11. LITIGATION

The company and its subsidiaries from time to time are parties to, or targets of, lawsuits, claims, investigations and proceedings, which are being handled and defended in the ordinary course of business. While the company is unable to predict the outcome of these matters, it believes, based upon currently available facts, that it is remote that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations or cash flows in the future. However, adverse developments could negatively impact earnings in a particular future fiscal period.

The company’s facilities are subject to various federal, state and local laws and regulations regarding the discharge of material into the environment and the protection of the environment in other ways. The company is not a party to any material proceedings arising under these regulations. The company believes that compliance with existing environmental laws and regulations will not materially affect the consolidated financial condition, results of operations, cash flows or the competitive position of the company. The company believes it is currently in substantial compliance with all material environmental regulations affecting the company and its properties. On August 9, 2016, the U.S. Department of Labor (the “DOL”) notified the company that it was scheduled for a compliance review under the Fair Labor Standards Act. The company is cooperating with the DOL.

At this time, the company is defending 24 complaints filed by distributors alleging that such distributors were misclassified as independent contractors. Eighteen of these lawsuits seek class and/or collective action treatment. The remaining six cases allege individual claims and do not seek class or collective action treatment. The respective courts have ruled on plaintiffs’ motions for class certification in six of the pending cases, each of which is discussed below:

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Rehberg et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Jamestown, LLC: In March 2013, the U.S. District Court for the Western District of North Carolina (Charlotte Division) conditionally certified a class action for claims under the Fair Labor Standards Act (“FLSA”) related to a complaint filed against the company and one of its subsidiaries on September 12, 2012, by Scott Rehberg and certain other plaintiffs. The parties are currently participating in mediation pursuant to the court’s order.

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Martinez et al. v. Flowers Foods, Inc., Flowers Bakeries Brands, Inc., Flowers Baking Co. of California, LLC, and Flowers Baking Co. of Henderson, LLC: On February 1, 2016, the U.S. District Court for the Central District of California denied a motion for conditional class certification under the FLSA related to a complaint filed against the company and certain of its subsidiaries on July 20, 2016 by Giovanni Martinez and certain other plaintiffs. This lawsuit was settled on confidential terms and was dismissed by the court on July 7, 2016.

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Stewart et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Batesville, LLC: On August 12, 2016, the U.S. District Court for the Western District of Tennessee granted conditional class certification under the FLSA related to a complaint filed against the company and one of its subsidiaries on July 2, 2015, by Jacky Stewart and certain other plaintiffs. The court limited the class to distributors operating out of designated warehouse locations in the state of Tennessee only.

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Coyle v. Flowers Foods, Inc. and Holsum Bakery, Inc.: On August 30, 2016, the U.S. District Court for the District of Arizona granted class certification under the FLSA related to a complaint filed against the company and one of its subsidiaries on July 20, 2015 by Terry Coyle.

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McCurley v. Flowers Foods, Inc. and Derst Baking Co., LLC: On October 24, 2016, the U.S. District Court for the District of South Carolina granted conditional class certification under the FLSA related to a complaint filed against the company and one of its subsidiaries in January 20, 2016 by Paul McCurley.

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Neff et al. v. Flowers Foods, Inc., Lepage Bakeries Park Street, LLC, and CK Sales Co., LLC: On November 7, 2016, the U.S. District Court for the District of Vermont granted conditional class certification the FLSA related to a complaint filed against the company and certain of its subsidiaries on December 2, 2015 by Nick Neff and certain other plaintiffs.

The company and/or its respective subsidiaries are vigorously defending all of these lawsuits. Given the stage of the complaints and the claims and issues presented, except for lawsuits disclosed herein that have reached a settlement or agreement in principle, the company cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the unresolved lawsuits.

On November 8, 2016, Flowers Foods' subsidiary, Lepage Bakeries, reached an agreement to settle a lawsuit seeking class action treatment (Bokanoski et al. v. Lepage Bakeries Park Street, LLC and CK Sales Co., LLC), originally filed by Bart Bokanoski and certain other plaintiffs in the U.S. District Court for the District of Connecticut on January 6, 2015, for $1.25 million, including attorneys' fees. The settlement also includes certain non-economic terms which are intended to strengthen and enhance the independent contractor model. This agreement, which includes 49 territories, is subject to court approval. This settlement is recorded in selling, distribution and administrative expenses in our Condensed Consolidated Statements of Income for the twelve and forty weeks ended October 8, 2016.

On August 12, 2016, a class action complaint was filed in the U.S. District Court for the Southern District of New York by Chris B. Hendley (the “Hendley complaint”) against the company and certain senior members of management (collectively, the “defendants”). On August 17, 2016, another class action complaint was filed in the U.S. District Court for the Southern District of New York by Scott Dovell, II (the “Dovell complaint” and together with the Hendley complaint, the “complaints”) against the defendants. Plaintiffs in the complaints are securities holders that acquired company securities between February 7, 2013 and August 10, 2016. The complaints generally allege that the defendants made materially false and/or misleading statements and/or failed to disclose that (1) the company’s labor practices were not in compliance with applicable federal laws and regulations; (2) such non-compliance exposed the company to legal liability and/or negative regulatory action; and (3) as a result, the defendants’ statements about the company’s business, operations, and prospects were false and misleading and/or lacked a reasonable basis. The counts of the complaints are asserted against the defendants pursuant to Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 under the Exchange Act. The complaints seek (1) class certification under the Federal Rules of Civil Procedure, (2) compensatory damages in favor of the plaintiffs and all other class members against the defendants, jointly and severally, for all damages sustained as a result of wrongdoing, in an amount to be proven at trial, including interest, and (3) awarding plaintiffs and the class their reasonable costs and expenses incurred in the actions, including counsel and expert fees. The company and/or its respective subsidiaries are vigorously defending these lawsuits. Given the stage of the complaints and the claims and issues presented, the company cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the unresolved lawsuits.