MESA, Ariz. -- Megafoods Stores here anticipates amending its lawsuit against Fleming Cos., Oklahoma City, to reflect some of the claims contained in a lawsuit by David's Supermarkets, Grandview, Texas, against the wholesaler, attorneys for Megafoods told SN.
Megafoods' lawyers declined to elaborate on the matter.
David's won its case, which questioned Fleming's policies on costs and markups; Fleming plans to appeal the decision. Megafoods originally filed suit against Fleming two years ago after Fleming refused to ship goods to the retailer, which prompted it to file for Chapter 11 protection in August 1994. Megafoods subsequently presented the court with a reorganization plan, which it proposes to put into effect later this year. However, Fleming has asked the U.S. Bankruptcy Court in Phoenix to convert the Chapter 11 to a Chapter 7, which would require Megafoods to liquidate its assets. The court is scheduled to hear the matter May 14. Megafoods officials declined to comment on Fleming's request when contacted by SN. Megafoods operates 40 stores: 17 price-impact Megafoods units in Arizona and 23 conventional Handy Andy stores in San Antonio.
Fleming's motion asking for the conversion to Chapter 7 indicates that Megafoods has operated at an average loss of approximately $4 million per month since its Chapter 11 filing and that additional credit losses could total $20 million.
Fleming also said that, at the time Megafoods filed for Chapter 11 protection, the retailer owed it $20 million of secured outstanding debt and was liable for $37 million under partially secured store sublease agreements. In the third quarter of 1994, Fleming recorded a $6.5 million charge to cover its net credit exposure to Megafoods.
