Safeway 1997 Annual Report Download - page 38

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Note K: Commitments and Contingencies
Legal Matters In July 1988, there was a major fire at the
Company’s dry grocery warehouse in Richmond, California.
Through January 3, 1998, in excess of 125,000 claims for per-
sonal injury and property damage arising from the fire have
been settled for an aggregate amount of approximately $122.5
million. The Company’s loss as a result of the fire damage to its
property and settlement of the above claims was substantially
covered by insurance.
As of January 3, 1998, there were still pending approximately
3,500 claims against the Company for personal injury (including
punitive damages), and approximately 460 separate claims for
property damage, arising from the smoke, ash and embers gen-
erated by the fire. A substantial percentage of these claims have
been asserted in lawsuits against the Company filed in the
Superior Court for Alameda County, California. There can be no
assurance that the pending claims will be settled or otherwise
disposed of for amounts and on terms comparable to those set-
tled to date.
In early 1996, a purported class action was filed on behalf of
persons allegedly injured as a result of the smoke, ash and
embers generated by the fire. The complaint, which was amend-
ed after the Court sustained the Company’s demurrer with leave
to amend, generally alleges that the Company fraudulently (i)
obtained settlements of certain claims arising out of the fire and
(ii) made statements that induced claimants not to file actions
within the time period under the statute of limitations. The
amended complaint seeks compensatory and punitive damages.
The Company has received notice from its insurance carrier
denying coverage for claims asserted in this case. Safeway
strongly disagrees with the insurance carrier’s denial of cover-
age. On April 21, 1997, the Court sustained Safeway’s demurrer
to the second amended complaint without leave to amend. In
May 1997, the Court dismissed the case, and plaintiffs have
filed an appeal, which is pending.
Safeway believes that coverage under its insurance policy will
be sufficient and available for resolution of all remaining third-
party claims arising out of the fire.
On September 13, 1996, a class action lawsuit entitled
McCampbell et al. v. Ralphs Grocery Company, et al., was filed
in the Superior Court of San Diego County, California against
Vons and two other grocery store chains operating in southern
California. In the complaint it is alleged, among other things,
that Vons and the other defendants conspired to fix the retail
price of eggs in southern California. The plaintiffs claim that the
defendants violated provisions of the California Cartwright Act
and engaged in unfair competition. Plaintiffs seek damages they
allege the class has sustained; the amount of damages sought is
not specified. If any damages were to be awarded, they may be
trebled under the applicable statute. In addition, plaintiffs seek
an injunction against future acts that would be in restraint of
trade or that would constitute unfair competition. An answer has
been filed to the complaint that denies plaintiffs’ allegations and
sets forth several defenses. On October 3, 1997, the Court
issued an order certifying a class of retail purchasers of white
chicken eggs by the dozen from defendants’ stores within the
Counties of Los Angeles, Riverside, San Bernardino, San Diego,
Imperial and Orange during the period from September 13,
1992 to the present. The Company believes that Vons has meri-
torious defenses to plaintiffs’ claims.
There are also pending against the Company various claims
and lawsuits arising in the normal course of business, some of
which seek damages and other relief, which, if granted, would
require very large expenditures.
It is management’s opinion that although the amount of liability
with respect to all of the above matters cannot be ascertained at
this time, any resulting liability, including any punitive damages,
will not have a material adverse effect on the Company’s financial
statements taken as a whole.
Commitments The Company has commitments under contracts
for the purchase of property and equipment and for the con-
struction of buildings. Portions of such contracts not completed
at year-end are not reflected in the consolidated financial state-
ments. These unrecorded commitments were $92.5 million at
year-end 1997.