In a federal lawsuit whose details are sealed, a local Nordstrom shareholder is taking on the big retailer’s top brass with claims that the founding family’s fleet of airplanes is being subsidized by the company.
The complaint alleges that Nordstrom, which itself owns two planes, manages and services eight other aircraft owned by members of the extended Nordstrom family. Their private fleet today includes a single-engine turboprop and four floatplanes. In addition, the company leases from the family a pair of business jets — a Bombardier CL-600 and a Cessna 560.
The arrangement has resulted in a “vast, bloated and costly Flight Department to serve the needs of the Nordstrom family” and not the company’s multibillion-dollar retail business, claims the suit, filed last month in federal court in Seattle.
Most critically, the lawsuit says Nordstrom has subsidized the family’s private use of its airplanes to the tune of millions of dollars.
But Nordstrom says that the opposite is true: that charging the family to operate their aircraft helps reduce the costs of the company’s own flight needs. Having access to the family’s aircraft also gives the company flexibility: Last year some 330 employees from across the company used the planes to visit store openings, fulfillment centers and meetings, the retailer says.
Nordstrom said in a statement that the staffing levels are “well within industry standards for the number of planes Nordstrom uses.” The company says it has long employed nine pilots, while the suit contends that three or four should suit its needs.
In regulatory filings, Nordstrom says the family’s payments for aircraft services “exceeded” their estimated cost.
But the lawsuit, filed by King County resident Judith Burbrink on behalf of the company and its shareholders, says the board really hasn’t studied how much money the operation actually costs, and that the statements in the securities filings are misleading.
Burbrink used a little-appreciated facet of Washington corporation law to demand, as a shareholder, detailed information from the company.
That data, and investigations by her attorneys, resulted in the suit’s claim that the Nordstroms pay “just a fraction of the costs.”
Burbrink’s attorneys filed the lawsuit under a temporary seal to give Nordstrom the opportunity to request protection for sensitive company information. Nordstrom has asked U.S. Judge John Coughenour to keep it under wraps.
The lawsuit seeks, among other things, to force Nordstrom directors to take a close look at the costs of providing aviation services to the family, as well as an award of unspecified damages to the company. It also seeks to have Nordstrom pay for the plaintiff’s costs, including attorney fees.
In a redacted version reviewed by The Seattle Times, most of the financial details presented to back up the lawsuit’s claim were blacked out.
But the suit asserts that through the arrangement for operating the Nordstroms’ personal aircraft fleet, the retailer “has secretly diverted millions of dollars in hidden subsidies to the family.”
Asked about the claims, Nordstrom responded that the rates charged to the family members are calculated by a third-party aviation-research company. It maintains that its regulatory filings about the arrangement are “complete and accurate, and satisfy all relevant disclosure rules and requirements.”
It’s not uncommon for publicly traded companies to have complicated arrangements involving the private aircraft of their jet-setting executives.
Last year, Starbucks disclosed in securities filings that the coffee giant had leased CEO Howard Schultz’s $65 million Gulfstream G650 to fly its executives around on business. Under their agreement, Schultz had to pay Starbucks for his use of the plane.
The Nordstrom lawsuit alleges that in 2007, the extent of the aircraft-related transactions between Nordstrom and its namesake family “increased dramatically, as a direct result of the financial crisis” that chopped the value of company stock.
It claims “the Nordstrom family began to shift the cost of flying and maintaining their vast fleet of personal planes on to the Company.”
Nordstrom says the financial crisis had no impact whatsoever. The company says it has always operated between seven and 10 airplanes, including the family’s, since 1998. The total briefly jumped to 11 in 2007, when the company and the family both took delivery of one airplane each before selling a couple.
It’s unclear how or why 67-year-old Burbrink, who used to own the Villa Heidelberg Bed and Breakfast in West Seattle, first began tracking the Nordstroms’ personal air fleet.
The lawsuit says she’s been a shareholder for more than 40 years. On Thursday, her 500 shares were worth about $40,000.
She declined to comment, referring questions to her attorneys, who didn’t immediately respond.
It’s also unclear how much the Nordstroms really take to the air. According to data from FlightAware.com, one of the single-engine planes — a Pilatus PC-12 with room for nine passengers, co-owned by executive Jamie Nordstrom and another family member — last month flew to a couple of high-profile winter getaways for the well-to-do: Jackson Hole and Aspen.
Two of the floatplanes whose tail numbers were not blacked out in the redacted lawsuit, both De Havillands, don’t show any recent flights.
Original article can be found at: http://www.seattletimes.com
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