Abercrombie & Fitch 2010 Annual Report Download - page 28

Table of Contents
ITEM 3. LEGAL PROCEEDINGS
A&F is a defendant in lawsuits and other adversary proceedings arising in the ordinary course of business. Legal costs incurred
in connection with the resolution of claims and lawsuits are generally expensed as incurred, and the Company establishes reserves for
the outcome of litigation where it deems appropriate to do so under applicable accounting rules. Actual liabilities may exceed the
amounts reserved, and there can be no assurance that final resolution of these matters will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows. The Company's identified contingencies include the following
matters:
On June 23, 2006, Lisa Hashimoto, et al. v. Abercrombie & Fitch Co. and Abercrombie & Fitch Stores, Inc., was filed in the
Superior Court of the State of California for the County of Los Angeles. In that action, plaintiffs alleged, on behalf of a putative class
of California store managers employed in Hollister and abercrombie kids stores, that they were entitled to receive overtime pay as
"non-exempt" employees under California wage and hour laws. The complaint sought injunctive relief, equitable relief, unpaid
overtime compensation, unpaid benefits, penalties, interest and attorneys' fees and costs. The defendants answered the complaint on
August 21, 2006, denying liability. On June 23, 2008, the defendants settled all claims of Hollister and abercrombie kids store
managers who served in stores from June 23, 2002 through April 30, 2004, but continued to oppose the plaintiffs' remaining claims.
On January 29, 2009, the Court certified a class consisting of all store managers who served at Hollister and abercrombie kids stores in
California from May 1, 2004 through the future date upon which the action concludes. The parties then continued to litigate the claims
of that putative class. On May 24, 2010, plaintiffs filed a notice that they did not intend to continue to pursue their claim that members
of the class did not exercise independent managerial judgment and discretion. They also asked the Court to vacate the August 9, 2010
trial date previously set by the Court. On July 20, 2010, the trial court vacated the trial date and the defendants then moved to decertify
the putative class.
On September 16, 2005, a derivative action, styled The Booth Family Trust v. Michael S. Jeffries, et al., was filed in the United
States District Court for the Southern District of Ohio, naming A&F as a nominal defendant and seeking to assert claims for
unspecified damages against nine of A&F's present and former directors, alleging various breaches of the directors' fiduciary duty and
seeking equitable and monetary relief. In the following three months, four similar derivative actions were filed (three in the United
States District Court for the Southern District of Ohio and one in the Court of Common Pleas for Franklin County, Ohio) against
present and former directors of A&F alleging various breaches of the directors' fiduciary duty allegedly arising out of antecedent
employment law and securities class actions brought against the Company. A consolidated amended derivative complaint was filed in
the federal proceeding on July 10, 2006. On February 16, 2007, A&F announced that its Board of Directors had received a report of
the Special Litigation Committee established by the Board to investigate and act with respect to claims asserted in the derivative cases,
which concluded that there was no evidence to support the asserted claims and directed the Company to seek dismissal of the
derivative cases. On September 10, 2007, the Company moved to dismiss the federal derivative cases on the authority of the Special
Litigation Committee Report. On March 12, 2009, the Company's motion was granted and, on April 10, 2009, plaintiffs filed an
appeal from the order of dismissal in the United States Court of Appeals for the Sixth Circuit. Plaintiff's appeal has been fully briefed
and argued and is awaiting decision. The state court has stayed further proceedings in the state-court derivative action until resolution
of the consolidated federal derivative cases.
On December 21, 2007 Spencer de la Cruz, a former employee, filed an action against Abercrombie & Fitch Co. and
Abercrombie & Fitch Stores, Inc. (collectively, the "Defendants") in the Superior Court of
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