SAVE MART SUES RALEY'S TO DISSOLVE PARTNERSHIP

ELLIOT ZWIEBACH

MODESTO, Calif. -- Save Mart Supermarkets here has filed suit against Raley's Supermarkets & Drug Centers, West Sacramento, Calif. -- its partner in a series of distribution joint ventures -- seeking to dissolve the partnership.

The suit accuses Raley's of conspiring to undermine the partnership -- called Super Store Industries, or SSI -- and asks the court to dissolve the partnership, order an accounting of its assets to achieve an equitable distribution of finances and appoint a receiver to take over management of SSI until the dissolution is complete.

Save Mart operates 100 stores in central and northern California with an estimated volume of $1.4 billion; Raley's operates 121 stores in central and northern California with an estimated volume of $2.2 billion.

SSI, which was founded in 1980, operates two dairies and a grocery and frozen-food warehouse with 750 employees and combined annual volume estimated at about $1 billion.

Under terms of the partnership agreement, SSI is operated wholly independently from the partners' retail businesses, with an independent administrator responsible for day-to-day operations.

The partnership originally included a third company, Bel Air Markets, Sacramento; however, when Raley's acquired Bel Air in 1992, it gained control of more than 50% of SSI's revenues and ownership, although less than two-thirds of the total, Michael J. Teel, president and chief executive officer of Raley's, told SN last week.

Asked to respond to the lawsuit's allegations last week, Teel told SN, "I'm not interested in dissolving SSI. We're committed to SSI and we want to see it continue."

He said he was surprised by the civil suit, since he said Save Mart executives had not discussed the situation with Raley's prior to the filing Dec. 28.

"We hope the suit is just legal grandstanding," Teel said. "It contains several false statements and references to issues that need to be discussed. At most, it is simply legal positioning."

He also said he "would like SSI's employees and the industry to know Raley's is certainly committed to continuing operations."

The suit, filed in San Joaquin County Superior Court, alleges that "Raley's/Bel Air have engaged in a course of conduct . . . designed to seize control of SSI, subvert its operation and destroy its independence." The suit alleges that Raley's/Bel Air has sought to deprive Save Mart of meaningful participation in SSI management committee affairs by making unilateral decisions without consulting Save Mart; using SSI to advance its own interests; causing SSI to make expenditures for items and projects uniquely beneficial to Raley's/Bel Air; fomenting disruption and disharmony among SSI's work force; injecting itself into decisions reserved for SSI executives; and refusing to allow SSI to pay its executives annual cost-of-living increases or bonuses.

"The foregoing conduct has interfered with the business of SSI and has created irreconcilable differences," the suit says. "As a result . . . the relationship between the partners has deteriorated . . . such that it is not reasonably practicable for Save Mart to carry on the business of the partnership."

The suit says that, because Save Mart believes the disagreement cannot be reconciled, "it would be in the best interests of the parties if the partnership were dissolved."

The suit warns that, unless a receiver is appointed to take possession of SSI assets and property, "such property and assets are in danger of being lost, removed or materially destroyed [by Raley's/Bel Air] . . . by virtue of their majority ownership vote in the partnership."