Court Certifies HHGregg Class Action by Employees

             Pavlack Law is pleased to report that the Marion County Superior Court recently certified a plaintiff class in the case of Dwain Underwood v. HH Gregg. The case will now proceed on behalf of a class of dozens of current and former employees of HH Gregg who were denied substantial annual bonuses as promised by the company at the beginning of the year.

            As was reported here and in the Indianapolis Business Journal, last year, Pavlack Law filed a class action suit  on behalf of former HHGregg employee Dwain Underwood. As a putative class action, Mr. Underwood and his counsel sought to certify a class of similarly situated valued HHGregg employees who were entitled to incentives based upon the performance of the company throughout its fiscal year. For the 2012 fiscal year, Mr. Underwood was presented with a form outlining his incentive targets. Under the express terms of the “Total Rewards Statement,” the incentive payments were tied to the company’s “earnings before interest, taxes, depreciation and amortization” – better known as EBITDA.

            After the close of HHGregg’s FY2012, it informed the employees eligible for EBITDA based incentive payments that the company failed to meet its necessary EBITDA target and thus no payments would be made. This was untrue, as the company’s EBITDA for the year had exceeded the target specified in the Total Rewards Statements it provided to its employees, triggering HH Gregg’s obligation to pay bonuses.

        HH Gregg attempted to justify its non-payment of bonuses by saying that it based bonuses on something it calls “Adjusted EBITDA” – even though the Total Rewards Statements unambiguously used the term EBITDA. By utilizing “Adjusted EBITDA” the company has sought to remove a substantial windfall that it received as the result of a keyman life insurance policy that generated $40 million with only $600,000 going to the estate of the late Jerry Throgmartin and the remaining $39.4 million into HHGregg’s coffers. Pursuant to HHGregg’s accounting records and public filings, its EBITDA, properly calculated to include the keyman insurance proceeds, met the incentive threshold and entitled its eligible employees to incentive payments.

            As was reported earlier this week by the IBJ, on July 9, the case progressed through a key stage: a Marion County (Indianapolis), Indiana Superior Court Judge ordered that case should be certified as a class defined as:

All current and former employees of HHGregg who received Total Rewards Statements making them eligible for Incentive Payments for FY2012, and who were still employed by HHGregg at the conclusion of FY2012; but excluding Dennis L. May, Jeremy J. Aguilar, Gregg W. Throgmartin, Douglas T. Moore, and Michael G. Larimer.

The court also ordered that Mr. Underwood’s attorneys be appointed as class counsel. In making the determination, and based on records provided to Mr. Underwood and his attorneys by HHGregg, the Court concluded that there are 62 persons who meet this definition and would be eligible to seek recovery of the incentive payments sought in the case. Based upon the preliminary records provided thus far in the case, with further discovery soon to be developed in the wake of the class certification order, it appears that the aggregate recovery could be in excess of $5 million if Mr. Underwood and the class succeed at trial.

            This result has been hard won after numerous motions and hundreds of pages of briefing in the case to date. It would not have been possible to get this far without the diligent efforts and commitment of Mr. Underwood. His efforts and the continued work of his attorneys will continue to drive this case toward accomplishing its goal of holding HHGregg to its promises.

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