Family Dollar 2010 Annual Report Download - page 58

The following table shows the Company’s other commercial commitments at the end of fiscal 2010:
Other Commercial Commitments (in thousands)
Total Amounts
Committed
Standby letters of credit .......................................... $153,882
Surety bonds ................................................... 3,419
Total ..................................................... $157,301
A substantial portion of the outstanding amount of standby letters of credit (which are primarily renewed on an
annual basis) is used as surety for future premium and deductible payments to the Company’s workers’
compensation and general liability insurance carrier. The Company accrues for these liabilities based on the total
estimated costs of claims filed and claims incurred but not reported, and are not discounted.
Litigation
Since 2004, individuals who have held the position of Store Manager for the Company have filed lawsuits
alleging that the Company violated the Fair Labor Standards Act (“FLSA”), and/or similar state laws, by
classifying them as “exempt” employees who are not entitled to overtime compensation. The majority of the
complaints in each action also request that the cases proceed as collective actions under the FLSA or as class
actions under state laws and request recovery of overtime pay, liquidated damages, and attorneys’ fees and court
costs. The Company currently has 21 such cases pending against it. As previously disclosed in the Company’s
Annual Report on Form 10-K for fiscal 2009, on October 5, 2009, the Supreme Court decided not to hear the
Company’s appeal of the store manager classification litigation known as the Morgan case. During the first
quarter of fiscal 2010, the Company paid the judgment of $35.6 million, plus interest, attorneys’ fees and other
related costs, thus concluding the Morgan litigation.
Grace v. Family Dollar Stores, Inc. and Ward v. Family Dollar Stores, Inc. are both pending in the U.S. District
Court for the Western District of North Carolina, Charlotte Division (the “N.C. Federal Court”). In those cases,
the court has returned orders finding that the plaintiffs were not similarly situated and, therefore, that neither
nationwide notice nor collective treatment under the FLSA is appropriate. Hence, the Grace and Ward cases are
proceeding as approximately 43 individual plaintiff cases.
On July 9, 2009, the Court granted summary judgment against Irene Grace on the merits of her misclassification
claim under the FLSA. The Company has filed summary judgment motions related to each of the remaining 42
plaintiffs in the Grace and Ward cases. On September 9, 2009, the plaintiffs appealed certain rulings of the N.C.
Federal Court to the United States Court of Appeals for the Fourth Circuit including the court’s summary
judgment order against Irene Grace. Briefing related to the appeal was completed on August 20, 2010. In the
event that summary judgment is denied with respect to any of the individual Grace and Ward plaintiff’s claims,
the court has stated it will conduct what it has referred to as “mini-trials” of a few plaintiffs at a time. We intend
to vigorously defend the Company in these actions; however, no assurances can be given that the Company will
be successful in the defense of these matters.
Including Grace and Ward, a total of seventeen class and/or collective or single plaintiff misclassification cases
are now pending before the N.C. Federal Court.All of these cases have been either transferred by U.S. District
Courts in various states to the N.C. Federal Court or were the subject of an order entered by the United States
Judicial Panel on Multidistrict Litigation (“MDL Panel”) transferring the cases from United States district courts
in various states to the N.C. Federal Court for coordination of discovery with the other pending cases. The N.C.
Federal Court has stayed all discovery in these cases pending the outcome of the Grace and Ward appeals.
Presently, there are a total of 64 named plaintiffs and/or opt-ins in these cases.
The Company has received four additional class action lawsuits in which the sole or dispositive issue is the
exempt status of Store Managers under various state laws. Twila Walters et. al. v. Family Dollar Stores of
Missouri, Inc., alleging violations of the Missouri Minimum Wage Law, was originally filed on
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