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Grocers Fight Over $40M in Inventory

LOS ANGELES (CN) - Albertsons claims that independent grocery retailer Haggen Food & Pharmacy is refusing to pay almost $40 million for inventory after buying 140 stores from the supermarket chain.

Albertson's LLC and Albertson's Holdings sued Haggen Holdings this past Friday in state court for breach of contract, anticipatory breach of contract, fraud and breach of the implied covenant of good faith and fair dealing.

According to Albertsons, Haggen agreed to purchase 99 Albertsons and 47 Safeway stores after the Federal Trade Commission ordered Albertsons to divest the stores when it bought Safeway for $9.2 billion this past January.

Under a June 19 purchase agreement, Haggen, the largest independent grocery retailer in the northwestern United States, agreed to pay for store inventory within 30 days, according to the 16-page complaint.

Haggen paid for the stock in 108 stores but refused to keep up its end of the bargain for the remaining 38, Albertsons says in its complaint.

"Haggen's timing in waiting just days after the final stores were acquired and without any previous notice (but despite having such alleged knowledge as early as Feb. 26, 2015 and possibly earlier), to levy baseless claims, mostly with broad and unsupported generalized allegations, in justification of a $41,104,056 holdback, reflects its fraudulent and bad faith intent," the 16-page complaint states.

In an email, Haggen spokeswoman Deborah Pleva said that it notified Albertsons of "violations of its obligations under the parties' purchase agreement, and possibly the related FTC consent decree and orders and requirements of state attorneys general."

Haggen had "hoped that the parties could amicably address these issues," Pleva added.

"It is unfortunate Albertsons has chosen to file what appears to be nothing more than a strike suit to avoid addressing its wrongful conduct. Haggen will mount a vigorous defense and aggressively prosecute its counterclaims," Pleva wrote.

In a June 29 letter from its attorneys, Haggen asked to review Albertsons' documents and interview employees, even though the purchase agreement does not give it any right to make that demand, Albertsons' lawsuit says.

The holding company also ignored a provision of the purchase agreement that allows the parties to resolve disputes over inventory pricing.

"As of July 17, 2015, Haggen is past due for the inventory purchase price for 32 acquired stores, which amount totals $36,177,057," the complaint states. "Another $4,926,999 will be past due on July 21, 2015, for the final six stores acquired."

Albertsons seeks actual and punitive damages, attorneys' fees and costs.

The grocer's spokesman Carlos Illingworth said the chain does not comment on pending litigation.

It is represented by David Jacobs of Epstein Becker & Green.

Albertsons became the second-largest grocery store in the nation after the Safeway merger, behind Ohio-based Kroger.


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