ST. JOSEPH, Mo. -- A group of 20 retailers in Kansas and Missouri has filed a suit here against Fleming Cos., Oklahoma City, and two of its former executives, alleging a long pattern of intentional overcharging.
The suit, which Fleming characterized as "warmed-over charges," includes the involvement of the Vinson & Elkins law firm, which has brought a number of related actions against Fleming, including one by David's Supermarkets, Grandview, Texas.
That David's case initially brought a $211 million judgment against Fleming, which was later tossed out because the judge hadn't disclosed his links to the plaintiff. Fleming later settled for less than a tenth of that amount while not admitting liability. The Missouri suit claims actual damages are likely to be in the multimillion dollar range.
In addition to Fleming, the defendants in the Missouri case are Dean Werries, former Fleming chairman and chief executive officer and a current board member, and Byron Duffield, who was Fleming's top executive in the Kansas City division, which supplied the plaintiffs.
The plaintiffs, who own and operate 24 retail grocery stores, were in some cases supplied by Fleming for more than 15 years. Most still have ongoing supply agreements with Fleming. They allege that Fleming "systematically, intentionally and willfully overcharged plaintiffs for groceries and related products for years without the knowledge of plaintiffs."
Fleming is requesting an extension of the time it has to file a written answer until May 15. The decision on an extension must be made by U.S. District Court Senior Judge Howard Sachs, according to Dan Boulware, the lead attorney for the plaintiffs, who is with the Watkins, Boulware, Lucas, Miner, Murphy & Taylor law firm here.
The retailers bringing the case (almost all still in business) are located in the St. Joseph, Mo., and Kansas City, Kan., metropolitan areas. Those in Kansas include Don's United Super, Kansas City; Seventh Street United Super, Kansas City; Bob's United Super, Kansas City; Forest United Super, Winfield; and McKinzie Enterprises, Overland Park. Those in Missouri include RVR United Super, Kansas City; Coddington Enterprises, Sugar Creek; Ray's Foods, Independence; United Super, Kansas City; Stadium United Super, Kansas City; Valle Vista United Super, Summit; Fisher Family Corp., Blue Springs; Richmond Hills United Super, Richmond; W.H. Koch Co., Chillicothe; R&D Foods, St. Joseph; D&R Foods, St. Joseph; R-N Foods, St. Joseph; R-J Foods, St. Joseph; Leon's United Super, Kansas City; and Bi-Lo Market, Warrensburg.
The allegations include fraudulent misrepresentation and nondisclosure, breach of written agreements, breach of Fleming's duty of good faith and fair dealing, negligence and racketeering.
Some of the suit's central allegations center on Fleming's agreements to sell groceries and related products to the retailers at Fleming's cost plus fees disclosed in its "Sell Plan." The suit charges that "Fleming covertly, intentionally schemed to manipulate the business relationship so that the cost Fleming passes on to the retail grocers for groceries and related products is higher than the cost Fleming actually pays for the product." Stated differently, the suit alleges, "Fleming marks up its cost before adding the Sell Plan fees."
Among the allegations about Fleming's practices are that the wholesaler:
Hid overcharges by keeping two sets of books -- at the division and corporate levels.
Routinely bought and sold goods between its various divisions for the reasons of "internally creating false or inflated list prices for groceries and related products," enabling the wholesaler to sell to the retailers at inflated prices.
Failed to pass on vendor rebates and allowances, and savings from forward buying, diverting and slotting fees.
Induced vendors to "artificially inflate" invoices on which Fleming bases its prices to the retailers.
Nancy Del Regno, Fleming vice president of communications and public affairs, told SN the company "believes the lawsuit involves no more than warmed-over charges.
"We've been targeted by these unjustified accusations before," she said. "In fact, since the David's judgment was overturned, we've seen the same group of lawyers three times."
Del Regno stressed that Fleming believes it has conducted its business "in an honorable, legal and ethical manner," using well-established industry practices. She added, "It's extremely frustrating when facts and comments are misrepresented and taken out of context by those seeking to alter their basic economic relationships with Fleming.
"We will vigorously defend our business practices, protect our good name and continue to support our customers with integrity," Del Regno said.
Del Regno stressed that although food wholesaler is only one element in a retailer's success, "fortunately, there are literally thousands of customers Fleming has supplied over the last 80-plus years who have effectively used Fleming's marketing plans and programs to succeed."
The suit states that Fleming was able to hide its actions because of the control it gained over retailers on many levels.
Fleming loaned money to some of the operators and as conditions of lending entered into "equity partnerships" with retailers and mandated that Fleming officers become officers of the retail companies, the suit states. Fleming also held master leases on the properties of some of the retailers, handled aspects of the stores' accounting systems and acted as their agent in dealing with vendors in relation to advertising allowances and promotional incentives, the suit says.
"Fleming's systematic and calculated creation of a role for itself as owner, partner, advisor, lender, landlord, accountant and agent for the retail grocers allowed Fleming to establish pervasive and heavy-handed control over the retailer grocers, to deal with the grocers with assumed impunity and to conceal its wrongdoing from the retail grocers for years," the suit alleges.