Commitments And Contingencies

3 Months Ended

Jun. 18, 2011

Commitments And Contingencies

Commitments And Contingencies

20.  Commitments and Contingencies

Supply Agreement

On June 2, 2011, our Company entered into a definitive agreement with C&S effective May 29, 2011, whereby C&S will provide Services in support of a substantial portion of our Company's supply chain. This agreement terminates and replaces the warehousing, logistics, procurement and purchasing agreement under which the parties have been operating since 2008.

The term of the agreement is through the effective date of our Company's plan of reorganization in its Bankruptcy Filing but may be extended by either party for a term concurrent with a fixed volume commitment based upon wholesale purchases of merchandise resulting in a term of approximately seven years. The cost structure of the agreement is a combination of a fixed cost and variable upcharge pricing model. The charges are subject to adjustment due to volume change or other material changes to the operating assumptions of the agreement.

Our Company expects it will realize a run-rate of more than $50 million in annual savings commencing with our Company's emergence from the Bankruptcy Filing pursuant to a plan of reorganization. The agreement provides our Company with important service enhancements, including detailed service specifications and key performance measures. The agreement also permits our Company to maintain product standards and specifications for all merchandise purchased for resale in our Company's stores.

Lease Assignment

On August 14, 2007, Pathmark entered into a leasehold assignment contract for the sale of its leasehold interests in one of its stores to CPS Operating Company LLC, a Delaware limited liability company ("CPS").  Pursuant to the terms of the agreement, Pathmark was to receive $87.0 million for assigning and transferring to CPS all of Pathmark's interest in the lease and CPS was to have assumed all of the duties and obligations of Pathmark under the lease.  CPS deposited $6.0 million in escrow as a deposit against the purchase price for the lease, which is non-refundable to CPS, except as otherwise expressly provided in the agreement.  The assignment of the lease was scheduled to close on December 28, 2007.   On December 27, 2007, CPS issued a notice terminating the agreement for reason of a purported breach of the agreement, which, if proven, would require the return of the escrow. We are disputing the validity of CPS's notice of termination as we believe CPS's position is without merit.  Because we are challenging the validity of CPS's December 27, 2007 notice of termination, we issued our own notice to CPS on December 31, 2007, asserting CPS's breach of the agreement as a result of their failure to close on December 28, 2007.  CPS's breach, if proven, would entitle us to keep the escrow.  Both parties have taken legal action in New York state court to obtain the $6.0 million deposit held in escrow. In May 2011, the Bankruptcy Court entered an order authorizing the Pathmark and CPS to proceed with their New York state litigation notwithstanding the automatic stay.

Rejection of GHI Trucking Agreement

On February 4, 2011, the Bankruptcy Court entered an order authorizing Pathmark to reject a burdensome trucking agreement with GHI and enter into an interim replacement trucking arrangement with C&S.  Because Pathmark was GHI's largest customer, its rejection of the trucking agreement negatively impacted GHI's business, prompting GHI to layoff a significant number of its employees.  The local union representing GHI's employees subsequently brought suit against GHI in New Jersey federal court alleging that GHI's termination of its employees violated New Jersey state and federal WARN statutes and constituted a breach of GHI's collective bargaining agreement with the union.  On March 31, 2011, GHI filed a motion with the Bankruptcy Court seeking leave to file a third party complaint in the New Jersey action seeking in excess of $100 million in damages against our Company alleging, among other things, that our conduct in connection with rejecting the trucking agreement was tortious and that we were responsible for any WARN Act liability of GHI to its former employees.  The Bankruptcy Court denied GHI's motion, and GHI appealed the Bankruptcy Court's decision to the district court, which appeal is pending.

LaMarca et al v. The Great Atlantic & Pacific Tea Company, Inc ("Defendants")

On June 24, 2004, a class action complaint was filed in the Supreme Court of the State of New York against The Great Atlantic & Pacific Tea Company, Inc., d/b/a A&P, The Food Emporium, and Waldbaum's alleging violations of the overtime provisions of the New York Labor Law.  Three named plaintiffs, Benedetto LaMarca, Dolores Guiddy, and Stephen Tedesco, alleged on behalf of a class that our Company failed to pay overtime wages to full-time hourly employees who were either required or permitted to work more than 40 hours per week. This matter has been stayed by our Bankruptcy Filing and is a claim that is subject to compromise.  

Other

We are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business.  We are also subject to certain environmental claims.  While the outcome of these claims cannot be predicted with certainty, Management does not believe that the outcome of any of these legal matters will have a material adverse effect in our Consolidated results of operations, financial position or cash flows.