| Legal Proceedings | 23. Legal Proceedings
The Company is involved in a variety of claims, suits,
investigations and proceedings that arise from time to time in the
ordinary course of its business, including actions with respect to
contracts, intellectual property, taxation, employment, benefits,
securities, personal injuries and other matters. The results of
these proceedings in the ordinary course of business are not
expected to have a material adverse effect on the Company’s
consolidated financial position or results of operations.
The Company records a liability when it believes that it is both
probable that a liability will be incurred, and the amount of loss
can be reasonably estimated. The Company evaluates, at least
quarterly, developments in its legal matters that could affect the
amount of liability that has been previously accrued and makes
adjustments as appropriate. Significant judgment is required to
determine both probability and the estimated amount of a loss or
potential loss. The Company may be unable to reasonably estimate
the reasonably possible loss or range of loss for a particular
legal contingency for various reasons, including, among
others: (i) if the damages sought are indeterminate;
(ii) if proceedings are in the early stages; (iii) if
there is uncertainty as to the outcome of pending proceedings
(including motions and appeals); (iv) if there is uncertainty
as to the likelihood of settlement and the outcome of any
negotiations with respect thereto; (v) if there are
significant factual issues to be determined or resolved;
(vi) if the proceedings involve a large number of parties;
(vii) if relevant law is unsettled or novel or untested legal
theories are presented; or (viii) if the proceedings are
taking place in jurisdictions where the laws are complex or
unclear. In such instances, there is considerable uncertainty
regarding the ultimate resolution of such matters, including a
possible eventual loss, if any.
Legal matters are inherently unpredictable and subject to
significant uncertainties, some of which are beyond the
Company’s control. As such, there can be no assurance that
the final outcome of these matters will not materially and
adversely affect the Company’s business, financial condition,
results of operations, or cash flows.
Except as otherwise described below with respect to the Adrea
LLC(Adrea) matter, the Company has determined that a loss is
reasonably possible with respect to the matters described below.
Based on its current knowledge, the Company has determined that the
amount of loss or range of loss that is reasonably possible (or, in
the case of Adrea, probable), including any reasonably possible
(or, in the case of Adrea, probable) losses in excess of amounts
already accrued, is not estimable.
The following is a discussion of the material legal matters
involving the Company.
PIN Pad Litigation
As previously disclosed, the Company discovered that PIN pads in
certain of its stores had been tampered with to allow criminal
access to card data and PIN numbers on credit and debit cards
swiped through the terminals. Following public disclosure of
this matter on October 24, 2012, the Company was served with
four putative class action complaints (three in federal district
court in the Northern District of Illinois and one in the Northern
District of California), each of which alleged on behalf of
national and other classes of customers who swiped credit and debit
cards in Barnes & Noble Retail stores common law claims
such as negligence, breach of contract and invasion of privacy, as
well as statutory claims such as violations of the Fair Credit
Reporting Act, state data breach notification statutes, and state
unfair and deceptive practices statutes. The actions sought
various forms of relief including damages, injunctive or equitable
relief, multiple or punitive damages, attorneys’ fees, costs,
and interest. All four cases were transferred and/or assigned
to a single judge in the United States District Court for the
Northern District of Illinois, and a single consolidated amended
complaint was filed. The Company filed a motion to dismiss the
consolidated amended complaint in its entirety, and in September
2013, the Court granted the motion to dismiss without
prejudice. The Plaintiffs then filed an amended complaint, and
the Company filed a second motion to dismiss. On October 3,
2016, the Court granted the second motion to dismiss, and dismissed
the case without prejudice; in doing so, the Court permitted
plaintiffs to file a second amended complaint by October 31,
2016. On October 31, 2016, the plaintiffs filed a second
amended complaint. The Company filed a motion to dismiss the
second amended complaint, and that motion has been fully briefed
and is awaiting decision. A status hearing is scheduled for
March 14, 2017.
Cassandra Carag individually and on behalf of others
similarly situated v. Barnes & Noble, Inc.,
Barnes & Noble Booksellers, Inc. and DOES 1 through 100
inclusive
On November 27, 2013, former Associate Store Manager Cassandra
Carag (Carag) brought suit in Sacramento County Superior Court,
asserting claims on behalf of herself and all other hourly
(non-exempt) off-the-clock
Adrea LLC v. Barnes & Noble, Inc.,
barnesandnoble.com llc and NOOK Media LLC
With respect to the Adrea matter described herein, the Company has
determined, based on its current knowledge, that a loss is
probable.
On June 14, 2013, Adrea filed a complaint against
Barnes & Noble, Inc., NOOK Digital, LLC (formerly
barnesandnoble.com llc) and B&N Education, LLC (formerly NOOK
Media LLC) (collectively, B&N) in the United States District
Court for the Southern District of New York alleging that various
B&N NOOK products and related online services infringe U.S.
Patent Nos. 7,298,851 (‘851 patent), 7,299,501 (‘501
patent) and 7,620,703 (‘703 patent). B&N filed its Answer
on August 9, 2013, denying infringement and asserting several
affirmative defenses. At the same time, B&N filed
counterclaims seeking declaratory judgments of non-infringement patents-in-suit.
Beginning October 7, 2014, through and including
October 22, 2014, the case was tried to a jury in the Southern
District of New York. The jury returned its verdict on
October 27, 2014. The jury found no infringement with respect
to the ‘851 patent, and infringement with respect to the
‘501 and ‘703 patents. It awarded damages in the amount
of $1,330. The jury further found no willful infringement with
respect to any patent.
On July 24, 2015, the Court granted B&N’s post-trial
application to invalidate one of the two patents (the ‘501
patent) the jury found to have been infringed. On
September 28, 2015, the Court heard post-trial motions on the
jury’s infringement and validity determinations, and on
February 24, 2016, it issued a decision upholding the
jury’s determination of infringement and validity with
respect to the ‘703 patent. Since the original damages award
was a total award for infringement of both patents, the Court held
a new trial to determine damages for infringement of the ‘703
patent, which trial concluded on July 15, 2016.
On December 28, 2016, the Court issued its decision on the
issue of damages, finding that (a) Adrea should be entitled to
a damages award of $267, based on a reasonable royalty rate of 5.1
cents per unit, and (ii) Adrea was not entitled to any
enhancement of damages, as B&N’s infringement was not
willful. Following letter briefing, in which Adrea asked the
Court to award prejudgment interest of approximately $90, the
Court, following B&N’s reasoning, added $3 in prejudgment
interest to its damages award, and on January 12, 2017 entered
judgment in favor of Adrea the total amount of $270. Adrea
subsequently moved the Court for supplemental damages relating to
any allegedly infringing products B&N may have sold that were
not taken into account in the first verdict. In addition, Adrea
asked the Clerk of the Court to tax costs against B&N in the
amount of $110. B&N is opposing both requests, and the briefing
on those applications is ongoing. In the meantime, the time to
appeal the Court’s judgment is tolled, pending the
determination of Adrea’s motion for supplemental damages.
Café Manager Class Actions
Two former Café Managers have filed separate actions alleging
similar claims of entitlement to unpaid compensation for
overtime. In each action, the plaintiff seeks to represent a
class of allegedly similarly situated employees who performed the
same position (Café Manager). Specifically, Christine
Hartpence filed a complaint against Barnes & Noble, Inc.
(Barnes & Noble) in Philadelphia County Court of Common
Pleas on May 26, 2015 (Case No.: 160503426), alleging that she
is entitled to unpaid compensation for overtime under Pennsylvania
law and seeking to represent a class of allegedly similarly
situated employees who performed the same position (Café
Manager). On July 14, 2016, Ms. Hartpence amended her
complaint to assert a purported collective action for alleged
unpaid overtime compensation under the federal Fair Labor Standards
Act (FLSA), by which she sought to act as a class representative
for similarly situated Café Managers throughout the United
States. On July 27, 2016, Barnes & Noble removed the
case to the U.S. District Court of the Eastern District of
Pennsylvania (Case No.: 16-4034). Ms. Hartpence re-filed re-filed
On September 20, 2016, Kelly Brown filed a complaint against
Barnes & Noble in the U.S. District Court for the Southern
District of New York (Case No.: 16-7333) |
