Dollar General 2013 Annual Report Download - page 154

DOLLAR GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Commitments and contingencies (Continued)
in its defense of the action on the merits or otherwise. Similarly, at this time the Company cannot
estimate either the size of any potential class or the value of the claims asserted if this action were to
proceed. 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 its defense efforts, the resolution of
Richter could have a material adverse effect on the Company’s consolidated financial statements as a
whole.
On April 9, 2012, the Company was served with a lawsuit filed in the United States District Court
for the Eastern District of Virginia entitled Jonathan Marcum v. Dolgencorp. Inc. (Civil Action
No. 3:12-cv-00108-JRS) in which the plaintiffs, one of whose conditional offer of employment was
rescinded, allege that certain of the Company’s background check procedures violate the Fair Credit
Reporting Act (‘‘FCRA’’). Plaintiff Marcum also alleges defamation. According to the complaint and
subsequently filed first and second amended complaints, the plaintiffs seek to represent a putative class
of applicants in connection with their FCRA claims. The Company responded to the complaint and
each of the amended complaints. The plaintiffs’ certification motion was due to be filed on or before
April 5, 2013; however, plaintiffs asked the court to stay all deadlines in light of the parties’ ongoing
settlement discussions (as more fully described below). On November 12, 2013, the court entered an
order lifting the stay. The court has not issued a new scheduling order but has set a pre-trial
conference for March 27, 2014.
The parties have engaged in formal settlement discussions on three occasions, once in January
2013 with a private mediator, and again in March 2013 and July 2013 with a federal magistrate. On
February 18, 2014, the parties reached a preliminary agreement to resolve the matter for up to
$4.08 million, which must be submitted to and approved by the court. Based on this preliminary
settlement agreement, the Company believes, but cannot guarantee, that the court will not proceed
with the March 27, 2014, pre-trial conference.
The Company’s Employment Practices Liability Insurance (‘‘EPLI’’) carrier has been placed on
notice of this matter and participated in both the formal and informal settlement discussions. The EPLI
Policy covering this matter has a $2 million self-insured retention. Because the Company believes that it
was likely to expend the balance of its self-insured retention in settlement of this litigation or
otherwise, it accrued $1.8 million in the fourth quarter of 2012, an amount that is immaterial to the
Company’s consolidated financial statements as a whole.
At this time, although probable, it is not certain that the court will approve the settlement. If the
court does not approve the settlement and the case proceeds, it is not possible to predict whether
Marcum ultimately will be permitted to proceed as a class action under the FCRA, and no assurances
can be given that the Company will 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 asserted by the plaintiffs.
In September 2011, the Chicago Regional Office of the United States Equal Employment
Opportunity Commission (‘‘EEOC’’ or ‘‘Commission’’) notified the Company of a cause finding related
to the Company’s criminal background check policy. The cause finding alleges that Dollar General’s
criminal background check policy, which excludes from employment individuals with certain criminal
convictions for specified periods, has a disparate impact on African-American candidates and
employees in violation of Title VII of the Civil Rights Act of 1964, as amended (‘‘Title VII’’).
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