Dollar General 2012 Annual Report Download - page 161

10-K
DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Commitments and contingencies (Continued)
as a class or similar action, it could have a material impact on 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 alleged 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 sought damages and an injunction limiting the sale of food
and other items in those stores. Although plaintiffs did not make a demand for any specific amount of
damages, documents prepared and produced by plaintiffs during discovery suggested that plaintiffs
would seek as much as $47 million although the court limited their ability to prove such damages. The
Company vigorously defended the Winn-Dixie matter and viewed that sum as wholly without basis and
unsupported by the law and the facts. 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 court granted the
Company’s motion challenging the admissibility of plaintiffs’ damages expert, precluding the expert
from testifying. The case was consolidated with similar cases against Big Lots and Dollar Tree, and a
non-jury trial commenced on May 14, 2012 and presentation of evidence concluded on May 22, 2012.
The court issued an order on August 10, 2012 in which it (i) dismissed all claims for damages,
(ii) dismissed claims for injunctive relief for all but four stores, and (iii) directed the Company to
report to the court on its compliance with restrictive covenants at the four stores for which it did not
dismiss the claims for injunctive relief. The Company believes that the ruling will have no material
impact on the Company’s financial statements or otherwise. Plaintiffs filed a notice of appeal of the
court’s decision on August 28, 2012. If the court’s ruling is overturned on appeal, in whole or in part,
no assurances can be given that the Company will be successful in its ultimate defense of the action on
the merits or otherwise. If the Company is not successful in its defense, the outcome could have a
material adverse effect on the Company’s financial statements as a whole.
In 2008, the Company terminated an interest rate swap as a result of the counterparty’s
declaration of bankruptcy and made a cash payment of $7.6 million to settle the swap. On May 14,
2010, the Company received a demand from the counterparty for an additional payment of
approximately $19 million plus interest. In April 2011, the Company reached a settlement with the
counterparty under which the Company paid an additional $9.85 million in exchange for a full release.
The Company accrued the settlement amount along with additional expected fees and costs related
thereto in the first quarter of 2011. The settlement was finalized and the payment was made in May
2011.
From time to time, the Company is a party to various other legal actions involving claims
incidental to the conduct of its business, including actions by employees, consumers, suppliers,
government agencies, or others through private actions, class actions, administrative proceedings,
regulatory actions or other litigation, including without limitation under federal and state employment
laws and wage and hour laws. The Company believes, based upon information currently available, that
such other litigation and claims, both individually and in the aggregate, will be resolved without a
material adverse effect on the Company’s financial statements as a whole. However, litigation involves
an element of uncertainty. Future developments could cause these actions or claims to have a material
adverse effect on the Company’s results of operations, cash flows, or financial position. In addition,
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