Item 3. Legal Proceedings

We are not party to any material legal proceedings, other than ordinary routine litigation incidental to our business that is not material to our business or financial condition.

In May 2013, with the assistance of the law firm of Davis Polk & Wardwell LLP, we commenced an investigation into inaccurate billing with respect to certain government contracts. This issue had been reported to our senior management by a Charles River employee. We promptly reported these matters to the relevant government contracting officers, the Department of Health and Human Services’ Office of the Inspector General, and the Department of Justice, and we are cooperating with these agencies to ensure the proper repayment and resolution of this matter. The investigation confirmed that our RMS business

segment billed the Department of Health and Human Services for certain work that had not been performed with respect to a small subset of our government contracts. It has been determined that when employees regularly assigned to work in research model barrier rooms associated with these contracts were absent, other employees' names would be substituted on time-keeping records associated with the relevant contracts. We billed the government for the hours associated with these substitute employees, despite the fact that, in many cases, these employees did not perform any services in connection with the relevant government contracts. Based on the findings of the investigation to date, we believe that this conduct was limited to our research model facilities in Raleigh, North Carolina, and Kingston, New York. We previously identified approximately $1.5 million of excess amounts billed on these contracts, and recorded a liability for such amount. Based on our ongoing discussions with the government, we have recorded an additional charge of $0.3 million during the fiscal year 2016. Our best estimate, which totals $1.8 million, may be subject to change based on the terms of any final settlement with the Department of Justice and the Department of Health and Human Services’ Office of the Inspector General. We have already taken appropriate steps to prevent this conduct from recurring, and will consider additional remedial measures following the conclusion of the matter.

In July 2015, IDEXX filed a complaint in the United States District Court for the District of Delaware alleging we have infringed three (3) recently issued patents related to a blood spot sample collection method used in determining the presence or absence of an infectious disease in a population of rodents. On September 21, 2015, we timely filed a motion to dismiss the complaint on the grounds that all of the claims are directed to unpatentable subject matter and therefore are invalid. On October 7, 2015, IDEXX filed an amended complaint, which substantially asserted the same patents and infringement allegations as asserted in the original complaint, and on October 26, 2015, we timely filed a motion to dismiss this amended complaint. The hearing on the motion to dismiss was held on January 12, 2016. On July 1, 2016, the Court issued an opinion denying the motion to dismiss. We filed our answer to the complaint on July 21, 2016. In addition, on July 29, 2016, we initiated an inter partes review (IPR) procedure with the United States Patent and Trademark Office, challenging the validity of the IDEXX patents. On February 6, 2017, we entered into a settlement agreement with IDEXX, which involved the withdrawal by IDEXX of their complaint and withdrawal by us of the IPR.