$9 mil. bond sought for damages in Las Vegas grocery slot case

Grace Leong

Monday, Sept. 27, 1999 | 11:49 a.m.

Albertson's and Raley's are demanding that Jackpot Enterprises Inc. post a bond of at least $9 million to cover potential damages the stores may suffer because of Jackpot's refusal to remove 246 slot machines from 15 disputed Raley's stores in Las Vegas.

Albertson's and Raley's said in a U.S. District Court motion that a $50,000 security bond ordered by the court to support a preliminary injunction issued on Sep. 14 against them is far from sufficient to reimburse Raley's for damages incurred if the injunction is revoked.

Raley's said its claim for at least $9 million was justified because it believed United Coin Machines Co. will try to recoup its start-up losses from Raley's after the injunction stripped United Coin of its rights to immediately occupy the Raley's stores.

Raley's added the potential claims could be even higher than $9 million if Jackpot fails to fulfil a promise it made at a hearing on its motion for the injunction to pay Raley's the difference between the higher license fees United Coin had offered to pay for its locations within the stores and the license fees Jackpot will pay while the injunction is in effect. Separately, United Coin, the latest entrant to the legal dispute, filed suit Thursday against Jackpot and Anchor Gaming Co. in an attempt to force their gaming machines out of the grocery stores. United is a subsidiary of Alliance Gaming Corp. of Las Vegas.

Since 1998, Cardivan, Jackpot's subsidiary, has been operating gaming devices at 15 of 19 Albertson's stores in Las Vegas, while Anchor was operating gaming devices at the remaining four stores.

Anchor Gaming was also sued for adopting the same tactics as Jackpot. The suit said Anchor Gaming sought to join the federal suit last week to prevent Raley's and United Coin from operating its slot machines in the four Raley's stores.

Albertson's had to sell its 19 Nevada stores to Raley's as part of an antitrust settlement with the Federal Trade Commission to get approval for its merger with American Stores Co. American Stores, owner of Lucky supermarkets and Sav-On drugstores, became a wholly-owned subsidiary of Albertson's after the merger.

When United Coin learned of Raley's purchase of the Albertson's stores, it opened negotiations with Raley's from mid-May through mid-June to get the license to operate gaming devices at the stores.

Albertson's maintained that when it sold its 19 stores to Raley's this year, Jackpot's contractual rights to operate gaming devices at the 15 stores terminated on that date.

Albertson's didn't grant Jackpot any rights to continue its gaming operations at a store after its supermarket operations at that location were terminated, said Joseph Kistler, Albertson's attorney.

The suit alleged Cardivan was also in negotiations with Raley's at that time, and claimed Cardivan's representatives had indicated in their communications with Raley's that it believed its license agreement had been terminated.

The suit said United Coin was chosen by Raley's to be the slot route operator because it offered to pay higher fees for its locations within Raley's Southern and Northern Nevada stores.

It alleged Jackpot had sued the grocery stores and asserted a unilateral right to remain there under its contract with Albertson's only after it lost its bid to be a slot route operator.

Raley's agreed on June 22 to grant United Coin exclusive rights for a 10-year term to operate slot machines and coin-operated gaming devices at all Raley's stores in Nevada, including the 19 Albertson's stores bought by Raley's. Fifteen of those stores were licensed to Cardivan and subject to preliminary injunction.

United Coin said it had sought to join the federal lawsuit to move for a stay or dissolution of the injunction shortly after it was granted to Jackpot's subsidiary, Cardivan, but the court had refused to let United Coin join the suit and denied its other motions as moot.

In the Clark County District Court suit, United Coin also sued Raley's, alleging it refused to allow United Coin to install its gaming devices in a three-day conversion period starting Sep. 15-18, and causing it to waste substantial time and resources preparing and getting the necessary state and regulatory approvals for its occupation of the 15 stores.

United Coin said it suffered substantial revenue losses of more than $3 million because it was forced to cancel the installation of its 308 gaming devices it purchased for the 19 stores, and has also lost many of its employees as a result of Jackpot's and Anchor Gaming's refusal to relinquish their slot operating licences.

United Coin said it spent a substantial amount of personnel and financial resources to recruit 90 workers to serve as slot hosts to operate United Coin's 308 gaming devices in the 19 stores. Had United Coin been allowed to operate its gaming devices, its net revenues in the 19 stores would have exceeded $250,000 a month, the suit said.

"Assuming this action doesn't come to trial for two years, United Coin's estimated lost net revenue will likely exceed $6 million. Combined with its nearly $3 million in startup costs, United Coin estimated charges over the next two years of over $9 million," United Coin said in its motion.

United Coin also accused Albertson's of breaching its obligations to Raley's when it failed to remove all of Jackpot's gaming equipment from the 19 stores within three days after Raley's acquisition of the Albertson's stores.

"We are hoping that the trial will determine whether (Jackpot) has the right to remain in Raley's stores until 2005, or whether the contracts were terminated when Raley's took over," Kistler said. "If the trial determines the contracts were terminated when Raley's took over, there could be significant damages that Jackpot would have to pay the stores."

Don Kornstein, Jackpot's president and chief executive, declined comment.

"We will be filing a response in a timely fashion according to the rules of federal procedure," said Jackpot's attorney, Donald Campbell. "A U.S District Court judge has ruled in our favor for a restraining order, and the order speaks for itself. As to the other suit filed, we have no knowledge of it and can't comment on it until such time served upon us."

United Coin's president, Bob Miodunski, could not be reached for comment.