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Zale’s Canadian division signs agreement with Alliance Data

BY CSA STAFF

Dallas — Alliance Data Systems Corp., a provider of loyalty and marketing solutions derived from transaction-rich data, and Zale Corp., announced a national agreement between Alliance Data’s Canadian coalition loyalty business and Zale Canada. The agreement provides for Zale’s Canadian brands, Peoples Jewellers and Mappins Jewellers, to participate as the exclusive sponsors in the fine jewelry category in the Canadian Air Miles Reward Program.

Peoples Jewellers and Mappins Jewellers will begin issuing reward miles in Ontario by mid-May and will roll-out its participation in the coalition loyalty program throughout Canada in August.

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OfficeMax off to a slow start in 2011

BY CSA STAFF

NAPERVILLE, Ill. — OfficeMax started fiscal 2011 off with sales declines and lower earnings. The company announced that total sales were $1.8 billion in the first quarter of 2011, a decrease of 2.8% from the first quarter of 2010. For the first quarter of 2011, OfficeMax reported net income available to OfficeMax common shareholders of $11.4 million, or 13 cents per diluted share. For the first quarter of 2010, OfficeMax reported net income of $24.8 million, or 29 cents per diluted share.

The company reported that retail segment sales decreased 1.8% to $937.3 million in the first quarter of 2011 compared with the first quarter of 2010, reflecting a same-store sales decrease of 1.2%. A modest decline in same-store sales in the United States was partially offset by stronger same-store sales in Mexico.

Contract segment sales decreased 3.9% compared with the prior year period to $925.7 million in the first quarter of 2011 (a decrease of 6.2% on a local currency basis). This decline reflected a U.S. Contract operations sales decrease of 5.6% and an international Contract operations sales decrease of 0.5% in U.S. dollars (a sales decrease of 7.4% on a local currency basis).

Ravi Saligram, president and CEO of OfficeMax, said, "First quarter sales were lower than the prior-year quarter and adjusted operating income margin rate was significantly lower than the first quarter of 2010. We are disappointed with our start to the year. In recognition of current trends and upon a deeper evaluation of our existing capabilities, we have put in place strong actions, including significant cost mitigation programs to bring our expenses in-line with last year. We believe these actions should help drive improved performance."

OfficeMax ended the first quarter of 2011 with a total of 991 retail stores, consisting of 912 retail stores in the United States and 79 retail stores in Mexico. During the first quarter of 2011, OfficeMax closed six retail stores in the United States.

Bruce Besanko, EVP, CFO and chief administrative officer of OfficeMax, said, "While adverse weather impacted our results, sales declines in the first quarter were primarily the result of significantly lower spending by our existing Contract customers as well as weaker Retail store traffic. We are diligently working to address areas of concern and strengthen our core business, and therefore, are reaffirming our previous 2011 sales and operating income margin guidance."

Based on these trends, OfficeMax said it anticipates that for the second quarter, total company sales will be approximately flat to the prior year’s second quarter, including the favorable impact of foreign currency translation, and the adjusted operating income margin rate will be lower than the prior year. For the full year 2011, OfficeMax said it anticipates that total company sales will be flat, to slightly higher than, the prior year, including the favorable impact of foreign currency translation and the benefit of a 53rd week, and the adjusted operating income margin rate will be in line with, to slightly lower than, the prior year.

In addition, OfficeMax said it expects a reduction in retail store count for the full year 2011,with approximately 15 store closures in the U.S., and approximately eight to 10 store openings in Mexico.

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Retailers beware or rejoice?

BY CSA STAFF

By Jim McNeill and Gary K. Brucker Jr., [email protected], [email protected]

On March 29, 2011, the United States Supreme Court heard oral argument in Dukes v. Wal-Mart, the largest class action in American history. But the Court was not interested in the merits of the 1.5 million sexual discrimination claims. Rather, the Court heard argument on whether the trial court and Ninth Circuit Court of Appeal were correct in allowing the case to proceed as a massive class action. At this point, it is too early to tell how the Supreme Court will rule, but one thing is clear, significant issues regarding the rules shaping class action litigation are in play.

At issue is how courts apply the rules for allowing a case to proceed as a class action, where the claims of many are pursued (or defended) by “representative(s).” The “rules” of certification are set out in Federal Rule of Civil Procedure 23. That rule contains various hurdles a case must clear to reach the certification goal. First, under Rule 23(a), the party seeking certification must show that the class is numerous, that the legal and factual issues are common class-wide, that the claims and defenses of class members are typical, and that the representative is up to the task. Next, one of three routes to certification must be established. There’s Rule 23(b)(1) for class actions where separately litigating claims would lead to inconsistent results, Rule 23(b)(2) for actions seeking injunctive relief where a party acts or refuses to act on grounds generally applicable to the class, and Rule 23(b)(3).

As it stands now, most class actions seek certification under Rule 23(b)(3), which requires that class representatives show the claims to be addressed can be litigated via facts and law that are common to all the class members, rather than by issues related to individuals in the class. Because this “predominance inquiry” is often the most difficult hurdle to clear, those opposing certification typically focus their efforts and argument on establishing that issues unique to each individual class member require separate, as opposed to collective, consideration. Historically, this argument has been especially persuasive in employment discrimination class actions, where each alleged instance of discrimination is often unique and individualized, rather than institutional in nature.

Because the predominance inquiry can be a difficult hurdle to overcome, class representatives have increasingly sought to certify actions under Rule 23(b)(2), which doesn’t require that common questions “predominate” over individual issues. The obvious question, of course, is why does anyone ever bother to pursue class actions under Rule 23(b)(3) given this easier path? The answer used to be simple: Rule 23(b)(2) is supposed to apply in cases seeking prospective injunctive relief (to stop or require some action), and not, per the Rule’s commentary, “to cases in which the appropriate final relief relates exclusively or predominantly to money damages.” Recently, however, certification seekers have begun to use Rule 23(b)(2) to not only seek injunctive relief, but to also seek money damages, characterizing them as “secondary” or “incidental” to the main injunctive relief desired.

Although Dukes brings the Supreme Court into this issue, various Circuit Courts of Appeal have reached divergent opinions on whether and when class certification under Rule 23(b)(2) is appropriate if money damages are also sought. Most notable among them being the Ninth Circuit in its Dukes opinion now under review, in which the Ninth Circuit permitted seven female employees of Wal-Mart, each claiming separate and unrelated instances of sex discrimination, to represent 1.5 million other employees under Rule 23(b)(2). This should trigger alarm, considering that the Ninth Circuit’s ruling effectively allows the Plaintiffs to pursue what could be billions of dollars in back pay under a Rule 23(b)(2) rubric that denies Wal-Mart any ability to prove that many, if not most, of the 1.5 million class members never suffered discrimination.

Based on the justices’ questions during oral argument, most observers agree the Court is likely to reverse in a split decision. In so doing, the Court is may clarify and limit the extent to which money damages can be sought as relief under Rule 23(b)(2). If this prediction proves correct, employers should rejoice the receding wave of Rule 23(b)(2) class actions. Conversely, should the Court affirm the certification ruling, or decline to rule on the Rule 23(b)(2) issue, employers stand to suffer an increased swell of new filings.

In addition to the critical Rule 23(b)(2) issue, the Court may also clarify the state of the law on two related procedural issues. First is to what extent the merits of an action, i.e., the validity of the claims or defenses, may be considered during the class certification process. The majority of courts ruling on this issue believe merits-based inquiry is inappropriate at the class certification stage. But in Dukes, the Ninth Circuit held that courts can and should weigh the merits of an action to a limited extent when assessing class certification. The implications of this decision are significant, as allowing merits inquiries will expand the scope of pre-class certification discovery to merits-based issues, increase litigation costs, and convert class certification into a mini-trial on the merits of an action.

The second issue the Court may clarify is the extent to which the requirement of common legal and factual questions can be satisfied through the use of statistics and anecdotal evidence. Again, the Ninth Circuit agreed with the certification decision notwithstanding the fact that it meant seven employees represent 1.5 million others at trial. Such a monumental class would seem impossible to litigate without eviscerating Wal-Mart’s right to defend against individual discrimination claims. But the Dukes plaintiffs were successful in arguing that statistical analysis of Wal-Mart’s records, when coupled with anecdotal evidence of discrimination experienced by 120 employees, could overcome the drawbacks of attempting to try 1.5 million claims together. The result: Unless the Supreme Court curtails this far-reaching use of statistical and anecdotal evidence, one or two instances of discrimination may just snowball into a class action on behalf of half of an employer’s work force.

In summary, no matter how the Supreme Court rules in Dukes, it is sure to be a landmark decision and employers are wise to monitor the decision closely.

Jim McNeill (mckennalong.com/professionals-129.html) is an attorney with McKenna Long & Aldridge and a member of the firm’s Litigation Group. He can be reached at [email protected].

Gary K. Brucker Jr. (mckennalong.com/professionals-955.html) is an associate with McKenna Long & Aldridge in the firm’s Litigation Group. He can be reached at [email protected].

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