Costco 2007 Annual Report Download - page 74

Note 10—Commitments and Contingencies
Legal Proceedings
The Company is involved from time to time in claims, proceedings and litigation arising from its
business and property ownership. The Company is a defendant in the following matters, among others:
Two cases purportedly brought as class actions on behalf of certain present and former Costco
managers in California, in which plaintiffs principally allege that they have not been properly
compensated for overtime work. Scott M. Williams v. Costco Wholesale Corp., United States District
Court (San Diego), Case No. 02-CV-2003 NAJ (JFS); Greg Randall v. Costco Wholesale Corp.,
Superior Court for the County of Los Angeles, Case No. BC-296369. The Randall matter is currently in
the final stages of class certification briefing. Williams has been stayed pending the class certification
outcome in Randall.
An overtime compensation case certified as a class action on behalf of present and former hourly
employees in California, in which plaintiffs principally allege that Costco’s semi-annual bonus formula is
improper with regard to retroactive overtime pay. Anthony Marin v. Costco Wholesale Corp., Superior
Court for the County of Alameda, Case No. RG-04150447. Costco has filed an appeal challenging the
entry of a $5.3 million judgment in favor of the class.
A case brought as a class action on behalf of present and former hourly employees in California, in
which plaintiffs principally allege that Costco did not properly compensate and record hours worked by
employees and failed to provide meal and rest breaks. Kevin Doty and Sarah Doty v. Costco
Wholesale Corp., United States District Court (Los Angeles), Case No. CV-05-3241 FMC (JWJ). On
May 14, 2007, the Court granted final approval to a $7.5 million classwide settlement. Settlement
distribution via a third-party administrator is ongoing.
A case purportedly brought as a class action on behalf of present and former hourly employees in
California, in which the plaintiff principally alleges that Costco’s routine closing procedures and security
checks cause employees to incur delays that qualify as uncompensated working time and that
effectively deny them statutorily guaranteed meal periods and rest breaks. Elizabeth Alvarado v.
Costco Wholesale Corp., United States District Court (San Francisco), Case No. C-06-04015-MJJ.
Discovery is ongoing in this case. A class certification hearing is set for December 18, 2007.
Claims in these five actions are made under various provisions of the California Labor Code and the
California Business and Professions Code. Plaintiffs seek restitution/disgorgement, compensatory
damages, various statutory penalties, punitive damages, interest, and attorneys’ fees.
A case brought as a class action on behalf of certain present and former female managers, in which
plaintiffs allege denial of promotion based on gender in violation of Title VII of the Civil Rights Act of
1964 and California state law. Shirley “Rae” Ellis v. Costco Wholesale Corp., United States District
Court (San Francisco), Case No. C-04-3341-MHP. Plaintiffs seek compensatory damages, punitive
damages, injunctive relief, interest and attorneys’ fees. Class certification was granted on January 11,
2007. On May 11, 2007, the United States Court of Appeal for Ninth Circuit granted a petition to hear
Costco’s appeal of the certification. On May 30, 2007, the District Court ordered a stay during the
pendency of the appeal.
Class actions stated to have been brought on behalf of certain present and former Costco members. In
Barmak v. Costco Wholesale Corp., et al., No. BC348857 (Superior Court for the County of Los
Angeles), it is asserted that the Company violated various provisions of the common law and California
statutes in connection with its former practice of paying Executive Members who downgraded or
terminated their memberships a 2% Reward for less than twelve months of eligible purchases. Plaintiff
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