El Pollo Loco 2016 Annual Report Download - page 31

ITEM 3. LEGAL PROCEEDINGS
OnoraboutFebruary24,2014,aformeremployeefiledaclassactionintheSuperiorCourtoftheStateofCalifornia,CountyofOrange,againstEPLonbehalfof
allputativeclassmembers(allhourlyemployeesfrom2010tothepresent)allegingcertainviolationsofCalifornialaborlaws,includingfailuretopayovertime
compensation,failuretoprovidemealperiodsandrestbreaks,andfailuretoprovideitemizedwagestatements.Theputativeleadplaintiff’srequestedremedies
includecompensatoryandpunitivedamages,injunctiverelief,disgorgementofprofits,andreasonableattorneys’feesandcosts.Nospecificamountofdamages
soughtwasspecifiedinthecomplaint.WehaveexecutedaMemorandumofUnderstandingoutlininganagreementinprinciplebetweenthepartiestosettlethe
claimsonaclass-widebasis.Thepartiesareworkingtomemorializethesettlementandsecuretherequiredcourtapproval.
DanielTurocy,etal.v.ElPolloLocoHoldings,Inc.,etal.(CaseNo.8:15-cv-01343)wasfiledintheUnitedStatesDistrictCourtfortheCentralDistrictof
CaliforniaonAugust24,2015,andRonHuston,etal.v.ElPolloLocoHoldings,Inc.,etal.(CaseNo.8:15-cv-01710)wasfiledintheUnitedStatesDistrictCourt
fortheCentralDistrictofCaliforniaonOctober22,2015.Thetwolawsuitshavebeenconsolidated,withco-leadplaintiffsandclasscounsel.Aconsolidated
complaintwasfiledonJanuary29,2016,onbehalfofco-leadplaintiffsandotherssimilarlysituated,allegingviolationsoffederalsecuritieslawsinconnection
withHoldingscommonstockpurchasedorotherwiseacquiredandthepurchaseofcalloptionsorthesaleofputoptions,betweenMay1,2015andAugust13,
2015(the“ClassPeriod”).ThenameddefendantsareHoldings;StephenJ.Sather,LauranceRoberts,andEdwardJ.Valle(collectively,the“Individual
Defendants”);andTrimaranPolloPartners,L.L.C.,TrimaranCapitalPartners,andFreemanSpogli&Co.(collectively,the“ControllingShareholderDefendants”).
Amongotherthings,Plaintiffsallegethat,in2014andearly2015,HoldingssufferedlossesduetorisinglaborcostsinCaliforniaand,inanattempttomitigatethe
effectsofsuchrisingcosts,removeda$5valueoptionfromourmenu,whichresultedinadecreaseinvalue-consciousstoretraffic.Plaintiffsfurtherallegethat
duringtheClassPeriod,HoldingsandtheIndividualDefendantsmadeaseriesofmateriallyfalseandmisleadingstatementsthatconcealedtheeffectthatthese
factorswerehavingonstoresalesgrowth,resultinginHoldingsstockcontinuingtobetradedatartificiallyinflatedprices.Asaresult,Plaintiffsandothermembers
oftheputativeclassallegedlysuffereddamagesinconnectionwiththeirpurchaseofHoldings’stockduringtheClassPeriod.Inaddition,Plaintiffsallegethatthe
IndividualDefendantsandControllingShareholderDefendantshaddirectinvolvementin,andresponsibilityover,theoperationsofHoldings,andarepresumedto
havehad,amongotherthings,thepowertocontrolorinfluencethetransactionsgivingrisetotheallegedsecuritieslawviolations.Inbothcases,Plaintiffsseekan
unspecifiedamountofdamages,aswellascostsandexpenses(includingattorneys’fees).Defendantsintendtovigorouslydefendagainsttheclaimsasserted.In
addition,onSeptember16,2015,theCompanyandcertainofitsofficersanddirectorsreceivedaninformal,non-publicinquiryfromtheSECrequestingvoluntary
productionofdocumentsandinformation.AllpartiesarecooperatingfullywiththeSEC'srequest.
OnoraboutNovember5,2015,apurportedEPLshareholderfiledaderivativecomplaintonbehalfoftheCompanyintheCourtofChanceryoftheStateof
DelawareagainstcertainEPLofficers,directorsandTrimaranPolloPartners,L.L.C.Thederivativecomplaintallegesthatthesedefendantsbreachedtheirfiduciary
dutiestoEPLandwereunjustlyenrichedwhentheysoldsharesofEPLatartificiallyinflatedpricesduetoallegedmisrepresentationsandomissionsregarding
EPL’scomparablestoresalesinthesecondquarterof2015.TheEPLshareholder’srequestedremediesincludeanawardofcompensatorydamagestoEPL,aswell
asacourtordertoimprovecorporategovernancebyputtingforwardforstockholdervotecertainresolutionsforamendmentstoEPL’sBylawsorCertificateof
Incorporation.
Wearealsoinvolvedinvariousotherclaimsandlegalactionsthatariseintheordinarycourseofbusiness.Wedonotbelievethattheultimateresolutionofthese
otheractionswillhaveamaterialadverseeffectonourfinancialposition,resultsofoperations,liquidity,orcapitalresources.Asignificantincreaseinthenumber
ofclaims,oranincreaseinamountsowingundersuccessfulclaims,couldmateriallyandadverselyaffectourbusiness,financialcondition,resultsofoperations,
andcashflows.


ITEM 4. MINE SAFETY DISCLOSURE
None.


28