Safeway 2001 Annual Report Download - page 41

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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 sub-
sequently 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 plaintiffs’ motion for judg-
ment 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. On November 6, 2001, the California
Court of Appeal affirmed the decision of the trial court. On
January 23, 2002, the California Supreme Court denied plain-
tiffs’ petition for review, and the case is now terminated.
On August 23, 2000, a lawsuit entitled Baker, et al. v. Jewel
Food Stores, Inc., et al. was filed in the Circuit Court of Cook
County, Illinois, against the Company’s subsidiary, Dominick’s,
and Jewel Food Stores, a subsidiary of Albertson’s, Inc. The com-
plaint alleges, among other things, that Dominick’s and Jewel con-
spired to fix the retail price of milk in nine Illinois counties in the
Chicago area, in violation of the Illinois Antitrust Act. The plain-
tiffs purport to bring the lawsuit as a class action on behalf of all
persons residing in the nine-county area who purchased milk from
the defendants’ retail stores in these counties. The complaint seeks
unspecified damages, and an injunction enjoining the defendants
from acts in restraint of trade. If damages were to be awarded, they
may be trebled under the applicable statute. On December 21, 2001,
the court denied the defendants’ motion for summary judgment,
which sought a dismissal of the entire action. On January 8, 2002,
the defendants moved the court to certify that decision for imme-
diate interlocutory appeal. That motion is currently pending.
Discovery in the matter is continuing, and no trial date has been
set. The Company believes that the allegations in the complaint are
without merit, and plans to defend this action vigorously.
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 lia-
bility with respect to all of the above matters cannot be ascer-
tained 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.
FURR’S AND HOMELAND CHARGE In 1987, Safeway assigned a
number of leases to Furr’s Inc. (“Furr’s”) and Homeland Stores,
Inc. (“Homeland”) as part of the sale of the Company’s former
El Paso, Texas and Oklahoma City, Oklahoma divisions. Furr’s
filed for Chapter 11 bankruptcy on February 8, 2001.
Homeland filed for Chapter 11 bankruptcy on August 1, 2001.
Safeway is contingently liable if Furr’s and Homeland are unable
to continue making rental payments on these leases. In 2001,
Safeway recorded a pre-tax charge to earnings of $42.7 million
($0.05 per share) to recognize estimated lease liabilities associat-
ed with these bankruptcies and for a single lease from Safeway’s
former Florida division.
Safeway has reviewed its potential obligations with respect to
assigned leases relating to other divested operations and, based
on an internal assessment by the Company, Safeway expects that
any potential losses, should there be any similar defaults, would
not be significant to Safeway’s net operating results, cash flow or
financial position.
COMMITMENTS The Company has commitments under contracts
for the purchase of property and equipment and for the construc-
tion of buildings. Portions of such contracts not completed at year-
end are not reflected in the consolidated financial statements. These
unrecorded commitments were $121.6 million at year-end 2001.