Albertsons, Haggen Settle Billion-Dollar Lawsuit (For Much Less)

A lawsuit filled with explosive claims that could have laid bare the real story behind the grocery chain Haggen’s disastrous expansion plan, has instead come to a somewhat anticlimactic end. Albertsons, the defendant in Haggen’s billion-dollar lawsuit, has quietly announced a settlement in the case – agreeing to pay about a half of one percent of what Haggen was seeking.

Buried in a 400+ page document filed with the Securities and Exchange Commission on Friday, was a notification that the two parties had reached an agreement to resolve their dispute. Instead of the billion dollars that Haggen was seeking, Albertsons agreed to pay $5.75 million in cash to Haggen, with the money ultimately going to the bankrupt grocer’s creditors.

A billion dollars could have gone a long way toward paying Haggen’s debts, and then some – possibly even allowing the grocer to stay in business instead of selling off all of its stores. Instead, Haggen will proceed with plans to sell off its 33 remaining locations to the highest bidders, next month.

It’s a far cry from the 164 stores that Haggen once had, briefly. Haggen acquired 146 of them from Albertsons almost exactly a year ago, then almost immediately ran into serious problems. Customers complained about high prices, expired food, out-of-stocks, and a perceived arrogance from the new store in town that didn’t even bother to properly introduce itself.

And Haggen claimed it was all Albertsons’ fault.

Haggen sued Albertsons in September, just a week before filing for bankruptcy. Its high prices, Haggen claimed, were a result of Albertsons purposely providing it with “incomplete, inaccurate, misleading and out of date pricing information.” The profusion of expired products, Haggen claimed, was due to Albertsons intentionally stocking stores with out-of-date items before handing the keys to Haggen. Once the handovers were made, Albertsons also allegedly used loyalty club data to offer special deals at nearby Albertsons-owned stores, and engaged in “an aggressive couponing campaign,” issuing high-value coupons to lure shoppers away from new Haggen stores.

And then there were the plain old dirty tricks, such as the missing store fixtures, broken equipment and – at one store – 256 cases of leftover frozen turkeys that Haggen says Albertsons left behind.

In short, the lawsuit claimed, Albertsons sold the stores to Haggen – and then sabotaged any chance Haggen had to succeed.

Haggen estimated that its damages “may exceed $1 billion”. Instead, it’s now settled for a mere $5.75 million – just barely a third of what Haggen now owes to its single largest creditor. The settlement, if approved by the bankruptcy court, would also resolve Albertsons’ own lawsuit against Haggen, in which it sought $41 million for store inventory it said Haggen never paid for.

Haggen has not commented on the settlement, but Albertsons issued a statement denying any wrongdoing: “Although we firmly believe that the claims asserted lacked any merit, the settlement enables us to avoid costly litigation. We are pleased to put this matter behind us and continue to focus on making our stores the favorite local supermarket for shoppers in every neighborhood we proudly serve.”

And Albertsons’ stores now include 32 that it had sold to Haggen, then bought back when Haggen went bust. And when Haggen auctions its remaining 33 stores on February 5th, Albertsons could conceivably scoop up some more.

Perhaps prophetically, Haggen warned of just such an outcome in its lawsuit. “Albertsons now has a dangerous probability of obtaining monopoly power” in the markets where Albertsons and Haggen once competed, Haggen claimed. That could ultimately allow Albertsons to “raise the prices of food, groceries or services, and decrease the quality and selection.”

Just what Haggen was accused of, when it bought the Albertsons stores in the first place. Except this time, shoppers who abandoned the high-priced offender for a lower-priced competitor, may no longer have a choice.