Lawsuit on Aisle 5

How Robert Gordon went from a farm commune to Safeway Inc.

Published in Corporate Counsel Edition - November 2009 — November 2009

Several decades ago, when Black Panther Bobby Seale was on trial in New Haven, Conn., the Yale Daily News enlisted freshman Robert Gordon to cover a story on students who wanted to donate their meal plan breakfasts to a Panther-sponsored program. Gordon’s reporting was part of an ongoing story, and he followed the group as it prepared for the 1970 May Day student strikes. The Yale Daily News did not support the strike, whereas Gordon (along with Yale’s president, Kingman Brewster, and its chaplain, William Sloane Coffin) did—so his editors took him off the assignment.

“The newspaper decided that because of my proximity to the situation, I needed to be removed from the story as a reporter,” he says.

But he didn’t just remove himself from the piece; he removed himself from campus. Gordon joined a group of students and moved into a farm commune 12 miles from New Haven. “I would wake up early, milk the cow and goats, and then go to class,” he says.

Fast-forward 40 years, and Gordon is now the senior vice president, general counsel and secretary of Safeway Inc., the fourth-largest grocery chain in North America. While growing a patch of tomatoes on a farm outside of New Haven and working with large-scale produce vendors are quite disparate, Gordon points out a common thread: “Basically, we saw our life on the farm as a way to do our best in the world, and share that best with others. In some sense, that’s what we try to do here at Safeway, too.”

 

Gordon joined Safeway in 1999, as the company was confronting a massive class action lawsuit over alleged price fixing on eggs. The plaintiffs sought damages of $89 million, which by California’s antitrust law would have been tripled to $267 million. Several years of litigation culminated in a six-week jury trial.

“The conditions were completely unfavorable,” he says. “The opposing counsel was very formidable; the judge, Anthony Joseph, seemed to be against us; and the jury was made up of the average consumer—class members who stood to win themselves if we lost.”

Gordon, who had recently resigned from private practice, was forced to watch it all from the sidelines. “I became the world’s worst client,” he says. “I would sit in the courtroom every day, frustrated that I wasn’t actually trying the case.”

At night, Gordon would work with his attorneys on everything from witness preparation to opening and closing statements. “I even had plenty of comments for the witness outlines and arguments of counsel for the other defendants,” he says.

In the end, the jury brought back a 9-3 verdict in favor of Vons (which Safeway acquired in 1997) and the other two defendants.

“Our outside lawyers, Greg Stone and Steve Perry, managed to produce a great result despite my interference,” he says with a laugh.

The case exemplifies one of Safeway’s top legal concerns: regulation. The company’s 1,735 stores, which include such regional banners as Randall’s, Dominick’s and Tom Thumb and produce $44 billion in total sales, are subject to strict scrutiny by federal officials.

“The regulatory challenges are considerable,” Gordon says. “We have numerous items in each store, several price changes during a given time period, countless transactions going through each store, and a lot of advertising.” Furthermore, he says, Congress under the Obama administration has put more emphasis on executive compensation and Securities and Exchange Commission disclosure rules.

To meet the challenges, Gordon recently expanded his legal team to 33 members, simultaneously cutting costs on outside counsel. “We have a fairly steady and big caseload in litigation, mostly in California, and mostly in the area of employment,” he says.

One of Safeway’s largest labor disputes occurred in 2003, when seven United Food and Commercial Workers locals protested revisions to its health benefits contracts. A five-month strike ensued—one of the longest in the UFCW’s history, with an estimated $580 million (pretax) loss for Safeway.  Four months into the strike, California’s then-attorney general Bill Lockyer filed a lawsuit against Safeway and two grocers, claiming that an agreement between the parties constituted an antitrust violation.

The strike ended in February 2004, but the crisis continued when leaders from a handful of state pension funds launched a campaign to oust Safeway’s CEO and two directors, alleging conflict of interest. The issue was resolved when the shareholders voted overwhelmingly to re-elect the CEO and two directors.

While that chapter in Safeway’s history is closed, governance issues and shareholder activism are growing concerns.

“There’s a new problem every day,” Gordon says.

 

Raised in Chicago and Minneapolis, Gordon is the middle child of an industrial machinery salesman and sixth-grade teacher. He worked for a local law firm one summer during high school, but the combination of filing and paperwork didn’t endear him toward the profession. “From that first experience I decided I would never become a lawyer,” he says. “But that’s when we were young and very fussy about what we thought we wanted to do for a living.”

He followed in his father’s footsteps in attending Yale, where he studied philosophy and psychology. Inspired by political activist lawyers like William Kunstler, he spent his next three years at the University of Virginia School of Law—although he says he went with no direction in mind. “I decided to go to law school purely for exploratory reasons,” he says.

After graduation, he moved to San Francisco to take a clerkship with Judge James R. Browning of the 9th U.S. Circuit Court of Appeals, and in 1977 joined Pillsbury Madison & Sutro. “I was just trying to find out what [corporate law firm life] was all about,” he says. “The people were smart, the matters were interesting, and they had a standard of excellence I aspired to.”

He started out handling a slew of pension-related cases, eventually working in most areas of business litigation. During his 22 years at the firm, he helped try large-scale cases that captured news headlines, including Pacific Lumber’s hostile takeover by Charles Hurwitz and Chevron’s dispute with Pennzoil. But his most interesting was the fiasco involving the Washington Public Power Supply System (WPPSS), also known as “Whoops” by the news media. Gordon’s firm represented a group of major utilities in Washington state who were among the 23 primary defendants sued when WPPSS defaulted on $2.25 billion worth of bonds for five nuclear plant projects planned in Washington. The projects were abandoned in 1983, leaving nearly 30,000 investors in the lurch and prompting at least 70 lawsuits.

“[The case] involved not only the issues surrounding the WPPSS bond default, but also the history of power in the Pacific Northwest and the nuclear power industry in the United States,” he says.

For three months, Gordon defended his clients in the courtroom. At the end of 1988, most parties in the various lawsuits reached a $753 million settlement, to which his clients contributed a “fair” amount, he says.

In his later years at Pillsbury, Gordon began handling work for Safeway. Its general counsel at the time, Michael Ross, asked Gordon to join the company as deputy general counsel. A year later, in 2000, Ross retired and Gordon took the top job.

He sometimes misses the courtroom. “But the challenge to get great results in every case the company is involved in, whether I’m handling it or not,” he says, “is certainly as great as prevailing in any individual case.”

Gordon recently took part in Safeway’s new health care initiative, which rewards employees for healthful behavior with monetary incentives and premium reductions. “When you are redesigning any health care plan, especially one that is attempting to reward healthful behavior, you will have to consider issues of employment discrimination and employee privacy, among others,” Gordon explains. “I feel we have successfully navigated through these issues. In the process, we’ve been able to identify portions of the law that need to be changed to make these types of plans even more cost-effective and beneficial to employees.” Safeway’s CEO, Steven Burd, recently met with President Barack Obama to discuss the program.

The company has also been on a campaign to reinvent its own image, with new organic and healthful-food product lines. Since 2004, Gordon has directed his legal team in negotiating contracts with vendors and establishing trademarks for the lines.

In some ways, you could say he has come full circle—growing a patch of tomatoes on a farm outside of New Haven and working with large-scale organic produce vendors do, in fact, have something in common.

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