7. COMMITMENTS AND CONTINGENCIES. |
9 Months Ended | |||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Text Block] |
Purchase
Commitments – At September 30, 2011, the Company
had fixed-price purchase contracts with its suppliers to
purchase $17,742,000 of ethanol. These fixed-price contracts
will be satisfied throughout the remainder of 2011. At
September 30, 2011, the Company had indexed-price purchase
contracts with its suppliers to purchase 2,826,000 gallons of
ethanol.
Sales
Commitments – At September 30, 2011, the Company
had entered into sales contracts with its major customers to
sell certain quantities of ethanol and WDG. The volumes
indicated in the indexed price contracts table will be sold
at publicly-indexed sales prices determined by market prices
in effect on their respective transaction dates (in
thousands):
Litigation
– General –
The Company is subject to legal proceedings, claims and
litigation arising in the ordinary course of business. While
the amounts claimed may be substantial, the ultimate
liability cannot presently be determined because of
considerable uncertainties that exist. Therefore, it is
possible that the outcome of those legal proceedings, claims
and litigation could adversely affect the Company’s
quarterly or annual operating results or cash flows when
resolved in a future period. However, based on facts
currently available, management believes that such matters
will not adversely affect the Company’s financial
position, results of operations or cash flows.
Litigation
– Barry Spiegel – State Court
Action– On December 22, 2005, Barry J. Spiegel,
a former shareholder and director of Accessity, filed a
complaint in the Circuit Court of the 17th Judicial District
in and for Broward County, Florida (Case No. 05018512), or
the State Court Action, against Barry Siegel, Philip Kart,
Kenneth Friedman and Bruce Udell, or collectively, the
Individual Defendants. Messrs. Udell and Friedman are former
directors of Accessity and Pacific Ethanol. Mr. Kart is a
former executive officer of Accessity and Pacific Ethanol.
Mr. Siegel is a former director and former executive officer
of Accessity and Pacific Ethanol.
The
State Court Action relates to the Share Exchange Transaction
and purports to state the following five counts against the
Individual Defendants: (i) breach of fiduciary duty, (ii)
violation of the Florida Deceptive and Unfair Trade Practices
Act, (iii) conspiracy to defraud, (iv) fraud, and (v)
violation of Florida’s Securities and Investor
Protection Act. Mr. Spiegel based his claims on allegations
that the actions of the Individual Defendants in approving a
Share Exchange Transaction caused the value of his Accessity
common stock to diminish and is seeking approximately $22.0
million in damages. On March 8, 2006, the Individual
Defendants filed a motion to dismiss the State Court Action.
Mr. Spiegel filed his response in opposition on May 30, 2006.
The court granted the motion to dismiss by Order dated
December 1, 2006, on the grounds that, among other things,
Mr. Spiegel failed to bring his claims as a derivative
action.
On
February 9, 2007, Mr. Spiegel filed an amended complaint
which purports to state the following five counts: (i) breach
of fiduciary duty, (ii) fraudulent inducement, (iii)
violation of Florida’s Securities and Investor
Protection Act, (iv) fraudulent concealment, and (v) breach
of fiduciary duty of disclosure. The amended complaint
included Pacific Ethanol as a defendant. On March 30, 2007,
Pacific Ethanol filed a motion to dismiss the amended
complaint. Before the court could decide that motion, on June
4, 2007, Mr. Spiegel amended his complaint, which purports to
state two counts: (a) breach of fiduciary duty, and (b)
fraudulent inducement. The first count is alleged against the
Individual Defendants and the second count is alleged against
the Individual Defendants and Pacific Ethanol. The amended
complaint was, however, voluntarily dismissed on August 27,
2007, by Mr. Spiegel as to Pacific Ethanol.
Mr.
Spiegel sought and obtained leave to file another amended
complaint on June 25, 2009, which renewed his case against
Pacific Ethanol, and named three additional individual
defendants, and asserted the following three counts: (x)
breach of fiduciary duty, (y) fraudulent inducement, and (z)
aiding and abetting breach of fiduciary duty. The first two
counts are alleged solely against the Individual Defendants.
With respect to the third count, Mr. Spiegel has named
Pacific Ethanol California, Inc. (formerly known as Pacific
Ethanol, Inc.), as well as William L. Jones, Neil M. Koehler
and Ryan W. Turner. Mr. Jones is a director of Pacific
Ethanol. Mr. Turner is a former director and officer of
Pacific Ethanol. Mr. Koehler is a director and officer of
Pacific Ethanol. Pacific Ethanol and the Individual
Defendants filed a motion to dismiss the count against them,
and the court granted the motion. Plaintiff then filed
another amended complaint, and Defendants once again moved to
dismiss. The motion was heard on February 17, 2010, and
the court, on March 22, 2010, denied the motion requiring
Pacific Ethanol and Messrs. Jones, Koehler and Turner to
answer the complaint and respond to discovery
requests.
Discovery
was then taken by all parties, and the Plaintiff served his
expert report in June 2011 relating to the damages that the
Plaintiff is claiming.The deposition of the Plaintiff’s
expert was set for October 2011, and the Defendants have
since filed their motions for summary judgment.The case has
been set for a non-jury trial commencing on Monday, February
27, 2012.
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