16. Commitments and Contingencies SEC Matter The Company provided general accounting, finance and governance documentation in response to a subpoena received from the SEC in March 2018. Following this initial document request, the Commission requested additional information pertaining to the Companys accounting for partial payments from insurance companies, where the Company is continuing to pursue additional collections for the estimated balance. Beginning in the third quarter of 2018, the Companys Audit Committee initiated a review of the Companys accounting for these partial payments. The Audit Committee has completed this review. In connection with this review, the Audit Committee determined that the Companys change in estimate of the collectability of accounts receivable relating to partial payments was appropriate. The Commissions investigation is ongoing, and the Company is continuing to fully cooperate on this matter, including providing the Commission with information regarding the restatements of historical financial reports contained in the Companys most recent Annual Report. The Commissions investigation is neither an allegation of wrongdoing nor a finding that any violation of law has occurred. At this time, the Company is unable to predict the final outcome of this matter or what impact it might have on the Companys consolidated financial position, results of operations or cash flows. Securities Litigation On May 16, 2019, an alleged shareholder filed a purported class action in the United States District Court for the Middle District of Tennessee against the Company and certain of its current and former officers (Caudle v. AAC Holdings, Inc. et al.) . The plaintiff generally alleges that defendants violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making allegedly false and/or misleading statements and failing to disclose certain information, with respect to financial statements reported by the Company for periods between 2016 and 2018, which statements were restated in the Companys Annual Report on Form 10-K for the year ended December 31, 2018. In a related matter, on August 16, 2019, an alleged shareholder filed a derivative action on behalf of AAC Holdings, Inc. in the United States District Court in the Middle District of Tennessee (Cooper v. Michael Cartwright et al.) against the Companys current and certain former members of its board of directors and senior executive team, alleging that these individuals breached their fiduciary duties and engaged in mismanagement. Given the uncertainty of litigation and the preliminary stage of these cases, we cannot at this time estimate the reasonably possible loss or range of loss that may result from these actions. The Company believes that the allegations are without merit and is vigorously defending the action. Other Matters The Company is also aware of various other legal matters arising in the ordinary course of business. To cover these other types of claims as well as the legal matters referenced above, the Company maintains insurance it believes to be sufficient for its operations, although some claims may potentially exceed the scope of coverage in effect and the insurer may argue that some claims, including, without limitation, the claims described above, are excluded from coverage. Plaintiffs in these matters may also request punitive or other damages that may not be covered by insurance. Except as described above, after taking into consideration the evaluation of such matters by the Companys legal counsel, the Companys management believes at this time that the anticipated outcome of these matters will not have a material impact on the Companys consolidated financial position, results of operations or cash flows.