Two Louisiana grocery giants bitterly ended a decades-old alliance in 2008 and spent the next six years sniping at each other in civil-suit filings at a Thibodaux courthouse.
On Monday, Thibodaux-based retail grocery chain Rouses Enterprises and Baton Rouge-based wholesale grocery supplier Associated Grocers will turn that paper-and-ink war into a jury trial before 17th Judicial District Judge F.H. “Buddy” Larose.
At issue is whether Rouses was ousted improperly from membership in Associated Grocers in 2008 and whether it was compensated fairly for an ownership interest in the grocery distribution company. Rouses is asking the judge to reinstate its membership in Associated Grocers.
Both companies started small, shared their early histories and grew into powerhouses.
Rouses Enterprises opened its first store in Houma in 1960, joining Associated Grocers in 1965. Now, the family chain operates more than 40 Rouses grocery and prepared-food stores across southern Louisiana, Mississippi and Alabama.
Third-generation owners Donny Rouse and Ali Rouse Royster say on the company’s website that nearly 6,000 employees now work at Rouses stores that feature “smokehouses, sausage kitchens and seafood boiling rooms” in addition to aisles of produce and groceries.
On Associated Grocers’ website, President and CEO J.H. Campbell Jr. says the firm was founded in 1950 by 17 independent retail grocers.
Since then, the Baton Rouge company has grown to serve a membership of more than 220 “independent supermarkets in Louisiana, Texas and Mississippi,” its website says. The company employs more than 750 full-time workers and boasts annual sales of more than $675 million.
For more than 40 years, Rouses stores and Associated Grocers were each a part of the other’s growth.
Larose said in the court record Oct. 3 that Associated Grocers’ sales to Rouses stores “accounted for more than 18 percent of AG’s business.”
Rouses alleges in its court filings that it also held 20 percent of Associated Grocers’ stock and purchased $148 million in products from the Baton Rouge supplier in the year before their split.
That mutually profitable relationship ended in late 2007 and early 2008, though, as the Rouses brand doubled through acquisition of 16 Sav-A-Center stores in the New Orleans metropolitan area.
What happened after those purchases remains a matter of dispute at the Thibodaux courthouse.
Through a team of New Orleans lawyers headed by James R. Swanson, Rouses and the company’s founder, Anthony J. Rouse Sr., said in court filings that Associated Grocers treated them unfairly.
Rouse Sr. was improperly removed from the Baton Rouge firm’s board of directors in March 2008, according to Rouses filings. 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 filed its suit against Associated Grocers in April 2008.
Through a team of Baton Rouge lawyers headed by Glenn M. Farnet, Associated Grocers disputes Rouses allegations.
“Associated Grocers did not wrongfully terminate and paid Rouses the correct redemption price,” the Baton Rouge firm told Larose in June .
“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,” Associated Grocers said.
In addition, Associated Grocers’ lawyers argued, “Rouses began considering membership termination in November 2007, when it unilaterally sought bids from alternative suppliers.”
“In October 2007, Rouses sent out letters to Supervalu, AWG, C&S Wholesale Grocers and Associated Grocers seeking a response to a request for proposal for a long-term supply agreement,” the Baton Rouge firm added.
Associated Grocers asked Larose for a summary judgment in its favor.
Rouses argued against the request for summary judgment. Officials of the Thibodaux firm acknowledged 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.
“Rouses was then shocked when AG proposed to increase the mark-up on Rouses’ groceries,” the Thibodaux company told the judge.
On Oct. 3, Larose 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.
A member of the judge’s staff said late Friday the case remained scheduled for trial Monday.