Commitments and Contingencies

4 Months Ended

Apr. 24, 2021

Commitments And Contingencies Disclosure [Abstract]

14. COMMITMENTS AND CONTINGENCIES

Self-insurance reserves and other commitments and contingencies

The company records self-insurance reserves as an other accrued liability on our Condensed Consolidated Balance Sheets. The reserves include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on the company’s assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and current cost trends. The amount of the company’s ultimate liability in respect of these matters may differ materially from these estimates.

In the event the company ceases to utilize the independent distributor model or exits a geographic market, the company is contractually required in some situations to purchase the distribution rights from the independent distributor. The company expects to continue operating under this model and has concluded that the possibility of a loss is remote.

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 laws and 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 laws and regulations affecting the company and its properties.

Litigation

The company and its subsidiaries from time to time are parties to, or targets of, lawsuits, claims, investigations and proceedings, including personal injury, commercial, contract, environmental, antitrust, product liability, health and safety and employment matters, 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.

At this time, the company is defending 17 complaints filed by distributors alleging that such distributors were misclassified as independent contractors. Ten of these lawsuits seek class and/or collective action treatment. The remaining seven cases either allege individual claims or do not seek class or collective action treatment or, in cases in which class treatment was sought, the court denied class certification. The respective courts have ruled on plaintiffs’ motions for class certification in five of the pending cases, each of which is discussed below. Unless otherwise noted, a class was conditionally certified under the FLSA in each of the cases described below, although the company has the ability to petition the court to decertify that class at a later date:

Case Name	Case No.	Venue	Date Filed	Status
Noll v. Flowers Foods, Inc., Lepage Bakeries Park Street, LLC, and CK Sales Co., LLC	1:15-cv-00493	U.S. District Court District of Maine	12/3/2015	On January 15, 2019, the Court denied defendants’ motion to decertify the FLSA class and granted Plaintiff’s motion to certify under Federal Rule of Civil Procedure 23 a state law class of distributors who operated in the state of Maine. On August 3, 2020, the Court reconsidered its January 15, 2019 order and decertified the FLSA collective action.
Richard et al. v. Flowers Foods, Inc., Flowers Baking Co. of Lafayette, LLC, Flowers Baking Co. of Baton Rouge, LLC, Flowers Baking Co. of Tyler, LLC and Flowers Baking Co. of New Orleans, LLC	6:15-cv-02557	U.S. District Court Western District of Louisiana	10/21/2015	On April 9, 2021, the court decertified the FLSA collective action and denied plaintiffs' motion to certify under Federal Rule of Civil Procedure 23 a state law class of distributors who operated in the state of Louisiana.
Medrano v. Flowers Foods, Inc. and Flowers Baking Co. of El Paso, LLC	1:16-cv-00350	U.S. District Court District of New Mexico	4/27/2016
Martins v. Flowers Foods, Inc., Flowers Baking Co. of Bradenton, LLC and Flowers Baking Co. of Villa Rica, LLC	8:16-cv-03145	U.S. District Court Middle District of Florida	11/8/2016

Case Name

Case No.

Venue

Date Filed

Status

Caddick et al. v. Tasty Baking Co.

2:19-cv-02106

U.S. District Court Eastern District of

Pennsylvania

5/15/2019

On October 9, 2020, and later amended on December 1, 2020, the parties reached an agreement in principal to settle this matter and a companion case pending in the U.S. District Court for the District of New Jersey (Bertino v. Tasty Baking Co., No. 1:20-cv-03752) for a payment of $3.15 million, inclusive of attorneys’ fees and costs, service awards, and consideration for class members who are active distributors to enter into an amendment to their distributor agreements. The parties are currently working to obtain final court approval of the settlement. This settlement charge was recorded as a selling, distribution and administrative expense in our Condensed Consolidated Statements of Income during the third quarter of fiscal 2020.

The company and/or its respective subsidiaries contests the allegations and 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 that may arise from the unresolved lawsuits.

Since the beginning of Fiscal 2020, the company has settled, and the appropriate court has approved, the following collective/class action lawsuits filed by distributors alleging that such distributors were misclassified as independent contractors:

Case Name

Case No.

Venue

Date Filed

Comments

Rosinbaum et al. v. Flowers Foods, Inc. and Franklin Baking Co., LLC

7:16-cv-00233

U.S. District Court Eastern

District of North Carolina

12/1/2015

On December 29, 2020, the Court dismissed this lawsuit and approved an agreement to settle this matter for $8.3 million, inclusive of attorneys’ fees and costs,service awards, and incentives for class members who are active distributors to enter into an amendment to their distributor agreements. This settlement charge was recorded as a selling, distribution and administrative expense in our Consolidated Statements of Income during the fourth quarter of fiscal 2019.

Case Name	Case No.	Venue	Date Filed	Comments
Carr et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Oxford, Inc.	2:15-cv-06391	U.S. District Court Eastern District of Pennsylvania	12/1/2015	On September 29, 2020, the Court dismissed this lawsuit and approved an agreement to settle this matter and the Boulange matter (see below) for a payment of $13.25 million, inclusive of attorneys’ fees and costs, service awards, and incentives for class members who are active distributors to enter into an amendment to their distributor agreements. This settlement charge was recorded as a selling, distribution and administrative expense in our Condensed Consolidated Statements of Income during the fourth quarter of fiscal 2019 and was paid during the fourth quarter of fiscal 2020.
Boulange v. Flowers Foods, Inc. and Flowers Baking Co. of Oxford, Inc.	2:16-cv-02581	U.S. District Court Eastern District of Pennsylvania	3/25/2016	This matter has been consolidated with the Carr litigation described immediately above.
Neff et al. v. Flowers Foods, Inc., Lepage Bakeries Park Street, LLC, and CK Sales Co., LLC	5:15-cv-00254	U.S. District Court District of Vermont	12/2/2015	On January 31, 2020, the parties reached an agreement in principal to settle this matter for a payment of $7.6 million, inclusive of attorneys’ fees and costs, service awards, and incentives for class members who are active distributors to enter into an amendment to their distributor agreements. On October 22, 2020, the Court granted final approval of the settlement. The parties are awaiting a written order from the Court dismissing the lawsuit. This settlement charge was recorded as a selling, distribution and administrative expense in our Condensed Consolidated Statements of Income during the fourth quarter of fiscal 2019 and paid during the fourth quarter of fiscal 2020.

See Note 12, Debt and Other Obligations, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q for additional information on the company’s commitments.