Grocer seeks arbitration
Seattle-based Associated Grocers Inc. and Northwest Retail Ventures LLC filed a demand for arbitration Feb. 8 with the American Arbitration Association, according to Robert Hoyt, Northwest Retail Ventures chairman.
"Arbitration is something we filed because we think there’s some things that need to be explained," he said.
Hoyt contends that Safeway didn’t live up to its part in a deal with the Alaska attorney general’s office to divest seven stores.
"They handed us stores that were doomed from the start," he said. "Safeway let the stores run down prior to the sale (to Northwest Retail Ventures)."
Richard Near, Safeway’s Alaska general manager, said he could offer few details since the case is under way.
"They have their claims. We have ours," he said.
Attorneys continue to negotiate a potential settlement or the case could go to court, he said.
State officials required Safeway to sell six former Safeway stores and one Carrs store as part of a deal to acquire Alaska’s largest grocer, Carr Gottstein Foods Co., with 49 stores across the state. In August 1998 Safeway said it planned to buy Carrs for $330 million, but the state later ruled the acquisition would violate state antitrust laws and called for the grocer to divest some stores.
In October 1999 Northwest Retail Ventures of Seattle, including investors Associated Grocers and Bristol Bay Native Corp., agreed to buy six of the divested stores. Northwest Retail Ventures did not buy the Safeway store at University Center in Anchorage.
Last August Alaska Marketplace closed three of its six stores, citing financial losses. Those stores, located in Eagle River, Wasilla and at 5530 E. Northern Lights Blvd. in Anchorage, were later followed by the closure of the Fairbanks store plus two other Anchorage stores in December.
Alaska Marketplace operators claim Safeway breached terms of its sale agreement and terms laid out by the attorney general’s office. That agreement called for Safeway to "take such actions as are necessary to maintain the viability, marketability and competitiveness of each such divestiture asset to prevent the destruction, removal, wasting, deterioration or impairment of each such divestiture asset, except for ordinary wear and tear," until the divested store was sold.
Among other claims, Hoyt said Safeway allowed some shelves to go bare, causing customers to shop elsewhere before Alaska Marketplace took over operations.
"In reality we thought we’d bought viable stores," he said.
Associated Grocers and Northwest Retail Ventures are seeking $7 million in monetary damages based on an analysis of losses incurred plus expenses including attorney’s fees as well as equitable relief in cash, Hoyt said.
"A lot of money was lost by investors and suppliers, and nobody got the results they were looking for," he said.
Some of the money would be used to pay creditors, he said.
The state attorney general called for the divested stores to be operated as grocery stores for three years from the date the deal was finalized in February 1999.
Hoyt said his company has been unsuccessful in finding any other interested grocers due to the cost of losses and union wages as well as a competitive market led by major players Safeway and Fred Meyer.
Hoyt said he would like to sell the closed stores to a nongrocery player to cover losses.
Assistant attorney general Ed Sniffen might allow a sale to a nongrocery company "only if we were convinced there was no possibility or that it would be very unlikely that there would be another grocery store interested," he said.
Such a change would be considered differently for each store, he said. For example, Wasilla now has more grocery competition with a Fred Meyer than when Safeway and the state sought to preserve a competitive market, he said. The Fairbanks market also might have sufficient grocery players so the store could be run as a nongrocer, he said.
In Anchorage, however, the scenario is more complicated, Sniffen said.
The attorney general’s office would do an analysis before ruling, he said.
Arbitrators are now being chosen and the arbitration process could take several months, said Hoyt who joined Associated Grocers in July.
"We feel we’re the victim here. We’re not going to take it lying down. We got skinned good," he said.