Rite Aid 2014 Annual Report Download - page 21

Download and view the complete annual report

Please find page 21 of the 2014 Rite Aid 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.

Page out of 122

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122

Item 3. Legal Proceedings
We have been named in a collective and class action lawsuit, Indergit v. Rite Aid Corporation et al
pending in the United States District Court for the Southern District of New York, filed purportedly on
behalf of current and former store managers working in our stores at various locations around the
country. The lawsuit alleges that we failed to pay overtime to store managers as required under the
FLSA and under certain New York state statutes. The lawsuit also seeks other relief, including
liquidated damages, punitive damages, attorneys’ fees, costs and injunctive relief arising out of state and
federal claims for overtime pay. On April 2, 2010, the Court conditionally certified a nationwide
collective group of individuals who worked for us as store managers since March 31, 2007. The Court
ordered that Notice of the Indergit action be sent to the purported members of the collective group
(approximately 7,000 current and former store managers) and approximately 1,550 joined the Indergit
action. Discovery as to certification issues has been completed. On September 26, 2013, the Court
granted Rule 23 class certification of the New York store manager claims as to liability only, but denied
it as to damages, and denied our motion for decertification of the nationwide collective action claims.
We have filed a motion seeking reconsideration of the Court’s September 26, 2013 decision and
briefing on that motion is complete and awaiting a ruling. Once approved by the Court, notice of the
Rule 23 class certification as to liability only will be sent to approximately 1,750 current and former
store managers in the state of New York. At this time, we are not able to either predict the outcome of
this lawsuit or estimate a potential range of loss with respect to the lawsuit. Our management believes,
however, that this lawsuit is without merit and not appropriate for collective or class action treatment
and is vigorously defending this lawsuit.
We are currently a defendant in several putative class action lawsuits filed in state courts in
California alleging violations of California wage and hour laws, rules and regulations pertaining
primarily to failure to pay overtime, pay for missed meals and rest periods and failure to provide
employee seating. These suits purport to be class actions and seek substantial damages. We have
aggressively challenged both the merits of the lawsuits and the allegations that the cases should be
certified as class or representative actions. With respect to cases involving meal and rest periods (Chase
and Scherwin v. Rite Aid Corporation pending in Los Angeles County Superior Court and Kyle v. Rite
Aid Corporation pending in Sacramento County Superior Court), in light of the cost and uncertainty
involved in these lawsuits, we are involved in ongoing discussions with counsel for the Plaintiffs
concerning a possible resolution of these matters. With respect to the other lawsuits described in this
paragraph, we, at this time, are not able to predict either the outcome of these lawsuits or estimate a
potential range of loss with respect to said lawsuits.
We were served with a United States Department of Health and Human Services Office of the
Inspector General (‘‘OIG’’) subpoena dated March 5, 2010 in connection with an investigation being
conducted by the OIG and the United States Attorney’s Office for the Central District of California.
The subpoena requests records related to any gift card inducement programs for customers who
transferred prescriptions for drugs or medicines to our pharmacies, and whether any customers who
receive federally funded prescription benefits (e.g. Medicare and Medicaid) may have benefited from
those programs. We have substantially completed our production of records in response to the
subpoena. In June 2013, the government contacted us, and we are involved in ongoing discussions with
the government regarding the matter. We are unable to predict the timing or outcome of any review by
the government of such information.
We were served with a Civil Investigative Demand Subpoena Duces Tecum dated August 26, 2011
by the United States Attorney’s Office for the Eastern District of Michigan. The subpoena requests
records regarding Rite Aid’s Rx Savings Program and the reporting of usual and customary charges to
publicly funded health programs. In connection with the same investigation, we were served with a Civil
Subpoena Duces Tecum dated February 22, 2013 by the State of Indiana Office of the Attorney
20