Contingencies | Contingencies As part of our consumer services, we offer 24x7x365 member service support. If a member’s identity has been compromised, our member service team and remediation specialists will assist the member until the issue has been resolved. This includes our $1 million service guarantee, which is backed by an identity theft insurance policy, under which we will spend up to $1 million to cover certain third-party costs and expenses incurred in connection with the remediation, such as legal and investigatory fees. This insurance also covers certain out-of-pocket expenses, such as loss of income, replacement of fraudulent withdrawals, and costs associated with child and elderly care, travel, stolen purse/wallet, and replacement of documents. While we have reimbursed members for claims under this guarantee, the amounts in aggregate for the years ended December 31, 2015 , 2014 , and 2013 were not material. On March 13, 2014, we received a request from the FTC for documents and information related to our compliance with the FTC Order. Prior to our receipt of the FTC’s request, we met with FTC Staff on January 17, 2014, at our request, to discuss issues regarding allegations that have been asserted in a whistleblower claim against us relating to our compliance with the FTC Order. On October 29, 2014, we completed our responses to the FTC’s March 13, 2014 request for information, and on January 5, 2015, we provided responses to subsequent FTC requests for additional information. On July 21, 2015 the FTC lodged, under seal, in the United States District Court for the District of Arizona, a motion seeking to hold us in contempt of the FTC Order. On December 17, 2015, we entered into a comprehensive settlement agreement with the FTC, pursuant to which we resolved all matters related to the FTC Contempt Action and the Ebarle Class Action. Under the terms of the settlement, $100 million was placed into the registry of the court overseeing the FTC Contempt Action, $68 million of which is to be distributed to the court overseeing Consumer Class Action to fund the consumer redress contemplated by the Consumer Class Action settlement, and the remaining $32 million of which is authorized to fund consumer redress ordered by any states’ attorneys general, provided that certain conditions are met. If all or part of the $32 million is not used for that purpose, it will revert to the FTC. On January 19, 2015, plaintiffs Napoleon Ebarle and Jeanne Stamm filed a nationwide putative consumer class action lawsuit against us in the United States District Co. for the Northern District of California. The plaintiffs allege that we have engaged in deceptive marketing and sales practices in connection with our membership plans in violation of the Arizona Consumer Fraud Act and seek declaratory judgment under the Federal Declaratory Judgment Act. On March 27, 2015, plaintiffs filed an amended complaint, adding an additional plaintiff, Brian Litton, adding a breach of contract claim, and expanding the class period to include all members enrolled in one of the company’s identity theft protection plans since January 1, 2010, through the present. On November 3, 2015, LifeLock signed an agreement to settle the Ebarle Class Action and release all of the class’s related claims. The Ebarle Class Action settlement remains subject to court approval. On November 4, 2015 , plaintiffs filed a motion for preliminary approval. The hearing on Plaintiffs’ motion for preliminary approval of the class action settlement agreement was held on December 17, 2015, before the court overseeing the Ebarle Class Action. The court overseeing the Ebarle Class Action granted the motion for preliminary approval on January 20, 2016. On February 11, 2016, the court overseeing the FTC Action entered an order allowing the $68 million to be transferred from the court's registry to the settlement administrator in the Ebarle Class Action to fund the settlement. A hearing on final approval will be held on June 23, 2016. As of December 31, 2015 we have $13.0 million accrued for settlement of this claim, which was not included within the $100 million settlement paid to the FTC for settlement of the FTC Contempt Action and nationwide class action claims. In addition, we have $3.0 million accrued for a potential settlement with states attorneys general for related claims. On January 29, 2015, plaintiff Etan Goldman filed a California putative consumer class action complaint against us in Santa Clara Superior Court in San Jose, California. The complaint alleges that we violated California’s Automatic Renewal Law and Unfair Competition Law by failing to provide required disclosures concerning our auto renewal terms and cancellation policies. The complaint also seeks certification of a class consisting of all persons in California who had purchased subscriptions to identity theft protection services from us since December 1, 2010, injunctive relief, compensatory damages, restitution, and attorneys’ fees and costs. On May 15, 2015, the parties executed a class-wide settlement agreement. On February 5, 2016, the Court granted final approval of the settlement. Pursuant to the court-approved settlement, current and former LifeLock members with a California billing address who were enrolled in a LifeLock protection plan or subscription service between December 1, 2010, and July 24, 2015, who did not opt out of the settlement and who paid one or more auto renewed monthly or annual membership fees will automatically receive a cash payment. Cash payments from the settlement fund will be distributed to those class members who did not opt out of the settlement in March 2016. As of December 31, 2015 we have $2.5 million accrued for settlement of this matter. On August 1, 2014, our subsidiaries Lemon and Lemon Argentina, S.R.L. (Lemon Argentina, and together, the Lemon Entities) filed a lawsuit in Santa Clara Superior Court in San Jose, California, against Wenceslao Casares, former General Manager of Lemon, Cynthia McAdam, former General Counsel of Lemon, and Federico Murrone, Martin Apesteguia and Fabian Cuesta, each a former employee and former member of the Board of Directors of Lemon Argentina (the “Argentine Executives”). The complaint alleges breaches of employment-related contracts and breaches of fiduciary duty involving each named individual’s work for third-party Xapo, Inc. and/or Xapo, Ltd. during their employment by the applicable Lemon Entity. The parties, including the Argentine Executives, engaged in mediation in August 2014 in Buenos Aires, Argentina, and again in December 2014 in San Francisco, California, but were unable to settle any claims. On January 30, 2015, the Lemon Entities filed a second amended complaint alleging breaches of employment-related contracts, breaches of fiduciary duties, and fraud, and seeking declaratory relief against Mr. Casares, Ms. McAdam, and the Argentine Executives. Mr. Casares and Ms. McAdam demurred to the Second Amended Complaint on May 1, 2015, which the court overruled in its entirety on July 2, 2015. Mr. Casares and Ms. McAdam answered the Second Amended Complaint on July 24, 2015 and are currently participating in active written discovery with the Lemon Entities. The Argentine Executives entered their appearances in the litigation on July 24, 2015 and filed a motion to dismiss for inconvenient forum on September 8, 2015. That motion was heard on December 4, 2015 and granted on January 4, 2016, with an order staying the action in its entirety. Mr. Casares also filed a cross-claim against us and Lemon, Inc. (now Lemon, LLC) on July 24, 2015, for breach of contract, breach of the implied covenant of good faith and fair dealing, conversion, unjust enrichment, and declaratory relief, all arising from the termination of his employment. He filed an amended cross-claim asserting the same causes of action on September 22, 2015. We, along with Lemon, LLC, filed a motion to dismiss the amended cross-claim on October 22, 2015. Because of the January 4, 2016 order staying the case in its entirety, the court did not rule on the motion to dismiss. Mr. Casares filed a separate complaint against us, Lemon, LLC, and Shareholder Representative Services LLC (“SRS”) in Delaware Chancery Court on October 7, 2015 for breach of contract and seeking a declaratory judgment. The action concerns a December 12, 2014 settlement agreement that resolved certain disputes against other former shareholders of Lemon, Inc. arising out of our December 11, 2013 Lemon acquisition. We, along with Lemon, LLC, moved to dismiss the complaint on October 28, 2015. Mr. Casares responded by filing an amended complaint on January 8, 2016. LifeLock, Inc. and Lemon, LLC moved to dismiss the amended complaint. LifeLock, Inc. and Lemon, LLC's brief in support of the motion to dismiss is due on or before February 24, 2016. Mr. Casares's opposition is due March 25, 2016, and LifeLock, Inc. and Lemon, LLC's reply in support of the motion is due April 25, 2016. Mr. Casares has indicated he will file a motion for summary judgment on March 25, 2016. If filed, LifeLock, Inc. and Lemon, LLC's opposition will be due April 25, 2016, with Mr. Casares's reply brief due May 10, 2016. On July 22, 2015, Miguel Avila, representing himself and seeking to represent a class of persons who acquired our securities from July 30, 2014 to July 20, 2015, inclusive, filed a class action complaint in the United States District Court for the District of Arizona. His complaint alleges that our CEO, our CFO, and we violated Sections 10(b) and 20(a) of the Securities Exchange Act by making materially false or misleading statements, or failing to disclose material facts about our business, operations, and prospects, including with regard to our information security program, advertising, recordkeeping, and our compliance with the FTC Order. The complaint seeks certification as a class action, compensatory damages, and attorney’s fees and costs. On September 21, 2015, four other Company stockholders, Oklahoma Police Pension and Retirement System, Oklahoma Firefighters Pension and Retirement System, Larisa Gassel, and Donna Thompson, and their respective attorneys all filed motions seeking to be appointed the lead plaintiff and lead counsel in this class action. On October 9, 2015, the Court appointed Oklahoma Police Pension and Retirement System and Oklahoma Firefighters Pension and Retirement System as Lead Plaintiffs. On October 19, 2015, the Court entered a scheduling order pursuant to which, and consistent with that order, Lead Plaintiffs filed an amended complaint on December 10, 2015. We, along with our CEO and CFO, moved to dismiss the amended complaint on January 29, 2016. Lead Plaintiffs moved to lift a statutory discovery stay imposed by the Private Securities Litigation Reform Act on January 21, 2016. We, along with our CEO and CFO, opposed that motion on February 8, 2016. On March 3, 2014, and March 10, 2014, two securities class action complaints were filed in the United States District Court for the District of Arizona, against us, our CEO, and our CFO, for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On June 16, 2014, the court consolidated the complaints into a single action captioned In re LifeLock, Inc. Securities Litigation and appointed a lead plaintiff and lead counsel. On August 15, 2014, the lead plaintiff filed the Consolidated Amended Class Action Complaint, or the Consolidated Amended Complaint, seeking to represent a class of persons who acquired our securities from February 26, 2013 to May 16, 2014, inclusive, or the Class Period. The Consolidated Amended Complaint alleged that we, along with our CEO, our CFO, and our President, violated Sections 10(b) and 20(a) of the Exchange Act by making materially false or misleading statements, or failing to disclose material facts regarding certain of our business, operational, and compliance policies, including with regard to certain of our services, our data security program, and our CEO’s compliance with the FTC Order. The Consolidated Amended Complaint alleged that, as a result, certain of our financial statements issued during the Class Period and certain public statements made by our President, our CEO, and our CFO during the Class Period, were false and misleading. The Consolidated Amended Complaint sought certification as a class action, compensatory damages, and attorneys’ fees and costs. On September 15, 2014, we, along with our President, our CEO, and our CFO, filed a motion to dismiss the Consolidated Amended Complaint. On December 17, 2014, the court dismissed the Consolidated Amended Complaint and gave the lead plaintiff 21 days to seek leave to amend. The lead plaintiff filed his Second Consolidated Amended Complaint on January 16, 2015. It contained similar allegations, but no longer named our President as a defendant. On January 30, 2015, we, along with our CEO and our CFO, filed a motion to dismiss the Second Consolidated Amended Complaint. On July 21, 2015, the court granted the motion to dismiss, without leave to amend, and entered judgment in our favor. On August 18, 2015, the lead plaintiff along with another shareholder, City of Hallandale Beach Police and Firefighters’ Personnel Retirement Fund, moved to vacate the judgment on the grounds that the FTC’s July 21, 2015 motion seeking to hold us in contempt of the FTC Order constituted surprise and newly discovered evidence. Plaintiffs also sought permission to file a Third Consolidated Amended Complaint. We, our CEO, and our CFO opposed plaintiffs’ motion. On September 18, 2015, the court denied plaintiffs’ motion to vacate the July 21, 2015 judgment and plaintiffs’ request to file another complaint. On September 21, 2015, plaintiffs filed a notice of appeal with the Ninth Circuit Court of Appeals. Plaintiffs appeal from the lower court’s July 21, 2015 order dismissing the Second Consolidated Amended Complaint and entering judgment in our favor, and the court’s September 18, 2015 order denying plaintiffs’ motion to vacate that judgment. We expect the parties’ briefing of this appeal to be completed by May 2016. On September 23, 2015, Sridhar Manthangodu, a stockholder of ours, filed a derivative complaint captioned Manthangodu v. Davis, et al., in the Superior Court of the State of Arizona, Maricopa County. This derivative complaint, purportedly filed on our behalf (we are named as a nominal defendant in the action), alleges that certain of our directors (the “Director Defendants”) violated their fiduciary duties to LifeLock stockholders (and or aided and abetted in the violation of same) by failing to ensure that we complied with the FTC Order. According to the complaint, the Director Defendants’ alleged breach of their fiduciary oversight duties has exposed us to “material liability,” because we must defend against the FTC’s July 21, 2015 motion seeking to hold us in contempt of the FTC Order, and the shareholder securities class action filed on July 22, 2015 discussed above. The complaint seeks unspecified monetary damages, a return to the company of all personal compensation received by the Director Defendants, as well as unspecified corporate governance reforms. On October 16, 2015, the parties jointly moved for a transfer of this matter to the Commercial Court of Maricopa County Superior Court. On October 20, 2015, that motion was granted and the action was transferred to the Commercial Court. On November 17, 2015, and December 16, 2015, the Court held status conferences. At these conferences, the parties stated that they were engaged in continued discussions aimed at potential resolution of the action. On December 24, 2015 the Court issued an Order directing the parties to continue to engage in settlement discussions, including at a mediation before former Arizona Supreme Court Justice Stanley Feldman, which the parties participated in on February 9, 2016. The Court also appointed Plaintiff Manthangodu lead plaintiff and his counsel lead counsel. The parties attended another status conference before the Court on February 10, 2016, and, with the assistance of mediator Justice Feldman, continue to engage in discussions aimed at potential resolution of the case. On October 28, 2015, Larisa Gassel, a stockholder of ours, filed a derivative complaint captioned Gassel v. Davis, et al., in the United States District Court for the District of Arizona. This derivative complaint was purportedly filed on our behalf (we are named as a nominal defendant in the action), against certain of our directors and officers (the “Individual Defendants”). The complaint alleges that the Individual Defendants violated their fiduciary duties to LifeLock stockholders (and/ or aided and abetted or conspired to commit such violations) by making materially false or misleading statements, or failing to disclose material facts regarding our business, operations, and prospects, including with regard to certain of our services, our data security program, and our compliance with the FTC Order, in certain public statements made by us, our CEO, and CFO during the period July 30, 2014 through April 30, 2015. Based on these same allegations, the complaint also makes claims of gross mismanagement, abuse of control, and unjust enrichment against the Individual Defendants. According to the complaint, the Individual Defendants’ conduct has damaged us through costs associated with the defense of the securities class actions discussed above and the compensation and benefits provided to the Individual Defendants, as well as through loss of reputation and goodwill. The complaint seeks unspecified monetary damages, unspecified restitution to the company from the Individual Defendants, certain corporate governance reforms, and attorneys’ fees and costs. As this action was very recently filed, there has been no significant activity in the case to date. On January 8, 2016, we and the Individual Defendants moved to stay this federal derivative action as duplicative of the first-filed Manthangodu action discussed above. The briefing on that motion was completed on February 2, 2016. On November 19, 2015 and November 25, 2015, two stockholders of ours filed derivative complaints captioned Stein v. Davis, et al. and John L. Munson Revocable Trust v. Davis, et al., respectively, in the Delaware Court of Chancery. These derivative complaints were purportedly filed on our behalf (we are named as a nominal defendant in the actions), against certain of our current and former directors and officers (the “Individual Defendants”) The Stein complaint alleges that the Individual Defendants violated their fiduciary duties to LifeLock stockholders by making materially false or misleading statements, or failing to disclose material facts regarding our business, operations, and prospects, including with regard to our compliance with the FTC Order. Based on these same allegations, the Stein complaint also asserts a claim for unjust enrichment against all Individual Defendants. According to the Stein complaint, the Individual Defendants’ conduct has damaged us through costs associated with various civil and regulatory legal defenses, penalties, and fines, as well through loss and reputation and goodwill. The Stein complaint seeks unspecified money damages, equitable relief, and attorneys’ fees and costs. The Munson complaint alleges that the Individual Defendants violated their fiduciary duties to LifeLock stockholders by making materially false or misleading statements, or failing to disclose material facts regarding our business, operations, and prospects, including with regard to certain of our services, our data security program, and our compliance with the FTC Order, in certain public statements made by us. According to the Munson complaint, the Individual Defendants’ conduct has damaged us through costs associated with the defense of the securities class actions discussed above and the compensation and benefits provided to the Individual Defendants, as well as through loss of reputation and goodwill. The complaint seeks unspecified monetary damages, equitable relief, and attorneys’ fees and costs. No significant activity has occurred in these cases. On January 22, 2016, January 26, 2016, and February 1, 2016, three stockholders of ours filed derivative complaints captioned, City of Pontiac General Employees’ Retirement Sys. v. Guthrie, et al.; Liang Jiawei v. Davis, et al.; and Russell Sprouse v. Davis, et al., in the Superior Court of Arizona, Maricopa County. These derivative complaints were purportedly filed on our behalf (we are named as a nominal defendant in the actions) against certain of our current and former directors and officers (the “Individual Defendants”). The City of Pontiac complaint alleges that the Individual Defendants violated their fiduciary duties to LifeLock stockholders (and/ or aided and abetted or conspired to commit such violations) by making materially false or misleading statements, or failing to disclose material facts regarding our business, operations, and prospects, including with regard to certain of our services, our data security program, and our compliance with the FTC Order, in certain public statements made by us. Based on these same allegations, the City of Pontiac complaint also makes claims of corporate waste and unjust enrichment against the Individual Defendants. According to the City of Pontiac complaint, the Individual Defendants’ conduct has damaged us through costs associated with the defense of the securities class actions discussed above and the compensation and benefits provided to the Individual Defendants, as well as through loss of reputation and goodwill. The City of Pontiac complaint seeks unspecified monetary damages, unspecified restitution to the Company from Individual Defendants, certain corporate governance reforms, punitive damages, and attorneys’ fees and costs. The Jiawei complaint alleges that the Individual Defendants violated their fiduciary duties to LifeLock stockholders by making materially false or misleading statements, or failing to disclose material facts regarding our business, operations, and prospects, including with regard to certain of our services, our data security program, and our compliance with the FTC Order, in certain public statements made by us during the period of March 11, 2013 through the filing of the Jiawei complaint. Based on these same allegations, the Jiawei complaint also makes claims of unjust enrichment, gross mismanagement, and abuse of control against the Individual Defendants. According to the Jiawei complaint, the Individual Defendants’ conduct has damaged us through costs associated with the defense of the securities class actions discussed above and the compensation and benefits provided to the Individual Defendants, as well as through loss of reputation and goodwill. The Jiawei complaint seeks unspecified money damages, certain corporate governance reforms, and attorneys’ fees and costs. The Sprouse complaint alleges that Individual Defendants violated their fiduciary duties to LifeLock stockholders by failing to ensure that we complied with the FTC Order. This complaint further alleges that the Individual Defendants violated fiduciary duties by making materially false or misleading statements, or failing to disclose material facts regarding our business, and specifically our compliance with the FTC Order, in certain public statements made by us. Based on these same allegations, the Sprouse complaint also makes claims of unjust enrichment against certain of the Individual Defendants. According to the Sprouse complaint, the Individual Defendants’ conduct has damaged us in various ways, including through costs associated with various civil and regulatory legal defenses, penalties, and fines, losses associated with the suspension of the Lemon Wallet application, the renegotiation of LifeLock’s credit facility, and the implementation of a share repurchase plan. The Sprouse complaint seeks compliance with the FTC Order, unspecified money damages, disgorgement of certain Individual Defendants’ compensation, equitable relief, and attorneys’ costs and fees. As these three cases were recently filed, there has been no significant activity to date. We anticipate that these cases will be consolidated with the first-filed Manthangodu action discussed above. As these three cases (City of Pontiac, Jiawei, and Sprouse) were recently filed, there has been limited, procedural litigation activity to date. On February 5, 2016, plaintiff Manthangodu moved to consolidate these three actions with the first filed Manthangodu action. We filed papers joining in that motion the same day. Also on February 5, 2016, Sprouse filed a motion seeking to consolidate his case with Manthangodu action and to modify the Manthangodu Court's December 24, 2015 order to add Sprouse and his counsel as co-lead plaintiff and co-lead counsel in any consolidated action. By order dated February 11, 2016, the Court granted consolidation of the Sprouse and Manthangodu cases and further directed Sprouse to re-file his motion to be appointed co-lead plaintiff and co-lead counsel. On February 16, 2016, counsel for all parties (Manthangodu, City of Pontiac, Jiawei, Sprouse and us) filed a stipulation and proposed order (i) consolidating all complaints in one action under the first-filed Manthangodu case number and captioning it "In re: LifeLock, Inc. Derivative Litigation," and (ii) directing that any party seeking to be named co-lead plaintiff and/or co-lead counsel file motion papers in support thereof by February 22, 2016. The Company expects the Court to issue an order effecting the parties' stipulation on consolidation. In the year ended December 31, 2015 we acquired two assembled workforces through two asset acquisitions for a total of $1.0 million . Should the employees remain employed through a period of up to 2 years following each acquisition we will be required to make additional payments totaling $1.2 million , subject to certain terms and conditions. We are subject to other legal proceedings and claims that have arisen in the ordinary course of business. Although there can be no assurance as to the ultimate disposition of these matters, we believe, based upon the information available at this time, that, except as disclosed above, a material adverse outcome related to the matters is neither probable nor estimable. |