Albertsons 2016 Annual Report Download - page 102

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injunctive relief and attorneys’ fees. On July 5, 2011, the District Court granted the Company’s Motion to Compel Arbitration
for those plaintiffs with arbitration agreements and plaintiffs appealed. On July 16, 2012, the District Court denied plaintiffs’
Motion for Class Certification, and on January 11, 2013, the District Court granted the Company’s Motion for Summary
Judgment and dismissed the case regarding the non-arbitration plaintiffs. On February 12, 2013, the 8th Circuit reversed the
District Court decision requiring plaintiffs with arbitration agreements to arbitrate and remanded to the District Court. On
October 30, 2013, the parties attended a District Court ordered mandatory mediation, which was not successful in resolving the
matter. On May 21, 2014, a panel of the 8th Circuit (1) reversed the District Court’s decision granting summary judgment in
favor of the Company and (2) affirmed the District Court’s decision denying class certification of a class consisting of all
retailers located in the States of Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin that purchased wholesale
grocery products from the Company between December 31, 2004 and September 13, 2008, but remanded the case for the
District Court to consider whether to certify a narrower class of purchasers supplied from the Company’s Champaign, Illinois
distribution center and potentially other distribution centers. On January 16, 2015, the Company filed a Petition for Certiorari to
the United States Supreme Court seeking to appeal certain aspects of the 8th Circuit decision, and on June 8, 2015, the United
States Supreme Court denied the Petition. On June 19, 2015, the District Court Magistrate Judge entered an order that decided a
number of matters including granting plaintiffs' request to seek class certification for certain Midwest Distribution Centers and
denying plaintiffs' request to add an additional New England plaintiff and denying plaintiffs' request to seek class certification
for a group of New England retailers. On August 20, 2015, the District Court affirmed the Magistrate Judge's order. In
September 2015, the plaintiffs appealed to the 8th Circuit the denial of the request to add an additional New England plaintiff
and to seek class certification for a group of New England retailers. On March 1, 2016, the plaintiffs filed a class certification
motion seeking to certify five District Court classes of retailers in the Midwest. The Company's response to the motion to
certify is due May 6, 2016.
In August and November 2014, four class action complaints were filed against the Company relating to the criminal intrusions
into its computer network announced by the Company in fiscal 2015 (the "Criminal Intrusion"). The cases were centralized in
the Federal District Court for the District of Minnesota under the caption In Re: Supervalu Inc. Customer Data Security Breach
Litigation. On June 26, 2015, the plaintiffs filed a Consolidated Class Action Complaint. The Company filed a Motion to
Dismiss the Consolidated Class Action Complaint and the hearing took place on November 3, 2015. On January 7, 2016, the
District Court granted the Motion to Dismiss and dismissed the case without prejudice, holding that the plaintiffs did not have
standing to sue as they had not met their burden of showing any compensable damages. On February 4, 2016, the plaintiffs
filed a motion to vacate the District Court's dismissal of the complaint or in the alternative to conduct discovery and file an
amended complaint, and the Company filed its response in opposition on March 4, 2016. On April 20, 2016, the District Court
denied plaintiffs’ motion to vacate the District Court’s dismissal or in the alternative to amend the complaint.
On June 30, 2015, the Company received a letter from the Office for Civil Rights of the U.S. Department of Health and Human
Services (“OCR”) seeking documents and information regarding the Company’s HIPAA breach notification and reporting from
2009 to the present. The letter indicates that the OCR Midwest Region is doing a compliance review of the Company’s alleged
failure to report small breaches of protected health information related to its pharmacy operations (e.g., any incident involving
less than 500 individuals). On September 4, 2015, the Company submitted its response to OCR’s letter. While the Company
does not believe that a loss is probable by reason of the compliance review, the Company believes that a loss is reasonably
possible; however, at this time the Company cannot reasonably estimate a range of possible losses because the OCR's review is
at the very early stages and the Company does not know if OCR will find a violation(s) and, if so, what violation(s) and
whether OCR will proceed with corrective action, issuance of penalties or monetary settlement. The potential penalties related
to the issues being investigated are up to $50 thousand per violation (which can be counted per day) with a $1.5 per calendar
year maximum for multiple violations of a single provision (with the potential for finding violations of multiple provisions each
with a separate $1.5 per calendar year maximum); however, as noted above, any actual penalties will be determined only after
consideration by OCR of various factors, including the nature of any violation, remedial actions taken by the Company and
other factors determined relevant by OCR.
Predicting the outcomes of claims and litigation and estimating related costs and exposures involves substantial uncertainties
that could cause actual outcomes, costs and exposures to vary materially from current expectations. The Company regularly
monitors its exposure to the loss contingencies associated with these matters and may from time to time change its predictions
with respect to outcomes and its estimates with respect to related costs and exposures.
With respect to the IOS, C&S, Criminal Intrusion and OCR matters discussed above, the Company believes the chance of a
material loss is remote. It is possible, although management believes that the likelihood is remote, that material differences in
actual outcomes, costs and exposures relative to current predictions and estimates, or material changes in such predictions or
estimates, could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.