Safeway 1999 Annual Report Download - page 39

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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 February 10, 2000, in excess of 126,000 claims
for personal injury and property damage arising from the
fire have been settled for an aggregate amount of approxi-
mately $123.9 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 February 10, 2000, there were still pending
approximately 2,600 claims against the Company for per-
sonal injury (including punitive damages), and approxi-
mately 290 separate active claims for property 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, California. There can
be no assurance that the pending claims will be settled or
otherwise disposed of for amounts and on terms compara-
ble to those settled to date.
On July 10, 1998, Safeway was served with a new case
filed in the Superior Court for Alameda County, California,
authored by the same attorney who had filed a previous
class action relating to the Richmond warehouse fire that
was dismissed and affirmed on appeal. The July 1998
action, as amended, alleges that Safeway committed fraud
and breach of contract in connection with settlements
involving the Richmond warehouse fire. The case purports
to be filed on behalf of approximately 21,500 individual
plaintiffs. Plaintiffs seek damages according to proof, plus
interest and punitive damages. On March 5, 1999, the
court sustained the Company’s demurrer to plaintiffs’ fraud
claim. On May 20, 1999, the court granted the Company’s
motion for judgment on the pleadings on plaintiffs’ contract
claim. Plaintiffs filed a notice of appeal, and the appeal is
pending. The Company believes that the claims in this
case are without merit and that the judgment of the trial
court will be affirmed.
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 continues to believe that coverage under
its insurance policy will be sufficient and available for res-
olution of all remaining personal injury and property dam-
age 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. The complaint alleged, among other
things, that Vons and the other defendants conspired to fix
the retail price of eggs in southern California, in violation
of the California Cartwright Act, and that they engaged in
unfair competition. The court subsequently certified a
class of retail purchasers of white chicken eggs by the
dozen in southern California from September 1992 to
October 1997. A jury trial commenced in July 1999, and
plaintiffs asked the jury to award damages against Vons
(before trebling) of $36.8 million. On September 2, 1999,
the jury returned a verdict in favor of Vons and the other
defendants. On October 15, 1999, the court denied plain-
tiffs’ motion for judgment notwithstanding the verdict or a
new trial, and also denied their motion for judgment on the
unfair competition claim. On November 1, 1999, judgment
was entered in favor of defendants, and plaintiffs appealed.
The appeal is pending. The Company believes that plain-
tiffs have no meritorious grounds for an appeal and expects
the judgment to be affirmed.
Safeway acquired Dominick’s in November 1998. At
that time, there was pending against Dominick’s a class
action lawsuit that had been filed in the U.S. District Court
for the Northern District of Illinois in March 1995, alleging
gender discrimination and seeking compensatory and puni-
tive damages in an unspecified amount. The lawsuit also
alleged national origin discrimination, but the court denied
plaintiffs’ class certification motion as to those claims. On
December 20, 1999, the court granted the parties’ request
for preliminary approval of a proposed settlement agree-
ment that provides for the Company, while denying all lia-
bility, to implement job posting programs and other similar
forms of relief, to establish a $7.7 million settlement fund
to be available for distribution to eligible class members,
and to pay attorneys’ fees to current and former class
counsel in the maximum amount of $2.2 million. These
amounts are included in Other Accrued Liabilities at year-
end 1999. The court has scheduled a final fairness hearing
on the proposed settlement for March 31, 2000.