DW Backs Off Its Jade Pig Suit

June 18, 2004
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GRAND RAPIDS — On June 11, D&W Food Centers filed suit in Kent County Circuit Court on to block Jade Pig Ventures, one of its retail landlords, from imposing what D&W officials deem unfair property fees.

On June 18 it dropped the action.

The two parties agreed that they would resolve the dispute regarding fees through arbitration.

“Apparently, we should have done a better job communicating the basis for the fees,” said Scott Wierda of Jade Pig Ventures. “We wish we could have sat down and calmly discussed differing opinions about what fees are allowed under the leases prior to this week’s legal action.”

“We are very pleased that we can pursue a less adversarial alternative to resolving our dispute with Jade Pig Ventures,” said Betsy Raymond, D&W executive vice president. “We have long enjoyed a positive, constructive business partnership with Jade Pig Ventures, and we believe we can place our differences behind us and move forward with a renewed sense of respect for each other. We are very appreciative of their willingness to work with us in a way that allows us to return our complete focus onto the work of serving our customers.”

Earlier last week, D&W spokesman Ron Cox said in a strongly worded press release that newly imposed administrative fees on four food center properties and the central kitchen/commissary property on 44th Street that it leases from Jade Pig could total more than $1 million over the next several years.

The stores in question are in East Grand Rapids, Grand Rapids, Rockford and Kalamazoo.

On Friday, June 18, the day Circuit Court Judge Donald Johnston was to hear D&W’s pleading, D&W announced it had dropped the suit and that the parties had agreed to settle the dispute through arbitration instead.

“These are solid retail locations, all among D&W’s top performing stores,” said Raymond. “It doesn’t serve anyone’s interests to allow this dispute to continue. Both parties look forward to resolution of the disputed fees during arbitration and continuation of the solid working relationship they have enjoyed for more than five years.”

The suit had claimed that Jade Pig breached the lease agreements by tacking on new fees midway through the contract and asked the court to declare that Jade Pig is not entitled to the additional fees under the existing leases.

At the same time, D&W also filed a motion for a preliminary injunction, asking the court to stay any eviction proceedings that Jade Pig might initiate.

Cox said the food retailer “will not simply accept this arbitrary demand that threatens our ability to remain competitive.”

He asserted that the “unprecedented and unfair demand” by Jade Pig is a violation of the trust D&W placed in Jade Pig when it committed to long-term leases on the properties. He attributed the landlord’s assessment of a new fee to “greed.”

Jade Pig claimed the new fee on the collective properties currently exceeded $100,000. D&W received a letter from Jade Pig last Tuesday indicating it believes D&W is at default and should pay to avoid any eviction proceedings.

Raymond said the company first started noticing the additional fee on its monthly statements in January of this year.

“One of things we’re still trying to work through with them is exactly what the nature and the source of the charges are,” she said. “They have told us that they believe they had not been charging everything they could charge us. In a nutshell, that’s the explanation we have received to date.

“What we have seen to date would indicate that the charges they are attempting to pass through are their own headquarters’ overhead expenses.”

Prior to the suit being withdrawn, Wierda said that the disputed fee being was completely justified.

“It’s written out in the lease what we’re allowed to charge,” Wierda said earlier in the week. “All fees are an accepted expense as defined in the lease. I think questions about actual amounts and the nature of the dispute should be handled in a more appropriate forum and a more gentlemanly manner going forward.”

Raymond said D&W and its attorneys don’t believe that under the existing contracts Jade Pig has the right to charge additional fees. She couldn’t say what the administrative fees amounted to per property.

“It’s actually quite a complicated calculation that they go through. Honestly, that’s one of the issues — we’re still trying to understand exactly how those charges are calculated and allocated. It’s not the same for every property. They claim that today the total is over $100,000 in the aggregate.”

D&W attorney Jon Bylsma of Varnum Riddering Schmidt & Howlett said it’s highly unusual for a landlord to start charging additional fees midway through a lease agreement.

Through its previous court filing, D&W had offered to pay the disputed new fees into a court-supervised account.

The purpose of the account, Bylsma said, would have been to show that D&W could pay and would pay the disputed fees if the court decided in Jade Pig’s favor.

“We don’t believe the lease agreements provide in any way for this additional new fee. We don’t believe this needs to be paid,” he said. “This really is a gesture to show that this isn’t about ability to pay or anything like that. We’re saying, let’s not deal with injunction bonds. We’re able to pay this money. It’s certainly our effort to be upfront and above board in getting this resolved.”

D&W leases all of its 22 retail locations under long-term leases of typically 10 to 20 years, Raymond said.

She wouldn’t speak to the possibility of relocating the five D&W operations in question.

“I think it would be very premature to have any kind of dialogue regarding that. We like those sites and we like those stores and we don’t believe we’ll be going anywhere.”    

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