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The Los Angeles Times reports that Albertsons is suing Haggen for fraud, saying that the grocery chain has withheld more than $36 million in payments that it owed for inventory received as part of its acquisition of former Albertsons and Safeway stores.

The complaint says that "Haggen's acts were fraudulent in nature and done with malice and a willful disregard for Albertsons' rights."

It is just the latest bad news that has plagued Haggen since it made the decision, fueled by private equity money, to grow from an 18-store Pacific Northwest company and acquire 146 former Albertsons and Safeway stores that needed to be divested when those two companies merged. Since then, Haggen has gotten mixed to poor reviews for the stores it acquired and converted, and has recently been laying off employees and reducing store staff hours to compensate for disappointing sales.

According to the Times story, "Albertsons says that Haggen refused to pay for $36 million of inventory at 32 stores it acquired. Nearly $5 million in inventory at an additional six stores will be past due Tuesday -- bringing the total to more than $41 million, the complaint said.

"Haggen waited until deals closed on all 146 stores before notifying Albertsons that it would not pay for the inventory, the lawsuit alleged. The reasons -- related to unspecified issues that Haggen contends occurred during the acquisition process -- are 'baseless,' the lawsuit said.

"'Haggen's acts were fraudulent in nature and done with malice and a willful disregard for Albertsons' rights,' the lawsuit said."

Haggen has responded by saying that "it notified Albertsons in June of Albertsons' violations under the purchase agreement and possible further violations related to requirements of the Federal Trade Commission and various state attorneys general. Haggen declined to disclose those alleged violations. By filing a lawsuit, Haggen said Albertsons appears to be trying to avoid 'addressing its wrongful conduct'."
KC's View:
Just what Haggen needed.

I have no idea what the specific issues are in this dispute, but the headlines that this lawsuit will generate cannot help Haggen's already tattered reputation in the new markets it is serving. BTW ... I stopped at another couple of just-converted Haggen stores last weekend, and found them as lacking in inspiration as the one I visited a couple of months ago. And yes, they still had some California wine mixed into some Oregon wines on a display marked "local" - you'd think these guys would learn.

I also talked to some more local shoppers who'd decided to give Haggen a try after the conversions, and to a person they said that they thought that the prices were high and the stores "nothing special," and that they would not be going back.

This story just keeps getting worse and worse.