Rite Aid 2015 Annual Report Download - page 24

On a regular basis and as part of our normal business, we evaluate store performance and may
reduce in size, close or relocate a store if the store is redundant, underperforming or otherwise deemed
unsuitable. We also evaluate strategic dispositions and acquisitions of facilities and prescription files.
When we reduce in size, close or relocate a store or close distribution center facilities, we often
continue to have leasing obligations or own the property. We attempt to sublease this space. As of
February 28, 2015, we had 6,294,112 square feet of excess space, 4,363,571 square feet of which was
subleased.
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 filed a motion seeking reconsideration of the Court’s September 26, 2013 decision which motion
was denied in June 2014. We subsequently filed a petition for an interlocutory appeal of the Court’s
September 26, 2013 ruling with the U. S. Court of Appeals for the Second Circuit which petition was
denied in September 2014. 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 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, failure to reimburse
business expenses and failure to provide employee seating (the ‘‘California Cases’’). 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 pharmacist 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), during the period ended March 1, 2014, we recorded a legal
accrual with respect to these matters. We and the attorneys representing the putative class of
pharmacists have agreed to a class wide settlement of the case of $9.0 million subject to final Court
approval. The parties are in the process of obtaining Court approval.
In the employee seating case (Hall v. Rite Aid Corporation, San Diego County Superior Court), the
Court, in October 2011, granted the plaintiff’s motion for class certification. We filed our motion for
decertification, which motion was granted in November 2012. Plaintiff subsequently appealed the
Court’s order which appeal was granted in May 2014. We filed a petition for review of the appellate
court’s decision with the California Supreme Court, which petition was denied in August 2014.
Proceedings in the Hall case are stayed pending a decision by the California Supreme Court in two
similar cases. With respect to the California Cases (other than Chase and Scherwin and Kyle), we, at
24