Ex-President Sues Stater Bros.
Jack H. Brown, the suspended president of Stater Bros., filed suit Thursday in San Bernardino County Superior Court in an effort to prevent the supermarket company from postponing its annual meeting.
Refusing to issue an immediate order, Judge Ben Kayashima instead set a hearing for next Tuesday at which Stater must say why it should not proceed with the meeting on March 20, as originally planned.
The suit marks a further escalation of the battle between Brown and Chairman Bernard R. Garrett for control of the Colton-based company, which operates 94 supermarkets in Southern California. The two have been soliciting shareholder support by mail for their respective slates of director candidates.
Despite Stater Bros.’ announcement Tuesday that the executive committee had decided to postpone the meeting from March 20 to April 28, Brown said he intends to show up at the originally appointed time and place, since he wants to get the matter resolved.
“We as shareholders believe that date (March 20) still stands,” he said. “We believe a majority of the shareholders will be there.”
Brown, who controls 41% of the company’s stock through a partnership called La Cadena Investments, said his attorneys have advised him that, if a majority of the outstanding shares is represented, the shareholders can conduct business.
“It’s a meeting of shareholders, not a meeting of officers,” Brown said. “Every individual who owns a share of stock is entitled to attend and vote. The only reason perhaps that Mr. Garrett won’t show up is that he doesn’t own any stock.”
(Although Garrett technically owns no shares, members of his family owned 38.7% of Stater as of Feb. 19.)
Phillip I. Myers, a Stater Bros. spokesman, responded that “the company’s reaction is that that (Brown’s March 20 meeting) would not be an official Stater Bros. annual meeting.”
Myers said that the filing of Garrett’s proxy material has been delayed by the litigation and a review of first-quarter financial results but that the material should be filed with the Securities and Exchange Commission “pretty soon.”
Separately Thursday, Stater Bros. issued revised results for two fiscal first quarters, those ending Dec. 29, 1985, and Dec. 30, 1984.
Net income for the more recent period was revised upward to $2.2 million from $1.8 million, a figure that was reported Feb. 6 but later withdrawn for review by the company’s outside auditors, Arthur Young & Co.
That profit compared to revised net income of $358,000 for the same period the year before. Earlier, the company had reported net for that period of $661,000. As previously reported, revenue for the quarter was $224.6 million, compared to $191 million in the year-ago period.
In a statement, Garrett said: “The revisions to previously reported results . . . are primarily attributable to correcting certain adjustments related to inventory and cost of sales, which adjustments were made under Jack H. Brown prior to his suspension on Feb. 10, 1986, as president and chief executive.”
In a separate suit in which an amended complaint was filed Wednesday by Stater Bros. in U.S. District Court here, the company seeks a temporary restraining order to halt Brown’s mailing of proxy solicitation letters. It also asks that Brown be ordered to correct what Garrett’s attorneys called inaccurate disclosures in his proxy materials.
In similar suits filed last month in federal court and Los Angeles County Superior Court, Stater Bros. accused Brown of manipulating the chain’s profit figures just before it made an initial public offering of stock last November. The suits allege that Brown intended to reduce the stock’s initial price, allowing him to buy large numbers of shares at depressed prices.
Brown has labeled the allegations “absolutely false.”
