Rite Aid Settles Lawsuit Over Practices

Financially troubled drugstore chain Rite Aid Corp. said Thursday that it has agreed to pay $2.8 million in civil fines to settle a lawsuit brought by California prosecutors accusing the company of making misleading statements about prices, the availability of goods and the expiration dates on some items.

In the settlement filed in San Diego County Superior Court, the nation’s No. 3 drugstore chain admitted no liability but agreed to pay $2.6 million in penalties to be divided evenly among 12 counties, including Los Angeles and Ventura, and the city of San Diego. It will pay an additional $200,000 to cover their expenses.

The company also agreed to have an outside auditor check pricing and merchandising at its nearly 600 California stores and to hire a new executive who will monitor prices and merchandise policies at those stores.

Tim Foster, a former western district manager for Fred Meyer Inc., has been named to the new post of vice president of quality assurance, Rite Aid spokeswoman Sarah Datz said. Foster will be based on the West Coast.

The settlement was in response to a case brought by the prosecutors, also filed Thursday, contending that Rite Aid had violated two previous court orders to fix ongoing pricing and merchandise problems at its stores, said Los Angeles County Deputy Dist. Atty. Kathleen Tuttle.

In 1998, some Rite Aid customers complained to state authorities that the chain was selling products such as condoms and baby food past their expiration dates. Other complaints said that prices rung up at the checkout counter were different from those marked on the goods and that some stores advertised sales of products that were not available.

A number of county prosecutors took action against Rite Aid and in December 1998 and July 1999 obtained court orders that required the company to fix the problems.

Last December, prosecutors complained to Rite Aid that the orders were not being followed. Among the new concerns from consumers, San Diego Deputy City Atty. Steven Gold said, were medicine bottles with manufacturer’s expiration dates that did not match those on the printed labels and used breast pumps and other devices that were repackaged as new for sale.

The complaints led to the new round of concessions from Rite Aid announced Thursday, which prosecutors said they found satisfactory.

“They’ve taken it on as an upper management obligation or duty to make sure that things are corrected in their stores,” said Robert Nichols, Marin County deputy district attorney.

Rite Aid, based in Camp Hill, Pa., bought the California stores from Thrifty PayLess Inc. late in 1996. The company, which has 3,800 U.S. stores, saw its shares plummet after it restated three years of earnings figures last year. A new management team earlier this month said it found new lenders to finance operations.

On Thursday, Rite Aid shares rose 19 cents to close at $6.69 on the New York Stock Exchange. Its shares have lost 40% so far this year.