Transocean Proxy Statement and 2010 Annual Report
Transocean Proxy Statement and 2010 Annual Report
Transocean Proxy Statement and 2010 Annual Report
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TRANSOCEAN LTD. AND SUBSIDIARIES<br />
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued<br />
Macondo well incident<br />
Overview—On April 22, <strong>2010</strong>, the Ultra-Deepwater Floater Deepwater Horizon sank after a blowout of the Macondo well caused<br />
a fire <strong>and</strong> explosion on the rig. Eleven persons were declared dead <strong>and</strong> others were injured as a result of the incident. At the time of the<br />
explosion, Deepwater Horizon was located approximately 41 miles off the coast of Louisiana in Mississippi Canyon Block 252 <strong>and</strong> was<br />
contracted to BP America Production Co.<br />
As we continue to investigate the cause or causes of the incident, we are evaluating its consequences. Although we cannot<br />
predict the final outcome or estimate the reasonably possible range of loss with certainty, we have recognized a liability for estimated loss<br />
contingencies that we believe are probable <strong>and</strong> for which a reasonable estimate can be made. We have also recognized a receivable for<br />
the portion of this liability that we believe is recoverable from insurance. As of December 31, <strong>2010</strong>, the amount of the estimated liability<br />
was $135 million, recorded in other current liabilities, <strong>and</strong> the corresponding estimated recoverable amount was $94 million, recorded in<br />
accounts receivable, net, on our consolidated balance sheet. New information or future developments could require us to adjust our<br />
disclosures <strong>and</strong> our estimated liabilities <strong>and</strong> insurance recoveries. See “—Contractual indemnity.”<br />
Litigation—As of December 31, <strong>2010</strong>, 304 actions or claims were pending against <strong>Transocean</strong> entities, along with other<br />
unaffiliated defendants, in state <strong>and</strong> federal courts. Additionally, government agencies have initiated investigations into the Macondo well<br />
incident. We have categorized below the nature of the legal actions or claims. We are evaluating all claims <strong>and</strong> intend to vigorously<br />
defend any claims <strong>and</strong> pursue any <strong>and</strong> all defenses available. In addition, we believe we are entitled to contractual defense <strong>and</strong> indemnity<br />
for all wrongful death <strong>and</strong> personal injury claims made by non-employees <strong>and</strong> third-party subcontractors’ employees as well as all liabilities<br />
for pollution or contamination, other than for pollution or contamination originating on or above the surface of the water. See “—<br />
Contractual indemnity.”<br />
Wrongful death <strong>and</strong> personal injury—As of December 31, <strong>2010</strong>, we <strong>and</strong> one or more of our subsidiaries have been named, along<br />
with other unaffiliated defendants, in 30 complaints that were pending in state <strong>and</strong> federal courts in Louisiana <strong>and</strong> Texas involving multiple<br />
plaintiffs that allege wrongful death <strong>and</strong> other personal injuries arising out of the Macondo well incident. Per the order of the Multi-District<br />
Litigation Panel (the “MDL”), these claims have been centralized for discovery purposes in the U.S. District Court, Eastern District of<br />
Louisiana. The complaints generally allege negligence <strong>and</strong> seek awards of unspecified economic damages <strong>and</strong> punitive damages. BP plc<br />
(together with its affiliates, “BP”), MI-SWACO, Weatherford Ltd. <strong>and</strong> Cameron International Corporation <strong>and</strong> certain of its affiliates have,<br />
based on contractual arrangements, also made indemnity dem<strong>and</strong>s upon us with respect to personal injury <strong>and</strong> wrongful death claims<br />
asserted by our employees or representatives of our employees against these entities. See “—Contractual indemnity.”<br />
Economic loss—As of December 31, <strong>2010</strong>, we <strong>and</strong> one or more of our subsidiaries were named, along with other unaffiliated<br />
defendants, in 70 individual complaints as well as 185 putative class-action complaints that were pending in the federal <strong>and</strong> state courts in<br />
Louisiana, Texas, Mississippi, Alabama, Georgia, Kentucky, South Carolina, Tennessee, Florida <strong>and</strong> possibly other courts. The<br />
complaints generally allege, among other things, potential economic losses as a result of environmental pollution arising out of the<br />
Macondo well incident <strong>and</strong> are based primarily on the Oil Pollution Act of 1990 (“OPA”) <strong>and</strong> state OPA analogues. See “—Environmental<br />
matters.” One complaint also alleges a violation of the Racketeer Influenced <strong>and</strong> Corrupt Organizations Act, but we were not named in this<br />
particular master complaint. The plaintiffs are generally seeking awards of unspecified economic, compensatory <strong>and</strong> punitive damages, as<br />
well as injunctive relief. See “—Contractual indemnity.” Per the order of the MDL, the economic loss claims filed in federal courts have<br />
been or will be centralized for discovery purposes in the U.S. District Court, Eastern District of Louisiana. Absent agreement of the parties,<br />
however, the cases will be tried in the courts from which they were transferred.<br />
Federal securities claims—Three federal securities law class actions are currently pending in the U.S. District Court, Southern<br />
District of New York, naming us <strong>and</strong> certain of our officers <strong>and</strong> directors as defendants. Two of these actions generally allege violations of<br />
Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 promulgated under the Exchange Act <strong>and</strong><br />
Section 20(a) of the Exchange Act in connection with the Macondo well incident. The plaintiffs are generally seeking awards of unspecified<br />
economic damages, including damages resulting from the decline in our stock price after the Macondo well incident. The third action was<br />
filed by a former GlobalSantaFe shareholder, alleging that the proxy statement related to our shareholder meeting in connection with our<br />
merger with GlobalSantaFe violated Section 14(a) of the Exchange Act, Rule 14a-9 promulgated thereunder <strong>and</strong> Section 20(a) of the<br />
Exchange Act. The plaintiff claims that GlobalSantaFe shareholders received inadequate consideration for their shares as a result of the<br />
alleged violations <strong>and</strong> seeks rescission <strong>and</strong> compensatory damages.<br />
Shareholder derivative claims—In June <strong>2010</strong>, two shareholder derivative suits were filed by our shareholders naming us as a<br />
nominal defendant <strong>and</strong> certain of our officers <strong>and</strong> directors as defendants in the District Courts of the State of Texas. The first case<br />
generally alleges breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement <strong>and</strong> waste of corporate assets in<br />
connection with the Macondo well incident <strong>and</strong> the other generally alleges breach of fiduciary duty, unjust enrichment <strong>and</strong> waste of<br />
corporate assets in connection with the Macondo well incident. The plaintiffs are generally seeking, on behalf of <strong>Transocean</strong>, restitution<br />
<strong>and</strong> disgorgement of all profits, benefits <strong>and</strong> other compensation from the defendants.<br />
Environmental matters—Environmental claims under two different schemes, statutory <strong>and</strong> common law, <strong>and</strong> in two different<br />
regimes, federal <strong>and</strong> state, have been asserted against us. See “—Litigation—Economic loss.” Liability under many statutes is imposed<br />
without fault, but such statutes often allow the amount of damages to be limited. In contrast, common law liability requires proof of fault<br />
<strong>and</strong> causation, but generally has no readily defined limitation on damages, other than the type of damages that may be redressed. We<br />
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