LV slot route operator says business is down at Rite Aid

Kim Smith and David Strow

Thursday, Dec. 9, 1999 | 11:54 a.m.

Jackpot Enterprises Inc. of Las Vegas on Wednesday sued Rite Aid Corp., claiming a plan to expand Jackpot's slot machine business at Rite Aid stores is in jeopardy because of Rite Aid's well-publicized financial and regulatory problems.

Jackpot has a contract with Rite Aid to operate slots at 31 Las Vegas Rite Aid stores and in March signed a contract to expand with Rite Aid as Rite Aid intended to build another 40 to 60 stores in Nevada.

Because of this expansion plan, Jackpot says it was induced into paying substantially higher fees to Rite Aid for the right to operate slots in the existing stores.

However, Rite Aid's financial troubles mean its expansion plan is in doubt and Jackpot says it's now losing money at the existing stores because of the higher licensing fees and a reduced volume of business caused by publicity about Rite Aid's troubles and the possibility Rite Aid will sell some stores in the West.

"The stores in question are being operated in a 'holding pattern' with the public being aware of Rite Aid's being a 'loser' that plans to sell the place and get out of town. Such an atmosphere is particularly antithetical to gaming operations. It repels customers in general and gaming customers in particular," Jackpot said in its suit.

Jackpot is seeking to have its slot contract with Rite Aid dissolved and is asking for damages of at least $20 million.

Rite Aid "appears on the brink of financial collapse," the lawsuit states, and Jackpot says it feared any damages would be uncollectible if the court does not take immediate action against Rite Aid.

The suit says Jackpot's subsidiaries Cardivan Co. and Corral Coin Inc. pay Rite Aid more than $425,000 per month for the right to operate slots in the 31 Las Vegas Rite Aid stores.

Because of Rite Aid's struggles, the Jackpot companies claim they've taken an operating loss at the Rite Aid stores of more than $1 million since July 1.

Both companies halted payments to Rite Aid on Sept. 30.

Cardivan and Corral Coin have asked for an emergency temporary restraining order and preliminary injunction to prevent Rite Aid from pursuing the defaulted monthly payments until the lawsuit is resolved or, in the alternative, having the payments placed in a constructive trust.

Sarah Datz, public relations manager for Pennsylvania-based Rite Aid, declined comment on the lawsuit, saying Rite Aid had yet to be served.

Rite Aid, the nation's third-largest pharmacy chain, has seen its stock tumble more than 80 percent this year after restating its earnings downward by $500 million for the past three fiscal years. The debt-ridden company's chief executive, Martin Grass, resigned in October. A team of well-respected executives from Kroger Co. took over at the chain this week, reassuring investors.

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