Item 3. LEGAL PROCEEDINGS

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In the ordinary course of business, the Company and its subsidiaries are defendants in or parties to various claims, actions and proceedings, which are at varying stages of investigation, arbitration or adjudication and involve a variety of areas of law. Due to the inherent difficulty of predicting the outcome of litigation and claims, the Company often cannot predict what the eventual outcomes of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be. An adverse outcome in one or more of these matters could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

Profits Participants Litigation

On November 25, 2015, Wark Entertainment, Inc. filed a lawsuit (the “Wark Lawsuit”) against Twentieth Century Fox Film Corporation, Fox Broadcasting Company (the “FOX Network”), and Fox Entertainment Group, Inc. (“Fox Entertainment Group”) in the Superior Court of the State of California, County of Los Angeles, Central District (the “Superior Court”). On November 30, 2015, Temperance Brennan, L.P., Snooker Doodle Productions, Inc., and Bertha Blue, Inc. filed a lawsuit (the “Temperance Brennan Lawsuit”) against 21CF, Fox Entertainment Group, Twentieth Century Fox Film Corporation, and the FOX Network in the Superior Court. The plaintiffs in these cases are profits participants in the television series Bones, which was produced by Twentieth Century Fox Television, a unit of Twentieth Century Fox Film Corporation (“TCFTV”), and aired on the FOX Network from 2005 to 2017. TCFTV, 21CF, the FOX Network and Fox Entertainment Group are defendants in one or both of the Wark Lawsuit and the Temperance Brennan Lawsuit (collectively, the “Lawsuits”), which were joined by the Superior Court on December 21, 2015.

The plaintiffs in the Lawsuits alleged, among other things, that TCFTV breached its contracts with the plaintiffs and committed fraud concerning certain of those contracts, and that 21CF, Fox Entertainment Group, and the FOX Network induced TCFTV’s breach of contract and intentionally interfered with the plaintiffs’ contracts with TCFTV. These allegations were based on plaintiffs’ claims that in licensing Bones between affiliated 21CF entities, the defendants agreed to lower license fees for Bones to the detriment of the Plaintiffs (collectively, the “Affiliated Dealing Claims”). The plaintiffs also challenged TCFTV’s accounting practices with regard to Bones, including challenging TCFTV’s distribution and overhead charges for Bones (the “Accounting Claims”). The defendants vigorously disputed the Affiliated Dealing Claims and the Accounting Claims and the related allegations.

On April 8, 2016, the Superior Court stayed the Accounting Claims and ordered that the Affiliated Dealing Claims be submitted to arbitration pursuant to the plaintiffs’ contracts. On February 20, 2019, the arbitrator issued a punitive damages award of approximately $129 million against the defendants, including the FOX Network. On February 27, 2019, the defendants filed a motion with the Superior Court to vacate the entire punitive damages award on the ground that the arbitrator did not have authority to award punitive damages, and the plaintiffs filed a petition with the court to confirm the entirety of the arbitrator’s award. A hearing on these matters was held on April 29, 2019. On June 3, 2019, the Superior Court entered an order granting the defendants’ motion, denying the plaintiffs’ petition, and vacating the entire punitive damages award.

FOX News

The Company and certain of its current and former employees have been subject to allegations of sexual harassment and discrimination and racial discrimination relating to alleged misconduct at the Company’s FOX News business. The Company has resolved many of these claims and is contesting other claims in litigation. The Company has also received regulatory and investigative inquiries relating to these matters. To date, none of the amounts paid in settlements or reserved for pending or future claims is, individually or in the aggregate, material to the Company. The amount of liability, if any, that may result from these or related matters cannot be estimated at this time. However, the Company does not currently anticipate that the ultimate resolution of any such pending matters will have a material adverse effect on its business, financial condition, results of operations or cash flows.