Gordy’s Market Inc. wants a $46.2 million lawsuit filed by food distributor Nash Finch dismissed, and if it is not, the grocery chain seeks a jury trial.
“Gordy’s Market Inc. demands judgment dismissing plaintiff Nash Finch Company’s complaint against Gordy’s Market Inc., for its costs and disbursements according to law, and for any such further relief the court may deem just and equitable,” the company said in a 10-page court document responding to the lawsuit.
In the written response filed Thursday, Gordy’s contends that Nash Finch has “failed to state claims upon which relief can be granted,” and they have “failed to mitigate its damages.”
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In the Nash Finch lawsuit, the food distributor claims that Gordy’s owes $43.2 million in a rebateable incentive, a $1 million note, and $1.9 million in accounts receivable. In Gordy’s response letter, it states “GMI lacks knowledge or information sufficient to form a belief as to the truth of the allegations ... and therefore neither admits nor denies them.”
In the Nash Finch lawsuit, the food distributor claims that Gordy’s is on the verge of insolvency. Gordy’s did not address that issue in its response.
Gordy’s is represented by Milwaukee-based attorney Timothy Hansen. Milwaukee attorney Michael Polsky, who was appointed as receiver, has not “provided any direction” to Hansen on how to proceed forward, the response states.
“GMI files this responsive pleading to avoid the risk of default judgment entered against GMI if it fails to respond within the deadline prescribed by statute,” the response reads.
Polsky has set a deadline of April 24 for any creditors of Gordy’s to enter claims with the court if they seek to participate in any dividends.
William Jacobs, Nash Finch vice president of treasury and corporate development, submitted an affidavit along with the lawsuit, writing that Gordy’s is in default under the terms of the “customer supply agreement” from November 2017.
“GMI is unable to pay plaintiff timely since late August 2018,” Jacobs wrote. “GMI’s delinquent balance with plaintiff has grown considerably in the last few weeks.”
A review of Gordy’s finances indicates the company “has no excess cash to get caught up on its delinquent balance,” Jacobs wrote.
The lawsuit states that Gordy’s promised to pay the principal sum of $1 million, together with interest on the principal balance. As collateral, GMI included “equipment, fixtures, inventory, investment property” and included liquor, wine and beer licenses, the lawsuit states. Gordy’s assumed leases of six stores from Nash Finch, with collateral assigned to each of the six locations.
“As a result of these defaults, (Nash Finch) accelerated the maturity of the note so that all amounts there under were immediately due and payable as of Dec. 27, 2018,” the lawsuit states.
No future court dates have been set. The case is being handled by Judge James Isaacson, who oversaw the last lawsuit filed against Gordy’s.
In August 2017, Nash Finch filed an $86 million lawsuit against the grocery chain. By Dec. 7, 2017, 1,400 separate creditors filed proof of claims totaling an additional $50.7 million and Settlers Bank filed a claim of $5 million.
By the end of the year, 20 of the 26 Gordy’s Market locations had either been sold or closed, leaving just six in the company’s portfolio: Chippewa Falls downtown, Chippewa Falls on Lake Wissota, Cornell, Ladysmith, Chetek and Barron. The Eau Claire store was later added.
Jeff Schafer, who returned to the company in March 2017 after a half-year sabbatical, is now leading the new, smaller team. Joining him are his brother, Dan Schafer, as head of finances, and Jeff’s son, Nick, as head of merchandising.
The Schafers acquired the six stores in December 2017 through an auction and working out an agreement with SpartanNash, the new corporate name of Nash Finch.
SpartanNash was the highest bidder, buying the six stores at the auction for $19.8 million. The food distributor then agreed to assign its interest in the purchase to Gordy’s. This agreement allows the Schafers to retain ownership of the six stores and keep 340 employees on the payroll.
Some of the other 20 stores, like in Stanley, were never sold. Others, like Chippewa Falls south and Rice Lake, remain shuttered and aren’t reopening as grocery stores.