OtterBox is negotiating a settlement with a former employee who filed a whistleblower lawsuit alleging the cell-phone case maker underpaid federal import taxes on products it made in
Jimenez, who worked in customs compliance as OtterBox's supply-chain director, contended the company failed to pay customs duties on the full value of its cell-phone cases, violating the False Claims Act.
"The settlement discussions are open and ongoing," an OtterBox spokeswoman said in an email. "It would therefore be inappropriate for OtterBox to comment on them."
OtterBox previously said it would vigorously contest the lawsuit and was confident it would see a "favorable outcome" in court. On
But in a
"It's my sense that the settlement is fair to both sides," Porter said. "However, if the government does not approve all aspects of it, the settlement is off and we'll be back into litigating the case."
A spokesman for U.S. Attorney
Lawsuits often are settled to avoid the inconvenience and burden of litigation, said
"It's a prudent decision to get a client out of a nasty litigation," he said. "Any time you can get yourself out of a court case on tolerable terms, that's what you want to do."
OtterBox fired Jimenez in 2010 and she sued in 2011. The lawsuit was under seal in
In the lawsuit, Jimenez contends that OtterBox did not pay customs duties on the value of tooling and engineering of cases manufactured in
Jimenez, in court documents, says she told OtterBox founder
OtterBox responded to Jimenez's lawsuit in late September, asking the judge to dismiss the case. In what is known as a "prior disclosure," OtterBox said in a court filing that it admitted to the government before Jimenez sued the company that it had broken the law by not paying enough customs duties. Prior disclosure is a typical way a company can correct errors in its product valuation.
"If the parties agree to settle, I don't think the government's going to walk in the middle of that," he said.
Challenges to companies by whistleblower cases drive home that companies must ensure they follow federal customs requirements, Schuchat added. Violations of customs law can carry hefty fines and penalties.
He recommended that companies seek help from experts and develop internal policies on handling customs duties.
"It's like doing your taxes," he said. "You want to be accurate."
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