GNC 2010 Annual Report Download - page 38

Table of Contents
In April 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 it with Andro Products, and from whom it 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 U.S. District Court, 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 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. In August 2008, plaintiffs appealed the dismissal of the four cases to U.S. Court of Appeals for the Second
Circuit, and oral argument was heard on October 14, 2009. The Second Circuit reversed the dismissal and remanded the case to the U.S.
District Court, Southern District of New York.
In the Guzman case in California, plaintiffs' Motion for Class Certification was denied on September 8, 2008. Plaintiffs appealed on
October 31, 2008. Oral arguments took place on January 15, 2010 and the court reversed the order denying class certification.
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 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.
California Wage and Break Claim. On November 4, 2008, ninety-eight plaintiffs filed individual claims against the Company in the
Superior Court of the State of California for the County of Orange, which was removed to the U.S. District Court, Central District of California on
February 17, 2009. Each of the plaintiffs had previously been a member of a purported class in a lawsuit filed against the Company in 2007 and
resolved in September 2009. The plaintiffs allege that they were not provided all of the rest and meal periods to which they were entitled under
California law, and further allege that we failed to pay them split shift and overtime compensation to which they were entitled under California
law. Discovery in this case is ongoing and we are vigorously defending these matters. The court has developed a mediation procedure for
handling the pending claims and has ordered the parties to mediate with small groups of plaintiffs and stayed the case as to the plaintiffs not
participating in the mediations. The first of the mediation sessions occurred February 10, 2010 and March 4, 2010 and did not result in any
settlements. Any liabilities that may arise from these matters are not probable or reasonably estimable at this time.
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