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Rouses Markets and wholesale grocery supplier Associated Grocers (AG) headed to court on Monday, Oct. 13 for a jury trial in 17th Judicial District Court over whether Rouses was improperly removed from membership in AG in 2008, and whether the supermarket chain was adequately compensated for its ownership interest in the Baton Rouge, La.-based grocery distribution company, according to published reports. Rouses also wants its AG membership reinstated.
At one time, AG's sales to Rouses stores "accounted for more than 18 percent of [the wholesaler's] business," noted Judge F.H. "Buddy" Larose in the court record earlier this month. According to Rouses' court filings, the Thibodeaux, La.-based grocer also held 20 percent of AG stock and bought $148 million in products from the supplier in the year before the companies parted ways after more than 40 years.
In a suit originally filed in April 2008, Rouses alleges that company founder Anthony J. Rouse Sr. was improperly removed from AG's board of directors in March 2008, while at the same time, the wholesaler said it would no longer supply food products to Rouses' 16 newly acquired Sav-A-Center stores.
The grocer also claims that AG improperly seized Rouses' stock in the company and redeemed it for $900,000 less than it would have been worth a few months later.
Request for Summary Judgment Denied
AG disputes the allegations, saying that Rouses was fairly compensated for the stock and began considering terminating its membership back in late 2007, "when it unilaterally sought bids from alternative suppliers" Supervalu, Associated Wholesale Grocers and C&S Wholesale Grocers, as well as AG, "seeking a response to a request for proposal for a long-term supply agreement."
Rouses acknowledged that it sought supply proposals from other firms after the Sav-A-Center acquisition, noting that it was "shocked when AG proposed to increase the markup on Rouses' groceries."
On Oct. 3, Judge Larose denied AG's request for summary judgment, saying he was "not convinced that the membership contract between AG and Rouses was terminable at-will." Regarding the stock, the judge said, "The bylaws 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.
AG currently has more than 220 independent retailer members in Louisiana, Mississippi and Texas, while Rouses operates more than 40 stores in Alabama, Louisiana and Mississippi.