Note N - Commitments and Contingencies

6 Months Ended

Dec. 03, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

NOTE N – COMMITMENTS AND CONTINGENCIES

Litigation

We are presently, and from time to time, subject to pending claims and lawsuits arising in the ordinary course of business. We provide reserves for such claims when payment is probable and estimable in accordance with GAAP. At this time, in the opinion of management, the ultimate resolution of pending legal proceedings, including the matters referred to below, will not have a material adverse effect on our operations, financial position, or cash flows.

On April 17, 2012, a wage and hour case styled Guttentag, et al vs. Ruby Tuesday, Inc. was filed in the United States District Court, Southern District of New York.  The named plaintiffs, and five additional former employees who have joined the suit as opt-in plaintiffs, allege that the Company violated the Fair Labor Standards Act and state wage and hour laws in New York and Florida.  Plaintiffs filed their motion for conditional certification on March 8, 2013, which sought a nationwide putative class of all current and former servers, bartenders, and food runners who worked for the Company between April 17, 2009 and the present.   On June 11, 2013 the court entered an order granting conditional certification of the nationwide class requested by plaintiffs.  Mediation was conducted in early September 2013, but the effort was unsuccessful. We continue to explore a possible agreed resolution. The court has made no findings as to the merits or lack of merits of the plaintiffs’ claims and we are vigorously defending this matter. Notice of the lawsuit and the right to opt-in was mailed to the putative class members in November 2013, and at present approximately 4.5% of the putative class have filed consents to opt-in. 

On September 30, 2009, an age discrimination case styled Equal Employment Opportunity Commission (Pittsburgh) v. Ruby Tuesday, Inc. (the “EEOC Lawsuit”), was filed in the United States District Court for the Western District of Pennsylvania (the “Court”). The U.S. Equal Employment Opportunity Commission (“EEOC”) Pittsburgh Area Office alleged in the suit that the Company violated the Age Discrimination in Employment Act (“ADEA”) by failing to hire employees within the protected age group in five Pennsylvania restaurants and one Ohio restaurant. On December 9, 2013, the Court approved a consent decree entered into between the EEOC and the Company in Civil Action No. 09-1330. Without any admission of liability, the Company agreed to make five equal monthly payments totaling $575,000 into a qualified settlement account that individuals aged 40 or older who applied for a position at one of the six restaurants from January 1, 2005 through the date of the decree may apply to receive. The Company also agreed to make efforts to recruit and hire more individuals aged 40 or older at the three restaurants involved in the litigation that are currently open. Civil Action 09-1330 is closed, subject to the Court’s continuing jurisdiction over the consent decree. Not closed, but inactive (as far as we are aware), is the EEOC’s Notice of an ADEA Directed Investigation (“DI”), regarding potential age discrimination in violation of the ADEA in hiring and discharge for all positions at all other restaurants in the United States. On April 30, 2013, the Court entered an order terminating a miscellaneous action filed by the EEOC in furtherance of the DI. We do not believe that the DI will have a material adverse effect on our operations, financial position, or cash flows.

On November 8, 2010, a personal injury case styled Dan Maddy v. Ruby Tuesday, Inc., which had been filed in the Circuit Court for Rutherford County, Tennessee, was resolved through mediation.  Included in the Maddy settlement was a payment made by our secondary insurance carrier of $2,750,000.  Despite making this voluntary payment, our secondary insurance carrier filed a claim against us based on our alleged failure to timely notify the carrier of the Maddy case in accordance with the terms of the policy. 

We believe our secondary insurance carrier received timely notice in accordance with the policy and we are vigorously defending this matter.  Should we incur potential liability to our secondary carrier, we believe we have indemnification claims against two claims administrators. 

We believe, and have obtained a consistent opinion from outside counsel, that we have valid coverage under our insurance policies for any amounts in excess of our self-insured retention.  We believe this provides a basis for not recording a liability for any contingency associated with the Maddy settlement.  We further believe we have the right to the indemnification referred to above.  Based on the information currently available, our December 3, 2013 and June 4, 2013 Condensed Consolidated Balance Sheets reflect no accrual relating to the Maddy case.  There can be no assurance, however, that we will be successful in our defense of our carrier’s claim against us.  On January 10, 2014, a voluntary dismissal without prejudice of this case was entered.