Neiman Marcus 2013 Annual Report Download - page 26

Table of Contents
waiver in the Mandatory Arbitration Agreement. This led to further proceedings in the trial court, a stay of the arbitrations, and a decision by the trial court,
on its own motion, to reconsider its order compelling arbitration. The trial court ultimately decided to vacate its order compelling arbitration due to a recent
California appellate court decision. Following this ruling, the Company timely filed two separate appeals, one with respect to Mr. Pinela and one with
respect to Ms. Monjazeb, with the Court of Appeal, asserting that the trial court did not have jurisdiction to change its earlier determination of the
enforceability of the arbitration agreement. The appeal with respect to Mr. Pinela has been fully briefed and awaits the setting of a date for oral argument. The
appeal with respect to Ms. Monjazeb will be dismissed once final approval of the class action settlement is granted (as described below).
Notwithstanding the appeal, the trial court decided to set certain civil penalty claims asserted by Ms. Tanguilig for trial on April 1, 2014. In these
claims, Ms. Tanguilig sought civil penalties under the Private Attorneys General Act based on the Company's alleged failure to provide employees with meal
periods and rest breaks in compliance with California law. On December 10, 2013, the Company filed a motion to dismiss all of Ms. Tanguilig’s claims,
including the civil penalty claims, based on her failure to bring her claims to trial within five years as required by California law. After several hearings, on
February 28, 2014, the court dismissed all of Ms. Tanguilig’s claims in the case and vacated the April 1, 2014 trial date. The court has awarded the Company
its costs of suit in connection with the defense of Ms. Tanguilig’s claims, but denied its request of an attorneys’ fees award from Ms. Tanguilig. Ms. Tanguilig
filed a notice of appeal from the dismissal of all her claims, as well as a second notice of appeal from the award of costs, both of which are pending before the
Court of Appeal. Should the Court of Appeal reverse the trial court’s dismissal of all of Ms. Tanguilig’s claims, the litigation will resume, and Ms. Tanguilig
will seek class certification of the claims asserted in her Third Amended Complaint. If this occurs, the scope of her class claims will likely be reduced by the
class action settlement and release in the Monjazeb case (as described below); however, that settlement does not cover claims asserted by Ms. Tanguilig for
alleged Labor Code violations from approximately December 19, 2003 to August 20, 2006 (the beginning of the settlement class period in the Monjazeb
case). No date has been set for oral argument in Ms. Tanguilig’s appeals.
In Ms. Monjazeb's class action, a settlement was reached at a mediation held on January 25, 2014. After several hearings, the trial court granted
preliminary approval of the settlement on May 6, 2014 and directed that notice of settlement be given to the settlement class. The deadline for class members
to opt out of the settlement was August 11, 2014. The final approval hearing was held on September 18, 2014. The court stated that final approval of the
settlement would be granted, but required plaintiff's counsel to submit additional information to support plaintiff's motion for attorney's fees.
In addition, the National Labor Relations Board (NLRB) has been pursuing a complaint alleging that the Mandatory Arbitration Agreement’s class
action prohibition violates employees’ rights to engage in concerted activity, which was submitted to an administrative law judge (ALJ) for determination on
a stipulated record. Recently, the ALJ issued a recommended decision and order finding that the Company's Arbitration Agreement and class action waiver
violated the National Labor Relations Act. The matter has now been transferred to the NLRB for further consideration and decision.
On December 6, 2013, a third putative class action was filed against the Company in the San Diego Superior Court by a former employee. The case is
entitled Marisabella Newton v. Neiman Marcus Group, Inc., et al., and the complaint alleges claims similar to those made in the Monjazeb case. After filing
an answer to the complaint in the Newton case and responding to discovery, we reached a settlement of Ms. Newton's individual claims and a dismissal of her
class allegations, subject to court approval. The court approved the settlement and dismissed the case on August 25, 2014.
We will continue to vigorously defend our interests in these matters. Based upon the pending settlement agreement with respect to Ms. Monjazeb's
class action claims, we recorded our currently estimable liabilities with respect to both Ms. Monjazeb's and Ms. Tanguilig's employment class actions
litigation claims in fiscal year 2014, which amount was not material to our financial condition or results of operations. We will continue to evaluate these
matters, and our recorded reserves for such matters, based on subsequent events, new information and future circumstances.
On August 7, 2014, a putative class action complaint was filed against The Neiman Marcus Group LLC in Los Angeles County Superior Court by a
customer, Linda Rubenstein, in connection with the Company's Last Call stores in California. Ms. Rubenstein alleges that the Company has violated various
California consumer protection statutes by implementing a marketing and pricing strategy that suggests that clothing sold at Last Call stores in California
was originally offered for sale at full-line Neiman Marcus stores when allegedly, it was not, and is allegedly of inferior quality to clothing sold at the full-line
stores. On September 12, 2014, we removed the case to the United States District Court for the Central District of California. We will vigorously defend our
interests in this matter. We will continue to evaluate this matter based on subsequent events, new information and future circumstances.
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