Discovery on all claims and cross-claims is ongoing, and the court has reserved time in
April 2011 for a possible trial.
In January 2009,
Texas Instruments elected under the acquisition agreement to become the controlling party for this lawsuit and will manage and defend the litigation on behalf of both Texas Instruments and us. Although we are working with Texas Instruments to defend
the litigation, we believe that a loss is probable and, as of December 31, 2009, have recorded a reserve of $5.9 million for this matter. There can be no assurances, however, that this reserve will be sufficient to cover the extent of our costs and
potential liability from this or any related matters. Any additional liability in excess of this reserve could have a material adverse effect on our financial condition or results of operations.
Pursuant to the terms of the acquisition agreement entered into
in connection with the 2006 Acquisition, and subject to the limitations set forth in that agreement, Texas Instruments has agreed to indemnify us for certain claims and litigation, including this matter, provided that the aggregate amount of costs
and/or damages from such claims exceeds $30.0 million. If the aggregate amount of costs and/or damages from these claims exceeds $30.0 million, Texas Instruments is obligated to indemnify us for amounts in excess of the $30.0 million threshold up to
a cap on Texas Instruments indemnification obligation of $300.0 million. In January 2010, we notified Texas Instruments that, as of December 31, 2009, we believe we had incurred approximately $26.7 million of costs that apply towards the
indemnification, excluding the $5.9 million reserve noted above. Texas Instruments has reserved all rights to contest that claim, and may dispute all or some portion of the amount we claimed. We believe that our costs and/or damages from the
Whirlpool Litigation and other claims and litigation matters will ultimately exceed $30.0 million.
We are also involved in a related, but separate, proceeding with Texas Instruments insurer, American Alternative
Insurance. On June 3, 2009, Texas Instruments filed a lawsuit against American Alternative seeking reimbursement for its defense costs in the Whirlpool litigation and third party claims. The case, Texas Instruments Incorporated v. American
Alternative Ins. Corp., was filed in the 193rd Court
of Dallas County, Texas, No. DC-09-07045-L. On October 16, 2009, American Alternative filed a third party claim against STI alleging that we assumed liability for the Whirlpool matters under the acquisition agreement referred to in the preceding
paragraph. On that basis, American Alternative has asserted that we owe American Alternative for any amounts that it may ultimately be required to pay to Texas Instruments. Texas Instruments is defending this claim on STIs behalf, and has
filed an answer denying any liability.
Pelonis Appliances: On December 26, 2008, seven individuals filed suit against Pelonis Appliances, Inc., which sells a fan forced heater product, manufactured by GD Midea Environmental Appliances Mfg. Co. Ltd., or GD
Midea, that incorporates one of our thermal cut-off products, which was purchased from one of our distributors. The lawsuit, Cueller v. Pelonis Appliances, Inc., No. 08-16188, 160th Judicial District Court of Dallas County, Texas, arose out of a residential fire that resulted in one
death, personal injuries (including burns) to the other plaintiffs and property damage.
Pelonis demanded indemnity from Sensata in a letter dated May 6, 2009, and we rejected that demand. On June 9, 2009, the plaintiffs amended their complaint to include STI as a defendant. The
plaintiffs seek an unspecified amount of actual and exemplary damages.
On August 3, 2009, we answered the amended complaint, denying any liability. We also asserted cross-claims against Pelonis for indemnification and against Pelonis and GD Midea as responsible third
Discovery is ongoing, and a trial has
been scheduled for August 2, 2010. As of December 31, 2009, we have not recorded a reserve for this matter.