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Note 7 - Contingencies
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3 Months Ended |
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Jul. 01, 2012
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| Commitments and Contingencies Disclosure [Text Block] |
Note
7 – Contingencies
BreathableBaby,
LLC (“BreathableBaby”) filed a complaint against
the Company and Crown Crafts Infant Products, Inc.
(“CCIP”), a wholly-owned subsidiary of the
Company, on January 11, 2012 in the United States District
Court for the District of Minnesota, alleging that
CCIP’s mesh crib liner infringes BreathableBaby’s
patent rights relating to its air permeable infant bedding
technology. The Company believes that it has meritorious
defenses to the claims asserted in the complaint, and the
Company intends to defend itself vigorously against all such
claims. The Company and CCIP filed a motion for
summary judgment of non-infringement on May 14,
2012. On July 25, 2012, the Court entered an order
denying that motion without prejudice to refiling it at the
close of discovery. In doing so, the Court did not
rule on the merits of the Company’s motion, but instead
determined that further discovery was required before a
motion for summary judgment could be decided.
CCIP
has filed an application for a patent related to its mesh
crib liner with the United States Patent and Trademark
Office, and, along with other costs related to CCIP’s
patent application, the Company has capitalized the defense
costs associated with the BreathableBaby litigation in the
accompanying consolidated balance sheets. In the
event of an unfavorable outcome with respect to the
BreathableBaby litigation or a denial of CCIP’s patent
application, the Company would be required to recognize an
impairment charge amounting to these accumulated
costs.
On
or about May 17, 2012, an alleged Maryland purchaser of a
CCIP bedding set filed a complaint against the Company and
CCIP in the United States District Court for the Central
District of California, purportedly on behalf of herself and
all others similarly situated. The complaint
generally alleges that CCIP’s crib bumper products put
children at risk of suffocation or crib death and that the
Company and CCIP concealed and failed to disclose these
purported risks through allegedly false and misleading
advertising and product packaging. The complaint
does not allege that any child has actually been harmed by
these products. The complaint alleges violations
of various consumer protection laws in California, Maryland
and numerous other states. The purported class is
defined in the complaint as “All consumers who, within
the applicable statute of limitations, purchased
defendants’ crib bumper products or bedding sets that
include a crib bumper.” The complaint
alleges an alternative class that would be limited to
residents of Maryland. The complaint seeks damages
for the purported class in an unspecified amount, injunctive
relief, “restitution and disgorgement of all monies
acquired by the defendants by means of any act or
practice” the Court finds to be unlawful, a
Court-ordered “corrective advertising campaign”,
and an award of plaintiffs’ attorneys fees and
costs. The Company believes that it has
meritorious defenses to the claims asserted in the complaint,
and the Company intends to defend itself vigorously against
all such claims. On July 23, 2012, the Company and
CCIP filed an answer to the complaint and a motion to dismiss
certain of the stated claims. This motion is
scheduled to be heard by the Court on August 27, 2012.
In
addition to the foregoing civil complaints, the Company is,
from time to time, involved in various other legal and
regulatory proceedings relating to claims arising in the
ordinary course of its business. Neither the
Company nor any of its subsidiaries is a party to any such
proceeding the outcome of which, individually or in the
aggregate, is expected to have a material adverse effect on
the Company’s financial condition, results of
operations or cash flows.
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