Family Dollar 2012 Annual Report Download - page 63

Litigation
The Company is engaged in a number of legal proceedings. The matters or groups of related matters discussed
below, if decided adversely to the Company, or settled by the Company, individually or in the aggregate, may
result in liability material to the Company’s financial condition or results of operations.
Wage and Hour Class Actions
Since 2004, certain individuals who 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. Some of the cases also
seek to proceed as collective actions under the FLSA or as class actions under state laws. Plaintiffs seek recovery
of overtime pay, liquidated damages, attorneys’ fees and court costs.
The Multi-District Litigation
Many of the cases asserting claims under the FLSA were consolidated in a Multi-District Litigation (“MDL”)
proceeding pending in the Western District of North Carolina, Charlotte Division (the “N.C. Federal Court”).
There are presently twelve cases in the MDL proceeding in which plaintiffs are asserting individual, class and/or
collective action status. In August and September 2012, the Company requested that the Joint Panel for the MDL
transfer two individual FLSA actions to the MDL, Blomberg v. Family Dollar Stores of Florida, Inc. and Ryan v.
Family Dollar Stores of Massachusetts, Inc. In total, following certain dismissals and summary dispositions, 38
individually named plaintiffs currently have cases pending in the MDL proceeding.
In two of the cases, Grace v. Family Dollar Stores, Inc. and Ward v. Family Dollar Stores, Inc., the N.C. Federal
Court determined that the plaintiffs were not similarly situated and, therefore, that neither nationwide notice nor
collective treatment under the FLSA was appropriate. The N.C. Federal Court also granted summary judgment
against Irene Grace on the merits of her misclassification claim under the FLSA. The plaintiffs appealed certain
rulings of the N.C. Federal Court to the United States Court of Appeals for the Fourth Circuit (the “Fourth
Circuit”). On March 22, 2011, the Fourth Circuit affirmed the N.C. Federal Court’s decision finding that
Ms. Grace was exempt from overtime compensation under the FLSA. The Fourth Circuit did not address the
class certification finding the issue was moot given that the claims had been dismissed on the merits.
In addition to the Grace decision, the N. C. Federal Court has repeatedly ruled in favor of the Company and
granted summary judgment, finding that the plaintiffs were properly classified as exempt from overtime pay.
Most of these plaintiffs have appealed these dismissals to the Fourth Circuit.
All putative class action cases based solely on state law have been dismissed from the MDL and were transferred
to the appropriate state court jurisdiction (see below).
State Law Class Actions
In addition to the cases pending in the MDL proceeding, the Company is a defendant in seven class action
lawsuits in seven states alleging that store managers should be non-exempt employees under various state laws.
The plaintiffs in these cases also seek recovery of overtime pay, liquidated damages, attorneys’ fees and court
costs. The states and cases are:
• Colorado – Julie Farley v. Family Dollar Stores of Colorado, Inc., was filed on February 7, 2012, in
the United States District Court for the District of Colorado seeking unpaid overtime for a class of
current and former Colorado store managers whom plaintiffs claim are not properly classified as
exempt from overtime pay under Colorado law. On June 4, 2012, the Company filed a motion to
dismiss certain of plaintiff’s state law claims. That motion is currently pending before the court. Class
discovery has begun.
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