Pizza Hut 2005 Annual Report Download - page 74
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Please find page 74 of the 2005 Pizza Hut annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Plaintiff alleges that she and other current and former
PizzaHut Restaurant General Managers (“RGMs”) were
improperlyclassifiedasexemptemployeesundertheU.S.
FairLaborStandardsAct(“FLSA”).Thereisalsoapendent
statelawclaim,allegingthatcurrentandformerRGMsin
Californiaweremisclassifiedunderthatstate’slaw.Plaintiff
seeks unpaid overtime wages and penalties. On May 5,
2004,theDistrictCourtgrantedconditionalcertificationof
anationwideclassofRGMsundertheFLSAclaim,providing
noticetoprospectiveclassmembersandanopportunityto
jointheclass.Approximately12percentoftheeligibleclass
members haveelected to jointhe litigation.However,on
June30,2005,theDistrictCourtgrantedPizzaHut’smotion
tostrikeallFLSAclassmemberswhojoinedthelitigation
afterJuly15,2004.Theeffectofthisorderistoreducethe
numberofFLSAclassmemberstoonlyapproximately88(or
approximately2.5%oftheeligibleclassmembers).
InNovember2005,thepartiesagreedtoasettlement.
PizzaHutbelievesthatdefinitivesettlementdocumentswill
bepreliminarilyandfinallyapprovedbytheCourtwithinsixty
toninetydaysfollowingsubmissionofthedocumentstothe
Court.Wehaveprovidedforthissettlementamountinour
ConsolidatedFinancialStatements.
OnNovember26, 2001, a lawsuit againstLong John
Silver’s, Inc. (“LJS”) entitled Kevin Johnson, on behalf of
himselfandallotherssimilarlysituatedv.LongJohnSilver’s,
Inc.(“Johnson”)wasfiledintheUnitedStatesDistrictCourt
for the Middle District of Tennessee, Nashville Division.
Johnson’ssuitallegedthatLJS’sformer“Security/Restitution
forLosses”policy(the“Policy”)providedfordeductionsfrom
RGMsandAssistantRestaurantGeneralManagers(“ARGMs”)
salariesthatviolatethesalarybasistestforexemptpersonnel
under regulations issued pursuant to the FLSA. Johnson
alleged that all RGMs and ARGMs whowereemployedby
LJSforthethreeyearperiodpriortothelawsuit—i.e.,since
November26,1998—shouldbetreatedastheequivalentof
hourlyemployeesandthuswereeligibleundertheFLSAfor
overtimeforanyhoursworkedover40duringallweeksinthe
recoveryperiod.Inaddition,Johnsonclaimedthatthepoten-
tialmembersoftheclassareentitledtocertainliquidated
damagesandattorney’sfeesundertheFLSA.
LJSbelievedthatJohnson’sclaims,aswellastheclaims
ofallothersimilarlysituatedparties,shouldberesolvedin
individualarbitrationspursuanttoLJS’sDisputeResolution
Program(“DRP”),andthatacollectiveactiontoresolvethese
claimsincourtwasclearlyinappropriateunderthecurrent
stateofthelaw.Accordingly,LJSmovedtocompelarbitration
intheJohnsoncase.LJSandJohnsonalsoagreedtostaythe
actioneffectiveDecember17,2001,pendingmediationand
enteredintoatollingagreementforthatpurpose.Aftermedi-
ationdidnotresolvethecase,andafterlimiteddiscovery
andahearing,theCourtdeterminedonJune7,2004,that
Johnson’sindividualclaimsshouldbereferredtoarbitration.
Johnsonappealed,andthedecisionoftheDistrictCourtwas
affirmedinallrespectsbytheUnitedStatesCourtofAppeals
fortheSixthCircuitonJuly5,2005.
OnDecember19,2003,counselforplaintiffintheabove
referencedJohnsonlawsuit,filedaseparatedemandforarbi-
trationwiththeAmericanArbitrationAssociation(“AAA”)on
behalfofformerLJSmanagersErinColeandNickKaufman,
who reside in South Carolina (the “Cole Arbitration”).
ClaimantsintheColeArbitrationdemandaclassarbitration
onbehalfofthesameputativeclass—andthesameunder-
lyingFLSAclaims—aswereallegedintheJohnsonlawsuit.
The complaint in the Cole Arbitration subsequently was
amendedtoallegeapracticeofdeductions(distinctfromthe
allegationsastothePolicy)inviolationoftheFLSAsalary
basistest,andtoaddVictoriaMcWhorter,anotherLJSformer
manager, as an additional claimant. LJS has denied the
claimsandtheputativeclassallegedintheColeArbitration,
anditisLJS’spositionthattheclaimsofCole,Kaufman,and
McWhortershouldbeindividuallyarbitrated.
Arbitrations under LJS’s DRP, including the Cole
Arbitration,aregovernedbytherulesoftheAAA.InOctober
2003,theAAAadopteditsSupplementaryRulesforClass
Arbitrations (“AAA Class Rules”). The AAA appointed an
arbitratorfortheColeArbitration.OnJune15,2004,the
arbitratorissuedaclauseconstructionaward,rulingthatthe
DRPdoesnotprecludeclassarbitration.LJSmovedtovacate
theclauseconstructionawardintheUnitedStatesDistrict
CourtfortheDistrictofSouthCarolina.OnSeptember15,
2005,thefederalcourtinSouthCarolinaruledthatitdid
nothavejurisdictiontohearLJS’smotiontovacate.LJShas
appealedtheU.S.DistrictCourt’srulingtotheUnitedStates
CourtofAppealsfortheFourthCircuit.Whilejudicialreview
oftheclauseconstructionawardwaspending,thearbitrator
permittedclaimantstomoveforaclassdeterminationaward,
whichwasopposedbyLJS.OnSeptember19,2005,thearbi-
tratorissuedaclassdeterminationaward,certifyingaclass
ofLJS’sRGMsandARGMsemployedbetweenDecember17,
1998,andAugust22,2004,onFLSAclaims,toproceedon
anopt-outbasisundertheAAAClassRules.Thatclassdeter-
minationawardwasupheldonappealbytheUnitedStates
DistrictCourtfortheDistrictofSouthCarolinaonJanuary20,
2006.LJShasappealedtherulingoftheU.S.DistrictCourt
totheUnitedStatesCourtofAppealsfortheFourthCircuit.
LJSbelievesthattheDRPprovidesforindividualarbi-
trations.LJSalsobelievesthatiftheColeArbitrationmust
proceed on a class basis, (i) the proceedings should be
governed by the opt-in collective action structure of the
FLSA,(ii)aclassshouldnotbecertifiedundertheapplicable
provisionsoftheFLSA,and(iii)eachindividualshouldnot
beabletorecoverformorethantwoyears(andamaximum
threeyears)priortothedatetheyfileaconsenttojointhe
arbitration.Wehaveprovidedfortheestimatedcostsofthe
Cole Arbitration, basedonaprojection ofeligibleclaims,
theamountofeacheligibleclaim,theestimatedlegalfees
incurredbytheclaimantsandtheresultsofsettlementnego-
tiationsinthisandotherwageandhourlitigationmatters.But
inviewofthenoveltiesofproceedingundertheAAAClass
Rulesandtheinherentuncertaintiesoflitigation,therecan
benoassurancethattheoutcomeofthearbitrationwillnot
resultinlossesinexcessofthosecurrentlyprovidedfor.
On September 21, 2005, a collective action lawsuit
againsttheCompanyandKFCCorporation,originallyentitled
Parlerv.YumBrands,Inc.,d/b/aKFC,andKFCCorporation,
wasfiledintheUnitedStatesDistrictCourtfortheDistrict
of Minnesota. Plaintiff alleges that he and other current
78. | Yum!Brands,Inc.