State Wins a Key Round in Supermarket Battle : Must Post Only $10,000 Bond to Appeal Lucky-Alpha Beta Merger, Court Says

A federal judge in Los Angeles ruled Tuesday that California Atty. Gen. John K. Van de Kamp must post a bond of only $10,000 to pursue his U.S. Supreme Court challenge to the proposed merger of American Stores’ Lucky and Alpha Beta food chains.

The ruling, which American Stores can appeal, was a vital victory in Van de Kamp’s yearlong battle to block the integration of the two supermarket companies.

Ruling with uncharacteristic swiftness after a brief afternoon hearing, U.S. District Judge David V. Kenyon said that in requiring a $10,000 bond--far short of the $8.5 million that American Stores requested at the hearing--he gave great weight to an emergency opinion issued last week by Supreme Court Justice Sandra Day O’Connor.

She indicated that Van de Kamp would have “a fair prospect” of winning his case if her High Court colleagues voted for a review.

Citing evidence that the merger would cause “irreparable harm” to California consumers, Kenyon said that “to require a greater sum might be tantamount to deciding (the case) at the District Court level when it has vitality at the Supreme Court level.” He said such an outcome “would not be fair and proper.”

Kenyon added that O’Connor’s opinion “in this court’s mind radically changes the posture of this case.”

Lawyers noted that American Stores, based in Salt Lake City, can appeal the bond ruling with the Supreme Court. An attorney with Sidley & Austin, outside lawyers for American Stores, said a decision on an appeal would be made today.

Andrea Sheridan Ordin, chief assistant attorney general who argued for the reduction, said the office would post the bond within 48 hours.

“That’s no problem,” she said. But her enthusiasm was tempered.

While “we’re very pleased with the court’s decision,” she noted that it “merely keeps the stay in place until the U.S. Supreme Court has a chance to rule.”

The $10,000 represents a drastic reduction from the $16.3 million that Kenyon last month ordered the attorney general to pay. At the time, the judge said the hefty bond was intended to compensate American Stores for potential losses during the appeal process if it ultimately prevailed.

Van de Kamp appealed the amount, arguing that the state was pursuing the case on behalf of consumers and did not have the funds to post such a bond. He said he would have to give up his bid to ban the merger unless the bond requirement were eliminated or reduced.

The U.S. 9th Circuit Court of Appeals subsequently said it was lifting an order prohibiting the merger and returned the case to Kenyon’s jurisdiction for formal approval. Van de Kamp’s office then asked O’Connor to intervene.

Last week, in her 11th-hour action, O’Connor first ignored the bond requirement in agreeing to continue the prohibition against the merger. A day later, on Aug. 22, she clarified her opinion, saying the ban was conditioned on the posting of a “good and sufficient bond,” the size of which would be determined by the District Court.

Good Chance for Review

In a seven-page “in chambers” opinion, which is not binding, O’Connor said there was “a reasonable probability” that at least four justices--the required number--would approve a review of the case. The High Court reconvenes Oct. 2 after its summer recess.

Before the Tuesday hearing, lawyers for both sides speculated that Kenyon, known for his deliberate style, would not rule immediately on the bond. But after both sides presented their cases, Kenyon announced that he needed “three to five minutes,” then would issue his decision.

While the judge was in his chambers, Frank Rothman, a Los Angeles-based attorney for American Stores, said he has tried about 50 cases in Kenyon’s court but that “I have never once seen him rule from the bench.” In the hearing, Rothman argued that the bond should be about $8.5 million, based on O’Connor’s statement that any amount should be calculated from the date of her opinion.

In her arguments, Ordin contended that requiring a bond “in any substantial amount” would close the “courthouse door” to Van de Kamp. She also said the attorney general’s office believed American Stores’ allegations of losses relating to the merger to be “disputed and inflated.”

Nearing Anniversary

Rothman, in response, argued that “if we are right, we cannot recover any more than the nominal bond.”

“How Mrs. Ordin can say we would be protected by a $10,000 bond is preposterous,” he said. The bond would be forfeited to American Stores if the Supreme Court rejected Van de Kamp’s bid to halt the merger.

American Stores representatives showed little emotion when the judge handed down his ruling, the latest twist in a case that will mark its one-year anniversary Friday.

Last year, as American Stores was getting ready to integrate the chains, Van de Kamp challenged the merger on antitrust grounds, arguing that it would reduce competition and cost consumers millions of dollars in higher food bills.

“We’re so numb from it all,” one American Stores spokesman said at the hearing. “We’ve trained ourselves not to raise our expectations.”

In June, 1988, American Stores paid $2.5 billion for Lucky Stores, intending to merge Lucky with its less successful Alpha Beta chain and create a single Lucky chain that would save millions of dollars annually in reduced advertising, distribution and other costs. The company has said the legal delays are costing it $1.5 million a week in duplicative expenses.