Safeway to pay $2.25 million to settle lawsuit, Supervalu board members step down

Safeway (NYSE:SWY) has agreed to pay $2.25 million to settle a lawsuit filed in Northern California alleging that the grocer charged higher prices than advertised, misrepresented the weights of products and falsely claimed that produce from other countries was locally grown. The lawsuit also alleged that Safeway failed to act in accordance with a 2008 injunction requiring it to minimize price discrepancies by offering customers free items or $5 gift cards when pricing errors were discovered.

Safeway does not admit liability in the case, however the retailer has agreed to add more signs to notify consumers of its price-accuracy policy and hire an independent auditor to conduct annual reviews. A court order prohibits the chain from making inaccurate or misleading statements, charging more than the lowest posted price and failing to honor valid promotions and discounts.

News of the lawsuit comes on the heels of Safeway being purchased by Cerberus Capital Management. That transaction has led to the resignation of two directors on the board of Supervalu, one of Safeway's direct competitors. Mark Neporent and Lenard Tessler announced on Thursday their decision to step down from the board, where they had been members since 2013 following the Cerberus-led acquisition of Supervalu's Albertsons assets and its investment in Supervalu.

"In light of the transaction announced today, we felt it was in the best interests of Supervalu for us to resign our seats on the Supervalu board," said Neporent in a statement. "The directors who will be designated to replace Lenard and me under the tender offer agreement are expected to be independent of both Cerberus and Supervalu and will add to Supervalu's outstanding board."

For more:
-See this San Jose Mercury News article 
-See this Supervalu press release

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