Big Lots 2015 Annual Report Download - page 143

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NOTE 10 – COMMITMENTS, CONTINGENCIES AND LEGAL PROCEEDINGS
On May 21, May 22 and July 2, 2012, three shareholder derivative lawsuits were filed in the U.S. District Court for the
Southern District of Ohio against us and certain of our current and former outside directors and executive officers (Jeffrey
Berger, David Kollat, Brenda Lauderback, Philip Mallott, Russell Solt, Dennis Tishkoff, Robert Claxton, Joe Cooper, Steven
Fishman, Charles Haubiel, Timothy Johnson, John Martin, Norman Rankin, Paul Schroeder, Robert Segal and Steven Smart).
The lawsuits were consolidated, and, on August 13, 2012, plaintiffs filed a consolidated complaint, which generally alleges that
the individual defendants traded in our common shares based on material, nonpublic information concerning our guidance for
fiscal 2012 and the first quarter of fiscal 2012 and the director defendants failed to suspend our share repurchase program
during such trading activity. The consolidated complaint asserts claims under Ohio law for breach of fiduciary duty, unjust
enrichment, misappropriation of trade secrets and corporate waste and seeks declaratory relief and disgorgement to us of
proceeds from any wrongful sales of our common shares, plus attorneys’ fees and expenses.
The defendants filed a motion to dismiss the consolidated complaint, which was granted by the Court in an Opinion and Order
dated April 14, 2015, pursuant to which plaintiffs’ claims were all dismissed with prejudice, with the exception of their claim
for corporate waste, which was dismissed without prejudice. On May 5, 2015, plaintiffs filed a Motion for Leave to File
Verified Consolidated Amended Shareholder Derivative Complaint, which seeks to replead the claim for corporate waste that
was dismissed without prejudice by the Court, as well as a Motion for Reconsideration and, in the Alternative, for Certification
of Question of State Law to the Supreme Court of Ohio. Defendants’ responses to both motions were filed on May 29, 2015.
On August 3, 2015, the Court granted Plaintiffs’ Motion for Leave to File Verified Consolidated Amended Shareholder
Derivative Complaint, and Plaintiffs filed the amended complaint on the same date, asserting a claim for corporate waste. On
September 30, 2015, defendants filed an answer to the amended complaint. The case is currently in discovery.
We received a letter dated January 28, 2013, sent on behalf of a shareholder demanding that our Board of Directors investigate
and take action in connection with the allegations made in the derivative and securities lawsuits described above. The
shareholder indicated that he would commence a derivative lawsuit if our Board of Directors failed to take the demanded
action. On March 6, 2013, our Board of Directors referred the shareholder’s letter to a committee of independent directors to
investigate the matter. That committee, with the assistance of independent outside counsel, investigated the allegations in the
shareholder’s demand letter and, on August 28, 2013, reported its findings to our Board of Directors along with its
recommendation that the Board reject the shareholder’s demand. Our Board of Directors unanimously accepted the
recommendation of the demand investigation committee and, on September 9, 2013, outside counsel for the committee sent a
letter to counsel for the shareholder informing the shareholder of the Board’s determination. On October 18, 2013, the
shareholder filed a derivative lawsuit in the U.S. District Court for the Southern District of Ohio against us and each of the
current and former outside directors and executive officers named in the 2012 shareholder derivative lawsuit. The plaintiff’s
complaint generally alleges that the individual defendants traded in our common shares based on material, nonpublic
information concerning our guidance for fiscal 2012 and the first quarter of fiscal 2012 and the director defendants failed to
suspend our share repurchase program during such trading activity. The complaint asserts claims under Ohio law for breach of
fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, corporate waste and misappropriation of trade
secrets and seeks damages, injunctive relief and disgorgement to us of proceeds from any wrongful sales of our common
shares, plus attorneys’ fees and expenses.
The defendants filed a motion to dismiss the complaint, which was granted by the Court in an Opinion and Order dated April
14, 2015, which dismissed the plaintiff’s claims with prejudice with the exception of his claim for corporate waste and his
assertion that our Board of Directors wrongfully rejected his demand to take action against the individually named defendants.
On May 5, 2015, the Court so ordered the parties’ stipulation, staying plaintiff’s time to seek leave to amend his complaint in
order to make a request to inspect the Company’s books and records pursuant to Ohio Revised Code §1701.37, and plaintiff
served that request for inspection on May 8, 2015. On August 17, 2015 plaintiff filed an Amended Verified Shareholder
Derivative Complaint. On September 30, 2015, defendants moved to dismiss the amended complaint. As of November 20,
2015 the motion was fully briefed and awaits decision.