Fishman Haygood Secures Settlement in Rouses Dispute
October 16, 2014
Thibodaux-based retail grocery chain Rouses Enterprises and Baton Rouge-based wholesale grocery supplier Associated Grocers have reached an undisclosed settlement in a legal dispute after three days of trial last week.
“The Rouse family is very satisfied with this resolution,” managing partner Donny Rouse said in a statement Monday. He said terms of the settlement are confidential.
Rouses had claimed in a lawsuit filed in state district court in Thibodaux that it had been ousted improperly from membership in Associated Grocers in 2008 and was not compensated fairly for an ownership interest in the grocery distribution company.
In addition to more than $900,000 in alleged damages, Rouses had sought return of its membership in Associated Grocers.
James Swanson, a New Orleans lawyer for Rouses, would not discuss terms of the settlement between Rouses and Associated Grocers.
“Rouses will continue to obtain its grocery supply from Associated Wholesale Grocers,” Swanson said Monday.
Associated Wholesale Grocers is based in Kansas City, Kansas, and is not affiliated with Baton Rouge-based Associated Grocers.
The Kansas food supplier reported sales of nearly $8.4 billion for the 2013 fiscal year.
J.H. Campbell Jr., president of Associated Grocers, confirmed that Rouses is still not a member of the Baton Rouge wholesaler, but would not discuss details of the settlement.
“Both parties are satisfied with the agreement, so we move on,” Campbell said. “It was an amicable settlement.”
Prior to the Thibodaux trial, Associated Grocers claimed in court documents that it did not wrongfully terminate Rouses and paid Rouses the correct redemption price for its stock.
Before last week’s jury trial, 17th Judicial District Judge F.H. “Buddy” Larose on Oct. 3 had denied Associated Grocers’ request for summary judgment. The judge said he was “not convinced that the membership contract between AG and Rouses was terminable at-will.”
As far as the early redemption of Rouses stock for a 2007 price is concerned, Larose said: “The by-laws grant the power to surrender stock held by a member to that member, not the corporation. Thus AG, the corporation, did not have authority to surrender the stock” held by Rouses.
For more than 40 years, Rouses stores and Associated Grocers were each a part of the other’s growth.
Associated Grocers was founded in 1950 by 17 independent retail grocers and now serves a membership of more than 220 independent supermarkets in Louisiana, Texas and Mississippi. Rouses Enterprises opened its first store in Houma in 1960, joining Associated Grocers in 1965. Rouses now has more than 40 stores.
The two companies’ relationship ended in late 2007 and early 2008 as the Rouses brand doubled through an acquisition of 16 Sav-A-Center stores in the New Orleans metropolitan area.
What happened after those purchases was a matter of dispute at the Thibodaux courthouse in six years of legal filings.
Lawyers for Associated Grocers said in court documents that Rouses began considering membership termination in November 2007, when it unilaterally sought bids from alternative suppliers.
Associated Grocers said Rouses sent out letters in October 2007 to Supervalu, AWG, C&S Wholesale Grocers and Associated Grocers seeking a response to a request for proposal for a long-term supply agreement.
Officials of the Thibodaux firm acknowledged in court documents that they sought supply proposals from Associated Grocers and several other firms after they added the large group of New Orleans-area stores to their assets.
The Thibodaux company said it was then shocked when Associated Grocers proposed to increase the markup on Rouses’ groceries.
The company said Anthony J. Rouse Sr. was improperly removed from the Baton Rouge firm’s board of directors in March 2008. At the same time, Associated Grocers announced it would no longer supply food products to Rouses’ 16 newly acquired stores, Rouses alleged.
Rouses also alleged Associated Grocers improperly seized its AG stock and redeemed it for $900,000 less than it would have been worth a few months later.
Rouses said in its court filings that it held 20 percent of Associated Grocers’ stock and purchased $148 million in products from the Baton Rouge supplier in the year before their split. Court documents said Rouses stores accounted for more than 18 percent of AG’s business.
Associated Grocers claimed it did not improperly remove Rouses from membership and that “Rouses received the redemption value of (more than $11.9 million) for its Class B stock applying the 2007 prevailing price in accordance with the by-laws.”
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