Kroger does not need to disclose to Albertsons why former Chairman and CEO Rodney McMullen resigned earlier this year, a Delaware court ruled on Friday.
The decision derails Albertsons’ claim in July that details surrounding McMullen’s departure are relevant to a lawsuit Albertsons filed against Kroger following the companies’ failed effort to merge. McMullen suddenly left Kroger in March after the company’s board concluded that his personal conduct violated its ethics policy but was unrelated to the company’s business. Kroger did not say what McMullen’s behavior involved.
“McMullen’s conduct is far afield from Kroger’s alleged breach of contractual obligations. Even if tangentially relevant, discovery into sensitive details of McMullen’s personal life risks a needless diversion in this suit,” Lori Will, vice chancellor of the Delaware Court of Chancery, wrote in the decision.
Albertsons had tried to make the case that McMullen’s behavior as chief executive of Kroger impugned his integrity and called into question his ability to devote proper attention to the companies’ plan to merge. The merger plan, announced in late 2022, ran into headwinds stemming from concerns by regulators and other critics that the supermarket operators’ combination would be anticompetitive, and the Federal Trade Commission filed a federal lawsuit seeking to block the deal in February 2024. Albertsons accused Kroger of not fulfilling “its contractual obligations to ensure that the merger succeeded.”
Will said that while it would be “pertinent” to Albertons’ claims against Kroger if McMullen’s personal issues affected his performance as CEO, the cause of those distractions is “immaterial.”
“External demands and commitments are a constant undercurrent beneath the surface of professional life. At critical moments, personal hardships — a family crisis, a health battle, or the loss of a loved one — take priority over job performance. By Albertsons’ logic, these deeply sensitive issues would be fair game for discovery in a busted deal case. They are, however, extraneous to the litigation,” Will said in the order.
In a separate case, a judge in Ohio said earlier this month that McMullen does not have to answer questions about his resignation from an attorney for a company owned by musician Jewel, Business Insider reported. The firm sued Kroger in 2023, claiming that the grocer breached an agreement to feature the singer-songwriter in events sponsored by the grocer, according to a CNN report.
Kroger also faced a lawsuit related to the failed transaction from C&S Wholesale Grocers, which had been in line to acquire nearly 600 stores and other assets the would-be merger partners intended to divest in connection with the transaction. C&S and Kroger settled the suit, in which C&S had claimed Kroger owed it a $125 million termination fee, in August, without disclosing the terms of the legal arrangement.
