| Commitments and Contingencies | NOTE 6 – COMMITMENTS AND CONTINGENCIES
Putative class action complaints were filed in the United States
District Court for the Northern District of Texas – Dallas
Division against Pier 1 Imports, Inc., Alexander W. Smith and
Charles H. Turner in August and October 2015 alleging violations
under the Securities Exchange Act of 1934, as amended. The
lawsuits, which have been consolidated into a single action
captioned Town of Davie Police Pension Plan, Plaintiff, v. Pier 1
Imports, Inc., Alexander W. Smith and Charles H. Turner,
Defendants, were filed on behalf of a purported putative class of
investors who purchased or otherwise acquired stock of Pier 1
Imports, Inc. between December 19, 2013 and December 17,
2015. The plaintiffs seek to recover damages purportedly caused by
the Defendants’ alleged violations of the federal securities
laws and to pursue remedies under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. The complaint seeks certification as a class action,
unspecified compensatory damages plus interest and attorneys’
fees. On August 10, 2017, the court granted the
Company’s motion to dismiss the complaint, while providing
the plaintiffs an opportunity to replead their complaint. An
amended complaint was filed with the court on September 25,
2017. Although the ultimate outcome of litigation cannot be
predicted with certainty, the Company believes that this lawsuit is
without merit and intends to defend against it vigorously.
The Company announced in January 2016 a voluntary recall of its
Swingasan Chair and Stand in cooperation with the CPSC. In
September 2016, the Company received a staff investigatory letter
from the CPSC indicating that the CPSC would investigate whether
the Company complied with certain reporting requirements of the
Consumer Product Safety Act with respect to the recall. The
Company responded to the inquiry and cooperated with the
CPSC. On September 20, 2017, the Company received a
letter from the CPSC proposing to resolve certain alleged
violations of the Consumer Product Safety Act relating to the
Swingasan recall on terms which would require, among other things,
the payment of a civil money penalty. The Company is
evaluating the assertions made by the CPSC and is preparing a
response. The Company disagrees with a number of the allegations
and legal conclusions asserted by the CPSC and believes the
requested civil money penalty is excessive in view of the
circumstances. Given the nature of this matter and the uncertainty
as to how and when it will be resolved, the Company believes that a
reasonable estimate of the potential range of loss in connection
with this matter is $2,000,000 to $6,200,000. While we anticipate
that the final settlement will fall within the estimated range of
outcomes, the final terms of the resolution of this matter cannot
be predicted with certainty and no assurances can be given as to
the specific amount that the Company may be required to pay.
The Company is a defendant in lawsuits pending in federal courts in
California containing various class action allegations under
California state wage-and-hour laws. These lawsuits seek
unspecified monetary damages, injunctive relief and
attorneys’ fees. The Company has sought to settle these cases
on terms favorable to the Company in view of the claims made, the
continuing cost of litigation and an assessment of the risk of an
adverse trial court or appellate decision. The Company has settled
or agreed to settle the pending cases, subject to completion of
associated procedural requirements. The Company does not believe
any reasonably foreseeable resolution of these matters will have a
material adverse effect on the Company’s financial condition,
results of operations or liquidity.
The Company recognized expense of $6,600,000 in the second quarter
of fiscal 2018 attributable to the legal and regulatory proceedings
described in the two preceding paragraphs as a component of
selling, general and administrative expenses.
There are various other claims, lawsuits, inquiries, investigations
and pending actions against the Company incident to the operations
of its business. The Company considers these other matters to be
ordinary and routine in nature. The Company maintains insurance
against the consolidated class action described in the first
paragraph in this Note and liability insurance against most of the
other matters noted in this paragraph. It is the opinion of
management, after consultation with counsel, that the ultimate
resolution of such matters will not have a material adverse effect,
either individually or in the aggregate, on the Company’s
financial condition, results of operations or liquidity. |
