A lawsuit brought by a former HHGregg Inc. manager charging that the company failed to pay incentive bonuses has been granted class-action status by a Marion Superior Court judge.
Former accounting manager Dwain Underwood filed his complaint in March 2013, claiming that the Indianapolis-based appliance, electronics and furniture retailer failed to factor a $40 million payout into the calculation used to determine whether employees were entitled to incentive bonuses.
The company collected the payout after Executive Chairman Jerry Throgmartin died in 2012.
Underwood claims HHGregg should have paid him a $25,000 bonus based on the company’s fiscal 2012 earnings before interest, taxes, depreciation and amortization, or EBITDA, of $144.4 million.
Underwood claims HHGregg wrongly based bonuses on “adjusted EBITDA,” which excluded the life insurance payout. The payout sent HHGregg's profit soaring in the fiscal fourth quarter of 2012.
The complaint involves 62 current and former HHGregg employees, according to Judge Robert R. Altice Jr.’s July 9 ruling awarding Underwood’s suit class-action status.
Underwood’s attorney, Eric Pavlack, said the amount of unpaid bonuses totals about $5 million.
“We’re very pleased with the decision,” he said. “We weren’t surprised because we think it’s the right decision. We were hopeful that this is what would happen.”
A spokeswoman for HHGregg said the company doesn’t comment on pending litigation.
In rendering his decision, the judge disagreed with HHGregg’s argument that class-action status should not be granted because some members don’t want to belong to the suit.
“If such class members do not wish to participate in this case,” Altice wrote, “they will have the opportunity to opt out after receiving notice.”
Underwood voluntarily left the company in January 2013, two months before he filed suit.
He is suing the company for breach of contract and unjust enrichment.