, (ii) the company used DBCP commercially only from 1973 to 1977 while it was registered for use by the U.S. Environmental Protection Agency and (iii) to its knowledge, the company never used DBCP commercially in either Guatemala or Honduras. The EPA did not revoke DBCP’s registration for use until 1979. The company ceased using DBCP in 1977.

This excerpt taken from the CQB 10-Q filed Nov 3, 2008.

Item 1—Legal Proceedings

The information in the second through eighth paragraphs, captioned “Colombia Related Matters,” of Note 5 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q is hereby incorporated by reference into this Item.

The information in the paragraphs captioned “Competition Law Proceedings” in Note 5 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q is hereby incorporated by reference into this Item.

Reference is made to the discussion under “Part 1, Item 3 – Legal Proceedings – Personal Injury Cases” in the company’s Annual Report on Form 10-K for the year ended December 31, 2007 regarding the purported DBCP class action in Hawaii State Court. Chiquita has been dismissed as a defendant from this case.

Regardless of their outcomes, the company has paid, and will likely continue to incur significant legal and other fees to defend itself in the proceedings described in “Part 1, Item 3 – Legal Proceedings – Personal Injury Cases” in the company’s Annual Report on Form 10-K for the year ended December 31, 2007, and in Note 5 herein, which may have a significant impact on the company’s financial statements. The company maintains general liability insurance policies that should provide coverage for the types of costs involved in defending the tort lawsuits described in the third and fourth paragraphs of Note 5, but its primary insurers have to date not paid such costs. Several primary general liability insurers have disputed their obligation to do so in whole or in part. One primary insurer has not yet taken a position on this question, and one is insolvent. On September 23, 2008, the company filed suit in the Common Pleas Court of Hamilton County, Ohio against three of the company’s primary general liability insurers seeking (i) a declaratory judgment with respect to the insurers’ obligation to reimburse the company for defense costs that it has incurred (and will incur) in connection with the defense of the tort claims described above; and (ii) an award of damages for the insurers’ breach of their contractual obligation to reimburse the company for such costs. See Chiquita Brands International, Inc. v. Federal Insurance Co., American Motorists Insurance Co., and Lumbermens Mutual Casualty Co., Case No. A0808934 (Ohio Ct. C.P. (Hamilton County), filed Sept. 23, 2008). There can be no assurance that any claims under the applicable policies will result in insurance recoveries.

This excerpt taken from the CQB 10-Q filed Aug 6, 2008.

Item 1 - Legal Proceedings

The information in the second through eighth paragraphs of Note 5 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q is hereby incorporated by reference into this Item. Regardless of their outcomes, the company will incur legal and other fees to defend itself in the proceedings described therein, which may have a significant impact on the company’s financial statements. The company maintains insurance policies for the types of costs involved in defending the tort lawsuits described in the third and fourth paragraphs of Note 5, but some of its insurers have disputed, and others are likely to dispute, their obligations to provide such coverage for all or part of such costs. There can be no assurance that any claims under the above policies will result in insurance recoveries.

Reference is made to the discussions under “Part I, Item 3 - Legal Proceedings - Competition Law Proceedings” in the company’s Annual Report on Form 10-K for the year ended December 31, 2007 and the second paragraph of Part II, Item 1 - Legal Proceedings in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, regarding the class action lawsuits which had been pending in the U.S. District Court for the Southern District of Florida and were settled in November 2007. With the resolution of the indirect purchaser’s purported appeal, the indirect purchaser settlement agreement, entered into in June 2007, becomes final and effective on August 6, 2008 and the company has begun a program to comply with its terms.

This excerpt taken from the CQB 10-Q filed May 2, 2008.

Item 1 - Legal Proceedings

The information in the fourth and eleventh paragraphs of Note 4 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q is hereby incorporated by reference into this Item. The additional tort lawsuit referred to in the fourth paragraph of Note 4 is captioned Julin et al. v. Chiquita Brands International, Inc., Case No. 08-20641-CIV.

Reference is made to the discussion under “Part I, Item 3—Legal Proceedings—Competition Law Proceedings” in the company’s Annual Report on Form 10-K for the year ended December 31, 2007, regarding the class action lawsuits which had been pending in the U.S. District Court for the Southern District of Florida and were settled in November 2007. On March 25, 2008, the District Court denied the individual appellant the right to proceed on appeal without paying the required costs. The District Court held that his appeal was frivolous, filed in bad faith, and that the individual had no standing to appeal because he had opted-out of the settlement.

This excerpt taken from the CQB 10-Q filed Nov 9, 2007.

Item 1 - Legal Proceedings

The information concerning (a) the plea agreement with the U.S. Justice Department, (b) the U.S. lawsuits alleging tort violations committed in Colombia and (c) the competition investigation by the European Commission provided in Note 3 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q are hereby incorporated by reference into this Item.

On October 12, 2007, a shareholder derivative lawsuit captioned City of Philadelphia Public Employees Retirement System v. Aguirre, et al. was filed against certain of the company’s current and former directors in the U.S. District Court for the Southern District of Ohio. On October 30, 2007, a second shareholder derivative lawsuit, captioned Hawaii Annuity Trust Fund for Operating Engineers v. Hills, et al., was filed against certain of the company’s current and former officers and directors in New Jersey Superior Court, Bergen County. On October 31, 2007, a third shareholder derivative lawsuit, captioned Sheet Metal Workers Local #218(S) Pension Fund v. Hills, et al., was filed against certain of the company’s current and former officers and directors in the U.S. District Court for the District of Columbia. All three complaints allege that the named defendants breached their fiduciary duties to the company and/or wasted corporate assets in connection with the payments that were the subject of the company’s March 14, 2007 plea agreement with the Justice Department referenced above. The complaints seek unspecified damages against the named defendants; two complaints also seek the imposition of certain equitable remedies on the company. None of the actions seek any monetary recovery from the company. The company is currently evaluating the complaints and any action which may be appropriate on the part of the company.

Reference is made to the discussion under “Part I, Item 3—Legal Proceedings—Competition Law Proceedings” in the company’s Annual Report on Form 10-K for the year ended December 31, 2006, and the discussion under “Part II, Item 1—Legal Proceedings” in the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, regarding the class action lawsuits filed in the U.S. District Court for the Southern District of Florida. The settlement agreements, settlement classes, and notice to the classes were preliminarily approved in July 2007. Notice was effected on the classes in August 2007, and a hearing regarding final approval of the settlements is scheduled for November 2007.

 

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This excerpt taken from the CQB 10-Q filed Aug 6, 2007.

Item 1 - Legal Proceedings

The information concerning the Justice Department investigation provided in Note 3 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q is hereby incorporated by reference into this Item.

Three separate lawsuits have been filed against the company in U.S. federal court claiming that the company is liable for alleged tort violations committed in Colombia. The first lawsuit was filed on June 7, 2007 in the U.S. District Court for the District of Columbia; the second was filed on June 13, 2007 in the U.S. District Court for the Southern District of Florida; and the third, a proposed class action, was filed on July 18, 2007 in the U.S. District Court for the District of New Jersey. The plaintiffs in all three suits claim to be, or claim to be members of a class of, family members or legal heirs of individuals allegedly killed by armed groups that received payments from the company’s former Colombian subsidiary. The plaintiffs claim that, as a result of such payments, the company should be held legally responsible for the death of plaintiffs’ family members. The lawsuits seek unspecified monetary damages. The company believes it has meritorious defenses to the plaintiffs’ claims and intends to defend itself vigorously against the lawsuits.

Reference is made to the company’s Annual Report on Form 10-K for the year ended December 31, 2006, and the discussion under “Part I, Item 3 - Legal Proceedings - Competition Law Proceedings” of the investigation regarding potential violations of European competition laws and the class action lawsuits filed in the U.S. District Court for the Southern District of Florida.

On July 24, 2007, the company received a Statement of Objections from the European Commission in relation to the European competition law matter. A Statement of Objections is a procedural document whereby the European Commission communicates its preliminary view in relation to a possible infringement of European Union competition laws and allows the companies identified in the document to present arguments in response. The company will study the Statement of Objections carefully and respond to the Commission in due course.

In relation to the U.S. class action lawsuits, the company entered into a settlement agreement in May 2007 with all named plaintiffs in the direct purchaser action. Pursuant to the settlement, the company paid $2.5 million into a class escrow fund in June 2007. In June 2007, the company also entered into a settlement agreement with all named plaintiffs in the indirect purchaser action, which requires the company to donate to charity fruit products with a retail value of approximately $1 million. The other defendants in both cases have entered into similar or identical settlement agreements. All of these settlements still require formal court approval before becoming final and binding on both classes.

 

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This excerpt taken from the CQB 10-Q filed May 4, 2007.

Item 1 - Legal Proceedings

The information concerning the Justice Department investigation and the Italian customs cases provided in Note 2 to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q is hereby incorporated by reference into this Item.

This excerpt taken from the CQB 10-Q filed Nov 9, 2006.

Item 1 - Legal Proceedings

Reference is made to Part I, Item 3 - Legal Proceedings in the company’s 2005 Annual Report on Form 10-K, and the description included under “Italian Customs Cases” of certain proceedings pending in Italy relating to customs duties allegedly owed by Chiquita Italia, the company’s Italian subsidiary, and others as a result of the use of banana import licenses in 1998-2000 which turned out to have been forged. In October 2006, Chiquita Italia received notice in a proceeding in the court of first instance, that the court had determined that Chiquita Italia was jointly liable for a claim of €4.7 million plus interest accrued from November 2004. Chiquita Italia intends to appeal this finding; the applicable appeal would involve de novo review of the entire factual record of the case as well as all the legal arguments, including those presented during the appeals process, and the appellate court can render a decision on the case that disregards or substantially modifies the lower court’s opinion. Pending appeal, Chiquita Italia will be required to post a bank guarantee in the amount of approximately €5 million.

 

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This excerpt taken from the CQB 10-Q filed Aug 4, 2006.

Item 1 - Legal Proceedings

Reference is made to the description in Part I – Item 3 – Legal Proceedings in the company’s Annual Report on Form 10-K for 2005 (the “10-K”) under the caption “Personal Injury Cases” of certain cases filed against the company and others alleging injuries as a result of exposure to DBCP in the 1970’s. The purported class action in Hawaii which was referred to as dormant has recently become more active. The company believes that it has meritorious defenses to this and all other DBCP cases, as indicated in the 10-K.

Reference is made to the description in Part I – Item 3 – Legal Proceedings in the company’s 10-K under “Competition Law Proceedings” of certain class action lawsuits in federal court in Florida against the company and three competitors by direct and indirect purchasers of bananas. The six “direct-purchaser” cases have been consolidated into one case, and one of the “indirect-purchaser” cases has been dismissed; accordingly, there are now two pending cases. In May 2006, the defendants’ motion to dismiss the direct-purchaser cases was denied. In May 2006, the company and the other defendants also filed a motion to dismiss the indirect-purchaser case. The company continues to believe that these lawsuits are without merit.

This excerpt taken from the CQB 10-K filed Mar 1, 2006.

ITEM 3 - LEGAL PROCEEDINGS

Justice Department Investigation. In April 2003, the company’s management and audit committee, in consultation with the board of directors, voluntarily disclosed to the U.S. Department of Justice, Criminal Division (the “Justice Department”), that its banana producing subsidiary in Colombia, which was sold in June 2004, had been forced to make “protection” payments to certain groups in that country which had been designated under United States law as foreign terrorist organizations. The company’s sole reason for allowing its subsidiary to submit to these payment demands had been to protect its employees from the risks to their safety if the payments were not made. The voluntary disclosure to the Justice Department was made because the company’s management became aware that these groups had been designated as foreign terrorist organizations under a U.S. statute that makes it a crime to support such an organization. The company requested the Justice Department’s guidance. Following the voluntary disclosure, the Justice Department undertook an investigation, including consideration by a grand jury. The company has cooperated with that investigation. In March 2004, the Justice Department advised that, as part of its criminal investigation, it would be evaluating the role and conduct of the company and some of its officers in the matter. In September-October 2005, the company was advised that the investigation is continuing and that the conduct of the company and some of its officers and directors remains within the scope of the investigation. The company intends to continue its cooperation with this investigation, but it cannot predict its outcome or any possible adverse effect on the company (including the materiality thereof), which could include the imposition of fines and/or penalties.

Italian Customs Cases. There are multiple pending proceedings involving potential liability of the company’s Italian subsidiary Chiquita Italia S.p.A. (“Chiquita Italia”) for additional customs duties on the import of bananas by Socoba S.r.l. (“Socoba”) into Italy during the years 1998 to 2000 for sale to Chiquita Italia. The duties are alleged to be due because these imports were made with licenses that were purportedly issued by the Spanish Ministry of Foreign Trade but were subsequently determined to have been forged. The amount of potential liability is based on the difference between the tariff rate for Latin American bananas imported with valid licenses (€75 per metric ton) and the tariff rate for Latin American

 

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bananas imported without valid licenses (€850 per metric ton), plus related taxes and interest. The authorities contend that Chiquita Italia should be jointly liable with Socoba because (a) Socoba was controlled by the former general manager of Chiquita Italia and allegedly managed for the benefit of Chiquita Italia and (b) the import transactions benefited Chiquita Italia, which arranged for Socoba to purchase the bananas from another Chiquita subsidiary and, after customs clearance, sell them to Chiquita Italia. In the first of these proceedings, Chiquita Italia received a notice of assessment in 2004 from customs authorities in Trento, Italy stating that Chiquita Italia, Socoba, the former managing director of Chiquita Italia and the managing director of Socoba are jointly and severally liable for approximately € 4.6 million of duties and taxes, plus interest, related to imports cleared in Trento. Subsequently, in May 2005 Chiquita Italia received notice of an investigation underway by customs authorities in Genoa, Italy into the possible joint liability of Chiquita Italia and Socoba for approximately €26.9 million (approximately $32 million) of duties and taxes, plus interest (an estimated €13.4 million, or approximately $16 million, of interest having accrued to date). The scope of the Genoa investigation includes all banana imports into Italy by Socoba for sale to Chiquita Italia that used the purported Spanish licenses, including imports cleared by customs authorities in Genoa, Trento and other Italian jurisdictions. Therefore, any amounts ultimately paid by Chiquita Italia in the Trento proceeding, or any similar proceedings in other jurisdictions, should reduce any ultimate liability of Chiquita Italia arising out of the Genoa investigation. In addition to the Trento assessment, Chiquita has thus far received assessments from customs authorities in Genoa and another jurisdiction totaling approximately €9.2 million. Chiquita Italia has appealed the Trento assessment to the Tax Commission in Trento and will appeal all other assessments, through appropriate procedures, on the bases that (a) Chiquita Italia had a good faith belief at the time the import licenses were obtained and used, that they were valid and (b) no Chiquita entity has ever had an ownership interest in Socoba, and Chiquita Italia should therefore not be held responsible for the acts of Socoba. In addition, Chiquita Italia has intervened in a judicial action filed by Socoba in Genoa, now in Rome, in March 2005 for a declaratory judgment that the Spanish licenses in question should be regarded as genuine. The Company’s Italian subsidiary has requested suspension of payment, pending appeal, of the Trento assessment and intends to request suspension of payment of all other assessments. The authorities may require the Italian subsidiary to post bank guarantees for the full amounts assessed as a condition to suspension of payment.

An unrelated “false license” case involves licenses used in 1998 to import bananas for Chiquita Italia that were obtained by an independent Italian license broker from the Italian Ministry of Foreign Trade on the basis of allegedly false license applications. In that case, in 1999 and 2002 the customs authorities in Trento assessed Chiquita Italia an aggregate of approximately €1.2 million of additional customs duties and taxes, plus interest (an estimated €0.6 million of interest having accrued to date). In 2004, an appellate court in Trento upheld the assessments, which Chiquita Italia is appealing to the Court of Cassation (the highest court in Italy) on the basis that it had no reason to know that the broker’s applications were false. In June 2004, at the conclusion of a related criminal investigation into the involvement of the current managing director of Chiquita Italia in this “false license” situation, an investigative judge found that the managing director did not engage in illegal conduct with respect to the use of those licenses. The public prosecutor in Trento appealed this decision. In May 2005, an appellate court in Trento affirmed the finding that the managing director did not know the licenses were fraudulently obtained, but convicted him of engaging in a license usage transaction whose structure was “fraudulent” and sentenced him to one year in prison, which it conditionally suspended. The structure in question, which the company believes was common in the industry, involved the sale of bananas by a Chiquita subsidiary to a license holder, who, after using the license to clear customs, sold the bananas to Chiquita Italia. The managing director has appealed this decision to the Court of Cassation on the basis that governmental authorities in Italy and elsewhere in the EU have confirmed the legality of the transaction structure in question.

 

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Personal Injury Cases. Between October 2004 and May 2005, four lawsuits were filed in Superior Court of California, Los Angeles County against two manufacturers of an agricultural chemical called DBCP, as well as three banana producing companies, including the company, that used DBCP. The approximately 4,800 plaintiffs in these U.S. lawsuits claim to have been workers on banana farms in Costa Rica, Panama, Guatemala and Honduras owned or managed by the defendant banana companies and allege sterility and other injuries as a result of exposure to DBCP. In October 2005, the company learned of a lawsuit filed against the same defendants, including the company, in civil court in the City of David, Panama on behalf of approximately 400 persons who allegedly suffered a variety of injuries and illnesses, mostly other than sterility, resulting from exposure to DBCP. In November 2005, a lawsuit in Panabo City, Philippines on behalf of approximately 2,100 purported banana workers against the same defendants, alleging sterility and other injuries as a result of exposure to DBCP, was served on the company’s Philippine counsel. The U.S. cases have not quantified the alleged damages; the Panamanian case seeks a total of $85 million; and the Philippines case seeks approximately $50,000 per plaintiff. No evidence has yet been offered in the Panama or Philippines lawsuits to support the plaintiffs’ alleged exposure to DBCP or the allegations of injury or illness. Similarly, little or no substantive discovery has occurred in the U.S. cases. None of these suits identify how many of the approximately 7,300 total named plaintiffs purport to have claims against Chiquita, as opposed to other banana company defendants. Although the company has little information with which to evaluate these lawsuits, it believes it has meritorious defenses, including the fact that the company used DBCP commercially only from 1973 to 1977 while it was registered for use by the U.S. Environmental Protection Agency and, to its knowledge, never used DBCP commercially in either Guatemala or Honduras. The EPA did not revoke DBCP’s registration for use until 1979. In the Philippines, the company never had any agricultural workers and purchased all of its bananas from an independent grower.

The company had previously settled (in 1998 for $4.7 million) virtually all of the DBCP cases that had been brought against it and other defendants in U.S. and foreign courts on behalf of approximately 4,000 claimants in Panama, the Philippines and Costa Rica. (A purported DBCP class action in Hawaii state court that had identified 11 claimants against the three banana producing companies and alleged an indeterminate number of other claimants was not settled and remains pending but dormant. In addition, a number of Philippine settling claimants represented by new counsel subsequently challenged in Philippine court whether the settlement funds were properly distributed to these claimants.) At the time these cases were settled, the company believed that these settlements covered the great preponderance of workers who could have had claims against the company arising in these three countries. To the company’s knowledge, the company did not use DBCP in other countries.

Over the last 19 years, a number of claims have been filed against the company on behalf of merchant seamen or their personal representatives alleging injury or illness from exposure to asbestos while employed as seamen on company-owned ships at various times from the mid-1940s until the mid-1970s. The claims are based on allegations of negligence and unseaworthiness. In these cases, the company is typically one of many defendants, including manufacturers and suppliers of products containing asbestos, as well as other shipowners. Six of these cases are pending in state courts in various stages of activity. Over the past eight years, 25 state court cases have been settled and 34 have been resolved without any payment. In addition to the state court cases, there are approximately 5,300 federal court cases that are currently inactive (known as the “MARDOC” cases). The MARDOC cases are managed under the supervision of the U.S. District Court for the Eastern District of Pennsylvania (the “Federal Court”). In 1996, the Federal Court administratively dismissed all then pending MARDOC cases without prejudice for failure to provide evidence of asbestos-related disease or exposure to asbestos. Under this order, all MARDOC cases subsequently filed against the company have also been administratively dismissed. The MARDOC cases are subject to reinstatement by the Federal Court upon a showing of some evidence of asbestos-related disease, exposure to asbestos and service on the company’s

 

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ships. While six MARDOC cases have been reinstated against the company, one of the cases has been dismissed and there has been little activity in the remaining five reinstated cases to date. As a matter of law, punitive damages are not recoverable in seamen’s asbestos cases. Although the company has very little factual information with which to evaluate these maritime asbestos claims, management does not believe, based on information currently available to it and advice of counsel, that these claims will, individually or in the aggregate, have a material adverse effect on the financial statements of the company.

Competition Law Proceedings. In June 2005, Chiquita announced that its management had recently become aware that certain of its employees had shared pricing and volume information with competitors in Europe over many years in violation of European competition laws and company policies, and may have engaged in several instances of other conduct which did not comply with European competition laws or applicable company policies. The company promptly stopped the conduct and notified the European Commission (“EC”) and other regulatory authorities of these matters; and the company is cooperating with the related investigation subsequently commenced by the EC. Based on the company’s voluntary notification and cooperation with the investigation, the EC notified Chiquita that it would be granted immunity from any fines related to the conduct, subject to customary conditions, including the company’s continuing cooperation with the investigation. Accordingly, Chiquita does not expect to be subject to any fines by the EC. However, if at the conclusion of its investigation, which could continue until 2007 or later, the EC were to determine, among other things, that Chiquita did not continue to cooperate, then the company could be subject to fines, which, if imposed, could be substantial. The company does not believe that the reporting of these matters or the cessation of the conduct should have any material adverse effect on the regulatory or competitive environment in which it operates, although there can be no assurance in this regard.

In July through November 2005, eight class action lawsuits were filed in the U.S. District Court for the Southern District of Florida against the company and three of its competitors on behalf of entities that purchased bananas in the United States either directly (6 cases) or indirectly (2 cases) from the defendants from May 1999 to the present. The complaints allege that the defendants engaged in a conspiracy to artificially raise or maintain prices and control and restrict output of bananas in the United States. The plaintiffs seek treble damages for violation of Section 1 of the Sherman Antitrust Act. The complaints provide no specific information regarding the allegations. The cases involving the indirect purchasers are currently pending before one judge, and the cases involving the direct purchaser defendants are pending before a different judge. The company expects them to be coordinated, but not consolidated. The company believes that the lawsuits are without merit. In December 2005, the company and other defendants filed a motion to dismiss the cases involving direct purchasers.

A number of other legal actions are pending against the company. Based on information currently available to the company and on advice of counsel, management does not believe these other legal actions will, individually or in the aggregate, have a material adverse effect on the financial statements of the company.

This excerpt taken from the CQB 10-Q filed Nov 7, 2005.

Item 1 - Legal Proceedings

 

Reference is made to the discussion in Part II - Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 relating to five class action lawsuits that were filed in the U.S. District Court for the Southern District of Florida against the Company and three of its competitors. The suits were filed on behalf of entities that purchased bananas in the United States directly from one or more of the defendants and allege that the defendants engaged in a conspiracy to artificially raise or maintain prices and control and restrict output of bananas in the United States. Subsequent to the date of the Form 10-Q for the second quarter, three additional lawsuits were filed in the same court, including one purporting to be on behalf of “indirect” banana purchasers. The Company expects that all the pending lawsuits will be consolidated into one case. The Company continues to believe that the lawsuits are without merit.

 

As described in Part II – Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, between October 2004 and May 2005, four lawsuits were filed in Superior Court of California, Los Angeles County against two manufacturers of an agricultural chemical called DBCP, as well as three banana producing companies, including the Company, that used DBCP. The plaintiffs in these U.S. lawsuits claim to have been workers on banana farms in Costa Rica, Panama, Guatemala and Honduras, owned or managed by the defendant banana companies and allege sterility and other injuries as a result of exposure to DBCP. In October 2005, the Company learned of a lawsuit filed against the same defendants, including the Company, in civil court in the City of David, Panama on behalf of approximately 400 persons who allegedly suffered a variety of injuries and illnesses, mostly other than sterility, resulting from exposure to DBCP. However, no evidence or argument has yet been offered in the Panama lawsuit to support or explain the plaintiffs’ alleged exposure to DBCP, the allegations of injury or illness, or the amount demanded ($85 million). Similarly, little or no substantive discovery has occurred in the U.S. cases, where the alleged damages have not yet been quantified. None of the U.S. or Panamanian suits identify how many of the approximately 5,800 total named plaintiffs purport to have claims against the Company, as opposed to other banana company defendants. Although the Company has little information with which to evaluate these lawsuits, it believes it has meritorious defenses, including the fact that the Company used DBCP commercially only from 1973 to 1977 while it was registered for use by the U.S. Environmental Protection Agency and to its knowledge never used DBCP commercially in either Guatemala or Honduras. The EPA did not revoke DBCP’s registration for use until 1979.

 

In 1998, the Company settled, for $4.7 million, virtually all of the then pending DBCP cases against it, which had been brought in U.S. and foreign courts on behalf of approximately 4,000 claimants in Panama, the Philippines and Costa Rica. (A purported DBCP class action in Hawaii state court that had identified 11 claimants against the three banana producing companies and alleged an indeterminate number of other claimants was not settled and remains pending but dormant). At that time, the Company believed that these settlements covered the great preponderance of workers who could have had claims against the Company arising in these three countries. To the Company’s knowledge, the Company did not use DBCP in other countries.

 

This excerpt taken from the CQB 10-Q filed May 10, 2005.

Item 1 - Legal Proceedings

 

The Company’s management has recently become aware that certain of its employees previously engaged in conduct which the Company believes did not comply with certain laws governing trade regulation. The Company has notified the appropriate regulatory authorities of this conduct and that it will fully cooperate with any related investigations. The Company believes that such matters should not result in any substantial fines. It is possible that, following completion of the investigations and any determination of wrongdoing, litigation could result, although the Company does not presently believe that the reported conduct should give rise to any material liabilities from such litigation.

 

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As described in “Part I - Item 3, Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, in October 2004, a lawsuit was filed in Superior Court of California, Los Angeles County against two manufacturers of an agricultural chemical called DBCP, as well as three banana producing companies, including the Company, that used DBCP. The plaintiffs in that suit claim to have been workers on banana farms in Costa Rica owned or managed by the defendant banana companies and allege sterility and other injuries as a result of exposure to DBCP. In April 2005, similar lawsuits were filed in the same court against the same defendants on behalf of plaintiffs claiming to have been workers on banana farms in Guatemala, Honduras and Panama. None of these lawsuits identify how many of the approximately 4,800 named plaintiffs purport to have claims against the Company, as opposed to other banana company defendants. Nor have the plaintiffs alleged damages yet been quantified. Although the Company has little information with which to evaluate this lawsuit, it believes it has meritorious defenses, including the fact that the Company used DBCP commercially in Costa Rica and Panama only from 1973 to 1977 while it was registered for use by the U.S. Environmental Protection Agency and to its knowledge never used DBCP commercially in either Guatemala or Honduras. The EPA did not revoke DBCP’s registration for use until 1979.

 

In 1998, the Company settled, for $4.7 million, virtually all of the then pending DBCP cases against it, which had been brought in U.S. and foreign courts on behalf of approximately 4,000 claimants in Panama, the Philippines and Costa Rica. (A purported DBCP class action in Hawaii state court that had identified 11 claimants against the three banana producing companies and alleged an indeterminate number of other claimants was not settled and remains pending.) At that time, the Company believed that these settlements covered the great preponderance of workers who could have had claims against the Company arising in these three countries.

 

This excerpt taken from the CQB 10-K filed Mar 16, 2005.

ITEM 3 - LEGAL PROCEEDINGS

 

In April 2003, CBII’s management and audit committee, in consultation with the board of directors, voluntarily disclosed to the U.S. Department of Justice that its banana producing subsidiary in Colombia, which was sold in June 2004, had been forced to make “protection” payments to certain groups in that country which have been designated under United States law as foreign terrorist organizations. CBII’s sole reason for allowing its subsidiary to submit to these payment demands had been to protect its employees from the risks to their safety if the payments were not made. The voluntary disclosure to the Justice Department was made because management became aware that these groups had been designated as foreign terrorist organizations under a U.S. statute that makes it a crime to support such an organization. Chiquita requested the Justice Department’s guidance. Following the voluntary disclosure, the Department undertook an investigation. Chiquita has cooperated with that investigation. In late March 2004, the Department of Justice advised that, as part of its criminal investigation, it will be evaluating the role and conduct of CBII and some of its officers in the matter. CBII intends to continue its cooperation with this investigation, but Chiquita cannot predict its outcome or any possible adverse effect on it, which could include the imposition of fines.

 

In early September 2004, the Company voluntarily disclosed to the SEC and the Department of Justice that in 2003 its Greek subsidiary made a payment of approximately €14,700 that may not comply with the U.S. Foreign Corrupt Practices Act. The payment, which was made in connection with the settlement of a local tax audit, was made in contravention of Company policies. These agencies have requested certain additional information and the Company has complied with that request and will cooperate with any further inquiry or investigation. While the Company has taken corrective and disciplinary action, it cannot predict the outcome of this matter, including whether these agencies would seek to impose fines and/or view this matter as involving a violation of the 2001 order discussed in the next sentence. Under a settlement reached with the SEC in 2001, the Company paid a $100,000 fine and consented to a finding that, as a result of similar payments by its former Colombian subsidiary in 1996-97, the Company had violated the books and records and internal controls provisions of the Securities Exchange Act of 1934 (“Exchange Act”). The Company also consented to an order that it cease and desist from committing or causing any future violations of these provisions.

 

In October 2004, a lawsuit was filed in Superior Court of California, Los Angeles County against two manufacturers of an agricultural chemical called DBCP, as well as three banana producing companies, including the Company, that used DBCP. The plaintiffs claim to have been workers on banana farms in Costa Rica owned or managed by the defendant banana companies and allege sterility and other injuries as a result of exposure to DBCP. The suit does not identify how many of the approximately 2,600 named plaintiffs purport to have claims against the Company, as opposed to other banana company defendants. Nor have the plaintiffs’ alleged damages yet been quantified. Although the Company has little information with which to evaluate this lawsuit, it believes it has meritorious defenses, including the fact that the Company used DBCP commercially only from 1973 to 1977 while it was registered for use by the U.S. Environmental Protection Agency. The EPA did not revoke DBCP’s registration for use until 1979.

 

In 1998, the Company settled, for $4.7 million, virtually all of the then pending DBCP cases against it, which had been brought in U.S. and foreign courts on behalf of approximately 4,000 claimants in Panama, the Philippines and Costa Rica. (A purported DBCP class action in Hawaii state court that had identified 11 claimants against the three banana producing companies and alleged an indeterminate number of other claimants was not settled and remains pending). At that time, the Company believed that these settlements covered the great preponderance of workers who could have had claims against the Company arising in these three countries. To the Company’s knowledge, the Company did not use DBCP in other countries.

 

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In October 2004, the Company’s Italian subsidiary received a notice of assessment from Customs authorities in Trento, Italy stating that this subsidiary and two individuals, including the subsidiary’s former managing director, are jointly and severally liable for approximately €4.2 million. This amount represents additional duties on the import of certain bananas into the European Union from 1998 to 2000, plus related taxes and interest. The notice states that these amounts are due because the bananas were imported with licenses that were subsequently determined to have been forged. The Company intends to appeal the assessment, through appropriate proceedings, on the basis of its good faith belief at the time the import licenses were obtained and used that they were valid.

 

Over the last 18 years, a number of claims have been filed against the Company on behalf of merchant seamen or their personal representatives alleging injury or illness from exposure to asbestos while employed as seamen on Company-owned ships at various times from the mid-1940s until the mid-1970s. The claims are based on allegations of negligence and unseaworthiness. In these cases, the Company is typically one of many defendants, including manufacturers and suppliers of products containing asbestos, as well as other shipowners. Eight of these cases are pending in state courts in various stages of activity. Over the past six years, 23 state court cases have been settled and 31 have been resolved without any payment. In addition to the state court cases, there are approximately 5,250 federal court cases that are currently inactive (known as the “MARDOC” cases). The MARDOC cases are managed under the supervision of the U.S. District Court for the Eastern District of Pennsylvania (the “Federal Court”). In 1996, the Federal Court administratively dismissed all then pending MARDOC cases without prejudice for failure to provide evidence of asbestos-related disease or exposure to asbestos. Under this order, all MARDOC cases subsequently filed against the Company have also been administratively dismissed. The MARDOC cases are subject to reinstatement by the Federal Court upon a showing of some evidence of asbestos-related disease, exposure to asbestos and service on the Company’s ships. While six MARDOC cases have been reinstated against the Company, one of the cases has been dismissed and there has been little activity in the remaining five reinstated cases to date. As a matter of law, punitive damages are not recoverable in seamen’s asbestos cases. Although the Company has very little factual information with which to evaluate these maritime asbestos claims, management does not believe, based on information currently available to it and advice of counsel, that these claims will, individually or in the aggregate, have a material adverse effect on the financial statements of the Company.

 

In January 2001, the Company filed a lawsuit in the Court of First Instance of the European Court of Justice claiming damages from the European Commission (the EU’s executive body) for not carrying out the EU’s commitment to reform its banana import regime to comply with 1997 WTO rulings. The lawsuit sought more than $500 million for damages inflicted on the Company from January 1999 until the regime’s reform in July 2001. In February 2005, the Court of First Instance ruled against the Company. The Company will not appeal this decision.

 

A number of other legal actions are pending against the Company. Based on information currently available to the Company and on advice of counsel, management does not believe these other legal actions will, individually or in the aggregate, have a material adverse effect on the financial statements of the Company.

 

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