Dollar General 2011 Annual Report Download - page 183

10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Commitments and contingencies (Continued)
Although the Company intends to vigorously defend the action, no assurances can be given that it
would be successful in the defense on the merits or otherwise. At this stage in the proceedings, the
Company cannot estimate either the size of any potential class or the value of the claims raised in this
action if it proceeds. For these reasons, the Company is unable to estimate any potential loss or range
of loss in such a scenario; however, if the Company is not successful in defending this action, its
resolution could have a material adverse effect on the Company’s financial statements as a whole.
On June 16, 2010, a lawsuit entitled Shaleka Gross, et al v. Dollar General Corporation was filed in
the United States District Court for the Southern District of Mississippi (Civil Action
No. 3:10CV340WHB-LR) (‘‘Gross’’) in which three former non-exempt store employees, on behalf of
themselves and certain other non-exempt Dollar General store employees, alleged that they were not
paid for all hours worked in violation of the FLSA. Specifically, plaintiffs alleged that they were not
properly paid for certain breaks and sought back wages (including overtime wages), liquidated damages
and attorneys’ fees and costs.
Before the Company was served with the Gross complaint, the plaintiffs dismissed the action and
re-filed it in the United States District Court for the Northern District of Mississippi, now captioned as
Cynthia Walker, et al. v. Dollar General Corporation, et al. (Civil Action No. 4:10-CV119-P-S) (‘‘Walker’’).
The Walker complaint was filed on September 16, 2010, and although it added approximately eight
additional plaintiffs, it added no substantive allegations beyond those alleged in the Gross complaint.
No other individuals opted into the Walker matter, and the entire matter was resolved for an amount
that is immaterial to the Company’s financial statements as a whole.
On May 20, 2011, a lawsuit entitled Winn-Dixie Stores, Inc., et al. v. Dolgencorp, LLC was filed in
the United States District Court for the Southern District of Florida (Case No. 9:11-cv-80601-DMM)
(‘‘Winn-Dixie’’) in which the plaintiffs allege that the sale of food and other items in approximately
55 of the Company’s stores, each of which allegedly is or was at some time co-located in a shopping
center with one of plaintiffs’ stores, violates restrictive covenants that plaintiffs contend are binding on
the occupants of the shopping centers. Plaintiffs seek damages and an injunction limiting the sale of
food and other items in those stores. Although plaintiffs have not made a demand for any specific
amount of damages at this point in the proceeding, documents prepared and produced by plaintiffs
during discovery suggest that plaintiffs may seek as much as $47 million. The Company intends to
vigorously defend the Winn-Dixie matter and views that sum as wholly without basis and unsupported
by the law and the facts currently available. The various leases involved in the matter are unique in
their terms and/or the factual circumstances surrounding them, and, in some cases, the stores named by
plaintiffs are not now and have never been co-located with plaintiffs’ stores. The Company has filed a
motion challenging the admissibility of plaintiffs’ damages expert. Hearings on that motion were held
on January 23 and on February 29, 2012, and no ruling has been made. The case is currently scheduled
for trial in May of 2012 and has been consolidated with similar cases against Big Lots and Dollar Tree.
However, at this time, no assurances can be given that the Company will be successful in its defense of
the action on the merits or otherwise. Similarly, at this time, because of certain outstanding threshold
issues that have yet to be addressed by the court, the Company is unable to estimate potential losses;
however, if the Company is not successful in defending the Winn-Dixie matter, the outcome could have
a material adverse effect on the Company’s financial statements as a whole.
In October 2008, the Company terminated an interest rate swap as a result of the counterparty’s
declaration of bankruptcy. This declaration of bankruptcy constituted a default under the contract
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