GNC 2009 Annual Report Download - page 36

Table of Contents
In each of the six cases, plaintiffs sought, or are seeking, to certify a class and obtain damages on behalf of the class representatives and all
those similarly-situated who purchased from us certain nutritional supplements alleged to contain one or more Andro Products.
On April 17 and 18, 2006, we filed pleadings seeking to remove the then-pending Andro Actions to the respective federal district courts for
the districts in which the respective Andro Actions were pending. At the same time, we filed motions seeking to transfer the then-pending Andro
Actions to the U.S. District Court, Southern District of New York based on "related to" bankruptcy jurisdiction, as one of the manufacturers
supplying us with Andro Products, and from whom we sought indemnity, MuscleTech Research and Development, Inc. ("MuscleTech"), had
filed for bankruptcy. We were successful in removing the New Jersey, New York, Pennsylvania, and Florida Andro Actions to federal court and
transferring these actions to the U.S. District Court, Southern District of New York based on bankruptcy jurisdiction. The California case,
Guzman V. General Nutrition Companies, Inc., was not removed and remains pending in the Superior Court of the State of California for the
County of Los Angeles.
Following the conclusion of the MuscleTech bankruptcy case, in September 2007, plaintiffs filed a stipulation dismissing all claims related to
the sale of MuscleTech products in the four cases then-pending in the Southern District of New York (New Jersey, New York, Pennsylvania,
and Florida). Additionally, plaintiffs filed motions with the Court to remand those actions to their respective state courts, asserting that the
federal court had been divested of jurisdiction because the MuscleTech bankruptcy action was no longer pending. That motion was never ruled
upon and has been rendered moot by the disposition of the case, discussed below.
On June 4, 2008, the U.S. District Court, Southern District of New York (on its own motion) set a hearing for July 14, 2008 for the purpose of
hearing argument as to why the New Jersey, New York, Pennsylvania, and Florida cases should not be dismissed for failure to prosecute in
conformity to the Court's Case Management Order. Following the hearing, the Court advised that all four cases would be dismissed with
prejudice and issued an Order to that effect on July 29, 2008. On August 25, 2008 plaintiffs appealed the dismissal of the four cases to U.S.
Court of Appeals for the Second Circuit.
In the Guzman case in California, plaintiffs Motion for Class Certification was denied on September 8, 2008. Plaintiffs appealed on
October 31, 2008.
On October 3, 2008, the plaintiffs in the five other Andro Actions filed another suit related to the sale of Andro products in state court in
Illinois. Stephens and Pio v. General Nutrition Companies, Inc. (Case No. 08 CH 37097, Circuit Court of Cook County, Illinois, County
Department, Chancery Division). The allegations are substantially similar to all of the other Andro Actions, as well as another case, Pio and
McDonald v. General Nutrition Companies, Inc. (Case No. 02 CH 14122, Circuit Court of Cook County, Illinois, County Department, Chancery
Division), which was dismissed on October 4, 2007 for want of prosecution.
As any liabilities that may arise from these cases are not probable or reasonably estimable at this time, no liability has been accrued in the
accompanying financial statements.
Wage and Hour Claim. On August 11, 2006, the Company and General Nutrition Corporation, one of the Company's wholly owned
subsidiaries, were sued in U.S. District Court, District of Kansas by Michelle L. Most and Mark A. Kelso, on behalf of themselves and all others
similarly situated. The lawsuit purports to certify a nationwide class of GNC store managers and assistant managers and alleges that GNC
failed to pay time and a half for working more than 40 hours per week. Plaintiffs contend that the Company and General Nutrition Corporation
improperly applied fluctuating work week calculations and procedures for docking pay for working less than 40 hours per week under a
fluctuating work week. In May 2007, the parties entered in to a settlement of the claims, which was subject to court approval. On or about
July 3, 2007, we sent a notice to all potential claimants, informing them of their right to elect to opt in to the settlement. In addition, we agreed to
pay the plaintiffs' counsel $0.7 million for attorneys' fees following approval by the court of the settlement. On July 23, 2007, the court approved
the settlement of claims as fair, reasonable, and adequate and entered its Order of Approval. Based on the total number of
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