|
COMMITMENTS AND CONTINGENCIES
|
9 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2011
|
Dec. 31, 2010
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 various claims and
contingencies in the ordinary course of its
business, including those related to litigation,
business transactions, employee-related matters,
and others. When the Company is aware of a claim or
potential claim, it assesses the likelihood of any
loss or exposure. If it is probable that a loss
will result and the amount of the loss can be
reasonably estimated, the Company will record a
liability for the loss. If the loss is not probable
or the amount of the loss cannot be reasonably
estimated, the Company discloses the claim if the
likelihood of a potential loss is reasonably
possible and the amount involved could be material.
While there can be no assurances, the Company does
not expect that any of its pending legal
proceedings will have a material financial impact
on the Company’s results.
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. In November 2011, the
case was settled. See Note 12.
|
Commitments
– The following is a description of significant
commitments at December 31, 2010:
Operating
Leases – Future minimum lease payments
required by non-cancelable operating leases in effect at
December 31, 2010 are as follows (in thousands):
Total
rent expense during the years ended December 31, 2010 and
2009 was $1,598,000 and $2,320,000, respectively.
Sales
Commitments – At December 31, 2010, the
Company had entered into sales contracts with its major
customers to sell certain quantities of ethanol, WDG and
syrup. 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):
Purchase
Commitments – At December 31, 2010, the
Company had fixed-price purchase contracts with its
suppliers to purchase $4,688,000 of ethanol and
indexed-price purchase contracts with its suppliers to
purchase 18,500 gallons of ethanol. These fixed- and
indexed-price commitments will be satisfied throughout
2011.
Contingencies
– The following is a description of significant
contingencies at December 31, 2010:
Litigation
– General – The Company is subject
to various claims and contingencies in the ordinary
course of its business, including those related to
litigation, business transactions, employee-related
matters, and others. When the Company is aware of a
claim or potential claim, it assesses the likelihood of
any loss or exposure. If it is probable that a loss
will result and the amount of the loss can be
reasonably estimated, the Company will record a
liability for the loss. If the loss is not probable or
the amount of the loss cannot be reasonably estimated,
the Company discloses the claim if the likelihood of a
potential loss is reasonably possible and the amount
involved could be material. While there can be no
assurances, the Company does not expect that any of its
pending legal proceedings will have a material
financial impact on the Company’s results.
Litigation
– Delta-T Corporation – On August 18,
2008, Delta-T Corporation filed suit in the United States
District Court for the Eastern District of Virginia (the
“First Virginia Federal Court case”), naming
Pacific Ethanol, Inc. as a defendant, along with its
former subsidiaries Pacific Ethanol Stockton, LLC,
Pacific Ethanol Imperial, LLC, Pacific Ethanol Columbia,
LLC, Pacific Ethanol Magic Valley, LLC and Pacific
Ethanol Madera, LLC. The suit alleged breaches of the
parties’ Engineering, Procurement and Technology
License Agreements, breaches of a subsequent term sheet
and letter agreement and breaches of indemnity
obligations. The complaint sought specified contract
damages of approximately $6,500,000, along with other
unspecified damages. All of the defendants moved to
dismiss the First Virginia Federal Court case for lack of
personal jurisdiction and on the ground that all disputes
between the parties must be resolved through binding
arbitration, and, in the alternative, moved to stay the
First Virginia Federal Court case pending arbitration. In
January 2009, these motions were granted by the Court,
compelling the case to arbitration with the American
Arbitration Association (the “AAA”). By
letter dated June 10, 2009, the AAA notified the parties
to the arbitration that the matter was automatically
stayed as a result of the Chapter 11 Filings.
On
March 18, 2009, Delta-T Corporation filed a
cross-complaint against Pacific Ethanol, Inc. and Pacific
Ethanol Imperial, LLC in the Superior Court of the State
of California in and for the County of Imperial. The
cross-complaint arose out of a suit by OneSource
Distributors, LLC against Delta-T Corporation. On March
31, 2009, Delta-T Corporation and Bateman Litwin N.V, a
foreign corporation, filed a third-party complaint in the
United States District Court for the District of
Minnesota naming Pacific Ethanol, Inc. and Pacific
Ethanol Imperial, LLC as defendants. The third-party
complaint arose out of a suit by Campbell-Sevey, Inc.
against Delta-T Corporation. On April 6, 2009, Delta-T
Corporation filed a cross-complaint against Pacific
Ethanol, Inc. and Pacific Ethanol Imperial, LLC in the
Superior Court of the State of California in and for the
County of Imperial. The cross-complaint arose out of a
suit by GEA Westfalia Separator, Inc. against Delta-T
Corporation. Each of these actions allegedly related to
the aforementioned Engineering, Procurement and
Technology License Agreements and Delta-T
Corporation’s performance of services thereunder.
The third-party suit and the cross-complaints asserted
many of the factual allegations in the First Virginia
Federal Court case and sought unspecified damages.
On
June 19, 2009, Delta-T Corporation filed suit in the
United States District Court for the Eastern District of
Virginia (the “Second Virginia Federal Court
case”), naming Pacific Ethanol, Inc. as the sole
defendant. The suit alleged breaches of the
parties’ Engineering, Procurement and Technology
License Agreements, breaches of a subsequent term sheet
and letter agreement, and breaches of indemnity
obligations. The complaint sought specified contract
damages of approximately $6,500,000, along with other
unspecified damages.
In
connection with the Chapter 11 Filings, the Plant Owners
moved the Bankruptcy Court to enter a preliminary
injunction in favor of the Plant Owners and Pacific
Ethanol, Inc. staying and enjoining all of the
aforementioned litigation and arbitration proceedings
commenced by Delta-T Corporation. On August 6, 2009, the
Bankruptcy Court ordered that the litigation and
arbitration proceedings commenced by Delta-T Corporation
be stayed and enjoined until September 21, 2009 or
further order of the court, and that the Plant Owners,
Pacific Ethanol, Inc. and Delta-T Corporation complete
mediation by September 20, 2009 for purposes of settling
all disputes between the parties. Following mediation,
the parties reached an agreement under which a stipulated
order was entered in the Bankruptcy Court on September
21, 2009, providing for a complete mutual release and
settlement of any and all claims between Delta-T
Corporation and the Plant Owners, a complete reservation
of rights as between Pacific Ethanol, Inc. and Delta-T
Corporation, and a stay of all proceedings by Delta-T
Corporation against Pacific Ethanol, Inc. until December
31, 2009. As a result of the complete mutual release and
settlement, the Company recorded a gain of approximately
$2,008,000 in reorganization costs for the year ended
December 31, 2009.
On
March 1, 2010, Delta-T Corporation resumed active
litigation of the Second Virginia Federal Court case by
filing a motion for entry of a default judgment. Also on
March 1, 2010, Pacific Ethanol, Inc. filed a motion for
extension of time for its first appearance in the Second
Virginia Federal Court case and also filed a motion to
dismiss Delta-T Corporation’s complaint based on
the mandatory arbitration clause in the parties’
contracts, and alternatively to stay proceedings during
the pendency of arbitration. These motions were argued on
March 31, 2010. The Court ruled on the motions in May
2010, denying Delta-T Corporation’s motion for
entry of a default judgment, and compelling the case to
arbitration with the AAA.
On
May 25, 2010, Delta-T Corporation filed a Voluntary
Petition in the Bankruptcy Court for the Eastern District
of Virginia under Chapter 7 of the Bankruptcy Code. The
Company believes that Delta-T Corporation has liquidated
its assets and abandoned its claims against the
Company.
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 the 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. Messrs. Jones and Turner are directors of
Pacific Ethanol. Mr. Turner is a former 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.
Litigation
– Barry Spiegel – Federal Court Action
– On December 28, 2006, Barry J. Spiegel, filed a
complaint in the United States District Court, Southern
District of Florida (Case No. 06-61848), or the Federal
Court Action, against the Individual Defendants and
Pacific Ethanol. The Federal Court Action relates to the
Share Exchange Transaction and purports to state the
following three counts: (i) violations of Section 14(a)
of the Securities Exchange Act of 1934, as amended, or
Exchange Act, and SEC Rule 14a-9 promulgated thereunder,
(ii) violations of Section 10(b) of the Exchange Act and
Rule 10b-5 promulgated thereunder, and (iii) violation of
Section 20(A) of the Exchange Act. The first two counts
are alleged against the Individual Defendants and Pacific
Ethanol and the third count is alleged solely against the
Individual Defendants. Mr. Spiegel bases his claims on,
among other things, allegations that the actions of the
Individual Defendants and Pacific Ethanol in connection
with the Share Exchange Transaction resulted in a share
exchange ratio that was unfair and resulted in the
preparation of a proxy statement seeking shareholder
approval of the Share Exchange Transaction that contained
material misrepresentations and omissions. Mr. Spiegel is
seeking in excess of $15.0 million in damages.
Mr.
Spiegel amended the Federal Court Action on March 5,
2007, and Pacific Ethanol and the Individual Defendants
filed a Motion to Dismiss the amended pleading on April
23, 2007. Plaintiff Spiegel sought to stay his own
federal case, but the Motion was denied on
July 17, 2007. The court required Mr. Spiegel to
respond to the Company’s Motion to Dismiss. On
January 15, 2008, the court rendered an Order
dismissing the claims under Section 14(a) of the
Exchange Act on the basis that they were time barred
and that more facts were needed for the claims under
Section 10(b) of the Exchange Act. The court, however,
stayed the entire case pending resolution of the State
Court Action. On November 9, 2011, the Company and
parties to the Spiegel cases entered into a
confidential settlement agreement to settle all matters
relating to the State Court Action and the Federal
Court Action. The settlement agreement
became effective on November 21, 2011 whereupon the
State Court Action and the Federal Court Action were
dismissed with prejudice.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||