Safeway countersues Yucaipa Companies

Safeway, the Pleasanton CA-based supermarket chain, has filed suit against the Yucaipa Companies for breach of contract, fraud, and intentional interference in connection with Safeway's effort to sell the Dominick's chain in Chicago.

In a cross-complaint filed in the Los Angeles Superior Court in response to an August 4 lawsuit by Yucaipa, Safeway explains why it considers Yucaipa's bid for the chain unacceptable, and why Safeway selected another bidder as the winner.

At the start of bidding for Dominick's, Safeway asked all bidders to sign an agreement that they would refrain from discussions with labor unions representing Dominick's employees until after a winning bidder had been selected. Safeway alleges that, instead of signing this agreement, YucaipaÑwithout Safeway's knowledge or approvalÑnegotiated regarding the terms of a future labor contract with the unions, and then approached Safeway about entering into the bidding.

According to Safeway, it requested that Yucaipa agreeÑand Yucaipa willingly agreed in writingÑthat if it was not the winning bidder, it would inform the unions that it was not interested in buying Dominick's and was supporting the party selected by Safeway as winning bidder.

When bids were requested, Yucaipa allegedly submitted a non-competitive bid that contained too many conditions. According to the cross-complaint, Yucaipa was repeatedly told that it needed to improve its bid and to eliminate many of the conditions. Yucaipa failed to act on this advice, says Safeway.

The company then selected another bidder as winner. Safeway says it asked Yucaipa to perform its contractual obligation to inform the unions that it was no longer interested in Dominick's, but Yucaipa refused. Instead, Safeway alleges, Yucaipa communicated with the unions and filed a lawsuit to try to interfere with any transaction between Safeway and the winning bidder.

Yucaipa's lawsuit claims Safeway engaged in a biased bidding process and had "extorted" Yucaipa's agreement to support the winning bidder with the unions. Yucaipa alleged that Safeway never had any intention of selling Dominick's to Yucaipa, because Safeway had purchased Dominick's for a higher price from a group that included Yucaipa, and would be too embarrassed to sell the chain back to Yucaipa at a lower price.