HOUSTON -- Randalls Food Markets here said last week it has filed an action against Fleming Cos., Oklahoma City, charging that the wholesaler violated terms of its supply agreement and asking that the agreement be terminated.
Randalls is Fleming's second largest customer, purchasing an average of $500 million worth of products a year over the past four years. A lawsuit by Furr's Supermarkets, Albuquerque, N.M., the distributor's largest customer, is pending against Fleming alleging overcharges, while a suit by David's Supermarkets, Grandview, Texas, with similar allegations, was settled out of court in March.
Randalls' action was filed last week with the American Arbitration Association in Dallas, which is expected to begin considering the dispute in three to six months, Randall Onstead, president of Randalls, told SN last week.
"This is a dispute that will be settled through arbitration," he said. He said Randalls is seeking "substantial damages," though he would not specify the amount, and termination of the supply agreement.
Fleming said in a formal statement, "Fleming's management is disappointed and believes Randalls' claim is unwarranted. The company believes it has complied with its contractual obligations and intends to vigorously defend the action."
The company said Randalls' action was taken following "an inspection of a small number of invoices [that] indicated both undercharges and overcharges," noting that the retailer's claim "is apparently based on both alleged overcharges and Fleming's change of its overall pricing formula."
Fleming said its agreement with Randalls requires that all disputes must be subject to binding arbitration and prohibits consequential or punitive damages.
Randalls operates 121 supermarkets in Texas under the names Randalls, Tom Thumb and Simon David. According to Fleming, the chain's purchases in 1996 totalled $484 million.
Randalls, which signed an eight-year supply agreement with Fleming in 1993, said the contract terms call for it to purchase products at Fleming's cost plus a small markup. The complaint alleges that Fleming has manipulated its costing procedures, which resulted in overcharges, and then "unilaterally changed its overall pricing formula" it also claims Fleming failed to provide supporting documentation for purchases, as required under the contract.
Based on documents provided to Randalls by Fleming, the retailer said it has purchased approximately $2 billion worth of products from the wholesaler since 1993.
Although some of the charges in the Randalls' and Furr's complaints are similar, Onstead said his company's charges resulted from Randalls' own audits, not formulas developed by Furr's.