Aarons 2012 Annual Report Download - page 74

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March 26, 2012, following the court’s ruling that the verdict would not be sustained, the Company entered into a
settlement agreement resolving the claims in the amount of $6.0 million. The Company recognized $35.5 million of
income related to the reversal of the lawsuit accrual in the first quarter of 2012.
In Kunstmann et al v. Aaron Rents, Inc., filed with the United States District Court, Northern District of Alabama
(Case No.: 2:08-CV-1969-WMA), on October 29, 2008, plaintiffs alleged that the Company improperly classified
store general managers as exempt from the overtime provisions of the Fair Labor Standards Act (―FLSA‖). Plaintiffs
seek to recover unpaid overtime compensation and other damages for a class almost exclusively comprised of
former general managers, most of whom terminated employment with the Company more than a year ago. On
October 4, 2012 the Court denied the Company’s motion for summary judgment, and on January 23, 2013, the Court
denied the Company’s motion for class decertification. The current class includes 247 individuals. The parties are
now working on proposing next steps for the conduct of the case.
In Margaret Korrow, et al. v. Aaron’s, Inc., originally filed in the Superior Court of New Jersey, Middlesex County,
Law Division on October 26, 2010, plaintiff filed suit on behalf of herself and others similarly situated alleging that
the Company is liable in damages to plaintiff and each class member because the Company’s lease agreements
issued after March 16, 2006 purportedly violated certain New Jersey state consumer statutes. The Company
removed the lawsuit to the United States District Court for the District of New Jersey on December 6, 2010 (Civil
Action No.: 10-06317(JAP)(LHG)). Plaintiff on behalf of herself and others similarly situated seeks equitable relief,
statutory and treble damages, pre- and post-judgment interest and attorneys’ fees. Discovery on this matter is closed.
To date, no class has been certified and, on December 17, 2012, the Company moved to dismiss the class allegations
from plaintiff’s complaint. On February 5, 2013, plaintiff filed its response and also moved to certify the class.
In Crystal and Brian Byrd v. Aaron’s, Inc., Aspen Way Enterprises, Inc., John Does (1-100) Aaron’s Franchisees
and Designerware, LLC., filed on May 16, 2011 in the United States District Court, Western District of
Pennsylvania (Case No. 1:11-CV-00101-SPB), plaintiffs allege that the Company and its franchisees knowingly
violated plaintiffs’ and other similarly situated plaintiffs’ privacy in violation of the Electronic Communications
Privacy Act and the Computer Fraud Abuse Act through its use of a software program called ―PC Rental Agent.‖
The District Court dismissed the Company from the lawsuit on March 20, 2012. On September 14, 2012, plaintiffs
filed an amended complaint against the Company and its franchisees alleging, among other claims, invasion of
privacy, interception of electronic communications in violation of the Federal Wiretap Act as amended by the
Electronic Communications Privacy Act and vicarious liability claims. The plaintiffs are seeking damages in
connection with the allegations of the amended complaint. On October 15, 2012, the Company filed a motion to
dismiss the amended complaint, which still remains pending.
The Company has received inquiries from and is responding to government agencies, including the Federal Trade
Commission, requesting information regarding the Byrd litigation and another incident involving the compromise of
customer information, and inquiring about, among other things, the Company’s retail transactional, information
security and privacy policies and practices.
The matter of Kurtis Jewell v. Aaron’s, Inc. was originally filed in the United States District Court, Northern District
of Ohio, Eastern Division on October 28, 2011 and was transferred on February 23, 2012 to the United States
District Court for the Northern District of Georgia (Atlanta Division) (Civil No.:1:12-CV-00563-AT). Plaintiff, on
behalf of himself and all other non-exempt employees who worked in Company stores, alleges that the Company
violated the FLSA when it automatically deducted 30 minutes from employees’ time for meal breaks on days when
plaintiffs allegedly did not take their meal breaks. Plaintiff claims he and other employees actually worked through
meal breaks or were interrupted during the course of their meal breaks and asked to perform work. As a result of the
automatic deduction, plaintiff alleges that the Company failed to account for all of his working hours when it
calculated overtime, and consequently underpaid him. On September 28, 2012, the Court issued an order granting
conditional certification of a class consisting of all hourly store employees from October 27, 2008 to the present.
The current class size is 1,788, which is less than seven percent of the potential class members. With limited
exceptions, the time period for additional members to be added to the class has expired.
The matter of Parish Harrigan and Carlos Urzua v. Aaron’s, Inc. was filed in the Superior Court of the State of
California, County of Sacramento on January 27, 2012 (Case No.: 34-2012-0117848). Plaintiffs allege that they
were subjected to jokes and name calling on the basis of their race and national origin. Plaintiffs further claim that
they were subject to retaliation after reporting the discrimination and harassment to the Company. The plaintiffs are
seeking damages in connection with the allegations. The Company denies the underlying allegations, believes that it
took prompt action to investigate the claims once it was notified of the allegations, denies that either plaintiff was
subject to retaliation and intends to vigorously defend itself in the litigation.