Safeway 1998 Annual Report Download - page 38

Note K: Commitments and Contingencies
Legal Matters In July 1988, there was a major fire at the
C o m p a n y ’s dry gro c e ry warehouse in Richmond, Californ i a .
T h rough January 2, 1999, in excess of 126,000 claims for
personal injury and pro p e r ty damage arising from the fire
have been settled for an aggregate amount of approximately
$123.9 million. The Company’s loss as a result of the fire dam-
age to its pro p e r ty and settlement of the above claims was
substantially covered by insurance.
As of January 2, 1999, there were still pending appro x i-
mately 3,100 claims against the Company for personal injury
(including punitive damages), and approximately 290 separate
claims for pro p e rty damage, arising from the smoke, ash and
embers generated 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,
C a l i f o rnia. There can be no assurance that the pending claims
will be settled or otherwise disposed of for amounts and on
terms comparable to those settled to date.
In early 1996, a purported class action was filed in the
Superior Court for Alameda County, California on behalf of
persons allegedly injured as a result of the smoke, ash and
embers generated by the fire. The complaint, which was
amended after the Court sustained the Company’s demurre r
with leave to amend, generally alleged 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 sought compensatory and
punitive damages. In May 1997, the Court dismissed the case,
and in May 1998 the California C o u rt of Appeal aff i rmed the
dismissal. In August 1998, plaintiffs’ petition for review by the
C a l i f o rnia Supreme Court was denied.
On July 10, 1998, Safeway was served with a new case
filed in the Superior Court for Alameda County, California
by the same attorney who handled the purported class action
described in the preceding paragraph. Safeway filed a demur-
rer, and plaintiffs filed an amended complaint. Safeway filed
a demurrer to the amended complaint. The first complaint
a s s e rted allegations that are generally similar to those in the
case described above. The amended complaint contains factual
allegations that materially contradict those contained in the
first complaint and includes a claim for breach of contract.
P l a i n t i ffs seek damages according to proof, plus interest and
punitive damages. The case purports to be filed on behalf of
a p p r oximately 21,500 individual plaintiffs. On March 5, 1999,
the Court sustained Safeway’s demurrer to plaintiffs’ fraud
claim and overruled Safeway’s demurrer to plaintiffs’ contract
claim. The Company believes that the claims in the new case
a re without merit and intends to defend this lawsuit vigoro u s l y.
The Company has received notice from its insurance carrier
denying coverage for the claims asserted in the two purported
class action suits described above. Safeway strongly disagrees
with the insurance carrier’s denial of coverage. Safeway contin-
ues to believe that coverage under its insurance policy will be
sufficient and available for resolution of all remaining personal
injury and property damage claims arising out of the fire.
On September 13, 1996, a class action lawsuit entitled
McCampbell et al. v. Ralphs Gro c e r y 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
C a l i f o rnia. In the complaint it is alleged, among other things,
that Vons and the other defendants conspired to fix the re t a i l
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. Plaintiffs have produced a damages
study which purports to support damages in excess of
$90 million attributable to Vons. 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 defens-
es. 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.
On September 23, 1998 the Court denied defendants’ motions
for summary judgment. It is expected that trial will commence
in the third quarter of 1999. The Company believes that Vons