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Smart & Final Settles Class Action Lawsuit

LOS ANGELES -- Smart & Final has settled a class action lawsuit involving the compensation of hourly employees in its California stores.

The lawsuit, Olivas v. Smart & Final, alleged that the company failed to properly calculate overtime pay, failed to pay employees for all hours worked including meal and rest periods, and failed to pay certain other compensation. The lawsuit was certified as a class action in January 2004, with approximately 13,000 potential class members representing former and current store employees, and covering a period of over six years.

"Unfortunately, similar class action lawsuits have been filed against many California retailers, restaurants, and other employers in recent years," said Etienne Snollaerts, president and c.e.o. of Smart & Final. "While we believe that we have defenses to the claims in this action, we have agreed to the proposed settlement to resolve all of the plaintiffs' claims and avoid the continuing distraction and expense, together with the risks, of protracted litigation."

The Tustin-based law firm that represented the Smart & Final employees, Callahan, McCune & Willis, said its clients deserve the settlement. "This settlement gives back to the employees the money they earned," said lead litigation counsel Larry Willis. "No corporation is above the law. This lawsuit proves that."

Under the terms of the proposed settlement, Smart & Final will compensate class members who make verified claims to a third party claims administrator appointed by the court. The proposed settlement is anticipated to be submitted for preliminary court approval on October 5. The company estimated that it will record a pre-tax charge of approximately $19 million in its 2005 third quarter, to account for the class member compensation, attorney fees, and administrative expenses.

Details of the final settlement agreement are still being negotiated, but the lead attorney for the plaintiffs said, "Trying to convince a big corporation to give back money that rightfully belongs to its employees is never easy."

In other news, Smart & Final's board of directors authorized the repurchase of up to $20 million of the company's common stock. The repurchases will be made in the open market or in privately negotiated transactions, at management's discretion according to market conditions and the stock price.

"The stock repurchase plan reflects our belief that Smart & Final stock, at current market prices, is undervalued based on recent performance and our growth prospects," Snollaerts said. "Having the authority to repurchase shares provides us with an additional opportunity to provide value to our shareholders and to offset the dilutive effect of stock option exercises."

Smart & Final Inc. operates 238 non-membership warehouse stores for food and foodservice supplies in California, Oregon, Washington, Arizona, Nevada, Idaho, and northern Mexico.
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