Save A Lot Directors Seek Dismissal of RICO Case

The owner and two directors of Save A Lot have moved to dismiss explosive charges of fraud and racketeering levied against them late last year by a group of independent store owners, characterizing the plaintiff’s case as a “failed” and “repackaged” breach-of-contract suit.

As previously reported, the store owners were a group of military veterans who collaborated under Honor Capital to open and operate 10 Save A Lot stores as a system, only to see each of the stores fail and close as the private investment firm Onex Corp. took over ownership of the licensed discount store brand from Supervalu. Their case alleged that Onex, an affiliated investor, and two of its executives who are also Save A Lot board members, Matthew Ross and Anthony Munk, conspired to entice investment through misleading claims and data, then mismanaged the company by failing to provide goods at competitive prices, amounting to seven counts of fraud and violations of the federal Racketeer Influenced and Corrupt Organizations Act, or RICO.

In a 30-page response filed late last week, Onex, Ross and Munk asked the U.S. District Court for the Eastern District of Missouri to dismiss the charges with prejudice, saying the store owners named the directors and not the retailer as defendants because they were “fully aware” their licensing agreements barred such actions. They added that the charges were “riddled with deficiencies” and unable to prove racketeering, fraud or conspiracy. A dismissal with prejudice would prohibit the plaintiffs from bringing another action making the same claim.

“No manner of disingenuous pleading can magically transform a simple commercial dispute about alleged mismanagement of Save A Lot into a treble damages federal RICO case,” the motion said. “Nor is a debate about whether a handful of plaintiffs’ grocery stores were supplied with enough cans of tuna fish or other items to stock supermarket shelves or charged appropriate wholesale prices for groceries, such as meat and vegetables, tantamount to racketeering.”

The defendants argued that the intervening cause of its licensee’s losses were established in their complaint “that being an independent operator of hard discount grocery stores in food deserts is a difficult business,” and that “Save A Lot has struggled” overall.

Agreements between the licensees and the company further establish that the success of licensed stores was “only ever speculative” and depended on the ability of the licensee as a business owner, among other factors.